LEGAL FILE

Former Texas dealership wins loan dispute

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An arbitration award in favor of a former Texas dealership has been upheld in a dispute over loan terms and a co-signer’s claim that her signature was forged on the retail installment sales contract.

The three-judge panel of the Texas Court of Appeals unanimously ruled that the dispute properly went to arbitration rather than to a court trial.

Based on his credit rating, Tomasa Lopez failed to qualify for financing to buy a used 2004 Chevrolet Suburban at what was then Casa Pontiac-Buick-GMC Inc. in Baytown, the court said. His sister in December 2004 agreed to co-sign for the loan and signed various documents, including one containing an arbitration agreement.

The Lopezes sued Casa under the Texas consumer protection law, alleging unconscionable conduct. The dealership was sold after the Lopez transaction, said Casa’s lawyer, Daniel Pappas of Houston, and no lenders were involved in the litigation.

The suit asserted that when the sister later received copies of the paperwork, she discovered different loan terms from what they had agreed on, that monthly payments and finance charges were higher than expected and that her signature had been forged on a sales contract containing several fees to which they had not agreed.

Lopez spoke no English. The plaintiffs also contended that Casa deceived him about being able to improve his credit rating by making payments on a note in his sister’s name.

Pappas said the suit sought “considerable damages,” including mental anguish and punitive damages.

A lower-court judge ordered the case to arbitration and later confirmed the arbitration award against the Lopezes.

The Court of Appeals agreed with Casa that the arbitration agreement was enforceable and that the Federal Arbitration Act applies because purchasing and financing of the Suburban clearly involved interstate commerce.

“All of the factual obligations arise out of or relate to the sale and financing of the vehicle,” Chief Justice Adele Hedges wrote in the court’s opinion. “These types of claims all fall within the scope of the arbitration agreement.”

The court also held that the Lopezes failed to provide evidence that the agreement was unconscionable due to their lack of education, lack of sophistication in financial and legal affairs and weak English-language skills.

And it emphasized that the sister admitted signing the arbitration agreement.

The plaintiffs’ lawyer, Philip W. Green of Kingwood, could not be reached. Pappas said Green has indicated that there will be a further appeal.

You can reach Eric Freedman at freedma5@msu.edu.

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