Nissan store prevails in suit over financing

The South Carolina Court of Appeals has tossed out a $19,963 judgment against a Nissan store, finding no bad-faith violations of the state dealer law in the financing and repossession of a used car.

Dick Smith Nissan in Columbia, S.C., didn't treat its customer, Latoya Brown, in an unfair and deceptive manner in the transaction involving a 2005 Mazda6, the unanimous three-judge panel held.

Instead, any financial injury that Brown suffered was caused by the third-party lender, Sovereign Bank, which wasn't sued, the panel said.

Dealer lawyer J. Gregory Studemeyer in Columbia said the customer suffered no actual damages.

In addition, he said, "As a practical matter in South Carolina, every disagreement between a consumer and a dealer is presumed to arise out of an unfair or deceptive act by the dealer. I think this case stands for the proposition that if a dealer carefully documents all of its communications with its customer, the presumption can be overcome, eventually."

In June 2007, Brown went to Dick Smith Nissan, where a college friend was a salesman. She hoped to buy a Nissan Altima but ended up with the Mazda in a contingent financing deal in which she was allowed to take the car before the loan was approved, according to legal documents.

After seven lenders sent rejection letters, she called the salesman and returned to the store, according to court documents. The store then gave her an approval letter from Sovereign, but it referred to an Altima rather than the Mazda and it said financing was contingent on proof of a higher monthly income than she earned.

In fact, Sovereign already had funded the loan and paid Dick Smith Nissan $13,091. However, several days later, Brown received a denial letter from Sovereign citing "insufficient credit file."

Brown left the car and keys at the store despite the salesman's warning that it would be repossessed. Sovereign subsequently repossessed it and claimed a $3,843 deficiency plus interest. Brown didn't dispute or pay the deficiency, nor did Sovereign sue to collect it.

Brown sued Dick Smith Nissan and its surety company under the South Carolina Dealer's Act. The litigation alleged wrongfully refusing to accept the car after the loan wasn't funded, submitting a fraudulent loan application, submitting an application on a vehicle other than the one she was buying, providing a purported approval letter that contained misrepresentations and failing to refund her down payment.

The dealership and its surety company denied any wrongdoing.

At a nonjury trial in Richland County, a judge awarded Brown damages, interest, court costs and attorney fees.

But the appeals court overturned the verdict, saying: "Any misconceptions Brown had about her financing that caused her to leave the Mazda6 at Dick Smith and incur damages were made by Sovereign Bank."

Inaccuracies in the approval letter based on "puffed" information were aimed at Sovereign to help obtain credit, not aimed at Brown, the court said.

"While we do not condone this practice," it said, there was insufficient evidence that any inaccuracies "rise to the level of bad faith, fraud or a deceptive act in violation of the Dealer's Act or otherwise caused Brown damage."

Brown's lawyer declined to comment on the ruling.

You can reach Eric Freedman at



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