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N.C. Ford store’s win in spot delivery suit upheld

A North Carolina dealership’s jury trial victory in a spot delivery case has survived an appeal by the customer.

The North Carolina Court of Appeals has refused to reinstate the suit against University Ford Inc. in Durham, N.C., by Lorie Ann Patterson, whose new car was repossessed after she failed to qualify for financing.

The three-judge panel unanimously rejected an effort by Patterson to overturn the jury verdict in favor of University Ford, saying state law clearly authorizes conditional delivery agreements.

“The dealers are going to be absolutely delighted here in North Carolina,” said defense lawyer G. Jona Poe Jr. of Durham.

In November 2010, Patterson applied online for financing through a third-party Web site that forwarded her request to University Ford and other dealerships, the decision said. University Ford asked her to fax her pay stub before coming in for a test drive.

She claims the general manager told her she had been approved for financing.

She signed a retail installment sales contract to buy a 2010 Mustang and trade in her 2007 Mustang. The document noted that the dealership was assigning the contract to a third-party lender.

At the same time, she signed a conditional delivery agreement stating that the store was giving Patterson the vehicle based on credit information she provided. It said the retail installment sales contract wasn’t binding until a lender accepted it and that final approval “rests solely with the lender.”

The conditional delivery agreement required the dealership to return Patterson’s deposit and trade-in if the contact was canceled, and it obligated Patterson to return the car within 24 hours of notification by the store.

‘Under the table’ income

A few days after signing the documents, the dealership asked Patterson for proof of the $1,000 a month additional income she said she was receiving “under the table” from her ex-husband and workers’ compensation benefits.

When she failed to supply the documentation, her financing application was denied and the dealership repossessed the car and returned her trade-in.

University Ford had already paid off the balance of Patterson’s loan on the 2007 Mustang, about $8,000, before returning it, and didn’t sue to recoup that money.

“We made a decision, more of a strategy thing, not to go after her for that” as part of an unsuccessful effort to settle the case without trial, said Poe, the dealership’s attorney.

Patterson sued University Ford for breach of contract, deceptive trade practices and conversion -- that is, arguing that taking back the 2010 Mustang amounted to taking Patterson’s property. She also sought compensatory and punitive damages. Patterson contended the dealership violated the retail installment sales contract by refusing to accept her monthly payments and by repossessing the car before the first payment was due.

University Ford denied liability, and a Durham County Superior Court jury found against her.

So did the Court of Appeals, saying the retail installment sales contract didn’t become binding because Patterson failed to qualify for financing as the conditional delivery agreement required.

‘No binding agreement’

There was “ample evidence” for the jury to determine that “the CDA constituted a part of the agreement between the parties ... and that there was no binding agreement in the event that the proposed lender declined to extend credit,” the court said in an opinion by Judge Sam Ervin IV.

Similarly, the court found no basis for Patterson’s conversion claim because she never obtained ownership. The dealership maintained insurance on the Mustang until it was repossessed and never transferred title.

As for the unfair trade practices claim, Patterson unsuccessfully argued that conditional delivery agreements are “inherently unfair and deceptive.” However, the court said North Carolina law explicitly authorizes the practice.

Further review?

Plaintiff’s lawyer Mario White of Clinton, N.C., said he’s considering asking the North Carolina Supreme Court to review the case because spot delivery problems for consumers are common in the state.

The appellate decision upholds “one-sided contracts” in favor of dealerships, White said. “They’ll have an individual come in and sign a RISC. If you read it in its entirety, it says it’s a final agreement, but buyers can’t change their mind unless the dealer does. If the buyer is bound, isn’t the dealer bound?”

You can reach Eric Freedman at

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