A suburban St. Paul dealership may have violated Minnesota's retail installment sales law by using a conditional delivery agreement and by failing to provide a customer with signed copies of his sales contracts, the state Court of Appeals has ruled.
However, the use of a conditional delivery agreement does not automatically violate the state consumer protection law, the court said.
Lawyers for Forest Lake Chrysler-Plymouth-Dodge will ask the Minnesota Supreme Court to review the decision.
The dispute stems from Raymond Scott's purchase of two minivans from the dealership in Forest Lake.
In 1994, Scott signed an installment contract for a 1991 Dodge Caravan, with 60 monthly payments and an 11.5 percent interest rate, for a total contract price of about $23,000.
The contract was assigned to a bank. The same day, Scott signed a conditional delivery agreement that required immediate return of the vehicle if financing was rejected.
After the bank denied the loan, the dealership reduced the purchase price about $250, and Chrysler Credit agreed to finance the transaction, although at an 18.4 percent interest rate, according to the court. The difference in the contract price was $2,933, but Scott went ahead with the deal.
The next year, Scott traded the 1991 Caravan for a 1995 model, for a total contract price of about $33,000.
He received copies of both sales agreements, but the dealership had signed neither copy, the suit alleges.
Scott sued Forest Lake Chrysler for alleged violations of the retail installment sales law and the consumer protection law. The suit sought damages for the price differential, penalties equal to the value of the purchases and attorney fees, according to his lawyer, Thomas Lyons of Maplewood.
'The statutes are there to protect consumers against sharp practices by auto dealers,' Lyons said, and 'to deal with those few rogue dealerships that can't conform their behavior to the standards expected by the legislature.'
The dealership denied any violations, and the case was dismissed without trial.
2 OUT OF 3
By a 2-1 vote, the appellate court reinstated two of Scott's three claims.
In an opinion by Judge Randolph Peterson, the majority said the dealership's failure to incorporate the conditional delivery agreement into the retail installment contract was improper.
'Although the conditional delivery agreement did not directly contradict or alter any term of the retail installment contract, the failure to obtain financing approval ultimately invalidated the entire retail installment contract,' the court said. 'It led to a second retail installment contract with a significantly higher interest rate.
'Due to the failure to obtain financing approval, the retail installment contract did not inform Scott of the cost of credit to him,' it said.
The court also said Forest Lake's failure to give Scott signed copies of the contracts for both transactions violated the installment sales law.
The court ordered a trial in Washington County District Court to determine whether the dealership acted intentionally or unintentionally and what damages Scott could collect.
CREDIT TERMS WERE CLEAR
At the same time, the court rejected Scott's consumer fraud argument, ruling that conditional delivery agreements are legal. And although Scott argued that the dealership fraudulently told him that the reduction in the price of the van compensated for the higher interest rate, the court said all the credit terms, including the total contract price, were written clearly in the installment contract.
Gregory Johnson of St. Paul, the dealership's lawyer, said, 'We believe we complied with the provisions of the law.'
He noted that the same legal issues are under review in an unrelated Minnesota case pending in the 8th Circuit U.S. Court of Appeals.
In that case, a lower court judge dismissed a similar suit against Wally McCarthy Pontiac-GMC-Hyundai Inc., which operates stores in the Minneapolis-St. Paul area.
Johnson also said the law was amended in 1996 to give dealerships seven days from delivery to provide buyers with a signed copy of their installment sales contract. Forest Lake offered to provide such copies to Scott after the change took effect, he added.
Lyons said his client will ask the Minnesota Supreme Court to reinstate the consumer protection claim.