The prospective purchaser of a San Antonio Chevrolet dealership isn't entitled to a refund of his $250,000 good-faith deposit, or earnest money, because he waited too long to cancel the transaction, the Texas Court of Appeals has ruled.
The opinion, written by Chief Justice Sherry Radack, lets the seller, Group 1 Automotive Inc., keep the escrowed money under the terms of an asset purchase agreement.
According to the court, Houston-area dealer William Robbins sought to buy Freedom Chevrolet in 2008. The agreement required General Motors' unconditional approval.
The decision and briefs did not disclose the sale price, and Group 1 declined to release the figure.
The agreement required closing within 60 days of the signing. But it gave Robbins the option of terminating the deal or extending the deadline in writing for two 30-day periods if GM didn't OK the franchise transfer by the deadline.
When GM's approval didn't come by the 60-day deadline, Robbins failed either to terminate or to extend. Instead, when GM did approve the transfer 16 days after the deadline, he asked Group 1 to lower the selling price. The company refused.
Robbins sued to recoup his $250,000, claiming that the asset purchase agreement automatically terminated when the closing failed to take place by the deadline.
A Harris County District Court judge ruled that Group 1 is entitled to keep the deposit.
The three-judge appellate panel agreed, saying the agreement unambiguously and "simply provides a mechanism" for Robbins to extend the closing date or recover the earnest money.
Because he failed to do so, the money belongs to Group 1, the court said.
Robbins' lawyer, William Green III of Houston, said he could not discuss the case while his client considers whether to seek Texas Supreme Court review.
Pete DeLongchamps, head of manufacturer relations at Group 1, said the penalty clause in the contract was clear, adding, "A deal is a deal. Each party should live up to its agreement."
He said Group 1 still owns Freedom Chevrolet.