A faulty finance document didn’t keep a California appeals panel from siding with a Modesto-area Honda store in a suit brought by purchasers of a used Accord who claimed the store had violated the state finance law.
Although Merced Honda violated the Automobile Sales Finance Act by failing to properly list a deferred down payment and by bundling the license fee with other document fees on the retail installment sales contract, the California Court of Appeal ruled that plaintiffs Adolfo and Margarita Pulido can’t rescind the deal because they drove the Accord for four years without making loan payments.
On top of that, the Pulidos must pay Merced Honda in Merced, Calif., and American Honda Finance Corp. more than $50,000 in attorney fees, the three-judge appeals panel ruled.
In 2005, the Pulidos traded in their 2005 Civic for the used 2003 Accord because they needed a larger vehicle. The store acquired the Accord at auction, according to the decision.
Negotiations were conducted primarily in Spanish, and the plaintiffs received copies of the contract in Spanish and English. They wrote two post-dated checks for the $1,500 down payment. When both checks bounced, the store accepted cash as a replacement without demanding a dishonored check charge.
The Pulidos’ first two credit applications were denied, but American Honda Finance eventually provided a loan.
A week after the deal, the dealership refunded the difference between the estimated Department of Motor Vehicle fees the plaintiffs had paid and the actual amount due.
More than a year later, the plaintiffs tried to rescind the deal based on alleged violations of financing and consumer laws. The dealership responded that it had already refunded the excess fees. But it amended the retail installment sales contract to separately list the deferred down payment. The amended contract contained an error as well, however.
The Pulidos sued the dealership and American Honda Finance in July 2006 and stopped making payments after October 2007. The lender charged off the $16,700 balance in December 2007.
The plaintiffs rejected a $24,000 settlement offer and demanded $150,000 in attorney fees, according to legal documents.
After a nonjury trial, a Merced County judge ruled against the Pulidos, saying they couldn’t prevail under the finance law because they drove the Accord during more than four years of litigation. The judge also found no unfair or deceptive practices in selling the car and awarded the defendants $54,771 in attorney fees.
The Court of Appeal unanimously upheld the verdict.
By not disclosing the deferred down payment and not itemizing fees on the retail installment sales contract, Merced Honda had violated the financing law, the court said.
However, the Pulidos didn’t properly rescind the contract, the court said, because “failure to both return the car and make the loan payments is inconsistent with the equitable nature of rescission.”
The court also found no misrepresentations about the deferred down payment that the plaintiffs had requested or about the license fees. In addition, it said, the dealership provided the mandatory Spanish-language version of the contract.
The underlying basis of the appellate ruling is “you can’t keep the vehicle and not make the loan payments,” said defense lawyer James Wilson of Merced, Calif. And for customers, “the lesson is ‘take a little harder look at whether you really want to pursue a claim’” under the financing law.
Wilson said it is uncertain whether the plaintiffs can afford to pay the defense’s attorney fees already awarded or additional defense fees for the appeal.
Plaintiffs’ lawyer Robert Padrick of Redwood City, Calif., said his clients had no problem with a deferred down payment but “didn’t request an undisclosed deferred down payment.”
Had the dealer properly disclosed the deferred down payment, the lender wouldn’t have financed the car and the Pulidos wouldn’t have been “locked into payments they couldn’t make,” Padrick said.
He said his clients had offered to return the car, but the defendants refused to take it back “because they didn’t want to rescind the deal.” The plaintiffs allowed it to be repossessed after losing at trial, he said.
Padrick said he hasn’t decided whether to appeal further but that the California Supreme Court is unlikely to accept the case for review.”