Automobile Trade-In Goes Sideways.
Above: Old car and truck outside the “Vehicles-You-Deserve” Used Car Dealership in Mesquite, Texas. Photographer: Carol M. Highsmith. 2014. Library of Congress.
At first glance, this seems like a fairly common scenario. A daughter trades in her father’s used car for a new one, and payments are not made for the new car. Bank sues alleged buyers, buyers cross-claim against bank and dealership, and assert affirmative defenses. Because automobile sales contracts typically contain arbitration clauses (indeed, “Arbitration: Automobiles” is one of our sidebar categories), cross-defendants then petition to compel arbitration. The trial court denies the petition based on “unconscionability.” But this case involves more than mere unconscionability. Bank of the West v. Ruiz, B253980 (2/5 April 13, 2015) (Turner, Mosk, Kriegler) (unpublished).
This case involves fraud in the inception – fraud that “goes to the inception or execution of the agreement, so that the promisor is deceived as to the nature of his act and actually does not know what he is signing . . . “
The Court of Appeal held that substantial evidence supported “implied findings” of fraud in the inception. The dealer’s agent allegedly went to the father’s home late at night to obtain his signature. The father did not speak or read English, and was shown documents solely in English. The father was told that he needed to sign the documents in connection with the trade-in, not in connection with the purchase, as the car was for his daughter. He was pressured to sign quickly. He never received a copy of the sales contract, despite asking for it. Supposedly, he was told in Spanish by the agent that the documents would be changed to his daughter’s name, but this was never done.
COMMENTS: Several cases are currently pending before the California Supreme Court addressing the issue of unconscionability in automobile sales contracts. Those cases should have no impact on this case, because the dispositive issue is now defined as fraud in the inception.
We have blogged about cases in which the fact that a customer or an employee spoke only a foreign language, but received documents in English, weighed on the scale of unconscionability. Here, that factor was one among several that supported the implied finding of fraud in the inception.