We have a Golden Retriever named Mullighan. Until I saw the movie, “Marley and Me,” I was convinced that Mullighan was the worst dog on the planet. He digs. He runs. He has no leash manners, and he doesn’t come when he’s called. Just name a bad habit for dogs and I’ll bet you that Mully has developed it to an art form.

One of his favorite things to do is to eat stuff that isn’t dog food. That’s not such a problem when he wolfs down used paper napkins. In fact, if he’d stop there, our lives would be duller. Mully also has developed a foot fetish and will occasionally bolt down a sock of mine or a pair of my wife’s pantyhose. That quirky little habit has led to two stomach operations, and has earned him the nickname, “The $10,000 Dog” (that figure includes the cost of an operation to repair a torn anterior cruciate ligament).

Mullighan’s problem is he can’t “connect the dots.” That is, he can’t figure out how his actions lead to particular results. The problem is not uncommon with what some car dealers have. They find themselves in a legal fix, and then can’t figure out how they got there. Here’s an example:

CNRS & Z Inc., doing business as Nu-2-U Auto Sales, sold a 2006 Chevrolet Impala to Randy Medious on credit, evidenced by a retail installment contract. As part of the sale, Medious traded in a 2002 Buick Rendezvous. The retail installment contract contained a provision notifying Medious that CNRS & Z was assigning the contract to a particular sales finance company. There is no indication from the facts reported in the case that Medious signed an “unwind agreement” or any other document giving the dealer the right to rescind the retail installment contract if the dealer was unsuccessful in finding someone willing to take assignment of it. 

As it turns out, that’s precisely what happened. The finance company refused to buy the contract and it was reassigned to CNRS & Z. The dealer refused to accept Medious’ payments, attempted to return his Buick, and
attempted to reclaim the Impala. Medious refused to accept the Buick or to return the Impala. Eventually, the lienholder on the Buick repossessed it.

CNRS & Z filed an action for replevin. The trial court ruled against CNRS & Z, finding that it breached the retail installment contract. CNRS & Z appealed.

The Court of Appeals of Mississippi upheld the decision against CNRS & Z. The appellate court determined that the retail installment contract did not make the sale of the vehicle contingent upon Medious obtaining financing from a third party. According to the appellate court, there was a legally binding sale, which CNRS & Z breached by attempting to return Medious’s Buick and by refusing to accept Medious’s payments on the contract.

Now, how would some dot connecting have helped this dealer? Well, a little reading exercise would have revealed that the retail installment contract between the dealer and the buyer made no mention of any financing contingencies. I haven’t seen the particular contract involved in this case, but if it’s like every other one I’ve ever seen, it says the dealer is selling a car on credit and that the buyer is buying a car on credit. The contract might name an assignee and the dealer and the buyer might have even discussed that possibility, but a successful assignment isn’t a contingency unless the contract says so.

A bit of research by the dealer or the dealer’s lawyer would also have revealed that when dealers don’t get the customer to sign an unwind agreement, courts regularly hold that they’re stuck with holding the contract and collecting the payments.

So, before you do your next spot delivery transaction, make sure that you have someone prepare an unwind agreement for you to have the customer sign. Whatever you do, though, don’t drop it on the floor. Mullighan will eat it.

Thomas B. Hudson, Esq., is a partner in the law firm of Hudson Cook LLP and the author of several books. For information regarding the books, call (401) 865-5411 or visit www.counselorlibrary.com. Copyright CounselorLibrary.com 2010, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only to F&I and Showroom magazine. HC# 4814-5305-4469 (2/10).

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