Opinion ID: 1102298
Heading Depth: 2
Heading Rank: 1

Heading: The Repossession Chargeback Agreement

Text: As previously noted, Bell signed an agreement in 1980 providing for GMAC to buy the dealership's retail paper on a modified nonrecourse basis. Under this agreement, GMAC charged the dealership back for the full participation that GMAC had paid the dealership when it purchased the contract, up to the amount of the repossession loss. The dealership's misrepresentation claim was based in part on allegations that Hall had misrepresented to Bell in 1980 and on other unspecified occasions that the dealership had the same benefits that all the other dealerships had and allegations that that representation was false because, according to the dealership, from 1980 up to the fall of 1991, when the dealership was removed from the Modification C plan, the dealerships located on the eastern bypass in Montgomery were not on a modified nonrecourse plan, but, instead, were charged back on a prorata basis (under the rule of 78). GMAC contends that the dealership failed to establish that Hall's representations were, in fact, false. After reviewing the record, we must agree. The statutory basis for the dealership's misrepresentation claim is Ala. Code 1975, § 6-5-101, which provides: Misrepresentations of a material fact made willfully to deceive, or recklessly without knowledge, and acted on by the opposite party, or if made by mistake and innocently and acted on by the opposite party, constitute legal fraud. The elements of a misrepresentation claim are 1) a misrepresentation of a material fact, 2) made willfully to deceive or recklessly without knowledge, 3) which was justifiably relied on by the plaintiff under the circumstances, and 4) which caused damage as a proximate consequence. Harrington v. Johnson-Rast & Hays Co., 577 So.2d 437 (Ala.1991). The evidence, viewed in the light most favorable to the dealership, does indicate that Hall made the same benefits representation in 1980 at the time the repossession chargeback agreement was signed and on certain unspecified occasions thereafter. However, we can find no evidence tending to show what chargeback plan the Montgomery bypass dealerships were on before 1990. The record is silent on that point. The evidence does show that the Montgomery bypass dealerships were on an unmodified nonrecourse plan in 1990 and thereafter. The evidence also indicates that Hall left his position as branch manager in early 1991. Therefore, the only way any representation on Hall's part could be actionable was if such a representation had been made in 1990 or early 1991, when, according to the evidence, Hall was still the branch manager and the Montgomery dealerships were not on a modified nonrecourse plan. The record, however, does not disclose when Hall's post-1980 representations concerning dealership benefits were actually made. [3] Contrary to the position taken by the dealership, this failure of proof is not insignificant. [4] The burden was clearly on the dealership to prove that Hall had made a false representation of material fact. Because the dealership failed in this respect, it could not base its misrepresentation claim on any statement that may have been made by Hall. The dealership also based its misrepresentation claim on allegations that Milton Edrington, who replaced Hall as control branch manager, had also misrepresented to Bell in 1991 that the dealership was on the same chargeback plan as the Montgomery bypass dealerships. The record does support the dealership's allegations in this regard. The essence of the dealership's misrepresentation claim, as we understand it, was that Bell's lack of knowledge that GMAC would consider putting the dealership under a different nonrecourse chargeback plan effectively prevented him from negotiating for such a plan. [5] Edrington replaced Hall as control branch manager in January 1991. The bypass dealerships were not on the Modification C plan in 1991. Bell's testimony indicates that sometime after Edrington replaced Hall, but before he discovered from another GM dealer, Larry Puckett (a Chevrolet dealer in Prattville), that he was not on the same plan as Puckett, Bell asked Edrington if his dealership was on the same repossession chargeback plan as the Montgomery bypass dealerships. Bell testified as follows: Q. Now, so, my question to youI apologize for not having mentioned Modification C earlier, but my question to you is did there come a time when you finally [got] taken off Mod C? A. Yes. Q. That was after your meeting in Montgomery with Mr. Edrington? A. Yes. Q. Up until [the] time that you got taken off of Modification C, were you familiar with that term at all? A. I had never heard of that term in my life. Q. Let me ask you, in connection with the repossessions of some of your retail customers, had you complained to Mr. Edrington or not about the high rate of repossessions for your customers? A. Yes. Q. In making those complaints to Mr. Edrington, had Mr. Edrington, before you complained in this meeting in Montgomery, had he ever told you that you were under Modification C? A. Never in my life. Q. Had he ever used that term at all? A. No, he had not. .... Q. Mr. Bell, right before the break we were talking about the dealer finance participation with GMAC; do you recall that testimony? A. Yes. Q. I want to ask you, Mr. Bell, during the time that you were doing business with GMAC, when your customers would have repossessions, were you aware that you were losing all your dealer finance participation every time there was a repossession? A. Yes. When GMAC lost money, yes, I was aware of that, very much aware of that. Q. Now, when you talked to Mr. Edrington about your repossession program, about your rate of repossessions for your retail customers, what, if anything, did Mr. Edrington tell you about whether you were on the same program as the dealers on the bypass? .... A. That I was on the same program that the dealers that were on the bypass were on. Q. What I was going to ask you in my follow-up question, and I do ask you now, Mr. Bell, is this: Tell the jury whether or not you asked any specific questions about either Cobb [a Cadillac-Pontiac dealership located on the bypass in Montgomery] or Brewbaker [a Buick dealership located on the bypass in Montgomery] or any of the bypass dealers of Mr. Edrington? A. Oh, yes. I always asked specific questions about General Cobb, Frank McGough [apparently the operator of a Chevrolet dealership on the Montgomery bypass], about Mr. Brewbaker. I always asked questions about them because they were my competitors. Q. Now, during this conversation with Mr. Edrington, what, if anything, did Mr. Edrington say to you in response to those specific questions about the bypass dealers? A. Mr. Edrington would always tell me that he could not discuss those dealers with me under any conditions. (Emphasis added.) The evidence indicates that Edrington misrepresented to Bell, up until Bell confronted him with the information that he had obtained from the other GM dealer, that his dealership was under the same repossession chargeback plan as the Montgomery bypass dealerships, and that Bell relied on that misrepresentation by not attempting earlier to renegotiate his chargeback agreement with GMAC. Bell testified as follows: Q. Mr. Bell, I want to ask you this question as we begin to get into that. First of all, do you recall a meeting or conversation that you had in the early fall of 1991 with Mr. Larry Puckett? A. I certainly do. Q. Who is ... Larry Puckett? A. Mr. Larry Puckett is a previous GMAC employee. Q. Mr. Puckett? A. Mr. Puckett is a previous GMAC employee. He is also the owner of Larry Puckett Chevrolet in Prattville. Q. All right, sir. Do you recall where you and Mr. Puckett were when you had the conversation that you're testifying about? A. Well, it was in Atlanta, Georgia, at a General Motors auto auction. Q. Without getting into anything Mr. Puckett said to you, Mr. Bell, let me ask you what, if any, action did you take after you had this conversation with Mr. Puckett that had to do with the GMAC people over in Montgomery? .... A. What it amounted to, I came back to Montgomery from Atlanta; and I went to Mr. Edrington's office; and what it amounted to, my chargebacks on my reserve were not prorated. I wanted to know, I wanted to know if I was on the same program that the rest of the dealers in Montgomery were on. I was told at the time that I went there that I was on the same program as the rest of the dealers. .... Q. Mr. Bell, I don't want to be repetitious at all about this. I want to be clear about it. Let me ask this question: Were there any dealers that you discussed in that fall meeting at Mr. Edrington's office in Montgomery other than the dealers located on the eastern bypass in Montgomery? If so, tell me. A. No. Q. All right. A. The dealers [on] the eastern bypass. Q. All right. Now I want to know at the time that you went in to talk to Mr. Edrington what you said to Mr. Edrington, first of all, and then what did Mr. Edrington say to you? A. Well, let me make sure this is right. I told him ... what I had heard Q. All right, sir. A. And I wanted to know if I was on the same program that the other dealers in Montgomery were on because I had been told that .... Q. Mr. Bell, when you made your statements to Mr. Edrington in his office, what, if anything, did Mr. Edrington say about the program that you were on and the program that the bypass dealers were on? A. That we all were on the same program. Q. Now, did you challenge Mr. Edrington on that statement? A. I did. I went back a second and maybe a third time. Q. What did you say in your subsequent visit or visits to Mr. Edrington about the program that you were on? A. I asked him again if I was on the same program that the dealers were on that were on the bypass. Q. What did Mr. Edrington say? A. At that time he told me that I was. Q. All right. What, if anything, did you say to Mr. Edrington about what Mr. Puckett had told you? A. That his chargebacks were prorated. .... Q. My question to you is, first of all, did you tell Mr. Edrington, over there, what Mr. Puckett had said to you? A. Yes, I did. Q. All right. After you told Mr. Edrington what Mr. Puckett had said, what did Mr. Edrington say at that time? A. Well, the third time, I think he admitted on the third time that I was on a different program. Q. All right. When you heard that from Mr. Edrington, what did you say to him? A. It took a lot out of me. Q. What did you say? A. I was very disappointed. I was very angry. Mr. Edrington was very much aware of that. Q. Did you tell him that you were upset? A. Oh, yes. He knew that. Q. What did you ask him to do for you, if anything? A. I told him that I wanted to be treated fair, and I felt that the dealers that were on the bypass were on a program where their chargebacks were prorated on the reserve and mine was not and I thought it was very unfair and that they had taken a lot of money from me. Q. Mr. Bell, did you ask Mr. Edrington to give you your money back? A. I certainly did. Q. What did Mr. Edrington say when you asked for your money back? A. Mr. Edrington told me that was his call and he was not going to give me my money back but he would put me on the program that the dealers, that the other dealers were on on the bypass. For the reasons set out above, we conclude that GMAC was not entitled to a judgment as a matter of law on this aspect of the dealership's misrepresentation claim. The dealership based its suppression claim on allegations that GMAC did not inform it that Modification C was not the only nonrecourse chargeback plan available to GM dealerships. Specifically, the dealership argues that GMAC should have disclosed to it that the Montgomery bypass dealerships were on a different nonrecourse chargeback plan. GMAC argues that the terms of its contracts with other dealerships were confidential and that it was under no legal duty to disclose to the dealership the nature of other chargeback plans that other dealerships may have been operating under. Initially, we note again that the record contains no evidence tending to show what chargeback plan the Montgomery bypass dealerships were on before 1990. Therefore, the dealership's suppression claim would have to be based on an alleged failure on the part of GMAC (Hall and Edrington) to disclose this information during 1990 and thereafter. The statutory basis for the dealership's suppression claim is Ala. Code 1990, § 6-5-102, which provides: Suppression of a material fact which the party is under an obligation to communicate constitutes fraud. The obligation to communicate may arise from the confidential relations of the parties or from the particular circumstances of the case. The elements of a suppression claim are 1) a duty to disclose the facts, 2) concealment or nondisclosure of material facts by the defendant, 3) inducement of the plaintiff to act, and 4) action by the plaintiff to his injury. Wilson v. Brown, 496 So.2d 756 (Ala.1986). Under § 6-5-102, silence is not fraud unless an obligation to communicate a material fact exists. Such an obligation may arise where a confidential relation or particular circumstances exist. Trio Broadcasters, Inc. v. Ward, 495 So.2d 621 (Ala.1986). This Court has defined a confidential relationship as follows: `[A relationship in which] one person occupies toward another such a position of adviser or counselor as reasonably to inspire confidence that he will act in good faith for the other's interests, or when one person has gained the confidence of another and purports to act or advise with the other's interest in mind; where trust and confidence are reposed by one person in another who, as a result, gains an influence or superiority over the other; and it appears when the circumstances make it certain the parties do not deal on equal terms, but, on the one side, there is an overmastering influence, or, on the other, weakness, dependence, or trust, justifiably reposed; in both an unfair advantage is possible. It arises in cases in which confidence is reposed and accepted, or influence required, and in all the variety of relations in which dominion may be exercised by one person over another.' See Holdbrooks v. Central Bank of Alabama, N.A., 435 So.2d 1250, at 1252 (Ala.1983), quoting 15A C.J.S. Confidential (1967). There is no question that the dealership and GMAC were, at all times, dealing with each other at arm's length. The evidence shows that Bell was intelligent and knowledgeable about the workings of an automobile dealership. In short, he was an experienced businessman. The evidence also shows that GMAC was in business to purchase retail paper from GM dealerships, provided that that paper was acceptable to GMAC. Although Bell sought, and GMAC provided, advice and financial assistance to the dealership, there is no evidence indicating that a confidential relationship existed between the dealership and GMAC that would impose a duty on GMAC to inform the dealership that Modification C was not the only nonrecourse chargeback plan used by GMAC. See Norman v. Amoco Oil Co., 558 So.2d 903 (Ala.1990), wherein this Court held that Amoco was under no duty to give a detailed explanation of its profitability index to one of its franchisees (Norman), even though Amoco used that index as a basis for not renewing Norman's contract. There is no evidence that GMAC was under any contractual obligation to allow the dealership to pick and choose which plan it would operate under. To the contrary, the evidence indicated that the majority of the dealerships in the Montgomery branch had at one time or another been on the Modification C plan, presumably to reduce the risk of loss to GMAC resulting from its purchase of marginal or risky retail paper. In this respect, GMAC's relationship with the dealership was similar to that of creditor and debtor, much like the relationship that exists between a bank and its customer, where the creditor dictates the terms for extending credit. In the absence of special circumstances, such as when a customer reposes trust in a bank and relies on financial advice, no fiduciary or confidential relationship exists between a creditor and a debtor. See Power Equipment Co. v. First Alabama Bank, 585 So.2d 1291 (Ala.1991). Application of the particular circumstances language contained in § 6-5-102 necessarily requires a case-by-case consideration of several factors. Quoting from Jim Short Ford Sales, Inc. v. Washington, 384 So.2d 83, 86-87 (Ala.1980), this Court, in Berkel & Co. Contractors, Inc. v. Providence Hospital, 454 So.2d 496, 505 (Ala.1984), stated: `A duty to speak depends upon the relation of the parties, the value of the particular fact, the relative knowledge of the parties, and other circumstances. Hall Motor Co. v. Furman, 285 Ala. 499, 234 So.2d 37 (1970).... Thus, each case must be individually examined to determine whether a duty of disclosure exists; a rigid approach is impossible, and, indeed, the words of the statute itself counsel flexibility.' Before an obligation to disclose can be imposed under the particular circumstances of a case, the relationship existing between the parties, while not necessarily required to be confidential, must nonetheless be such that a disclosure of material information is dictated. In Bama Budweiser of Montgomery, Inc. v. Anheuser-Busch, Inc., 611 So.2d 238, 246 (Ala.1992), this Court, citing Norman v. Amoco Oil Co., supra, noted that [w]hen the parties to a transaction deal with each other at arm's length, with no confidential relationship, no obligation to disclose arises when information is not requested. (Emphasis added.) As previously noted, GMAC had the right to contractually limit its exposure by requiring the dealership to participate in the Modification C plan as a condition to its purchasing the dealership's retail paper. GMAC was certainly within its rights in doing this to protect its financial interests. Considering the particular business enterprise involved here; the fact that Bell was an experienced businessman; the fact that it was GMAC's policy to treat as confidential its business dealings with individual GM dealerships; and the fact that GMAC was under no contractual obligation to allow the dealership to participate in any particular chargeback plan, we cannot hold that GMAC was under any general legal duty to disclose to the dealership the existence of other nonrecourse chargeback plans that it was using with other dealerships. Therefore, as our previous discussion illustrates, because there is no evidence indicating that Hall made a misrepresentation to the dealership with respect to the chargeback plan, the dealership could not base its suppression claim on any allegations of nondisclosure by Hall. However, because the evidence indicates that Bell specifically asked Edrington about the chargeback plan and that Edrington misrepresented that the dealership was on the same plan as the Montgomery bypass dealerships, a duty on GMAC's part to disclose the truth arose. [6] When a party, in a commercial setting, elects to make a representation, the party is under a duty to make a full and fair disclosure. This duty is not unlike the obligation that may arise between parties in a confidential or fiduciary relationship. See Sperau v. Ford Motor Co., 674 So.2d 24 (Ala.1995), judgment vacated 517 U.S. 1217, 116 S.Ct. 1843, 134 L.Ed.2d 945 (1996). Therefore, GMAC was not entitled to a judgment as a matter of law with respect to the dealership's suppression claim. With respect to the wantonness claim, GMAC was under no contractual obligation to let the dealership operate under an unmodified nonrecourse chargeback plan, and there is no common law duty that we are aware of that would preclude a finance company, such as GMAC, from dictating reasonable terms to govern its purchasing of retail sales contracts from a company such as the dealership. The dealership had no legal basis for insisting that it be allowed to operate under the chargeback plan of its choosing. The absence of a duty on the part of GMAC in this respect was fatal to the dealership's wantonness claim, and the trial court erred in submitting that claim to the jury.