Lisa Smith v. Sherry Coran d/b/a Coran Auto Sales

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OCTOBER 12, 2005








Olly Neal, Judge

This is an appeal from a decision of the Faulkner County Circuit Court finding that appellant, Lisa Smith, had not rescinded her conditional auto sales contract with appellee Coran Auto Sales and was therefore not entitled to reimbursement of her payments or costs associated with the purchase of the vehicle. For reversal, appellant asserts that the trial court erred in determining that she had not rescinded the contract for failure of title. We affirm the trial court.

The standard of review on appeal is whether the trial court's findings were clearly erroneous. See Superior Improvement Co. v. Mastic Corp., 270 Ark. 471, 604 S.W.2d 950 (1980); Ark. R. Civ. P. 52(a). A finding is clearly erroneous when, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. First Nat'l Bank of Izard County v. Garner, 86 Ark. App. 213, 167 S.W.3d 664 (2004). Recognition must be given to the trial judge's superior opportunity to determine the credibility of witnesses and the weight to be given to their testimony. Brown v. Blake, 86 Ark. App. 107, 161 S.W.3d 298 (2004).

On March 1, 2002, appellant Lisa Smith entered into a conditional sales contract with Coran Auto Sales for in-house financing of a 1999 Dodge van. The purchase price of the van was $12,915 with Smith placing a down payment of $3500 for a remaining balance of $9415 to be financed at 12.5 percent interest. Under the provisions of the contract, the down payment was not refundable. Subsequent payments of $140 were to be made bi-weekly.

On March 13, appellant paid for the license plate and sales tax on the van. However, on April 25, she received a letter from the Arkansas Revenue Department, Division of Motor Vehicles Suspense File Unit, which provided that additional documentation was needed before a title could be issued on the van. Appellant notified appellee. At trial, appellant testified that she told Ms. Coran that she was going to rescind the contract. She stated that, "I told her there was a problem with the title and that I did not want the vehicle any more. After I told her I no longer wanted the car I left." On May 20, 2002, Coran Auto Sales provided the needed documentation to the revenue department, and the new title was thereafter issued showing appellant as the owner and appellee as the lienholder. Subsequently, Coran Auto Sales repossessed the van on or about June 23 due to appellant's failure to make payments. Knowing that her down payment was not refundable, appellant demanded a refund anyway; Coran Auto Sales refused her demand.

Appellant filed a complaint on October 1, 2002, asserting that the conditional sales contract was usurious. Coran Auto Sales counter-claimed, arguing that it was entitled to reasonable usage of the vehicle for the time appellant drove the van and for all costs associated with her default on the loan. Richard Coran testified at trial that he and his wife Sherry owned Coran Auto Sales and that there was a mistake made on setting the interest for appellant's conditional sales contract. Rather than the 12.5 percent found in the contract,Coran testified that the prime interest rate at the time was 4.24 percent; therefore, the contract rate should have been about 9.25 per cent.

On December 1, 2004, the court entered a judgment that dismissed both claims with prejudice. The court found the interest rate stated in the conditional sales contract to be usurious. It also found that appellant had not rescinded the contract because she retained possession of the van, using it until Coran Auto sales repossessed it. Moreover, since appellant had made only one or two payments prior to repossession, the court determined that "based upon the amount of interest paid that the interest paid was deminimis [sic]." On the same entry date of the judgment, appellant filed her motion for new trial. The trial court did not rule on the motion, and appellant filed her notice of appeal on December 30, 2004.

In Arkansas, rescission of a contract at law on grounds of fraud or deceit is accomplished by the rescinding party's tendering the benefits received to the contracting party as soon as that person discovers the truth. BAAN, U.S.A. v. Truck USA, Inc., 82 Ark. App. 202, 105 S.W.3d 784 (2003). She must announce this purpose at once, adhere to it, and act with reasonable diligence. Herrick v. Robinson, 267 Ark. 576, 595 S.W.2d 637 (1980). If she continues to treat the property involved in the transaction as her own or conducts herself with reference to the transaction as though it were still subsisting and binding, she will be as conclusively bound by the contract as if the fraud had not occurred. Id.

In the instant case, we do not find that the trial court's decision was clearly erroneous. When appellant received the letter on April 25, she testified that she told Sherry Coran of Coran Auto Sales that she no longer wanted the vehicle due to the defect in the title. Nevertheless, she acknowledged that she kept the car until June 2002 when it was repossessed. Her actions, however, did not rescind the contract because she did not tender the van to Coran Auto Sales, thereby restoring it to its original position. See Herrick v.Robinson, supra. Instead, by keeping the van, appellant continued to treat the van as her own as though the contract for the sale of the van was still subsisting and binding, even though she failed to make any payments. Hence, she was conclusively bound by the contract as if the usury had not occurred.


Pittman, C.J., and Bird, J., agree.