By Eric D. Mulligan*
Admitting that you were wrong is always difficult, but sometimes it’s a lot easier than the alternative. When you make a mistake, you can often minimize the damage by making the customer whole as soon as you can.
On the other hand, doubling down on that mistake can turn a small problem into a big one. A Texas dealership learned that lesson the hard way when it repossessed a customer’s truck improperly and then tried to make her pay to get it back.
Donna Watson bought a used Toyota Tundra on credit from Yates Brothers Motor Company, Inc. Yates repossessed her truck less than two months later. When Watson called to find out why Yates took her truck, the dealership told her that she never submitted proof of insurance. In response, Watson provided proof of insurance and asked Yates to return the truck. Yates told her she had to pay a $500 repossession fee first, even though the contract did not mention a repossession fee.
Watson balked, and Yates sold the truck. Watson sued Yates for breach of contract, conversion, and violations of the Texas Deceptive Trade Practices Act, including unconscionable conduct under the DTPA. Yates counterclaimed for breach of contract. At trial, Yates stuck to its guns and argued that it repossessed the truck because Watson never provided proof of insurance. Yates also argued that it had the right to repossess the truck and charge a repossession fee because Watson was behind on her payments and did not give Yates her current address. Yates had not told Watson about these additional events of default before trial. The jury found that Watson did not default under the retail installment contract and that Yates acted unconscionably because it had no right to repossess the truck or charge a repossession fee. Yates appealed the judgment to the Texas Court of Appeals.
The appellate court affirmed the trial court’s judgment. The appellate court found that Watson offered credible evidence that she was current on her payments, she had notified Yates when she changed her address, and her insurance company had provided Yates with proof of insurance. As a result, Yates had no right to repossess the truck, no contractual or statutory right to demand that Watson pay a repossession fee, and no right to sell the truck when she refused to pay the fee. The appellate court found that Yates acted unconscionably. According to the appellate court, a person acts unconscionably under the DTPA if the person takes advantage of a consumer’s lack of knowledge and the resulting unfairness is “glaringly noticeable, flagrant, complete and unmitigated.”
By refusing to admit its error, Yates turned a routine mistake into an expensive lawsuit. Yates could have accepted Watson’s proof of insurance, returned her truck, and tried to figure out why the proof of insurance never made it into the dealership’s records when the insurance company first sent it. Instead, Yates demanded a repossession fee it had no right to demand. When Watson sued, Yates added more apparently phony reasons for repossessing Watson’s truck. Instead of getting the $500 repossession fee that it demanded from Watson, it got a judgment against it for $11,236, plus post-judgment interest and $87,000 in attorneys’ fees, a high price for not acknowledging a mistake.
Yates Brothers Motor Company, Inc. v. Watson, 2018 Tex. App. LEXIS 2893 (Tex. App. April 25, 2018).
*Eric D. Mulligan is an associate in the Maryland office of Hudson Cook, LLP. He can be reached at 410.865.5402 or by email at email@example.com.