Lobel Financial v. Baltazar CA4/3

FACTS AND PROCEDURE

Affordable Auto sells used cars, and in turn it sells its customers’ finance contracts to independent finance companies, such as Lobel. On May 28, 2003, Baltazar and Chavez, on behalf of Affordable Auto, signed a form “Dealer Agreement (with limited repurchase obligation)” (hereafter the Dealer Agreement) setting forth terms on which Affordable Auto (designated as “Dealer” in the Dealer Agreement) would sell finance contracts to Lobel (designated as “Company” in the Dealer Agreement). Paragraph 1 of the Dealer Agreement provided in relevant part, “The contracts will be assigned with full recourse” and paragraph 10 provided, “The Dealer will repurchase all contracts that default in the first three (3) payments of the contract term . . . .” The Dealer Agreement described a reserve account (Reserve Account) that Lobel internally maintained for each dealer from which a dealer could additionally profit if the dealer’s customers, as a group, honored their payment obligations and paid off their loans. Paragraph 4 of the Dealer Agreement provided in full: “The Company will withhold a percentage on each contract purchased from the Dealer and credit that amount to the…