BMW Financial Services NA, LLC v. Deloach

Frank Deloach (defendant) leased a BMW from BMW Financial Services (plaintiff) and stopped making payments. BMW repossessed the car, discovered the odometer had been tampered with, and sued Deloach for breach of the lease and odometer tampering, later selling the car at auction for $25,000. BMW failed to flag Deloach's account as part of pending litigation, so the account went to a collection agency, which settled Deloach's roughly $24,000 balance with his father for $14,000 in exchange for a full release of claims, signed August 17, 2015. Four days earlier, BMW had won a $114,677 default judgment against Deloach (mostly treble damages for the odometer tampering), which BMW did not learn of until after the settlement. BMW sought to rescind the settlement based on its own mistake in sending the account to collections during active litigation. Deloach moved to have the judgment marked satisfied, and the trial court agreed. BMW appealed.

Whether a contract may be rescinded for mistake of fact when the party seeking rescission made a mistake about a basic assumption that materially harmed the exchange, but that party bore the risk of the mistake and enforcement is not unconscionable.