Dealer Services Corporation Automotive Finance Corporation $408,200 Trebile Damages, Internet

Dealer Services Corporation Sues for Treble Damages of $408,200 in North Carolina

Alan and Sheree Egerton filed for Chapter 7 in U.S. Bankruptcy Court last January when their dealership, Alans Preowned Cars, failed.

Dealer Services Corporation, a finance company that used to floor the dealership's inventory has sued in bankruptcy court, alleging that Alan's Preowned Outlet borrowed against motor vehicles it didn't own. The lawsuit hopes to recover treble damages of $408,200 from Egerton, if it prevails at a scheduled May trial.

The case is striking similar to other cases regarding family owned dealerships across America.

In South Dakota, Jim and Karla Hofer operated a used car dealership in Mitchell that was financed at Farmers State Bank. As security, Farmers Bank filed a blanket UCC-1. In 2005, unbeknownst to the Bank, the Hofers began arranging financing through Dealer Services Corporation (DSC) and Automotive Finance Corporation (AFC), two Indiana based corporations specializing in dealer inventory finance.

Using DSC and AFC, the Hofers floorplanned their inventory and pledged individual vehicles as collateral for the loans. DSC and AFC perfected a purchase-money security interest (PMSI) in the individual vehicles, and the corresponding titles then identified DSC or AFC as the lien holder. Before the titles could be so marked, the Hofers made copies of the original, clear, title to provide to Farmers Bank as loan security, an illegal scheme known as a double floor plan (DFP).

The Hofers went out of business and filed for Chapter 7 bankruptcy relief. On December 12, 2006, Jim and Karla pleaded guilty to the federal charge in the United States District Court, District of South Dakota.

State and Federal agencies filed no charges against AFC or DSC, even though they provided the lesson plan to defraud the bank.