Suit Over Loan : Illiteracy Spells Trouble

Michael Peralta says he has never been able to read or write. For most of his 52 years, he has gotten by with the help of his more educated relatives. And his street instincts have taught him how to recognize a good deal when he sees one.

But his instincts failed him last year on one crucial day, when he also neglected to bring along an adult relative to witness a financial agreement he signed with a Van Nuys loan company.

Peralta, who has lived in the same Sun Valley home for 24 years, thought he was getting a solid deal when representatives of the loan company contacted him in May, 1987, and offered to arrange a loan to help him pay off a $40,000 loan on his house.

Not only would First Financial Home Loan pay off the loan, but it would arrange for Peralta to receive $10,000 in cash as a part of the transaction, Peralta said. Needing the money, Peralta signed the documents, he said.

The $40,000 loan was paid off by First Financial, but Peralta said he never got the promised cash.

Instead, after a year of waiting for the cash and not making loan payments until he got the $10,000, he got a foreclosure notice.

Now Peralta, who said he was disabled in a work-related injury three years ago, is fighting a bitter and complicated legal battle with First Financial. He said the company deceived him, forged his signature on several documents and took advantage of his illiteracy by signing him up for two loans totaling $66,000, which Peralta could not afford to pay.

“This has just been hell,” Peralta said last week during an interview, hitting the table top for emphasis. “I didn’t know what was happening, and the next thing, these people were trying to take my property away from me. I was more surprised than anyone else, but now I’m mad.”

First Financial was preparing to foreclose on Peralta’s Cartwright Avenue home in June when an attorney for Peralta, David G. Finkle, successfully won a preliminary injunction against the action.

Peralta and Finkle also filed suit in Los Angeles Superior Court against First Financial loan officers who they said conducted the transaction, and lenders who assisted with the loan. The suit charges the small private firm with fraud and breach of statutory and fiduciary duties, asking unspecified damages.

Representatives of First Financial named in the lawsuit last week denied that they took advantage of Peralta or defrauded him.

“This whole suit is a farce,” said one of the representatives, George F. Nassif, a loan agent at the time of the transaction. “This is one of the most well-documented loan transactions we engaged in.”

Court papers filed by the defendants said that Peralta never informed them that he was illiterate.

According to the lawsuit, Peralta owed $40,000 on a second mortgage on his home in May, 1987. He had borrowed the money to pay off earlier loans. Also, almost $3,000 in interest payments were due, and a notice of default had been issued.

That month, Peralta said, he received a call from First Financial representatives offering to arrange a loan for him so that he could pay off the $40,000 debt. The loan would be for $53,000, payable over 15 years at a 13% or 14% interest rate. As part of the transaction, Peralta was told, he would also have $10,000 for his own use.

Peralta said he explained to the representatives that he could not read, and that someone would have to explain terms of the agreement, the suit said. He was told to come to the First Financial office in July to formalize the agreement.

When he went to the office, Peralta signed several documents. After doing other paper work, Peralta was told that he would receive $10,000 in 45 days.

But the money never arrived, the suit said. Instead, Peralta said, he had unknowingly signed documents for two loans totaling $66,000, which was due at the end of one year. He said he only received one $795 monthly bill for the loan, which he did not pay.

In addition, Finkle said, Peralta’s name was forged on several loan documents and he was charged excessively for the transactions.

Peralta said he probably should have consulted a family member about the loans.

“But I’ve always been raised to trust people,” he said. “Now I don’t trust anyone. Nobody.”

Finkle said First Financial representatives failed to explain the transactions to Peralta. But Nassif and other defendants said they doubted that Peralta was illiterate.

While the two sides battle in court, Peralta is not sitting back. He said he is taking a remedial reading class. “Once I learn how to read, people who try to fool me are going to be sorry.”