Flores v. Transamerica HomeFirst

Donald and Helen Flores (plaintiffs), an elderly couple, took out a reverse mortgage on their home from Transamerica HomeFirst, Inc. (HomeFirst) (defendant). The transaction documents included a loan agreement with arbitration provisions. Under the provisions, the Floreses were compelled to adjudicate any dispute arising under the transaction via binding arbitration. By contrast, the provisions provided that HomeFirst faced no such limits on its rights with respect to disputes under the contract, including the right to seek judicial remedies or foreclose on the property. HomeFirst presented the loan agreement to the Floreses on preprinted documents without extending the Floreses any opportunity to negotiate. The Floreses sold their home, and HomeFirst demanded payment under the loan agreement. The Floreses were surprised that HomeFirst demanded not only the principal and the accumulated ordinary interest but also an additional amount that HomeFirst called contingent interest and that alone comprised a higher sum than the combined principal and ordinary interest. The Floreses paid under protest and brought a lawsuit against HomeFirst. HomeFirst petitioned the trial court to enforce the arbitration provisions of the loan agreement to compel arbitration. The trial court held that the provisions were unconscionable and thus unenforceable. HomeFirst appealed.