Fairley v. Turan-Foley Imports, Inc.

• Citation: 65 F.3d 475
• Decision Date: 03 October 1995
• Docket Number: TURAN-FOLEY,No. 94-60754,94-60754
• Parties: 27 UCC Rep.Serv.2d 723 Juanita B. FAIRLEY, Plaintiff-Appellant, v.IMPORTS, INC., d/b/a Turan-Foley Mitsubishi, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 475

65 F.3d 475

27 UCC Rep.Serv.2d 723

Juanita B. FAIRLEY, Plaintiff-Appellant, v. TURAN-FOLEY IMPORTS, INC., d/b/a Turan-Foley Mitsubishi,

Defendant-Appellee.

No. 94-60754.

United States Court of Appeals, Fifth Circuit.

Oct. 3, 1995.

Albert H. Pettigrew, Biloxi, MS, for appellant.

Henry F. Laird, Jr., Aultman, Tyner, McNeese, Ruffin & Laird, Gulfport, MS, for appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before E. GRADY JOLLY and BENAVIDES, Circuit Judges, and FITZWATER ^*, District Judge.

E. GRADY JOLLY, Circuit Judge:

Congress designed the Truth-in-Lending Act ("TILA"), 15 U.S.C. Sec. 1601 et seq., to protect consumers from inaccurate and unfair credit practices. Juanita Fairley took advantage of the Act and sued Turan-Foley Imports, Inc. ("Turan-Foley"), alleging violations of the TILA and state law against misrepresentation related to Fairley's purchase of a car. Her financing agreement listed 8.5 percent as the annual percentage rate, when the actual rate was 11.75 percent annually. When she took possession of the car, she was also under the impression that she had obtained credit life and disability insurance, as well as an extended warranty. After denying Turan-Foley's motion for summary judgment, the district court, acting on a motion for reconsideration, found that because no contract existed between the parties, it lacked subject matter jurisdiction over the case, and subsequently dismissed the case. Fairley appealed. Contrary to the district court's action, we believe this is the type of case for which Congress tailored the TILA. For the reasons explained below, we hold that the district court erred when it determined that a contract between the parties did not exist under Mississippi law, and, thus, the district court erred when it dismissed the case for lack of subject matter jurisdiction. Accordingly, we reverse and remand for further consideration.

I

This case comes to us in a rather unusual posture. A thorough discussion of the facts and procedural history therefore will help to explain the result we reach today.

On July 24, 1992, Juanita Fairley went to Turan-Foley to shop for a new automobile. Finding a 1992 Mitsubishi Eclipse sports car that she liked, Fairley completed and signed a credit application form from General Motors Acceptance Corporation ("GMAC") that had been given to her by a Turan-Foley finance and insurance manager, Thomas Matherne. Matherne promised Fairley a competitive interest rate of 8.5 percent. Wishing to check her credit union for a better interest rate, Fairley left the dealership. Matherne, however, called Fairley before she had time to check other rates and convinced her to return to Turan-Foley to see what he could offer her through GMAC.

On July 27, 1992, Fairley returned to Turan-Foley and spoke with Matherne and Jimmy Yelverton, the general manager of the dealership. Fairley told them that she wanted her payments to be between $250 and $267 per month for sixty months, and that she wanted credit life and disability insurance, as well as an extended warranty. She took the Eclipse for a test drive, and signed forms for credit life and disability insurance, an application for a certificate of title, and a sheet stating that Turan-Foley would install air conditioning and provide other services (the "We owe" document). The record also indicates that Fairley made a downpayment on the car in the amount of $1,000, which was received by the dealership on July 29. Fairley did not take the car home after the July 27 visit, but instead arranged to pick it up on Friday, July 31.

When Fairley arrived to claim the car on Friday, she spoke with Matherne and reminded him that they still had to complete an agreement regarding financing. Matherne told her that it was all taken care of and that a copy was in the glove compartment. When Fairley examined the supposed agreement, she found that it was not satisfactory for several reasons. First, the piece of paper that was called an agreement by Matherne was actually a partial copy of a finance agreement; that is, the lower portion of the page was missing. Second, this lone piece of paper was not what Fairley anticipated as a contract for the sale of the car. She expected the contract to be in a "pack" of documents. Third, the space on the agreement where the annual percentage rate and the finance charge were located was completely covered by a white sticker, so that the area was blank. When Fairley confronted Matherne with these shortcomings and demanded a complete agreement, Matherne first told her that he could not give her the contract because, as it was late on a Friday afternoon, everything was already locked for the evening. When this information did not appease her, he agreed to write in the area reserved for the annual percentage rate and the finance charge that the annual percentage rate was 8.5 percent for 60 months, he noted on the paper that the original contract could be obtained on Monday, August 3, and he signed this notation. Despite Matherne's assurances that everything was okay, Fairley was bothered by the fact that she had not actually signed what she considered to be a contract, the financing agreement.

On Monday, August 3, 1992, Fairley tried repeatedly by phone to contact Matherne, but he could not be reached. She did, however, leave a message that she wanted her contract. After several unsuccessful attempts to reach Matherne that week, Fairley was phoned by a representative of the dealership on Saturday, August 8, about returning to Turan-Foley to sign papers. Fairley could not go to the dealership at that time because she was about to travel out of town for the remainder of the weekend, but she told the representative that she wanted the papers so that she could consult a lawyer about the transaction. During the conversation, the representative said that he did not want to give the papers to her if she planned to visit a lawyer, but that she should still come to the dealership to sign everything.

While Fairley was away for the weekend, representatives of Turan-Foley paid several visits to her family and friends, harassing them and demanding that Fairley sign the papers. On Monday, August 10, after returning from her trip, Fairley consulted a lawyer about the situation. The attorney recommended that she go to the dealership and obtain copies of all the documents in her file so that the attorney could examine them before Fairley signed the documents. When Fairley and a neighbor visited the dealership, Yelverton, the general manager of the dealership, told Fairley that everything was okay because Turan-Foley had her signature on a financing contract with Mitsubishi, dated July 27. Fairley immediately protested that she had never signed a contract with Mitsubishi, and declared the signature a forgery when Yelverton let her look at the contract. Yelverton refused to give Fairley a copy of the signed contract, and he asked her to leave. ¹

In August, the first payment on the car became due. Fairley hand-delivered to Yelverton a check payable to Turan-Foley. Yelverton first accepted the check, but when he noticed that the payee was Turan-Foley, he returned the check to Fairley's attorney. Fairley sent the check and all future payments directly to Mitsubishi Credit Corporation in Casselberry, Florida, and, according to the record, has never missed a payment. Fairley eventually obtained a copy of the financing contract from Mitsubishi, and learned that she was being charged the annual percentage rate of 11.75 percent rather than 8.5 percent, that she had no disability nor credit life insurance coverage, and that she had not received an extended warranty on the car.

Fairley soon filed a complaint in federal district court alleging violations under the Truth-in-Lending Act, and a state claim of fraudulent inducement into the transaction. After some discovery, Turan-Foley filed a motion for summary judgment. The district court denied the motion, finding that genuine issues of material fact existed. Turan-Foley then filed a motion to reconsider the denial of summary judgment or, in the alternative, to dismiss for lack of subject matter jurisdiction. Upon reconsideration, the district court found that, because Fairley never signed a contract, she was not contractually obligated to purchase the vehicle under Mississippi law. Fairley v. Turan-Foley Imports, Inc., 864 F.Supp. 4, 6 (S.D.Miss.1994). Relying on Jensen v. Ray Kim Ford, Inc., 920 F.2d 3 (7th Cir.1990), the district court found that, because there was no contract under state law, the TILA was inapplicable. Fairley, 864 F.Supp. at 7. Accordingly, the district court found that there remained no basis for jurisdiction over the state claim of misrepresentation and dismissed the suit. Id.

On appeal, Fairley argues that a contract was consummated under Mississippi law. We agree and reverse and remand for trial.

II

From the district court's memorandum order, it is unclear whether it dismissed the case by reconsidering and granting Turan-Foley's motion for summary judgment, or by granting the defendant's motion to dismiss for lack of subject matter jurisdiction. In any event, we review de novo the district court's action. See Musslewhite v. State Bar of Texas, 32 F.3d 942, 945 (5th Cir.1994), cert. denied, --- U.S. ----, 115 S.Ct. 2248, 132 L.Ed.2d 256 (1995) (de novo review of Fed.R.Civ.P. 12(b)(1) motion); Little v. Liquid Air Corp., 37 F.3d 1069 (5th Cir.1994) (en banc) (de novo review of Fed.R.Civ.P. 56 motion for summary judgment).

A

(1)

The purpose of the TILA is to protect the consumer from inaccurate and unfair credit practices, and "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit." 15 U.S.C. Sec. 1601(a). "The TILA reflects a transition in...