Bragg v. Bill Heard Chevrolet, Inc., No. 03-11384.

• Decision Date: 25 June 2004
• Docket Number: No. 03-11384.
• Citation: 374 F.3d 1060
• Parties: Randal S. BRAGG, Robert I. Crabtree, et al., Plaintiffs-Appellants, v. BILL HEARD CHEVROLET, INC. — PLANT CITY, WFS Financial, Inc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

374 F.3d 1060

Randal S. BRAGG, Robert I. Crabtree, et al., Plaintiffs-Appellants, v. BILL HEARD CHEVROLET, INC. — PLANT CITY, WFS Financial, Inc., et al., Defendants-Appellees.

No. 03-11384.

United States Court of Appeals, Eleventh Circuit.

June 25, 2004.

Keith E. Hope, The Hope Law Firm, P.A., Holmes Beach, FL, J. Daniel Clark, Clark, Charlton & Martino, P.A., Tampa, FL, for Plaintiffs-Appellants.

Joseph H. Lang, Jr., Carlton Fields, St. Petersburg, FL, Chris S. Coutroulis, D. Matthew Allen, Marty Solomon, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa, FL, for Defendants-Appellees.

Thomas D. Domonoske, Harrisonburg, VA, for Amicus Curiae, Nat. Ass'n of Consumer Advocates.

Roger Slade, Pathman, Lewis, P.A., Miami, FL, for Amicus Curiae, FL Auto. Dealers Ass'n.

Appeal from the United States District Court for the Middle District of Florida.

Before BLACK, BARKETT and STAHL^*, Circuit Judges.

STAHL, Circuit Judge:

The issue before us is whether the district court correctly determined that plaintiff-appellant Randal Bragg failed to state a claim under the Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA") against defendant-appellee Bill Heard Chevrolet Inc.-Plant City ("Bill Heard"). We hold that Bragg's complaint does state a claim under TILA, and reverse the decision below.

I. BACKGROUND

We take the following recitation of facts from Bragg's amended complaint. See La Grasta v. First Union Securities, Inc., 358 F.3d 840, 845 (11th Cir.2004); Omar v. Lindsey, 334 F.3d 1246, 1247 (11th. Cir.2003). Bill Heard is licensed in Florida as a motor vehicle dealer and a motor vehicle retail installment seller. On September 28, 2001, Bragg visited Bill Heard and decided to purchase a new 2002 Chevrolet Silverado truck. As a down payment, Bragg paid six hundred dollars in cash and traded in his 1994 Ford Escort, which Bill Heard valued at five hundred dollars.

On that day, Bragg signed one Standard Purchase Contract ("Purchase Contract # 1") and two standard Florida Simple Interest Vehicle Retail Installment Contracts ("RISC # 1" and "RISC # 2"). Bill Heard did not sign these documents. Purchase Contract # 1 listed the selling price of the truck as $19,253.34, plus a Silencer Alarm ("SAP") for $399.00 and Vehicle Theft Registration ("VTR") for $199.00.¹ RISC # 1 listed an annual percentage rate ("APR") of 14.65 percent, a finance charge of $10,947.33, and amount financed of $21,158.91. RISC # 2 listed an APR of 14.50 percent, a finance charge of $10,642.05, and amount financed of $21,158.91. Both RISCs included insurance and debt cancellation coverage ("GAP Protection") for a charge of $495.00.² Bill Heard is listed as the "Creditor-Seller" in the RISCs.

Bragg also signed a Bailment Agreement for Vehicle Spot Delivery ("Bailment Agreement"). This permitted Bragg to take possession of the new vehicle immediately. The Bailment Agreement explicitly incorporated the terms of the Purchase Contract.

On October 1, 2001, Bill Heard contacted Bragg and requested that he sign additional documents. This time Bragg signed two new Purchase Contracts ("Purchase Contract # 2" and "Purchase Contract # 3") and two new RISCs ("RISC # 3" and "RISC # 4"). Purchase Contract # 2 listed a selling price of $18,993.00, plus an Extended Service Contract price of $990.00, while Purchase Contract # 3 listed a selling price of $18,993.00. Neither of these two Purchase Contracts contained charges for VTR and SAP. RISC # 3 listed an APR of 14.89 percent, a finance charge of $11,699.11, and an amount financed of $22,176.18, while RISC # 4 listed an APR of 14.89 percent, a finance charge of $11,102.69, and an amount financed of $21,046.09. All four of these contracts were backdated by Bill Heard to the date of Bragg's first visit, September 28, 2001. None of the contracts were executed by Bill Heard.

On October 5, Bill Heard assigned RISC # 4 to Triad Financial Corporation, and Triad issued payment to Bill Heard for $19,982.24. This RISC was the only one signed by Bill Heard.

Central to Bragg's claims is Bill Heard's "spot delivery" procedure. Here, we stress again that at this stage, we must accept as true the well-plead factual allegations in Bragg's complaint, as well as all inferences from those allegations in the light most favorable to Bragg. La Grasta, 358 F.3d at 845; Omar, 334 F.3d at 1247. Under "spot delivery," the customer is presented with a Purchase Agreement, RISC, and Bailment Agreement. Bill Heard then delivers the car to the customer "on the spot" on the same date that the customer signs the documents, and allows him or her to take the car without the passage of title. The customer in return typically makes a cash deposit or trades in an existing vehicle as a down payment. Bragg contends that customers like him are "under the impression they have purchased a car under certain sales and finance terms." On occasion, Bill Heard will notify a customer that it was not able to secure the financing rates agreed to in the documents and ask them to sign new agreements with less favorable financing terms. If a new RISC is executed, the financing terms are calculated from the date of actual delivery of the vehicle to the customer. According to Bragg, Bill Heard never executes the original RISCs. Instead, it uses the initial lower financing rates to entice the customers under a "bait and switch" scheme. Bragg also asserts that Bill Heard requires forfeiture of the down payment or trade-in vehicle if the customer refuses to accept the new financing terms.³

On November 30, 2001, Bragg filed a class action suit against Bill Heard in state court on behalf of himself and several other similarly situated customers. The complaint set forth five counts: (1) violations of Florida's Deceptive and Unfair Trade Practices Act, Fl. Stat. §§ 501.201, et seq.; (2) unjust enrichment; (3) violations of TILA and Regulation Z; (4) violations of Florida's Motor Vehicle Retail Sales Finance Act, Fl. Stat. §§ 520.01, et seq.; and (5) declaratory and injunctive relief. Bragg's TILA claim asserted that Bill Heard (1) failed to make required TILA disclosures prior to the buyer's consummation of credit terms; (2) failed to include in the finance charge the costs of credit insurance products sold in connection with the credit transaction, when it had failed to make the required disclosures as a precondition to excluding those charges from the finance charge; (3) failed to accurately disclose credit terms; (4) failed to state clearly that the APRs in the first two RISCs were "estimates"; and (5) failed to disclose any amounts it paid to third persons on Bragg's behalf.

Bill Heard removed the case to federal district court and on April 16, 2002, it moved to dismiss all of Bragg's claims pursuant to Fed.R.Civ.P. 12(b)(6). On September 1, 2002, the district court granted in part and denied in part Bill Heard's motion to dismiss and granted Bragg leave to file an amended complaint. We need not set forth each of the district court's dispositions in this first order.

On September 25, 2002, Bragg filed an amended complaint. In turn, Bill Heard moved to dismiss the TILA claim, arguing that Bragg never consummated a transaction with it in which a TILA violation occurred. On January 24, 2003, the district court dismissed the TILA claim with prejudice and declined to exercise supplemental jurisdiction over Bragg's remaining state law claims. It concluded that Bragg never consummated either of the first two RISCs because the relevant agreements contained an unsatisfied condition precedent: specifically, neither party was "bound" until Bill Heard sold either of the RISCs to another lender.

On January 29, 2003, Bragg filed a motion for rehearing. On February 14, in a published opinion, the district court again held that the first two RISCs were never consummated and hence no TILA violated occurred. Bragg v. Bill Heard Chevrolet, Inc., 245 F.Supp.2d 1235 (M.D.Fla.2003). The court also rejected Bragg's renewed argument that Bill Heard failed to clearly state that the APRs in the first two RISCs were "estimates" and thus in violation of TILA. Id. at 1238-39.

This appeal followed.⁴

II. DISCUSSION

A. Applicable law

We review a district court's dismissal for failure to state a claim de novo. Behlen v. Merrill Lynch, 311 F.3d 1087, 1090 (11th Cir.2002). In dismissing a complaint, the facts alleged therein must be taken as true and the district court must determine "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir.1993). Contract interpretation is a question of law that we review de novo. Southland Distrib. Mktg. Co., Inc. v. S & P Co., 296 F.3d 1050, 1053 (11th Cir.2002) (citing Gymco Constr. Co., Inc. v. Architectural Glass and Windows, Inc., 884 F.2d 1362, 1364 (11th Cir.1989)).

TILA's declaration of purpose states, in relevant part:

The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms ... would be strengthened by the informed use of consumer credit. The informed use of credit results from an awareness of the cost thereof by consumers. It is the purpose of this subchapter 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, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.

15 U.S.C. § 1601(a). As a remedial statute, TILA must be construed liberally in favor of the consumer. Ellis v. Gen. Motors Acceptance Corp., 160 F.3d 703, 707 (11th Cir.1998); Cody v. Cmty. Loan Corp. of Richmond County, 606 F.2d 499, 505 (5th Cir.1979).⁵

When a creditor sells...