Brown v. Kenron Aluminum and Glass Corporation

• Decision Date: 20 April 1973
• Docket Number: 72-1437.,No. 72-1304,72-1304
• Citation: 477 F.2d 526
• Parties: James BROWN and Rosa Lee Brown, Appellants, v. KENRON ALUMINUM AND GLASS CORPORATION, and Reynolds Aluminum Credit Corporation, Appellees. James BROWN and Rosa Lee Brown, Appellants, v. KENRON ALUMINUM AND GLASS CORPORATION, Appellee, and Reynolds Aluminum Credit Corporation.
• Court: U.S. Court of Appeals — Eighth Circuit

477 F.2d 526 (1973)

James BROWN and Rosa Lee Brown, Appellants, v. KENRON ALUMINUM AND GLASS CORPORATION, and Reynolds Aluminum Credit Corporation, Appellees.

James BROWN and Rosa Lee Brown, Appellants, v. KENRON ALUMINUM AND GLASS CORPORATION, Appellee, and Reynolds Aluminum Credit Corporation.

No. 72-1304, 72-1437.

United States Court of Appeals, Eighth Circuit.

Submitted March 13, 1973.

Decided April 20, 1973.

Robert C. Oberbillig, Des Moines, Iowa, for appellants.

Donald A. Wine, Des Moines, Iowa, for appellee Reynolds.

Before MATTHES, Chief Judge, and ROSS and STEPHENSON, Circuit Judges.

MATTHES, Chief Judge.

These appeals serve to highlight again the narrow range of remedies often afforded unwitting consumers by state law.

James Brown and his wife, Rosa Lee Brown, plaintiff-appellants, signed a contract in December of 1964 in which they agreed to purchase aluminum siding and four aluminum doors for their home from defendant-appellee Kenron Aluminum and Glass Corporation (Kenron). The contract recited a cash sale price of $2,998 payable in an undesignated number of monthly installments of $55.70. At the same time, appellants completed a credit application, which Kenron subsequently submitted to defendant-appellee Reynolds Aluminum Credit Corporation (Reynolds), a wholly-owned subsidiary of Reynolds Metals Company organized for the purpose of extending long-term credit to selected home improvement dealers. The record reveals that apart from Reynolds, Kenron also financed its customers through several local banks. Reynolds approved appellants' credit application and notified them that the "unpaid cash balance" of $2,998 was "payable in 84 monthly installments of $55.68." Appellants were not informed that 84 monthly installments of $55.68 equaled a time price of $4,677.12, in comparison to the quoted cash price of $2,998.

At the time of the signing of the contract, Mr. Brown, whose schooling was limited to the first grade, worked as a night watchman at Camp Dodge at a wage of $283 a month. Mrs. Brown earned $200 a month working in a rest home. They lived with Mrs. Brown's five children in a $3,000 home they were purchasing under a real estate contract calling for monthly payments of $55. According to appellants, they understood the home improvement contract to provide for installation of four doors and fourteen windows at an approximate cost of $1,000. When they were informed that instead they had signed a contract for siding and doors at a cash price of $2,998, they allegedly sought the advice of several persons who told them "there was nothing they could do but try to pay it off as best they could."

After Reynolds approved appellants' credit application, Kenron proceeded to remove the original slate siding from the Brown home and install the aluminum siding and doors. On February 17, 1965, Mrs. Brown signed a completion certificate. On that same date, both appellants executed a promissory note in the amount of $4,677.12, payable in 84 monthly installments of $55.68. And in order to secure the note, they also executed a real estate mortgage on their home. Reynolds purchased the promissory note and mortgage from Kenron on February 23.

From March, 1965 through June, 1966, appellants regularly paid monthly installments on the promissory note to Reynolds. During this period of time Mrs. Brown registered several complaints with Reynolds as to the application of the siding and incompletion of the work. The record shows that Reynolds relayed these complaints to Kenron, and that, on at least one occasion, Kenron made a service call. After June, 1966, appellants fell in arrears on the note, and Reynolds referred the Brown account to an attorney, George G. West. At about the same time, Reynolds purchased the vendor's interest in appellants' real estate contract, allegedly in order to protect Reynolds' security interest in the property. As payments were overdue on the real estate contract when it was acquired by Reynolds, it too was referred to West for collection. Between January 12, 1967, and March 11, 1968, appellants paid West $1,025, of which he applied $348.88 to the real estate contract and $676.12 to the note. On April 5, 1968, an additional $50 was paid by money order. The record does not reveal to which account this last payment was credited. On March 11, 1968, the balance due on the real estate contract was $975.92, and the balance due on the promissory note was $3,167.81.

On May 28, 1968, West served notice of forfeiture of the real estate contract and, on July 1, notice to vacate the premises. Suit for possession was filed on July 22 and later dismissed for improper service of process.

This diversity action was instituted by appellants against Kenron and Reynolds in state court on August 6, and removed by Reynolds to the United States District Court, Southern District of Iowa.

On August 9, 1968, Reynolds filed anew its suit for possession in the state court. That court, however, entered a stay pending the outcome of this action, upon the condition that appellants pay $75 monthly to the court. As of March 29, 1972, appellants had paid $3,009.50 to the state court pursuant to its order.

Appellants' amended complaint filed October 3, 1968, accused Kenron of fraudulent misrepresentation, breach of contract, usury, and unconscionability of contract. Reynolds was charged with fraud, conspiracy to defraud, liability of a principal for acts of its agent, usury and credit harassment.

In response to the amended complaint, defendants filed a motion to dismiss or, in the alternative, for a more definite statement. The trial court, on February 6, 1969, dismissed the usury claims on the ground that they had been improperly pleaded under Iowa law. Otherwise, defendants' motion was denied.

On March 12, 1970, appellants filed a pleading denominated "statement of damages" setting forth specific elements claimed as damages. The claims for relief against each defendant sought compensatory damages for payments made to Reynolds on the promissory note, costs of repairs, the difference between heating bills prior to and after the application of the siding, mental anguish and distress, credit harassment, attorney fees and expenses, and costs of the action. In addition, in Count VI of their amended complaint appellants sought rescission of the contract contained in Exhibit B (real estate contract). Also under each count, appellants requested punitive damages in the sum of $50,000 for the wanton, willful and reckless conduct of the defendants.

On February 3, 1971, the trial court filed an order permitting Kenron's attorney, George West, to withdraw as counsel on the ground that he would be called as a witness in the action. The order also provided that if new counsel failed to enter an appearance within fifteen days, Kenron would be in default without further notice. An attorney for the trustee of the bankruptcy estate of Kenron, which was pending at that time in the Northern District of Illinois, advised the court that Kenron would not appear and defend. Thereafter, a judgment of default was entered against Kenron and in favor of appellants in the sum of $6,400 plus interest.

Reynolds, however, vigorously contested the action.

On May 19, 1972, the trial court filed a memorandum and order finding Reynolds free from fraud or knowledge of fraud. Nor was there any evidence, the court held, that Kenron acted as an agent for Reynolds, that both had conspired to defraud appellants, or that Reynolds or West exceeded their legal rights in attempting to collect payments. The court also declared the real estate contract free of infirmity and, accordingly, refused appellants' request for its rescission.

Having been granted leave to proceed in forma pauperis by the...