Chancellor v. Gateway Lincoln-Mercury, A98A1226.

• Decision Date: 22 June 1998
• Docket Number: No. A98A1226.,A98A1226.
• Citation: 233 Ga. App. 38,502 S.E.2d 799
• Parties: CHANCELLOR et al. v. GATEWAY LINCOLN-MERCURY, INC. et al.
• Court: Georgia Court of Appeals

502 S.E.2d 799

233 Ga. App. 38

CHANCELLOR et al. v. GATEWAY LINCOLN-MERCURY, INC. et al.

No. A98A1226.

Court of Appeals of Georgia.

June 22, 1998.

Barnes, Browning, Tanksley & Casurella, Roy E. Barnes, Marietta, Michael K. Jablonski, Atlanta, John R. Bevis, Marietta, Neal H. Howard, Atlanta, for appellants.

Denney, Pease, Allison & Kirk, Ray L. Allison, Page, Scrantom, Sprouse, Tucker & Ford, W.G. Scrantom, Jr., George G. Boyd, Jr., Columbus, for appellees. ELDRIDGE, Judge.

On November 29, 1993, Peggy Chancellor and Betty Mitchell, her mother, plaintiffs-appellants, entered into a written retail installment sales contract with Gateway Lincoln-Mercury, Inc. ("Gateway"), defendant-appellee, to purchase a used 1985 Honda Prelude. The written contract showed a cash price of $4,383.50, an unpaid cash balance of $3,983.50 after deducting the $400.00 cash down payment, and $4,343.39 financed. The amount financed consisted of $51.55 credit life insurance, $171.88 credit disability insurance, $16.50 license, title, and registration fees, $120 for Roadguard service, $359.89 for "charges and amount paid to others on your behalf," and the balance of cash due as $3,983.50, totaling $4,343.39. The finance charge was shown as $1,384.69 at 27 percent annual percentage rate ("APR") for 24 payments of $238.67, beginning on January 13, 1994. The total payments were shown as $5,728.08. "The total cost of your purchase on credit, including your downpayment of $400.00 was $6,128.08."

Gateway provided to Mercury Finance Company of Georgia ("Mercury"), defendant-appellee, the buyer's order and plaintiffs' credit application for financing approval. In the buyer's order, the plaintiffs agreed to purchase the car for $4,450, conditioned upon credit approval. Subsequent to the execution of the buyer's order and prior to the execution of the contract, Gateway lowered the purchase price to $4,254.50. Robert Smith, Mercury's agent, approved the creditworthiness of the plaintiffs and agreed to the assignment of the contract at a discounted amount, provided Gateway closed the sale. Smith notified Gateway of the approval, the amount to be financed, the APR, and terms of the contract, as well as the discount that Gateway must accept for Mercury to take an assignment of the contract. Gateway never increased the purchase price to recoup, in whole or in part, the discount fee.

The retail installment sales contract provided in its very terms an immediate and automatic assignment from Gateway to Mercury, as soon as plaintiffs executed the contract.

After the plaintiffs executed the contract and all other paperwork, the original contract was delivered by Gateway to Mercury. Mercury inspected the paperwork and determined that Gateway had properly filled out the contract. Mercury took the assignment and then paid Gateway the face amount of the contract, less the discount of $450 for the assignment of the retail installment sales contract. Mercury retained the $450 as part compensation for financing and administering the installment sale. Mercury never gave the discount, or any portion of the discount, back to the car dealer.

The discount was deducted from the face amount of the purchase contract, i.e., price and sale of intangible rights in the contract and the total cost of the purchase on credit. Gateway considered the $450 discount as the cost of doing business with Mercury. Gateway's profit on the transaction was reduced by the discount of $450.

While Gateway is not in the business of loaning money or financing cars, it arranged for the financing in order to permit the plaintiffs to purchase the car and so Gateway could receive immediate payment. Gateway knew that there would be a discount charged by Mercury, but did not know the exact amount until Mercury approved the financing and informed Gateway of the amount prior to the execution of the contract. At no time did either Gateway or Mercury disclose to the plaintiffs that a discount of the face amount of the purchase price and intangible rights sold in the contract would be charged Gateway for the assignment by Mercury or, after the assignment, that the contract had been discounted $450.

1. Plaintiffs' first enumeration of error is that the trial court erred on summary judgment in determining that the $450 discount fee is not a finance charge that must be disclosed. We do not agree.

This contract formation constituted a five-step transaction, leading to written and oral agreements: (1) the written buyer's offer by plaintiffs, after the negotiation of the purchase terms for the used car and intangible rights with the seller, Gateway, contingent upon financing by Mercury; (2) an oral offer by Mercury to Gateway, in which Mercury agreed to finance the purchase of the used car and other intangible property rights on specified financing terms, if Gateway used the form retail installment contract which made Mercury the third party beneficiary and provided for automatic assignment to Mercury and if Gateway paid a discount fee of $450; (3) a counter-offer in writing made by Gateway to the plaintiffs in the form of the final retail installment sales contract with automatic assignment to Mercury; (4) plaintiffs' acceptance by execution of the retail installment sales contract, and Gateway's performance by delivery of the car and evidence of the intangible property to plaintiffs; and (5) acceptance and full performance by Gateway of Mercury's oral offer to Gateway by delivering the unaltered and executed retail installment sales agreement to Mercury for discounted payment.

Thus, the nature and origin of the discount fee must be determined from an analysis of the evidence: was it a finance charge, coming out of the loan proceeds only; was it part of the purchase price of the used car and intangible property sold to the plaintiffs, coming from the seller's proceeds of the sale; or was it part of the retail installment sales contract, i.e., sale of property, finance charges, and interest? Even if other lenders would receive similar treatment, such discount may well reflect only market forces at work to induce the purchase of the chattel paper. There was no evidence that on a cash purchase of the used car the plaintiffs would have received the same intangible rights for $450 less than the plaintiffs were obligated to pay under the agreement. The record shows that Gateway had already reduced the purchase price of the car $196 immediately prior to the contract execution, and there is no evidence that further price reduction was possible. Thus, after the defendants showed from the record the absence of damages, plaintiffs had the duty to come forward with evidence and failed to present any evidence to raise an issue of fact that they were damaged by the discount fee.

Therefore, if the $450 came out of the sales price for the used car and the intangible rights sold to the plaintiff, then such discount fee was part of the purchase price and could not be a finance charge.

The discount fee represented either the reduction from the value of Gateway's intangible property, i.e., the sales proceeds from the car and for the intangible property sold or the value of the entire retail installment sales contract, which reflected the fair market value of such intangible property when reduced to immediate cash value. OCGA §§ 44-1-3; 44-1-7. When the plaintiffs executed the contract, Gateway acquired an inchoate right or chose in action to the sales price of $4,254.50, as well as finance charges and interest, totaling $5,728.08, which was an assignable property right and which Gateway immediately assigned to Mercury at a prearranged discount price. OCGA §§ 44-12-22; 44-12-23; 44-12-24; Evans v. Brown, 196 Ga. 634, 639, 27 S.E.2d 300 (1943); William Iselin & Co. v. Davis, 157 Ga.App. 739, 742, 278 S.E.2d 442 (1981). The "non-UCC law is clear that all chooses in action arising upon contract, including accounts receivable, may be assigned so as to vest title and the right to sue on them in the assignee. E.g. Chattahoochee Holdings v. Marshall, 146 Ga.App. 658, 660(1), 247 S.E.2d 167 (1978); Andrews v. Adams Drive, Ltd., 142 Ga.App. 32, 33(3), 234 S.E.2d 835 (1977); see [OCGA § 44-12-22]." William Iselin & Co. v. Davis, supra at 742, 278 S.E.2d 442. Gateway had the absolute right to sell such uncollected chose in action for payment of installments by the plaintiffs for whatever price that such chose in action could bring in the fair market.

Gateway, acting on its own behalf and as agent for Mercury, negotiated the sale of such chattel paper prior to the execution of the contract by the plaintiffs, because Gateway and Mercury had concurrent interests in the transaction that also coincided with the plaintiffs' interest in obtaining financing. See OCGA §§ 11-9-102; 11-9-103(1), (3), and (4); 11-9-105(1)(b); 11-9-107(b); Continental Oil Co., etc. v. Sutton, 126 Ga.App. 78, 79, n. 1, 189 S.E.2d 925 (1972).

"[I]f the creditor separately imposes a charge on the consumer to cover certain costs, the charge is a finance charge if it otherwise meets the definition. For example: —A discount imposed on a credit obligation when it is assigned by the seller-creditor is not a finance charge [unless] the discount is [ ] separately imposed on the consumer. (See [12 CFR] § 226.4(a)(2).)" 12 CFR § 226.4(a)(1)(iii)(A)(2). In this case, under the contract, Gateway is the seller-creditor because Gateway sold the property on credit under the retail installment sales contract to the plaintiffs, even though it simultaneously assigned the contract without recourse at a discount to Mercury under the Truth in Lending Act ("TILA"). See 12 CFR § 226.2(a)(17)(i).

"The finance charge includes the following types of charges ... (6) Charges imposed on a creditor by another person for purchasing or accepting a consumer's obligation, if the consumer is required to pay the charges in cash, as an addition to the...