Citibank (South Dakota), NA v. Gifesman

• Decision Date: 01 May 2001
• Docket Number: (AC 20556)
• Citation: 773 A.2d 993,63 Conn. App. 188
• Parties: CITIBANK (SOUTH DAKOTA), N.A. v. MARK GIFESMAN
• Court: Connecticut Court of Appeals

63 Conn. App. 188

773 A.2d 993

CITIBANK (SOUTH DAKOTA), N.A. v. MARK GIFESMAN

(AC 20556)

Appellate Court of Connecticut.

Argued February 27, 2001.

Officially released May 1, 2001.

Spear, Dranginis and Peters, Js.

Jonathan J. Klein, for the appellant (defendant).

Robert J. O'Hara, with whom, on the brief, were Steven M. Greenspan and Mario R. Borelli, for the appellee (plaintiff).

Opinion

PETERS, J.

In this commercial appeal, a bank issued a secondary credit card at the request of its customer, the holder of a primary credit card. The applicable credit card agreement imposed liability on the primary cardholder for sums charged against the secondary credit card. The principal issue before us is whether § 1643 of the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq., overrides the credit card agreement so as to excuse the defendant, in whole or in part, from making the payments requested by the issuer. This is an issue of first impression in this state. The trial court held the primary credit card holder fully liable. We agree.

The plaintiff, Citibank (South Dakota), N.A., brought an action to collect $48,825.37 from the defendant, Mark Gifesman, for charges on two credit card bills that arose from the use of an authorized secondary credit card in the name of Alexei Popov, then a resident of Russia. The defendant denied his liability and filed a counterclaim in three counts. He charged the plaintiff with breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq.

The court ruled in favor of the plaintiff both on its own claim and on the counterclaim filed by the defendant. The defendant has appealed from both parts of the judgment against him.

LIABILITY OF THE DEFENDANT

TO THE PLAINTIFF

Throughout this case, the defendant has relied on 15 U.S.C. § 1643 as the source of his defense against liability to the plaintiff. He has not challenged the validity or applicability of the terms of the credit card agreement that impose such liability on him.¹ Under federal law, the defendant's liability may not exceed $50 if the plaintiff fails to prove² that disputed credit card charges were made by a person with "actual, implied, or apparent authority for such use and from which the cardholder receives no benefit."³ (Emphasis added.) 15 U.S.C. § 1602 (o). The court found that the plaintiff had established the defendant's ineligibility for such relief.

This court's review of the trial court's factual findings is limited. Unless a finding of fact is clearly erroneous, it must be sustained on appeal. Practice Book § 60-5; see Pandolphe's Auto Parts, Inc. v. Manchester, 181 Conn. 217, 221, 435 A.2d 24 (1980), and its progeny. It does not matter whether the findings are supported by indirect or direct evidence. See, e.g., State v. Figueroa, 235 Conn. 145, 163-64, 665 A.2d 63 (1995); State v. Boucino, 199 Conn. 207, 228, 506 A.2d 125 (1986); State v. Mazzetta, 21 Conn. App. 431, 433-35, 574 A.2d 806, cert. denied, 216 Conn. 807, 580 A.2d 64 (1990). We are not persuaded that the findings in this case were clearly erroneous.

The defendant focuses much of his argument on his claim that the court improperly found that unidentified users of a secondary credit card had apparent authority to use the card and that such use on their part subjected the defendant to liability. The undisputed facts show that, in April, 1995, the defendant requested from the plaintiff a secondary card in the name of Popov, a person unknown both to the plaintiff and to the defendant. The defendant's request was made at the behest of Vladislav Kharkover, a Russian acquaintance. Kharkover agreed to pay for charges arising out of the use of the Popov card and to pay the defendant a $25 monthly fee.⁴ To facilitate use of the Popov card abroad, the defendant sent Kharkover supporting documentation, including a copy of his own social security card. The Popov card was used extensively in Germany between July 18 and July 28, 1995, resulting in charges totaling $36,076.66.⁵

On July 20, 1995, the plaintiff notified the defendant of the attempted use of the Popov card for cash advances,⁶ the only activity associated with the Popov card of which the plaintiff was then aware.⁷ The following day, the plaintiff again contacted the defendant to ascertain, once more, whether the defendant wanted to block further use of the Popov card. On both occasions, the defendant asked the plaintiff not to cancel or block the card. On July 22, 1995, the plaintiff recorded the Popov card as possibly lost or stolen. The defendant never requested cancellation of the Popov card, and the plaintiff did not do so sua sponte.⁸

On the basis of this record, the court found that the defendant had conferred apparent authority on Popov to use the credit card. The defendant disputes the relevance of that finding in light of the plaintiffs acknowledged inability definitively to establish the identity of the users of the card. In the defendant's view, without such proof of identity, the defendant is shielded from liability. The defendant has not indicated how such a burden could be met when the issuer has no way of obtaining information about the ultimate users of a secondary card. As the court noted, if anyone had the better opportunity to obtain such information, it would have been the defendant, not the plaintiff.

The court found that, more likely than not, the user who obtained the cash advance was Popov. It found that a third person reasonably could believe that the user in question had the power to act on the authority of the defendant. Numerous cases cited by the plaintiff support the court's holding. See Towers World Airways, Inc. v. PHH Aviation Systems, Inc., 933 F.2d 174 (2d Cir. 1991); Draiman v. American Express Travel Related Services Co., 892 F. Sup. 1096 (N.D. Ill. 1995); Walker Bank & Trust Co. v. Jones, 672 P.2d 73 (Utah 1983), cert. denied sub nom. Harlan v. Interstate Bank of Utah Co., 466 U.S. 937, 104 S. Ct. 1911, 80 L. Ed. 2d 460 (1984). In our review of this finding, we are struck by how little has been disclosed about the transactions underlying this litigation. The record reveals nothing about the nature of the relationship between the defendant, Popov and Kharkover or of the intended use of the Popov card. We do not know whether the defendant has attempted to recover the amounts at issue from Kharkover in his role as guarantor. For that matter, no documentation attests to that role. We know nothing about how the card came to be used in Germany rather than in Russia. In short, the record raises more questions than it answers.

We conclude, therefore, that judicial prudence warrants our waiting for another case to decide the novel issue of the scope of authorized use of a secondary credit card. This course is open to us in light of the court's finding, in addition to its finding on authorization, that the defendant was not entitled to protection under the federal Truth in Lending Act because he had received a benefit for his role in the procurement of the Popov card.

The defendant does not dispute that he received a monthly stipend of $25 from Kharkover. He does not claim that the stipend arose from some other unrelated transaction. Similarly, he does not claim that only payments by Popov himself would qualify as a "benefit." He does not argue that the amount of the benefit was too insubstantial to qualify as a "benefit" as that term is used in the federal statute's definitional section, 15 U.S.C. § 1602 (o).⁹ Indeed, he has not revealed whether that stipend continues to be paid or when it was terminated. The defendant argues instead that, pursuant to 15 U.S.C. § 1643 (a),¹⁰unauthorized uses may not be charged against a credit card holder. He apparently fails to recognize the significance of the definition of "unauthorized" use in 15 U.S.C. § 1602 (o), which excludes from that category any transaction in which the cardholder receives any "benefit." See footnote 9. Under that definition, the Kharkover stipend, without more, made use of the Popov card an authorized use thereof.

The parties agree that the object of the federal Truth in Lending Act was to provide protection only for consumer credit card holders. For the purposes of determining authority for the use of a secondary credit card, Congress chose to define the dividing line between consumer and commercial transactions by reference to whether the cardholder had received any "benefit" from the issuance of such a credit card. Contrary to the view of the defendant, on the issue of authorized credit card use, the act did not incorporate the possibly broader definition of "consumer" contained in 15 U.S.C. § 1602 (h).¹¹ To the extent that these definitional sections are in conflict, the specifically applicable section, 15 U.S.C. § 1602 (o), takes precedence over the more general one. State v. State Employees' Review Board, 239 Conn. 638, 653, 687 A.2d 134 (1997).

In light of the specific provisions of the Truth in Lending Act, the defendant is mistaken in his assertion that payment of the stipend "for accommodating his friend's business" had "no bearing" on whether the Popov card had been put to unauthorized use. By its own unambiguous terms, the Truth in Lending Act provides the necessary bearing.

We conclude, therefore, that the plaintiff met its burden of proof that enforcement of the terms of the credit card agreement against the defendant does not violate the federal Truth in Lending Act. Because the defendant received a monetary benefit from the issuance of the secondary credit card to Popov, the subsequent use of that card was authorized as a matter of both federal and state law.

THE DEFENDANT'S COUNTERCLAIM

The defendant's counterclaim contained three counts. The defendant claimed that the plaintiff had failed to honor obligations arising out of (1) its...