Copley v. Rona Enterprises, Inc.

• Decision Date: 14 June 1976
• Docket Number: Civ. A. No. C-2-74-480.
• Citation: 423 F. Supp. 979
• Parties: Delbert C. COPLEY and Dicie Copley, Plaintiffs, v. RONA ENTERPRISES, INC. and Capital Savings & Loan Co., Defendants.
• Court: U.S. District Court — Southern District of Ohio

423 F. Supp. 979

Delbert C. COPLEY and Dicie Copley, Plaintiffs, v. RONA ENTERPRISES, INC. and Capital Savings & Loan Co., Defendants.

Civ. A. No. C-2-74-480.

United States District Court, S. D. Ohio, E. D.

June 14, 1976.

Phillip M. Walther, Columbus, Ohio, for plaintiffs.

Joel H. Mirman, Edward F. Chuha, Roland T. Gilbert, Columbus, Ohio, for defendants.

OPINION

DUNCAN, District Judge.

This is a civil action brought pursuant to Chapter 1 of Title I of the Consumer Credit Protection Act of 1968, known as the Truth in Lending Act, Pub.L. No. 90-321, 82 Stat. 146, set out at 1968 U.S.Code and Admin. News, p. 176 et seq., as amended, 15 U.S.C. § 1601 et seq. Under 15 U.S.C. § 1640(e), the United States District Courts have jurisdiction, concurrent with that of "any other court of competent jurisdiction," to adjudicate civil actions brought under the Act within one year of the date of the alleged violation. The parties have submitted certain issues in this case for a determination upon stipulated facts. The questions presented include whether an April 24, 1974, purchase agreement signed by plaintiffs and by defendant Rona Enterprises, Inc. violated the disclosure requirements of the Act, and whether adjudication of the state law claims asserted in this case would be a proper exercise of this Court's pendant jurisdiction.

The stipulations of the parties include the following:

(1) Plaintiffs entered into a "purchase agreement" (Exhibit 1) on April 24, 1974 for the purchase of a new Homette mobile home.

(2) The signatures appearing on the "purchase agreement" are genuine, and the attached copy of the "purchase agreement" is a true, unaltered copy thereof.

(3) The "retail installment contract and security agreement" (Exhibit 2) dated May 21, 1974 does not contain the genuine signature of either of the plaintiffs.

(4) The monetary figures appearing on Exhibit 2 are exactly the same as on Exhibit 1.

(7) Rona assigned Exhibit 2 to Capital, representing it to be a document signed by plaintiffs in connection with the purchase of the same mobile home.

(8) Capital had no knowledge of the existence of Exhibit 1, or of the fact that the signatures on Exhibit 2 were not genuine until after the filing of the within action.

(10) Plaintiffs have made three payments of $85.84 each, and have made no payments to Capital since ____, and the books and records of Capital show that there is due on said account the sum of $3,785.37.

(11) Plaintiffs have lived in said mobile home since May, 1974 and continue to live in said mobile home as of this date.

(12) On July 24, 1974, plaintiffs delivered to defendants Rona and Capital a letter in which they asserted a right to rescind due to the alleged failure on the part of Rona Enterprises, Inc. to comply with those provisions of the Truth in Lending Act.

(13) Rona Enterprises has not returned the down payment or payments made by plaintiffs, and both Rona and Capital allege that there is no right of rescission in this transaction.

(16) The term of the credit life insurance issued in connection with the transaction which is the subject of this suit runs for 60 months, which term equals the length of the obligation allegedly set forth in Exhibits 1 and 2.

(17) Rona Enterprises, Inc. is an Ohio corporation and is a dealer in mobile homes. In the ordinary course of its business, Rona regularly offered to assist in the obtaining of consumer credit extended by another company. In these instances, Rona prepared the contract documents and assigned them to various companies which extended credit to the Rona customers.

(18) Capital Finance Corporation is a corporation authorized to do business in the State of Ohio, and regularly extends and offers to extend credit in the ordinary course of its business, charging a finance charge when credit is extended by it.

The April 24, 1974, agreement to which plaintiffs and defendant Rona are signatories is styled "Form 100 Purchase Agreement UCC § 2-201." The document provides that "subject to the terms and conditions stated on both sides of this agreement seller defendant Rona agrees to sell and the purchaser plaintiffs Delbert and Dicie Copley agrees to purchase the following described property: a Homette mobile home Model 264114 FRB." Rona signed on a line under which appeared the following language: "Approved, Subject to acceptance of financing by bank or finance company." The first numbered paragraph on the reverse of the document is underlined and contains the following language:

In the event the transaction referred to in this order is not a cash transaction, the purchaser herein before, or at the time of delivery of the trailer, mobilehome or vehicle ordered, and in accordance with the terms and conditions of payment indicated on the face of this order, will either execute a retail installment contract, security agreement, or such other form of agreement as may be required by law. Title to said equipment shall remain in the Seller, until the agreed purchase price therefor is paid in full in cash, or a time payment contract has been executed, and accepted by a bank or finance company; thereupon title passes to purchaser even though actual delivery may be made at a later date.

The fifth numbered paragraph on the same side of the document is as follows:

Upon failure or the refusal of the purchaser to complete said purchase within 30 days of contract date, or an agreed extension thereof for any reason (other than cancellation on account of increase in price) the cash deposit may have such portion of it retained as will reimburse the dealer for expenses and other losses including attorney fees occasioned by purchaser's failure to complete said purchase. In the event a used car, trailer or mobilehome has been taken in trade, the purchaser hereby authorizes the dealer to sell said property, at public or private sale, and to deduct from the proceeds thereof a sum equal to the expenses and losses incurred, or suffered, by the dealer by reason of purchaser's failure to complete the transaction. Dealer shall have all the rights of a seller, upon breach of contract, under the Uniform Commercial Code 2-708, 2-710, 2-718, of the Uniform Sales Act (as applicable) provided the total amount of liquidated damages shall not exceed twenty (20%) percent of the cash sales price or $500 (whichever is lower) except in Wisconsin in which Sec. 218.01 with a penalty no greater than 5% of vehicle cash price shall prevail.

The stipulations of the parties indicate that the retail installment contract and security agreement of May 21, 1974, was never signed by plaintiffs, although it was "assigned" by defendant Rona to defendant Capital Savings & Loan Company. Defendant Rona insists that in the absence of some evidence of indebtedness, the April 24, 1974, transaction did not fall within the terms of the disclosure requirements of the Act.

The complaint was filed on October 15, 1974, and concerns an April 24, 1974, purchase agreement. After the complaint was filed in this Court, the Truth in Lending Act was amended¹ by Titles III and IV of an Act of October 28, 1974, Pub.L. No. 93-495, 88 Stat. 1500, set out at 1974 U.S. Code Cong. and Admin.News, pp. 1724, 1737 et seq. Under §§ 308 and 416 of the 1974 amendments, most changes in the Act are effective either upon enactment or one year thereafter, and are therefore not pertinent to the resolution of the issues presented in this case. Pursuant to § 408(e) of the 1974 amendments, the modifications contained in §§ 406, 407 and 408 of the amendments

shall apply in determining the liability of any person under chapter 2 15 U.S.C. §§ 1631-44 or 4 15 U.S.C. §§ 1666-1666j of the Truth in Lending Act, unless prior to the date of enactment of this Act such liability has been determined by final judgment of a court of competent jurisdiction and no further review of such judgment may be had by appeal or otherwise.

§ 408 amended 15 U.S.C. § 1640(a), which governs civil liability under the Act, while §§ 406 and 407 added subsections (f) and (g) to 15 U.S.C. § 1640. The law which the Court must apply in this case is therefore the Truth in Lending Act as it existed upon enactment in 1968, except that the Court will apply 15 U.S.C. § 1640 as amended by §§ 406-408 of the Act of October 28, 1974.

The April 24, 1974, purchase agreement signed by the Copleys and by defendant Rona is by its terms a contract for the extension of credit. The face of the agreement reflects a trade-in allowance of $1,000.00, and a cash down payment of $4,000. It reflects an unpaid balance of $3700.00, a finance charge of $1225.89, a charge of $154.51 for credit life insurance, a total deferred payment price of $10,150.40, and an annual percentage rate of 11.27%. While Rona's "approval" of the agreement is expressly contingent upon acceptance of financing, the purchasers' responsibility under the agreement is unconditional. The first paragraph on the reverse side of the agreement provides that the purchaser "before, or at the time of delivery of the trailer, mobilehome or vehicle ordered, and in accordance with the terms and conditions of payment indicated on the face of this order, will either execute a retail installment contract, security agreement, or such other form of agreement as may be required by law." The fifth paragraph provides that the purchasers are liable in damages to the seller if they fail to "complete the purchase" within thirty days, or an agreed extension.

It is apparent, then, that under the terms of the April 24, 1974, agreement, plaintiffs contractually bound themselves not only to purchase the mobile home, but also to purchase it on the credit terms set out on the face of the purchase agreement. Rona Enterprises, Inc. retained for itself the right to withdraw its agreement to sell, if financing was unavailable, but Rona left the purchasers no independent contractual right to escape the credit terms of the purchase agreement. Rona secured...