Decato Bros., Inc. v. Westinghouse Credit Corp.

• Decision Date: 22 July 1987
• Docket Number: No. 86-494,86-494
• Citation: 129 N.H. 504,529 A.2d 952
• Parties: DECATO BROTHERS, INC. v. WESTINGHOUSE CREDIT CORPORATION.
• Court: New Hampshire Supreme Court

Page 952

529 A.2d 952

129 N.H. 504

DECATO BROTHERS, INC. v. WESTINGHOUSE CREDIT CORPORATION.

No. 86-494.

Supreme Court of New Hampshire.

July 22, 1987.

R. Peter DeCato P.A., of Lebanon (R. Peter DeCato, on brief and orally), for plaintiff.

Cleveland, Waters & Bass, of Concord (Craig L. Staples, on brief and orally, and David W. Rayment on brief), for defendant.

JOHNSON, Justice.

The defendant appeals from the granting of summary judgment to the plaintiff and the denial of its cross-motion for summary judgment by a Master (Louie C. Elliott, Esq.) approved by the Superior Court (Smith, J.). The issue presented is whether the trial court erred in failing to apply the doctrine of accord and satisfaction to bar recovery in this case, notwithstanding its finding that the loan contract did not comply with the requirements of RSA chapter 399-B. We reverse.

In 1982, the plaintiff, a trucking dealership, obtained two commercial loans from the defendant in order to finance its business operations. The first loan was dated August 13, 1982, in the amount of $80,000, evidenced by a note of the same date calling for repayment of $111,581.76 in sixty monthly installments. The second loan, dated November 20, 1982, totalled $232,880.88, and was evidenced by a note calling for repayment of $295,200 in thirty-six monthly installments.

The loan documents for each loan reflected the principal amount financed, the number of monthly payments, the amount due per month, the length of the obligation, and the total amount due at maturity. The rate of interest was not specifically recited in the notes, however, and neither note contained any provision regarding prepayment.

At some point prior to maturity, the plaintiff found substitute financing with Hanover Bank & Trust Company (Hanover). Hanover contacted the defendant and asked for a "pay-off figure" for discharge of the obligations owed by the plaintiffs. The defendant quoted a pay-off figure of $271,433.92, which represented the remaining principal due plus prepayment penalties calculated under the so-called "Rule of 78's." On August 3, 1983, with the aggregate balance at $315,014.57, the plaintiff, acting through Hanover, tendered to the defendant a check for $271,433.92 with an accompanying letter stating that the amount represented "payment in full for DeCato Bros., Inc. obligation...." The defendant accepted and cashed the check, discharged the plaintiff's notes, and released its security interest in the plaintiff's equipment. Notwithstanding this "settlement," the plaintiff brought suit, seeking to recover all interest paid and the prepayment penalties.

The master's report of November 3, 1986, rejected the defendant's claim of accord and satisfaction, held that the notes violated RSA chapter 399-B, granted the plaintiff's motion for summary judgment, and awarded the plaintiff $49,025.15, plus costs and interest. The damages included all of the interest paid to the defendant, plus the prepayment charge. The defendant appeals.

The proper approach to this case necessarily involves an in-depth inquiry into the doctrine of accord and satisfaction. An accord and satisfaction may properly be defined as "a method of discharging a contract, or setting aside a cause of action ... by substituting for such contract or cause of action an agreement for the satisfaction thereof and the execution of such subsequent agreement." 1 Am.Jur.2d Accord & Satisfaction § 1 at 301 (1962). The following are the essential elements of an accord and satisfaction: (1) proper subject matter; (2) competent parties; (3) an assent or meeting of the minds; (4) a consideration. Rossi v. Stewart, 90 Ariz. 207, 210, 367 P.2d 242, 244 (1961).

The plaintiff argues that the notes are illegal under RSA chapter 399-B and that, therefore, the loan agreements in this case do not fall within the "proper subject matter" requirement of accord and satisfaction. In addressing this argument, we must discuss RSA chapter 399-B as it relates to this case.

Our threshold question in this regard is whether RSA chapter 399-B applies to commercial borrowers, as opposed to consumer borrowers. We begin with the language of the statute. RSA 399-B:2 provides:

"Any person engaged in the business of extending credit shall furnish to each person to whom such credit is extended, concurrently with the consummation of the transaction or agreement to extend credit, a clear statement in writing setting forth the finance charges, expressed in dollars, rate of interest, or monthly rate of charge, or a combination thereof, to be borne by such person in connection with such extension of credit as originally scheduled."

RSA 399-B:1, III defines "person" as "any individual, partnership, association, corporation, or unincorporated organization." Thus, the language of the statute on its face appears to contemplate protection for commercial as well as consumer borrowers. Further, RSA 399-B:1, I defines "credit" as "any loan, residential mortgage, deed of trust, advance, or discount; any conditional sales contract; any contract to sell, or sale, or contract of sale of property or services ... any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or money; any purchase, discount, or other acquisition of, or any credit upon the security of, any obligation or claim arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose or effect."

(Emphasis added.) Although this language may be vaguely descriptive of consumer-related credit transactions, the statute's use of the word "any" compels the conclusion that the legislature intended a broad sweep.

In the absence of legislative history or case law to the contrary, the plain meaning of the statute controls. See RSA 21:2; In re Robyn W., 124 N.H. 377, 379, 469 A.2d 1351, 1352 (1983). The fact that virtually all of the case law that has interpreted RSA chapter 399-B has involved consumer borrowers, see, e.g., Brunelle Aluminum Prods., Inc. v. Caron, 113 N.H. 730, 313 A.2d 736 (1973); First Fed. Savings & Loan Ass'n v. LeClair, 109 N.H. 339, 253 A.2d 46 (1969); American Home Improvement Co. v. MacIver, 105 N.H. 435, 201 A.2d 886 (1964), is not controlling. Our task is to discern the legislative intent as derived from the statutory language, In re Robyn W. supra, and our analysis compels us to hold that RSA chapter 399-B does apply to commercial borrowers.

The defendant cites American Home Improvement Co. v. MacIver, 105 N.H. 435, 201 A.2d 886 (1964), in support of its contention that the statute does not reach the commercial borrower. In that case, this court noted that "[d]isclosure statutes are designed to inform the uninformed and this includes many average individuals who have neither the capability nor the strength to calculate the cost of the credit that has been extended to them." Id. at 438, 201 A.2d at 887. Although this language certainly denotes the express inclusion of the consumer borrower within the statutory terms, it does not exclude the commercial borrower. American Home Improvement supra states only that the "uninformed" to whom the protections of RSA chapter 399-B extend includes consumers, leaving open the question whether the commercial borrower is within the class entitled to protection. Thus, the defendant's reliance on this case is unavailing, and we are left with the statutory language as our guide.

We now must consider whether the loan documents in this case are in violation of the disclosure requirements of RSA chapter 399-B. The statute requires a clear statement in writing setting forth the finance charges, expressed in dollars, rate of interest, or monthly rate of charge, or a combination thereof. In this case, the loan documents reflected the principal amount financed, the number of monthly payments, the amount due per month, the length of the obligation, and the total amount due at maturity. The rate of interest was not specifically recited in the notes, however, nor was any explicit "finance charge" specifically stated. Clearly, this is not compliance with the statute.

The defendant argues that the rate of interest and its amount in this case could be readily ascertained by a simple comparison of the principal amount financed with the face amount of the notes. That this may be so does not vitiate noncompliance with the statute, and the argument fades in the light of the clear language of the act. Brunelle Aluminum Prods., Inc. v. Caron, 113 N.H. 730, 313 A.2d 736 (1973), also cited by the defendant, is not like the present case. In Brunelle, the credit agreement gave the dollar cost of the loan, which this court held to be "a 'clear statement in writing setting forth the finance charges, expressed in dollars...." ' Id. at 731, 313 A.2d at 737 (quoting RSA 399-B:2). In the case at bar, however, the loan documents contained no independent figure reflecting the cost of the loan. Thus, lacking is "even a token compliance with the statute." American Home Improvement, supra 105 N.H. at 437, 201 A.2d at 887.

We...