Dryden v. Lou Budke's Arrow Finance Co.

• Decision Date: 24 September 1980
• Docket Number: No. 79-1694,79-1694
• Parties: Hilda DRYDEN, Appellant, v. LOU BUDKE'S ARROW FINANCE COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 641

630 F.2d 641

Hilda DRYDEN, Appellant, v. LOU BUDKE'S ARROW FINANCE COMPANY, Appellee.

No. 79-1694.

United States Court of Appeals,

Eighth Circuit.

Submitted March 11, 1980.

Decided Sept. 24, 1980.

Toby H. Hollander, Hollander & Vaughan, St. Louis, Mo., for appellant.

Phillip B. Sachs, Sachs & Miller, St. Louis, Mo., for appellee.

Before LAY, Chief Judge, HENLEY, Circuit Judge, and HANSON, ^* Senior District Judge.

HANSON, Senior District Judge.

This is a suit under the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., to recover statutory damages for the defendant's alleged failure to comply with the disclosure provisions of the TILA and Federal Reserve Board Regulation Z, 12 C.F.R. Part 226. The case was tried to the district court, which, without ruling on the alleged violations, held that the TILA does not apply to the "unusual, if not bizarre, set of facts" underlying the case, and that even if the TILA does apply, the defendant is relieved of liability under 15 U.S.C. § 1640(b). See Dryden v. Lou Budke's Arrow Finance Co., No. 79-94C(B) (E.D.Mo., July 12, 1979). We reverse and remand for further findings.

I.

The tale of the tangled transaction begins with the purchase by one Nathaniel Foster of a used car-a lemon, as it proved itself to be. Foster bought the car on credit on December 2, 1977, from an auto dealer in St. Louis, Missouri. The circumstances of Foster's purchase are not at issue here. Suffice it to say that financing was provided by defendant-appellee, Lou Budke's Arrow Finance Company (Budke's); ¹ a friend of Foster's, Romelia Mitchell, co-signed with him on the retail installment contract, the security agreement, and the note that were executed in connection with the sale; the amount to be paid off in monthly installments was $2,165.04, which sum included a finance charge of $607.32, and $147.22 for credit insurance on the life and health of Romelia Mitchell; the contract, security agreement and note were duly assigned to Budke's, to which the 36 monthly payments were to be made; and on the day of the purchase the auto dealer assigned its certificate of title to the car to Foster, who proceeded to apply for a new certificate in his name, all in accordance with Missouri law. A certificate of title was issued in Foster's name on January 12, 1978, showing the lien in favor of Budke's.

The first payment, in the amount of $60.14, was due on January 1, 1978. Unfortunately, Foster died on December 29, 1977, leaving his estate and Mitchell still obligated to pay for the car. Enter the plaintiff-appellant, Hilda Dryden. Dryden, an elderly home care visiting nurse, who badly needed a car for her personal use, was a friend of Foster's sister, Willie May Gooseby. Gooseby, who was administratrix of Foster's estate, suggested that Dryden "take over" Foster's car. Mitchell and Budke's proved willing to cooperate. The subsequent transaction between Dryden and Budke's is the subject of this lawsuit.

"The evidence," the district court said, "leaves in doubt the precise nature of the transaction." Leaving aside for the moment all question of the understandings or intentions of the parties on this issue, what happened is this. Dryden and Gooseby went by prearrangement to Budke's office on January 25, 1978. At that time the January 1 payment on the car was delinquent; Mitchell was in possession and title remained in Foster's name. Dryden and Gooseby had brought with them the monthly payment coupon book that had been issued to Foster. The agent of Budke's who handled the transaction crossed Foster's name out of the coupon book and wrote in Dryden's. Dryden paid the delinquent January payment and also the payment due on February 1. Gooseby then took Dryden to Mitchell's home to pick up the car. The next day, January 26, Dryden returned to Budke's office. Budke's agent had by then retrieved from their place of storage the retail installment contract, security agreement, and note signed in December by Foster and Mitchell. Dryden read these documents, they were discussed with her by Budke's agent, and it was explained to her that the terms of Foster's original finance transaction would remain in effect as to her, except that an adjustment would be made with respect to the premium for credit insurance on Mitchell, which would be cancelled. ² Dryden then added her signature to the note. So far it appears that Dryden simply assumed Mitchell's and Foster's existing obligation, and that Budke's accepted her as an obligor under that obligation. See 12 C.F.R. § 226.8(k).

There remained, however, the question of how title to the car was to be put in Dryden's name. As the district court pointed out, it would not have been necessary for this purpose to involve Budke's at all: "(Dryden) could have purchased the car directly from Foster's estate with the understanding that as payment therefor she would make the monthly payments due under the Foster-Mitchell contract." Such a course would have been consistent with Dryden's assumption of the Foster-Mitchell obligation. Instead, what the parties did by way of trying to put title in Dryden's name makes their transaction appear to be a hapless attempt at the sale of the car by Budke's to Dryden. Thus, while she was in Budke's office on January 26, Dryden apparently signed an application for a certificate of title and left it with Budke's. On the same day, Budke's agent swore out an affidavit of repossession, alleging that Budke's had repossessed the car from Foster and was holding it. Budke's proceeded to apply for a certificate of title in its name; one was issued to it on February 21, 1978. The plan, in which Gooseby and Mitchell apparently acquiesced, was that the title would be assigned to Dryden by Budke's once Budke's had title in its name. ³

"The best-laid schemes o' mice an' men/Gang aft agley,/An' lea'e us nought but grief and pain,/For promised joy!" Quite apart from the irregular title-transferring procedures adopted by the parties, ⁴ the car, as noted, was a lemon. Dryden testified as follows at the trial:

Q. (By counsel for Dryden) What was the condition of this car when you did get it?

A. (By Dryden) It never did run. It never run. The record is with AAA how many times they towed it. They towed it so many times they were talking about canceling me off. We went to University City (Romelia Mitchell's) and picked it up. It went to smoking (apparently because of some electrical problem) before we could get into St. Louis, into town with it. I got home with it and the next morning I called AAA.

Dryden had the car towed three separate times, in the approximately three weeks she had it, to the auto dealer that had originally sold it to Foster.

A. (By Dryden) * * * (W)hen I carried it back the last time, the third time it was carried there I told them if you can't fix it I don't want it. * * * But I said if you can fix the car I want the car. * * * I called about three times and they said it wasn't ready. So then I didn't hear no more and weeks rolled on and I called Lou Budke's and they couldn't give me no information. They couldn't give me no information about the car and I never did see the car no more. I never heard no more.

At length Dryden had her son drive her to the auto dealer's place of business. The car was not on the lot. When Dryden saw this, she began calling Budke's on the phone, and on one occasion she went to Budke's office, asking for the return of the $120.28 she had paid on January 25. Budke's consistently refused her request. Budke's evidently deemed Dryden to have abandoned the car and the financing transaction, and, having title in its name already, proceeded to sell the car to one Tommy Fobbs on May 10, 1978.

Dryden finally went for help in getting her money back to Legal Services of Eastern Missouri. By letter to Budke's dated October 27, 1978, a Legal Service attorney demanded a refund on behalf of Dryden by November 7, or else "we will file our claim in court." The demand letter, perhaps written on the basis of only partial information, fully adopted the "sale" theory of the transaction between Dryden and Budke's:

In January 1978, Ms. Dryden discussed with you the financing of (a car) which your company had repossessed from a previous owner. She paid One hundred twenty dollars and twenty-eight cents to you toward the purchase of this automobile. However, prior to her receiving the title to this car she rescinded her agreement for purchase because of the defective nature of this car.

It is Ms. Dryden's opinion, and ours as her counsel, that she is entitled to a full refund of the money she has paid to you thus far. According to § 301.210 R.S.Mo.:

". . . the sale of any motor vehicle or trailer registered under the laws of this state, without the assignment of such certificate of ownership, shall be fraudulent and void."

In that title to the car was not transferred, your company has no claim to Ms. Dryden's funds, and by this letter we demand that she receive this refund.

The demand letter also requested "a copy of any financing agreement between Ms. Dryden and Arrow Finance relevant to this transaction."

Budke's refunded Dryden's $120.28 on November 6, 1978. Legal Services evidently referred Dryden to private counsel for further consideration of any TILA claim she might have. This suit was filed on January 25, 1979. Dryden's complaint alleges, inter alia, that she entered into a consumer credit transaction with Budke's on January 26, 1978 that was subject to the TILA; and that in connection with that transaction Budke's violated the disclosure provisions of the TILA and Regulation Z in numerous specified respects. Dryden claims statutory damages in the sum of $1,000, plus court costs and her reasonable attorney's fees. See 15 U.S.C. § 1640(a).

II.

The district court held as follows. After concluding that the January 26, 1978 transaction between Dryden and Budke's cannot have been a valid sale of the car to...