Gonzalez v. Schmerler Ford

• Decision Date: 24 April 1975
• Docket Number: No. 73 C 3163.,73 C 3163.
• Citation: 397 F. Supp. 323
• Parties: Roger GONZALEZ, Plaintiff, v. SCHMERLER FORD, Defendant.
• Court: U.S. District Court — Northern District of Illinois

397 F. Supp. 323

Roger GONZALEZ, Plaintiff, v. SCHMERLER FORD, Defendant.

No. 73 C 3163.

United States District Court, N. D. Illinois, E. D.

April 24, 1975.

Ronald Goldberg, DePaul Law Clinic, Chicago, Ill., for plaintiff.

Jay L. Schultz, Chicago, Ill., for defendant.

MEMORANDUM DECISION

MAROVITZ, District Judge.

Plaintiff Roger Gonzalez brings suit against Schmerler Ford, an automobile dealership engaged in selling new and used automobiles at retail to consumers, and charges defendant with violation of the Truth in Lending Act, 15 U.S.C.A. § 1601 et seq., and Federal Reserve Regulation Z, 12 C.F.R. 226, by failing timely to disclose credit information in the sale of a used 1972 Pinto.

The Truth in Lending Act provides that "in connection with each consumer credit sale . . ., the creditor shall disclose . . ." divers items enumerated within the Act relating to the true cost of money or credit so that a consumer may compare rates between lenders or sellers. 15 U.S.C.A. § 1638(a). Bissette v. Colonial Mortgage Corp. of D.C., 340 F.Supp. 1191 (D.D.C.1972), rev'd. on other grounds, 155 U.S.App. D.C. 360, 477 F.2d 1245 (1973). Subsection (b) of 15 U.S.C.A. § 1638 provides that, ". . . the disclosures required . . . shall be made before the credit is extended, and may be made by disclosing the information in the contract or other evidence of indebtedness to be signed by the purchaser." Regulation Z elaborates upon this requirement, stating that "such disclosures shall be made before the transaction is consummated," 12 C.F.R. 226.8(a), and further, that "a transaction shall be considered consummated at the time a contractual relationship is created between a creditor and a customer irrespective of the time of performance of either party." 12 C.F.R. 226.2(cc).

The auto purchase at suit herein involves primarily two documents, one executed October 1, 1973, and one executed October 3, 1973. The October 1 document indicates that the Pinto was to be purchased for the sum of $2255.00, ten dollars of which was to be paid on October 1, and the remaining $2245.00 of which was to be paid on October 3. The October 3 document reflects an installment sales contract detailing a cash down payment, a trade-in on plaintiff's old car, and full disclosure of the credit information required by law. Plaintiff contends that the October 3 document is based upon an oral agreement of October 1 wherein plaintiff agreed to buy the used 1972 Pinto upon the expectation that Schmerler could arrange financing.

The central problem of the suit hinges on the dispute as to whether the document executed by the parties on October 1, 1973, accurately reflects the intention of plaintiff to purchase his car in one cash payment due on October 3, 1973, or whether that document only reflects plaintiff's commitment to buy the car subject to being able to arrange financing, with both parties knowing that a credit sale is contemplated from the outset of the transaction; the former situation would not require credit disclosures on October 1 since the Act has excluded from its coverage transactions in which finance charges are payable in four or fewer installments, 12 C.F.R. 226.2(k), whereas the latter situation arguably would necessitate an October 1 disclosure on the theory that a credit sale was consummated on that date, even though the written installment contract was not executed until October 3.

On February 6, 1974, defendant moved to dismiss the original complaint, which motion was granted pursuant to a Memorandum Opinion filed by this court on March 29. On April 8, 1974, plaintiff filed a motion to vacate our order of March 29, 1974, and for leave to amend his complaint instanter. On May 31, 1974, we filed a second Memorandum Opinion granting plaintiff's motion.

On December 19, 1974, a Final Pretrial Order was entered providing that no witnesses were to be heard and that the case was to be decided by this court, without a jury, on the basis of the written documents filed herein. We proceed to a disposition of the case on the merits.

Initially, two threshold questions must be confronted: (1) is any evidence other than the two documents described above, dated October 1 and October 3, 1973, admissible, and (2) is Schmerler Ford an "arranger of credit" as defined by Regulation Z, 12 C.F.R. 226.2(f).

The defendant objects, based upon the substantive rule concerning parol evidence, to the introduction into evidence of any depositions, affidavits, or documents other than those incorporated into the amended complaint. The parol evidence rule states that when two parties have made a contract and have expressed it in a writing to which they have both assented as the complete and accurate integration of that contract, evidence of antecedent understandings and negotiations will not be admitted for the purpose of varying or contradicting the writing. 3 Corbin on Contracts, § 573. The issues here, however, do not deal with varying the terms of a contract, but rather relate to whether the parties assented to a particular writing as the complete and accurate "integration" of that contract, whether there existed any contract or contracts — oral, written, or both — and when any given contractual relationship was formed. In determining these issues, or any one of them, there is no parol evidence rule to be applied; on these issues, no relevant evidence is excluded. No written document is sufficient, standing alone, to resolve these issues; no one of these issues can be determined by a mere inspection of the written document. 3 Corbin on Contracts, § 573. This case presents the typical hornbook situation for circumstances compelling the examination of parol evidence.

Defendant further argues that he is not an "arranger of credit" and so not covered by the Act. Regulation Z, 12 C.F.R. 226.2(f), provides:

(f) "Arrange for the extension of credit" means to provide or offer to provide consumer credit which is or will be extended by another person under a business or other relationship pursuant to which the person arranging such credit receives or will receive a fee, compensation, or other consideration for such service or has knowledge of the credit terms and participates in the preparation of the contract documents required in connection with the extension of credit. It does not include honoring a credit card or similar device where no finance charge is imposed at the time of that transaction.

The stipulated facts provide that while defendant does not extend credit to customers itself, it does, upon request, regularly assist potential customers in obtaining external credit from third parties to assist the potential customer in the purchase of an automobile. Schmerler generally contacts Ford Motor Credit Corporation, Citizens Bank & Trust Co., or various other financial institutions. Interrogatory No. 5. Defendant may submit as many as ten to fifteen requests for credit per day, according to defendant's finance manager. Duski deposition, p. 13.

It is further stipulated that on October 1, 1973, defendant and the plaintiff prepared a document which was transmitted to Ford Motor Credit Corporation, a potential third party creditor, on October 2, 1973. The document sets forth plaintiff's credit references and certain terms requested by plaintiff. Defendant did not know for certain, however, whether any third parties would be willing to extend credit to plaintiff. Stipulated Fact No. 11.

On October 3, 1973, Ford Motor Credit Corporation telephoned defendant and indicated that it would extend credit to plaintiff. In approving the credit application Ford Motor Credit Corporation did not set the interest rate or amount of monthly interest payments, but rather granted the defendant authority to negotiate an interest rate with plaintiff, which interest rate would be between the maximum allowable interest rate under State law and a minimum interest rate set by Ford Motor Credit Corporation.

Clearly Schmerler Ford has more than just a casual nexus with Ford Motor Credit Corporation. Defendant has stipulated that it prepared the customer statement to be forwarded to the potential creditor, and inasmuch as defendant seems to deal with Ford Motor Credit Corporation on a frequent basis, it contravenes common sense to conclude that it lacks knowledge of Ford's credit terms. We find that through this general knowledge of the credit terms of ...