Harrison v. Goodyear Service Stores, 51022

• Decision Date: 07 January 1976
• Docket Number: No. 51022,No. 3,51022,3
• Citation: 137 Ga.App. 223,223 S.E.2d 261
• Court: Georgia Court of Appeals
• Parties: Marie G. HARRISON v. GOODYEAR SERVICE STORES, etc

Page 261

223 S.E.2d 261

137 Ga.App. 223

Marie G. HARRISON v. GOODYEAR SERVICE STORES, etc.

No. 51022.

Court of Appeals of Georgia, Division No. 3.

Jan. 7, 1976.

Ernest V. Harris, Gainesville, John L. Cromartie, Jr., Atlanta, for appellant.

Greer, Sartain & Carey, J. Nathan Deal, Gainesville, for appellee.

STOLZ, Judge.

This is an appeal from an order granting foreclosure on a security agreement executed by Marie Harrison, the appellant, in favor of Goodyear Service Stores, the appellee, on February 4, 1974. Appellant purchased various appliances from Goodyear under sales agreements subject to the Retail Installment and Home Solicitation Sales Act, Code Ann. § 96-9 (hereinafter the Installment Sales Act). As each item was purchased, she signed a new sales contract incorporating the previous unpaid balance, less rebates on unearned finance charges and credit life insurance, into the new time price. The new contract was secured by unpaid collateral from the current and prior contracts. Appellant made timely payments on the contract until September, 1974, at which time further payments were discontinued. On March 21, 1975, Goodyear accelerated the unpaid balance and filed an application to foreclose pursuant to Code Ann. Ch. 67-7.

Ms. Harrison appeals from the order granting this application on the grounds that the contract violated the Installment Sales Act, thereby requiring forfeiture of finance charges and consequent recomputation of the unpaid balance, which would show that appellant was not yet in default at the time of acceleration. Held:

Whether Goodyear may foreclose its security interest depends upon whether Harrison was in default. The sales contract sub judice shows that the buyer was to make 35 payments of $60 and a final payment of $18.19, totaling $2,118.19. However, appellant Harrison owed Goodyear only $1,578.19, inclusive of taxes, credit life insurance and finance charge. Standing alone, Goodyear's use of 36 payments might not be a serious infraction; however, Goodyear also computed the finance charge on the basis of 36 monthly payments when the contract would be paid in full at the end of 27 months. ¹ Hence, the sales contract upon which Goodyear based its application to foreclose is violative of the Installment Sales Act.

Under Code Ann. § 96-910(b), a violation of the Act bars recovery of any finance, delinquency, or collection charge. It is of no consequence that the excessive charges may have resulted from an inadvertent error or that Goodyear may have orally offered to reduce the amount for which it sued Harrison. The amount that Goodyear might ultimately collect is not determinative of whether it violated the Installment Sales Act. Rather, it is the amount that Goodyear charged the appellant at the time it accelerated her unpaid balance that placed it in violation of the Act. In Reese v. Termplan, Inc., Bolton, 125 Ga.App. 473, 188 S.E.2d 177, we held that the Installment Sales Act was violated at the time the seller attempted to accelerate the unpaid balance. In the present case, to allow Goodyear to avoid the statutory forfeiture by a 'good faith' offer to correct an excessive time-price computation would not only ignore our decision in Reese, supra, but would severely dilute the penalty provisions of Code Ann. § 96-910. If a seller is allowed to change his time-price differential after it is determined that his charges violated the Act, then we render the penalty provided in § 96-910(b) totally ineffective, since forfeiture of finance charges deters no one if the violation may be erased and forfeiture thus avoided by a simple offer to reduce the amount charged. The civil penalty provisions of the Installment Sales Act are two-fold: § 96-910(b) provides for forfeiture of finance, delinquency or collection charges for a violation of § 96-903(d) or § 96-904(b), whereas § 96-910(c) provides a monetary penalty for a wilful violation of any provision of the Act.

Normally, the forfeiture of all finance charges would not affect one's right to repossess secured property, provided there has been a default. However, since the forfeiture of finance charges requires a recomputation of the amount owed, it may be determined whether or not a default has occurred. For example, if A owes B $100 to be paid $10 a month for 10 months under a retail sales contract, $40 of which is an unlawful time-price differential, then if A 'defaults' after paying $60 and B sues to foreclose on secured property, could we grant B's application? If the time-price differential violates Code Ann. Ch. 96-9, then B forfeits all of it, leaving a $60 debt, which A has already paid. A is not in default. To hold otherwise would allow B to repossess collateral for which he has received all that he is entitled to under the law. It...