Hartman v. Meridian Financial Services, Inc.

• Decision Date: 11 March 2002
• Docket Number: No. 01-C-0061-C.,No. 01-C-0060-C.,No. 01-C-0088-C.,No. 01-C-0415-C.,No. 01-C-0424-C.,No. 01-C-0104-C.,No. 01-C-0416-C.,No. 01-C-0254-C.,01-C-0060-C.,01-C-0061-C.,01-C-0088-C.,01-C-0104-C.,01-C-0254-C.,01-C-0415-C.,01-C-0416-C.,01-C-0424-C.
• Citation: 191 F.Supp.2d 1031
• Court: U.S. District Court — Western District of Wisconsin
• Parties: Allen W. HARTMAN and Kimberly M. Hartman, Khay Yang and Bee Yang, Patrick Gums and Shari Gums, Kelly Millard, Terry Reany and Tina Reany, Derrick Jones, Eric Sennholz, Michael Pipp and Kristine Pipp, Plaintiffs, v. MERIDIAN FINANCIAL SERVICES, INC., Defendant.

191 F.Supp.2d 1031

Allen W. HARTMAN and Kimberly M. Hartman, Khay Yang and Bee Yang, Patrick Gums and Shari Gums, Kelly Millard, Terry Reany and Tina Reany, Derrick Jones, Eric Sennholz, Michael Pipp and Kristine Pipp, Plaintiffs, v. MERIDIAN FINANCIAL SERVICES, INC., Defendant.

No. 01-C-0060-C.

No. 01-C-0061-C.

No. 01-C-0088-C.

No. 01-C-0104-C.

No. 01-C-0254-C.

No. 01-C-0415-C.

No. 01-C-0416-C.

No. 01-C-0424-C.

United States District Court, W.D. Wisconsin.

March 11, 2002.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Mary C. Fons, Fons Law Office, Stoughton, WI, for Patrick Gums, Shari Gums, Allen W. Hartman, Kimberly M. Hartman, Kelly Millard, Kristine Pipp, Michael Pipp, Michael Pipp, Terry Reany, Tina Reany, Eric Sennholz, Bee Yang, Khay Yang.

De Vonna Joy, Consumer Justice Law Center, Muskego, WI, for Derrick Jones.

Tomislav Z. Kuzmanovic, Hinshaw & Culbertson, Milwaukee, WI, for Meridian Financial Services, Inc.

OPINION AND ORDER

CRABB, District Judge.

These are civil actions for monetary relief that have been consolidated as case no. 01-C-0060-C. Plaintiffs contend that defendant Meridian Financial Services, Inc. undertook deceptive debt collection practices in connection with its attempt to collect money allegedly owed by plaintiffs for condominium timeshare interests. With the exception of Michael Pipp and Kristine Pipp, plaintiffs have asserted causes of action under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692; the Wisconsin Consumer Act, Wis.Stat. § 427.104(1); and the North Carolina Debt Collection Statute, N.C.GenStat. § 58-70-110. The Pipps have asserted a cause of action under the FDCPA only. In an order dated August 28, 2001, this court dismissed plaintiffs' causes of action brought under the North Carolina Debt Collection Statute. Jurisdiction is present under 28 U.S.C. §§ 1331 and 1367.

Presently before the court are plaintiffs' and defendant's cross-motions for summary judgment. Because I find that defendant violated the Fair Debt Collection Practices Act and Wisconsin Consumer Act, plaintiffs' motion for summary judgment will be granted and defendant's motion for summary judgment will be denied. Under the FDCPA, plaintiffs are entitled to a jury determination as to statutory damages. Trial on damages will go forward on April 29, 2002. After the amount of statutory damages under each act has been determined, plaintiffs will be allowed to submit an itemized statement of attorney fees and costs incurred in bringing these actions and defendant will be allowed to file objections to the amount of fees and costs sought by plaintiffs.

From the proposed findings of fact and the record, I find the following material facts to be undisputed.

UNDISPUTED FACTS

A. Background

On July 15, 1999, Interval Resort and Financial Services, Inc. acquired defendant Meridian Financial Services, Inc. Before the acquisition, C. Wayne Kinser had owned both defendant and Peppertree Resorts, Ltd. Since the acquisition and at all times relevant to this lawsuit, defendant and Peppertree Resorts, Ltd. have had no common ownership, officers or employees. Peppertree Resorts, Ltd. is the parent company of Peppertree Resort Villas, Inc. (In their briefs and proposed findings of fact, plaintiffs and defendant often refer to "Peppertree" generally, making it unclear exactly which Peppertree entity they are discussing. For the purpose of deciding the pending motions, when plaintiffs or defendant refer to "Peppertree," I have construed the reference to mean the Peppertree companies collectively.)

Defendant identified itself as, "Meridian Financial Services, Inc.," a collection agency, on its North Carolina collection agency license renewal application for the period of July 1, 2001 to June 30, 2002. Under "trade name" within the application, defendant listed only itself; it did not list "Peppertree Resorts Ltd. Credit and Collection Department" as a name under which it collects debts.

Since 1989, defendant has regularly attempted to collect debts that are allegedly due another party and has engaged in no other business. As of January 2000, approximately 45% of defendant's business was made up of collections on behalf of Peppertree accounts; the remainder was devoted to collections on other accounts.

B. Plaintiffs' Contracts with Peppertree Resort Villas, Inc.

Peppertree Resort Villas, Inc. sold each plaintiff a condominium timeshare interest at the "Peppertree at Tamarack" resort in Wisconsin Dells, Wisconsin. Peppertree Resorts Villas, Inc. sells timeshare interests regularly and deals in real property, services, money and credit. Each plaintiff purchased his or her timeshare interest (1) for personal, family or household purposes and not for business or commercial purposes; (2) under a land contract from Peppertree Resort Villas, Inc.; (3) in a single transaction, except for plaintiff Sennholz who purchased two timeshare interests in two transactions; and (4) by making a down payment and agreeing to make monthly payments on the contract.

The debt collection at issue arose from loan and maintenance fee debts on plaintiffs' timeshare interests. Plaintiffs' creditor is Peppertree Resort Villas, Inc. Defendant was not a party to any of the timeshare transactions, had no ownership in the alleged debts and never acquired the debts on its own or by assignment. A dispute arose between each plaintiff and Peppertree Resort Villas, Inc. and, as a result, plaintiffs retained legal counsel and stopped making payments.

Plaintiffs entered into one of two versions of the timeshare contracts. The two versions define "default" using slightly different language. The contracts issued to the Reanys, the Yangs, Jones and Sennholz use the following language:

13. DEFAULT: Buyer shall be in default under this Contract if he fails to pay on time, keep any promise, or fulfill any agreement or obligation contained herein or in any of the documents or instruments referenced herein. In the event of a default in the payment of any principal or interest which continues for a period of more than fifteen (15) days following the specified due date, or in the event of a default in the performance of any other obligation under this Contract, either of which continues for a period of thirty (30) days following the Seller's written notice thereof, then the entire outstanding balance under this Contract shall become immediately due and payable in full, at Seller's option.

The contracts issued to the Gumses, the Hartmans, the Pipps and Millard contain the following definition of default:

7. DEFAULT: BUYER agrees that time is of the essence and in the event of a default in the payment of any principal or interest which continues for a period of more than 15 days following the specified due date or in the event of a default in performance of any other obligation of BUYER either of which continues for a period of 30 days following written notice thereof by SELLER (delivered personally or mailed by certified mail), then the entire outstanding balance under this contract shall become immediately due and payable in full, at SELLER'S option.

Defendant collected unpaid debts on behalf of Peppertree Resort Villas, Inc. for the timeshare land contract payments and on behalf of Peppertree Homeowners Association for maintenance fees.

C. Defendant's Contract with Peppertree Resorts, Ltd.

Defendant entered into a contract with Peppertree Resorts, Ltd. in which it was to be Peppertree's "exclusive agent for the collection of unpaid debts." The contract provides that "[Peppertree Resorts, Ltd.], and its Affiliates agree to place all their delinquent loans and maintenance fee and club dues with [defendant] for collection" and that "delinquent loans shall mean any loan whose payment is more than 11 days past due; and delinquent maintenance fee or club dues accounts shall mean any such account which is more than 60 days past due."

The debt collection contract provides that:

"[defendant] shall make no express or implied representation to debtors of [Peppertree Resorts, Ltd.] or any Affiliate that [defendant] occupies any relationship to [Peppertree Resorts, Ltd.] or any Affiliate other than that of an independent contractor. Nothing in this Agreement nor the relationship between the parties hereto shall be construed to create a partnership or joint venture.... [Peppertree Resorts, Ltd.] and its Affiliates hereby authorize [defendant] to use [Peppertree Resorts, Ltd.'s] or its Affiliate's name in all collection activities pursued by [defendant] on accounts placed which are between 11 and 60 days delinquent. In all other circumstances, [defendant] shall use its name and company letterhead in all contacts and transactions with debtors and other persons that may, in any way, be concerned with the Agreement."

Under the terms of the contract, defendant had "sole and exclusive authority and control over the methods and manner of performance" subject to being in "material compliance with all federal, state and local laws and regulations regarding debt collection."

After July 15, 1999, defendant attempted to collect debt from plaintiffs under its own name, Meridian Financial Services, Inc., and under the name "Peppertree Resorts Ltd. Credit and Collection Department." If a loan payment was past due by 11 to 60 days, defendant would attempt to collect the debt under the name "Peppertree Resorts Ltd. Credit and Collection Department." After 60 days, defendant used its own name in its attempts to collect debts from plaintiffs. Defendant did not provide billing services other than debt collection for any of Peppertree's current accounts that were not in default.

Defendant communicated with Peppertree five to ten times daily. Defendant had 24-hour access to Peppertree's computers, which contained Peppertree's customer files. These files could be downloaded to defendant's computers. Defendant's employees did all past due collection on plaintiffs'...