In re Stewart

• Decision Date: 08 December 1988
• Docket Number: Bankruptcy No. 87-06121S,Adv. No. 88-0359S.
• Citation: 93 BR 878
• Parties: In re Alfred STEWART, Debtor. Alfred STEWART, Plaintiff, v. CREDITHRIFT OF AMERICA CONSUMER DISCOUNT CO., INC., and Louis Abrahamsen, t/a Century Carpet & Contractors, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

93 B.R. 878 (1988)

In re Alfred STEWART, Debtor Alfred STEWART, Plaintiff, v. CREDITHRIFT OF AMERICA CONSUMER DISCOUNT CO., INC., and Louis Abrahamsen, t/a Century Carpet & Contractors, Defendants.

Bankruptcy No. 87-06121S, Adv. No. 88-0359S.

United States Bankruptcy Court, E.D. Pennsylvania.

December 8, 1988.

Hilda Burgos, Community Legal Services, Inc., Philadelphia, Pa., for debtor.

John A. Wetzel, Philadelphia, Pa., for Abrahamsen.

Arnold Lieberman, Marlena Siegel, Philadelphia, Pa., for defendant/CREDITHRIFT.

Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

The instant little adversarial proceeding presents to us a glimpse of the dark side of the marketplace, revealing that, as in the 1960's, the poor may still pay far more for everyday consumer goods than more affluent members of the community. See D. CAPLOVITZ, THE POOR PAY MORE, 81-104 (1967); and W. MAGNUSON & J. CARPER, THE DARK SIDE OF THE MARKETPLACE, 32-41, 75-76, 118-20 (1968). As described in those documentaries, describing the lot of low-income consumers in the 1960's, we find that merchants who charge — and get — exorbitant prices for consumer goods and finance companies which protect them through probable feigned innocence of the merchants' activities are alive and well in the late 1980's. It also exemplifies that consumer protection legislation of the 1970's is available to protect disadvantaged consumers from some of the practices recognized as unfair in the 1960's, but that new devices contrived by ghetto merchants to circumvent such remedial legislature require a liberal interpretation of such legislation to blunt such exploitation. Cf. In re Fleet, Fleet v. United States Consumer Council, Inc., 95 B.R. 319, 331-336 (Bankr. E.D.Pa.1988) (Recommendation of Bankruptcy Judge to District Court).

Given our belief that the transaction here is representative of the worst sort of exploitive tactics, we do not hesitate to find both the Seller and the Finance Company involved in this transaction as potentially liable under the full extent of legislation of the 1970's, which we believe must be liberally interpreted to discourage these tactics. However, the victimized Debtor-consumer's settlement with the Seller here limits his damages to the agreed figure of $2,500.00. An express limitation written into the consumer legislation which allows the Debtor to pursue the finance company restricts his claims against that party to the $437.64 paid by the Debtor under the parties' contract. In light of many statutory violations implicated in the instant transaction and the reduction in their respective liabilities as a result of the aforementioned limitations, we have no hesitancy striking any security interest of the Finance Company in the goods in question and in imposing the Debtor's reasonable attorney's fees and costs incurred in prosecuting this proceeding against both Defendants, jointly and severally.

B. PROCEDURAL HISTORY

The Debtor, REVEREND ALFRED STEWART (hereinafter referred to as "the Debtor"), a 62-year-old part-time "field minister and evangelist" who, with his 74-year-old disabled, non-debtor spouse Gertrude, subsists on Social Security and SSI disability benefits, filed the Chapter 13 bankruptcy case underlying this proceeding on December 8, 1987. After five continuances, a year later we have scheduled his Confirmation hearing for what we have specifically stated will be the last time on December 13, 1988.

The instant adversary proceeding was filed on February 26, 1988. Named as Defendants were CREDITHRIFT OF AMERICA CONSUMER DISCOUNT CO. (hereinafter "the Finance Company") and JOHN DOE, trading as CENTURY CARPET & CONTRACTORS (hereinafter "the Seller"). In rather modest and vague fashion, the Complaint alleged that, on February 27, 1987, the Debtor had purchased a television (hereinafter "TV") and a video cassette recorder (hereinafter "VCR") from the Seller in which the cash price, though stated on the contract to be $2,090.00, was in fact "approximately $900.00." Consequently, the Defendants were said to be liable to the Debtor under the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. (hereinafter "TILA"); the Pennsylvania Goods and Services Installment Sales Act, 69 P.S. § 1101, et seq. (hereinafter "GSISA"); the applicable Pennsylvania usury law, Act No. 6 of 1974, 41 P.S. § 101, et seq. (hereinafter "Act 6"); and the Pennsylvania Unfair Trade Practices and Consumer Protection law, 73 P.S. § 201-1, et seq. (hereinafter referred to by its generic designation as a law regulating unfair and deceptive acts and practices, or "UDAP"), in certain undesignated sums. Both Defendants answered; in his Answer, the Seller identified himself as Louis Abrahamsen.

The matter came before us for trial on June 23, 1988. The Debtor's testimony registered a few surprises for all involved, including, apparently, his own counsel. In particular, he stated that his wife had signed the contract in blank in his home and that he had never remitted the $190.00 disclosed on the contract as a downpayment, a fact unlikely to be fabricated. The Debtor also attempted to call as a witness Alieda Garcia, a paralegal in his counsel's office, as a witness to the Seller's pricing policies derived from her experience in a subsequent investigatory visit to the Seller's place of business. Unfortunately, we were compelled to sustain objections to much of her testimony as hearsay and irrelevant, because she attempted to relate conversations from unidentified store personnel and she did not observe or price the same items as were sold to the Debtor.

Mr. Abrahamsen then took the stand and admitted the key element that the Debtor was trying to prove through Ms. Garcia's testimony: that he marked up items greater than twice their retail price in order to accommodate his liberal credit policies. Jack Breen, a Finance Company officer, attempted to establish his employer's distance from the unseemly pricing aspects of the transaction, stating that the Finance Company concentrated only on the amount advanced to the Debtor and his ability to repay it, and not on what was sold to the Debtor. He also stated that the Debtor had made but six payments of $72.94 pursuant to the contract, a total of $437.64.

In light of the surprises to her during the trial, the Debtor's counsel orally moved, at the conclusion thereof, to amend the Complaint to add claims for additional TILA violations arising from the misstatement that the Debtor had made a downpayment, thus inflating the cash price further but making it appear to the Finance Company that the Debtor had additional equity in the items purchased. See Bankruptcy Rule (hereinafter "B.Rule") 7015 and Federal Rule of Civil Procedure (hereinafter "F.R. Civ.P.") 15(b). Since the Defendants objected to this motion, we issued an Order of June 24, 1988, directing the Debtor to file a motion to amend the Complaint and to file a Brief supporting both the motion to amend and his position on the merits of the proceeding on or before July 8, 1988, with the Defendants to respond by July 15, 1988. The parties each requested an extension of these time-periods and the Debtor ultimately filed a motion to amend the complaint and Proposed Findings of Fact and Conclusions of Law, based on the proposed Amended Complaint, on August 5, 1988. The Finance company filed an Answer to the Amended Complaint, apparently indicating lack of opposition to the motion to amend, and a Brief in support of its position on August 22, 1988. The Seller opposed the motion to amend and it was listed for a hearing on September 6, 1988. On that day, we granted the motion, but allowed the Seller additional time for filing an answer and taking discovery, and we offered the parties an opportunity to present any supplementary evidence on October 20, 1988.

The October 20, 1988, hearing was continued to October 27, 1988, at which time we were advised that the Debtor and the Seller had reached a settlement and that neither the Debtor nor the Finance company wished to supplement the record. At its request, we allowed the Finance Company until November 7, 1988, to file a supplemental Brief. On October 31, 1988, the Seller and the Debtor signed a Stipulation whereby the Seller agreed to pay the Debtor $2,500.00 in satisfaction of all of the Debtor's claims against the Seller except attorney's fees, liability for which was still at issue, on or before November 18, 1988. We declined a request that we approve this Stipulation because its approval appeared contrary to B.Rule 7041 and F.R.Civ.P. 41(a). However, we do not doubt that its terms are enforceable as between the parties to it and we therefore shall work the terms of the Stipulation into our Order.¹

The facts, as between the remaining parties contesting the merits, i.e., the Debtor and the Finance Company, are mostly undisputed. Nevertheless, pursuant to B.Rule 7052 and F.R.Civ.P. 52(a), we are obliged to present our decision in the form of Findings of Fact and Conclusions of Law. We shall include our discussions of the rather interesting legal issues presented directly after the respective Conclusion of Law to which they are pertinent.

C. FINDINGS OF FACT

1. In early February, 1987, the Debtor called the Seller on the telephone in response to an advertising circular concerning availability of appliances and furniture on credit at the address of a store known as "M. London," located at 500 West Girard Avenue in a low-income neighborhood of Philadelphia.

2. The Debtor, as mentioned above, an elderly part-time minister with limited income, informed the Seller via the telephone that he was interested in purchasing a 25-inch color TV and a VCR on credit. The Seller proceeded to elicit from him all of the information necessary to fill out a credit application in the telephone conversation.

3. Several days later, on February 27, 1987, the...