Jackson v. Pasadena Receivables

• Decision Date: 11 April 2007
• Docket Number: No. 106, Sept. Term, 2006.,106, Sept. Term, 2006.
• Citation: 398 Md. 611,921 A.2d 799
• Parties: Sheri JACKSON v. PASADENA RECEIVABLES, INC.
• Court: Court of Special Appeals of Maryland

921 A.2d 799

398 Md. 611

Sheri JACKSON v. PASADENA RECEIVABLES, INC.

No. 106, Sept. Term, 2006.

Court of Appeals of Maryland.

April 11, 2007.

Reconsideration Denied June 6, 2007.

Ralph T. Byrd, Laytonsville, for petitioner.

Ronald S. Canter (Harry K. Wolpoff and Robert J. Burstein of Wolpoff and Abramson, L.L.P., Rockville; Michele R. Gagnon of Peroutka & Peroutka, P.A., Pasadena), all on brief, for respondent.

Argued before RAKER, CATHELL, HARRELL, BATTAGLIA, GREENE, and JOHN C. ELDRIDGE and ALAN M. WILNER (Retired, specially assigned), JJ.

WILNER, J.

This case began as a routine collection action in the District Court to recover judgment on a $5,146 credit card debt. The debtor, Sheri Jackson, has never denied that she used the credit card to purchase the items which, together with finance charges, comprise the debt and that, at some point, she simply stopped making payments on the account. Her defense, presented entirely through counsel, was that, because she never signed the credit card agreement and the credit card issuer, Citibank, made no reasonable attempt to obtain her signature, the credit card agreement violates a provision of the Maryland Retail Credit Accounts Law (RCAL), codified at Maryland Code, § 12-503(e)(1) of the Commercial Law Article (CL). As a result, Ms. Jackson claimed that, in accordance with CL § 12-513(a), all of the finance charges that had ever been assessed during the nine years that she used the credit card were forfeited.

Jackson made no effort to calculate the amount of those charges, so, except for an unsworn assertion by Pasadena that they did not exceed $1,745, the record is silent as to what they are — what proportion of the acknowledged $5,146 balance they might be. No counter-claim was filed by Jackson. She simply argued that, because of the statutory violation, neither Citibank nor the plaintiff in the action, Pasadena Receivables, Inc., to which Citibank had assigned the account, was entitled to recover any part of the $5,146 balance.

The District Court found no merit in Jackson's defense and entered judgment for Pasadena. On appeal, the Circuit Court for Baltimore City affirmed the District Court judgment. We granted certiorari and shall affirm the judgment of the Circuit Court.

BACKGROUND

Maryland's RCAL was first enacted in 1967; it now appears as title 12, subtitle 5 of the Commercial Law Article (CL §§ 12-501 through 12-515). Section 12-501(l) defines "retail credit account" as "an agreement or transaction for the retail sale of goods or services, which is negotiated or entered into and pursuant to which a time sale price is established" and adds that the definition "includes credit card financing by a financial institution." Section 12-502(a) requires that every retail credit account established after May 31, 1967 comply with the subtitle. Section 12-512 provides that "[n]o act, agreement, or statement of a buyer may constitute a valid waiver of any benefit or protection provided to him under this subtitle."

The law establishes detailed requirements with respect to retail credit accounts, including maximum interest that may be charged, information that must be disclosed to the buyer, the size of type that must be used to convey certain information, and the frequency with which information must be disclosed. The specific requirement most relevant here is contained in § 12-503(e)(1) — that a retail credit account agreement shall be in writing and that either it shall be signed by the buyer, or the seller or financial institution shall have made a reasonable attempt to obtain the signature of the buyer to the agreement. Section 12-513(a) imposes a civil penalty for violation of the Act: "if a holder violates any provision of this subtitle, no holder may collect or receive any finance charge from the buyer."

Jackson at some point received a credit card from Citibank, a national bank located in South Dakota. With its Statement of Claim, Citibank's assignee, Pasadena, asserted that the account was initially opened in December, 1994, but that the original application and contract had either been destroyed or lost and was unavailable. It attached a 1999 Credit Card Agreement, which set forth the terms and conditions relating to the credit card and its use and, among other things, stated, under the heading "Applicable Law," that "[t]he terms and enforcement of this Agreement shall be governed by federal law and the law of South Dakota, where we are located." There is no place in the agreement for a signature by the holder. Jackson used the card to make purchases for approximately nine years, and, apparently without any objection regarding the absence of a signed agreement, consistently maintained a balance on the card since then.

At the time suit was filed, the balance on the account was $5,146. It was agreed that the account had never been used to obtain cash advances, but only to purchase goods and services, and that it had been validly assigned to Pasadena. Other than the unsworn assertion by Jackson's counsel, there was no evidence that Jackson had not signed an application for the credit card or the original credit card agreement or that no effort had been made by Citibank to obtain her signature. Pasadena refused to stipulate to those assertions by counsel, although its attorney acknowledged that would be her testimony. There never was any testimony by Jackson, however, or by anyone else. The case proceeded solely on the stipulation that Jackson had the account, that she used the account to make purchases but not cash advances, that she kept a balance on the account over a nine-year period, that the principal balance on the account was $5,146, that the account had been assigned to Pasadena, and that the court could consider the documents that had been attached to Pasadena's complaint, among which was the 1999 agreement.

In response to Jackson's RCAL defense, Pasadena noted the choice of law provision in the agreement and pointed out, without contradiction, that South Dakota law allows an account to be opened without a signed application. It urged as well that (1) RCAL was preempted by §§ 85 and 86 of the National Banking Act, (2) a later-enacted Maryland law, § 5-408 of the Cts. & Jud. Proc. Article, provides that credit card agreements do not have to be signed by the buyer and thus, to the extent of that inconsistency, prevails over CL § 12-503(e), and (3) the finance charges that would be subject to forfeit under § 12-503(e) do not, in any event, exceed $1,745. After considering memoranda filed by the parties, the District Court found the choice-of-law argument telling and therefore held that South Dakota law was applicable. Because that law permits a credit card account to be opened without a signed application, the court rejected Jackson's RCAL defense and entered judgment for the agreed amount of $5,146, plus accrued interests, costs, and attorneys' fees allowed under the agreement. The court did not address the preemption issue or any of Pasadena's other arguments, as it was not necessary to do so.

Jackson filed a motion for reconsideration, complaining that the court had considered the 1999 agreement when it was apparent that the account had been opened much earlier. In denying the motion, the court reminded Jackson that, through counsel, she had stipulated that the court could consider that agreement, which was attached to Pasadena's complaint.

On appeal, the Circuit Court affirmed, for the same reason applied by the District Court. The court noted that the "primary issue presented" was whether the (1999) credit card agreement was controlling and the choice-of-law provision in it was enforceable. The court answered both questions in the affirmative. As did the District Court, the Circuit Court turned to Restatement (Second) of Conflicts, § 187(2), which provides that "[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied" unless (a) the chosen State has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen State would be contrary to a fundamental policy of a State which has a materially greater interest than the chosen State in the determination of the particular issue. The court found neither exception applicable.

DISCUSSION

Although there may be other reasons why Jackson's defense would fail, we shall follow the course of the two lower courts and base our decision on the choice of law provision in the credit card agreement. Whether or not rejection of Jackson's RCAL defense would be required as well on a theory of Federal preemption, as argued by Pasadena, our enforcement of the contractual provision is clearly harmonious with the result that would obtain if we applied that doctrine.¹

Jackson has not denied the existence of the 1999 agreement that was attached to Pasadena's Statement of Claim. Her unsworn defense to that agreement is the same as to the initial agreement — she never signed it and Citibank made no attempt to obtain her signature. That defense, as noted, rests principally on three provisions of RCAL: § 12-503(e), which requires either that a retail credit account be signed by the buyer or that the issuer have made a reasonable attempt to obtain the buyer's signature; § 12-512, which precludes a waiver by the buyer of any protection afforded by RCAL; and § 12-513(a), providing that if a holder violates any provision of the subtitle, no holder may collect or receive any finance charge from the buyer.

Undisputedly, the Agreement states that the terms and enforcement of the Agreement shall be governed by Federal law and the law of South Dakota. No one has claimed that there is any Federal law that would require Maryland law to be applied; indeed, in urging its preemption defense, Pasadena insists that Federal law requires application of South Dakota law....