Johns v. Ford Motor Credit Co., s. 88-2091
| Citation | 551 N.E.2d 179,49 Ohio St.3d 84 |
| Decision Date | 28 February 1990 |
| Docket Number | Nos. 88-2091,89-165,s. 88-2091 |
| Parties | JOHNS, Appellee, v. FORD MOTOR CREDIT COMPANY, Appellant. WACKERLY, Appellee, v. FORD MOTOR CREDIT COMPANY, Appellant. |
| Court | United States State Supreme Court of Ohio |
Syllabus by the Court
1. The cash price of a specified good in a retail installment sale is an amount agreed to in good faith by the parties which does not include service and finance charges. R.C. 1317.01(K).
2. Inclusion of the negative equity from a trade-in in the cash price of a specified good does not violate R.C. 1317.07 if the parties so agree in good faith.
The facts are stipulated.
Appellee, Jan M. Wackerly, entered into an agreement with Wally Armour Ford, Inc. ("Wally Armour") on May 3, 1985 to purchase a new 1985 Ford Escort. On June 9, 1986, a similar agreement was made between appellee, William R. Johns, and Wally Armour to purchase a new 1986 Ford Mustang. The manufacturer's suggested retail price on the Ford Mustang was $11,156, and $7,288 on the Ford Escort. As part of the purchase transaction for the new Ford Mustang, Johns made a down payment of $20 and traded in his 1985 Ford EXP on which he owed $7,939.14 to the financing bank. Wackerly made a cash down payment of $200 for the new Ford Escort and traded in his 1983 Ford Mustang on which he owed $7,843.86.
The parties agreed that the amounts owed on the "trade-ins" were in excess of their fair market value. The excess of the amount owed on the trade-ins over their market value has been characterized as "negative equity." Ostensibly, in order not to show a negative equity for the trade-ins, Wally Armour gave appellees a trade-in value in excess of the amounts owed on the cars they were trading. Correspondingly, it raised the price of the new automobiles above the manufacturer's suggested retail price. Armour allowed a trade-in of $9,010 on Johns' 1985 Ford EXP and raised the manufacturer's suggested retail price for the new Ford Mustang by $3,454. It allowed Wackerly a trade-in of $9,264.64 on his 1983 Ford Mustang and increased the manufacturer's suggested retail price on the new Ford Escort by $4,069. The prices for the new automobiles were thus arrived at by increasing the manufacturer's suggested retail price to compensate for the negative equity of the trade-ins.
Appellees were aware of and agreed to the conditions of the transactions. They executed retail installment contracts evidencing the agreement of the parties. The contracts were subsequently assigned to appellant, Ford Motor Credit Company. Johns and Wackerly, after making several payments to Ford Motor Credit Company, filed Chapter 13 petitions for reorganization in the United States Bankruptcy Court.
Appellees also filed complaints in the Court of Common Pleas of Stark County, alleging that appellant, Ford Motor Credit Company, and Wally Armour violated the Retail Installment Sales Act. Appellees contended that defendants violated R.C. 1317.07 by increasing the cash price on the new automobiles beyond the manufacturer's suggested retail price and by including the negative equity of the trade-ins in the cash price. The trial court in each case found that the parties' retail installment sales contracts did not evidence indebtedness greater than allowed by R.C. 1317.06 or 1317.07. It also found that appellees received net positive amounts for their trade-ins and that there was no negative equity financing involved in the transactions. Judgments were entered for appellant and Wally Armour.
The court of appeals, relying on In re Sloan (N.D.Ohio 1968), 285 F.Supp. 1, reversed in each case, holding that appellant violated R.C. 1317.07 by increasing the sticker price on the automobiles. The court's decision, as in In re Sloan, supra, mandated total forfeiture of the retail seller's rights arising from the sales transactions.
The causes are now before this court pursuant to the allowance of motions to certify the record, and have been consolidated for purposes of briefing and oral argument.
Donald R. Little, Canton, for appellees.
Buckingham, Doolittle & Burroughs, Frederick M. Lombardi and Patrick J. Keating, Akron, for appellant.
This case presents two issues for our consideration.
The first issue is whether a car dealer violates the Retail Installment Sales Act, R.C. 1317.07, by selling a new car at a price in excess of the sticker or manufacturer's suggested list price.
R.C. 1317.07 provides in pertinent part:
"No retail installment contract authorized by section 1317.03 of the Revised Code which is executed in connection with any retail installment sale shall evidence any indebtedness in excess of the time balance fixed in the written instrument in compliance with section 1317.04 of the Revised Code * * *."
R.C. 1317.04 provides in pertinent part:
Further, R.C. 1317.08 provides:
"If charges greater in amount than those provided for in * * * [R.C. 1317.04] are received by the retail seller, his agent, assignee, or successor in interest, the retail buyer, his assignee, or successor in interest may recover the total amount paid to the retail seller, his agent, assignee, or successor in interest, from the retail seller or the holder of the retail installment contract."
The court of appeals held that the cash price as required by R.C. 1317.04(A) is "determined not by the final bottom line price agreed to by these parties, but is rather the starting point--the price, sticker or otherwise, before trade-in allowances, for which any purchaser who had cash in hand could purchase the * * * [automobiles]."
R.C. 1317.01(K) defines "cash price" as "the price measured in dollars, agreed upon in good faith by the parties as the price at which the specific goods which are the subject matter of any retail installment sale would be sold if such sale were a sale for cash to be paid upon delivery instead of a retail installment sale. * * * " (Emphasis added.)
R.C. 1317.01(K) requires that the parties arrive at the cash price for the specified goods by good faith negotiation, but does not require that such cash price include charges attendant to retail installment sales--finance and service charges. See R.C. 1317.01(N) and (O). 1 The statute does not require that "cash price" be a fixed, predetermined amount applicable to all buyers. The test is not what is the seller's price for the goods for all buyers or even the retail price suggested by the manufacturer, but whether the price to a particular buyer was agreed upon in a good faith negotiation. Such price as required by the statute should not include finance and service charges. See Consumer Credit: The Ohio Retail Installment Sales Act and its Abuses (1969), 20 Case W.Res.L.Rev. 621, 632, at fn. 44.
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