Miller v. Colortyme, Inc., C2-92-2595
| Decision Date | 24 June 1994 |
| Docket Number | No. C2-92-2595,C2-92-2595 |
| Citation | 518 N.W.2d 544 |
| Parties | Delilah MILLER, et al., Petitioners, Appellants, v. COLORTYME, INC., et al., Respondents. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. Rent-to-own transactions are "consumer credit sales" for all purposes within the meaning of the Consumer Credit Sales Act, Minn.Stat. §§ 325G.15 and 325G.16 (1992).
2. Rent-to-own transactions are subject to the interest rate limitations of the general usury statute, Minn.Stat. § 334.01 (1992). The district court properly granted summary judgment for appellants on their claim that respondents violated Minn.Stat. § 334.01 by charging an excessive rate of interest in rent-to-own transactions.
3. The Rental-Purchase Agreement Act, Minn.Stat. §§ 325F.84-.98 (1992) does not repeal the Consumer Credit Sales Act.
Seymour J. Mansfield, Richard J. Fuller, Mansfield & Tanick, P.A., Mark N. Stageberg, Kay Nord Hunt, Lommen, Nelson, Cole & Stageberg, P.C., and David Ramp, Legal Aid Soc. of Minneapolis, Minneapolis, for appellants.
Jay M. Quam and Sue Halverson, Fredrikson & Byron, Minneapolis, for respondents.
Robert Hobbs, National Consumer Law Center, Inc., Boston, MA, William Crowder and Susan Bedor, Crowder & Bedor, St. Paul, for amicus curiae Nat. Consumer Law Center, Inc. Elmer B. Trousdale and Christopher M. Scotti, Oppenheimer, Wolff & Donnelly, St. Paul, for amicus curiae Minnesota Retail Merchants Ass'n.
James E. Rolshouse, Minneapolis, for amicus curiae Minnesota Ass'n of Rental Dealers.
Jarvis C. Jones, Minneapolis, for amici curiae N.A.A.C.P., the Urban Coalition of Minneapolis, the Minneapolis Urban League, Matthew Little and Gleason Glover.
H. Theodore Grindal and Joseph Musliek, Opperman, Heins & Paquin, Minneapolis, for amicus curiae Ass'n of Progressive Rental Organizations.
David Woodward, St. Paul, for amicus curiae Atty. Gen., State of Minn.
Heard, considered and decided by the court en banc.
We are asked to decide whether "rent-to-own" transactions (also known as "rental-purchase" transactions) are consumer credit sales under the Consumer Credit Sales Act, Minn.Stat. §§ 325G.15 and 325G.16 (1992), and if they are consumer credit sales, whether they are subject to the interest rate limitations of the general usury statute, Minn.Stat. § 334.01 (1992). The court of appeals held that rent-to-own agreements entered into by respondents are not consumer credit sales and are not usurious. We reverse and remand.
Respondent D.E.F. Investments, Inc. and its subsidiaries operate several rent-to-own dealerships in Minnesota. They do business under the trade name "Renter's Choice Home Furnishings." DEF uses standard form contracts to lease new and used furniture, televisions, appliances, and various other consumer goods to customers. Under these contracts, which are similar to others used in the rent-to-own industry, customers elect to rent items for a weekly or monthly rental term. At the end of each term, customers have a unilateral option to renew the agreement for another term. If a customer renews an agreement for a specified number of terms, the customer obtains title and ownership of the item rented for no additional consideration. Full payment of the rental fee must be made before or at the beginning of each term. In order to acquire ownership of an item, consumers ordinarily must pay a total price far in excess of fair market value. DEF does not offer consumer items for immediate sale.
Appellants Delilah Miller and Craig Stenzel both have entered into rent-to-own contracts with DEF over a period of several years. For example, on December 18, 1990, Miller entered into a rent-to-own transaction with DEF for a used washer and dryer, the stated cash price of which was $800.75. Under the contract, Miller could acquire ownership of the washer and dryer by making 16 monthly payments of $84.40, for a total of $1,350.40, or by making 69 weekly payments of $21.10, for a total of $1,455.90. As a further example, on October 17, 1990 Stenzel entered into a rent-to-own transaction with DEF for a 19"' color television, the stated cash price of which was $470. Under the contract, Stenzel could acquire ownership of the television by making 18 monthly payments of $47.70, for a total of $858.60, or by making 78 weekly payments of $12.75, for a total of $994.50. Some of the contracts Miller and Stenzel have entered into have resulted in completed purchases; others have not.
On April 7, 1992 appellants Stenzel and Miller filed a class action lawsuit against DEF seeking monetary damages as well as declaratory and injunctive relief. In the relevant counts of appellants' complaint, appellants allege that DEF has violated various consumer protection statutes by failing to treat rent-to-own transactions as credit sales under the Consumer Credit Sales Act, and that DEF has engaged in usury in violation of Minn.Stat. § 334.01. On August 3, 1992, appellants moved for partial summary judgment, asking for a declaratory judgment that respondents' contracts constitute credit sales. On August 5, 1992, DEF moved for partial summary judgment, seeking dismissal of appellants' usury claim.
On November 30, 1992, the district court filed an order which granted appellants' motion for summary judgment and declared contracts entered by "Class One" 1 to be "consumer credit sales for all purposes within the meaning of Minn.Stat. § 325G.15 and 325G.16." The court also denied DEF's motion for summary judgment and instead granted summary judgment for appellants on their usury claim, reserving the measure of damages for the fact finder.
After granting discretionary review, the court of appeals issued an opinion on August 3, 1993, reversing the district court. Miller v. Colortyme, Inc., 504 N.W.2d 258 (Minn.App.1993). The court of appeals held: (1) DEF's rent-to-own agreements are not "consumer credit sales" for all purposes within the meaning of Minn.Stat. §§ 325G.15 and 325G.16, and (2) DEF's agreements are not usurious under Minn.Stat. § 334.01. While not reaching the issue, the court of appeals further suggested that the Rental Purchase Agreements Act (RPAA), Minn.Stat. §§ 325F.84-.98, is in substantial conflict with the Consumer Credit Sales Act (CCSA), Minn.Stat. §§ 325G.15 and 325G.16, and that the provisions of the RPAA are controlling. This appeal followed.
We consider first whether the CCSA defines rent-to-own agreements as consumer credit sales, thereby departing from the common law distinction between leases and sales in order to provide the same protections to consumers who engage in rent-to-own transactions as to consumers who engage in traditional credit sales. At common law a rent-to-own transaction is regarded as a lease and not a sale because a buyer is not bound to pay the total purchase price and can terminate a transaction at any time by returning the property. See Samuel Williston, The Law Governing Sales of Goods at Common Law and Under the Uniform Sales Act, § 336 (1948). Prior to enactment of the CCSA this court followed the common law distinction. Hughes v. Becker, 260 Minn. 83, 87, 108 N.W.2d 781, 783 (1961).
The CCSA was originally enacted in 1971. In 1981 the legislature amended Minn.Stat. § 325G.15, subd. 5 of the CCSA to define certain terminable leases as a "sale of goods." Act of March 27, 1981, ch. 10, § 1, 1981 Minn.Laws 18-19. Under the amended version of Minn.Stat. § 325G.15, subd. 5, the term "sale of goods" includes:
a contract in the form of a terminable bailment or lease of goods if: (a) the bailee or lessee has the option to renew the contract by making the payments specified in the contract; (b) the contract obligates the bailor or lessor to transfer ownership of the property to the bailee or lessee for no other or a nominal consideration upon full compliance by the bailee or lessee with the bailee's or lessee's obligations under the contract including any obligation incurred by reason of the exercise of an option by the bailee or lessee to renew the contract; and (c) the payments contracted for by the bailee or lessee, including those payments pursuant to the exercise of an option by the bailee or lessee to renew the contract, are substantially equivalent to or in excess of the aggregate value of the property and services involved.
It is undisputed that DEF's contracts satisfy each of the above criteria and therefore constitute a "sale of goods" within the meaning of Minn.Stat. § 325G.15, subd. 5. First, under DEF's contracts the lessee has the option to renew the contract by making advance rental payments at the beginning of each rental term. Second, the contracts obligate DEF to transfer ownership to the consumer if the consumer renews the agreement for a specified number of payments. Third, the total payments necessary to acquire ownership exceed the value of the property and services provided by respondents.
Given that rent-to-own contracts are "sales of goods" within the meaning of Minn.Stat. § 325G.15, subd. 5, the question is whether they are protected "consumer credit sales" within the meaning of Minn.Stat. § 325G.15, subd. 2. Under Minn.Stat. § 325G.15, subd. 2, a "consumer credit sale" is defined as [A] sale of goods or services in which (a) credit is granted by a seller who regularly engages as a seller in credit transactions of the same kind; (b) the buyer is a natural person; and (c) the goods or services are purchased primarily for a personal, family or household purpose, and not for commercial, agricultural, or business purpose.
The court of appeals concluded that DEF's rent-to-own transactions are not protected "consumer credit sales." It reasoned that DEF does not grant credit to customers because customers prepay for use of leased goods with no further obligation. Miller v. Colortyme, 504 N.W.2d at 260.
We believe rent-to-own transactions are "consumer credit sales" within the...
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