Price v. Franklin Inv. Co., Inc.

• Decision Date: 23 February 1978
• Docket Number: No. 76-1022,76-1022
• Citation: 187 U.S. App. D.C. 383,574 F.2d 594
• Parties: James W. PRICE, Appellant, v. FRANKLIN INVESTMENT COMPANY, INC., et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 594

574 F.2d 594

187 U.S.App.D.C. 383

James W. PRICE, Appellant, v. FRANKLIN INVESTMENT COMPANY, INC., et al.

No. 76-1022.

United States Court of Appeals, District of Columbia Circuit.

Argued April 27, 1977.

Decided Feb. 23, 1978.

Al J. Daniel, Jr., Washington, D. C., for appellant.

Charles R. Donnenfeld, Washington, D. C., with whom Cameron M. Blake, Washington, D. C., Dennis A. Davison and Bernard D. Lipton, Silver Spring, Md., were on the brief for appellee, Franklin Inv. Co., Inc.

Stanley M. Karlin, Silver Spring, Md., for appellee, Center Motors, Inc.

Before MacKINNON, ROBB and WILKEY, Circuit Judges.

Opinion for the court filed by Circuit Judge MacKINNON.

MacKINNON, Circuit Judge:

The principal question raised by this appeal is whether, on the facts of this case, a finance company that purchased a consumer installment contract from an automobile dealer shared the dealer's liability for violations of the Truth in Lending Act, Title I of the Consumer Credit Protection Act, 15 U.S.C. §§ 1601-66 (1970 & Supp. V 1975), and the Federal Reserve Board's Regulation Z, 12 C.F.R. §§ 226.1-.1002 (1977). The district court, in granting summary judgment in favor of the finance company, answered this question in the negative. We reverse on this issue, but affirm the order of the district court in other respects.

I.

The facts are substantially undisputed. On June 5, 1972, appellant, a District of Columbia resident, purchased a used 1971 Ford Pinto automobile from appellee Center Motors, Inc. (Center), an automobile dealer located in Maryland about a mile outside the District of Columbia. On November 5, 1973, appellant traded the Pinto in to Center on a used 1972 Ford Torino. In each case, appellant signed a "Conditional Sales Contract" filled out by Center. While Center was denominated in the contracts as the lender, the contract forms were supplied by appellee Franklin Investment Company, a financial concern whose sole office was located in the District of Columbia and the forms provided that payments were to be made not to Center but to the "assignee." Center and Franklin enjoyed a close and long-standing relationship. Center normally did no credit investigation of its own, and admittedly did no such investigation in connection with either advance of credit to appellant. Franklin financed at least a portion of Center's car inventory on a "floor plan" basis (App. 286-87) and purchased at a discount a substantial percentage of Center's loan contracts. From 1970 to 1973 not less than 16% of the total conditional sale contracts purchased by Franklin were acquired from Center (App. 257). On each assignment, $25 was placed into a "reserve account" available to compensate Center for its liabilities on contracts sold with recourse or repurchase rights. ¹

The loan contract on the Pinto was assigned to Franklin on the day of the sale. When appellant traded in the Pinto, Center initially wrote the conditional sales contract for the Torino to require payment in a lump sum on the following day, and then on November 7, 1973, substituted a rewritten contract providing for installment payment. Franklin had apparently reapproved appellant's credit during the interim, and the rewritten contract was then assigned to Franklin. Franklin subsequently sent appellant a coupon book and letters referring to him as its "customer" and soliciting his further business.

Soon after the trade-in, appellant had mechanical problems with the Torino. Repairs by Center did not cure the problems, and Center refused to make further repairs. Appellant arranged for transmission repairs by a private shop and notified appellees of this fact, but declined to pay the repair charges or make any further payments on the contract. Franklin then repossessed the car from the repair shop, paying for the transmission repairs, and notified appellant that he could redeem the car by paying an amount totaling about $644. This sum consisted principally of the amount claimed to be due on the contract, the repair charges, and storage charges. Appellant did not redeem, and Franklin gave notice that the Torino would be sold at public sale. However, the car was apparently sold privately to Center, and a deficiency of about $351 was assessed against appellant.

On November 5, 1974, appellant filed suit in the district court against Center and Franklin, charging that the "Credit Sales Disclosure Statement" dated November 5, 1973 (App. 145) prepared by Center in connection with the Torino conditional sale contract contained violations of the Truth in Lending Act and Regulation Z, ² and that Center and Franklin were jointly liable to him for these violations. Appellant also asserted a number of "pendent" state-law claims, including usury, "loan sharking," and breach of warranty, arising out of both loans. He sought damages and injunctive relief on all claims on behalf of himself and a class of persons similarly situated. Appellant later amended his complaint, however, to omit all class action claims. Franklin counterclaimed for the deficiency allegedly due on the conditional sale contract.

The parties filed cross-motions for summary judgment and partial summary judgment. After a hearing the district court held that the Torino disclosure statement had violated the Truth in Lending Act and Regulation Z in several respects. Summary judgment was entered in favor of appellant against Center and Franklin's counterclaim was dismissed. Appellant was awarded the maximum statutory penalty of $1,000 plus costs and attorneys' fees, ³ but no injunctive relief was ordered. The district court entered summary judgment against the appellant on his claims against Franklin and dismissed his state law claims against both defendants for lack of jurisdiction. On May 17, 1976, appellant demanded and received Center's payment of the $1,000.00 penalty and court costs, but the amount of the reasonable attorneys' fees still owing remains to be determined. Appellant now challenges the district court's grant of summary judgment in favor of Franklin and its dismissal of the state claims, as well as the court's refusal to enjoin further violations by the appellees. Neither Center nor Franklin has appealed.

II.

As a threshold issue, both appellees argue that this appeal became moot when appellant accepted Center's tender of part payment of the judgment against it. Alternatively, they assert that this acceptance either waived appellant's right to challenge the judgment or estops him from doing so. It is a settled rule of law that a litigant may not accept all or a substantial part of the benefit of a judgment and subsequently challenge the unfavorable aspects of that judgment on appeal. ⁴ There is, however, a "firmly established exception that when a judgment or decree adjudicates separable or divisible controversies, the appealing party may accept the benefit of the separable or divisible feature in his favor and challenge the feature adverse to him . . . ." Luther v. United States, 225 F.2d 485, 497 (10th Cir. 1955), and cases cited therein.

In the present case, two reasons suggest that the claims against Center and Franklin are sufficiently "separable" that an appeal is not foreclosed despite appellant's acceptance of Center's payment. First, on appeal, since Franklin and Center occupy a different status, the statute might be construed to allow a separate statutory recovery against each defendant. Second, even if the statute is construed to allow only a single penalty, the two appellees might be held to be jointly liable. Such a determination would be relevant on remand, as the amount of the reasonable attorneys' fees still owing will vary dependingon whether or not appellant is deemed to have been successful against Franklin so as to merit an award of court costs and fees attributable to this part of its action under the Act. The Act clearly intends that the award of fees and costs is at least as important a part of a plaintiff's potential recovery as the small statutory penalty it establishes. ⁵ Thus, issues affecting the determination of these fees have an independent significance and should be appealable under the Luther standard. Having determined on this basis that the case before us is not moot, we proceed to the merits of the appeal.

III.

As to the federal claims, the district court's amended order contained only the conclusion that Center violated the Act and Regulation Z in several respects, and the conclusion that Center alone was liable to appellant for the violations. The court made no summary of material facts not in issue, and did not offer any explanation of his conclusions of law. The review process therefore must begin with a reconstruction of the reasoning of the district judge.

The district court held, on the facts most favorable to Center, that Center was liable for violations of the Act and Regulation Z. This holding necessarily rests on the conclusion that Center was a "creditor," ⁶ and that as such "creditor" it was required to make the required disclosures. These holdings are not challenged by any party to this appeal.

Nor is there any challenge to the specific violations found by the district court. The district court concluded that the disclosure statement violated three parts of Regulation Z: (1) 12 C.F.R. §§ 226.4(a)(3), (2) 226.6(d), and (3) 226.8(b)(4). Section 226.4(a) provides that the amount of any finance charge shall be computed to include "(3) Loan fee, points, finder's fee, or similar charge." ⁷ Section 226.6(d) provides that "(i)f there is more than one creditor . . . in a transaction, each creditor . . . shall be clearly identified . . . ." ⁸ Section 226.8(b)(4) requires the disclosure of "(t)he amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments."

The principal issue raised in this appeal is whether the district court properly entered summary judgment in favor of...