Quiller v. Barclays American/Credit, Inc.

Decision Date08 July 1985
Docket NumberNo. 83-8455,83-8455
Citation764 F.2d 1400
PartiesArthur QUILLER, Lillie Mae Quiller, and all other persons similarly situated, Plaintiffs-Appellants, v. BARCLAYS AMERICAN/CREDIT, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

John B. Long, Jay M. Sawilowsky, Augusta, Ga., for plaintiffs-appellants.

Douglas N. Campbell, Elise M. Bloom, Richard R. Cheatham, Thomas C. Shelton, Atlanta, Ga., for defendant-appellee.

James A. Brodsky, Washington, D.C., for amicus: Coord. Council on Manuf. Housing Finance.

Frank Max Salinger, Washington, D.C., for American Financial Services.

Paul E. Kauffman, Columbus, Ga., for amicus: Bertha M. Watkins, et al.

Appeal from the United States District Court for the Southern District of Georgia.

Before GODBOLD, Chief Judge, RONEY, TJOFLAT, HILL, FAY, VANCE, KRAVITCH, JOHNSON, HENDERSON, HATCHETT, and ANDERSON, Circuit Judges. *

PER CURIAM:

Arthur and Lillie Mae Quiller filed a class action against Barclays American/Credit, Inc., in the Superior Court of Richmond County, Georgia, alleging a violation of the Georgia Motor Vehicle Sales Finance Act, O.C.G.A. Secs. 10-1-30 to -38 (Michie 1982). After removing the case to the United States District Court for the Southern District of Georgia, Barclays moved to dismiss for failure to state a claim, contending inter alia that the action was precluded by the Depository Institutions Deregulation and Monetary Control Act, Pub.L. No. 96-221, Title V, Sec. 501, 94 Stat. 161 (1980) (codified at 12 U.S.C. Sec. 1735f-7 note). The district court granted Barclays' motion to dismiss, but a panel of this court reversed the order of dismissal and remanded the case for further proceedings. Quiller v. Barclays American/Credit, Inc., 727 F.2d 1067 (11th Cir.1984).

On rehearing en banc, we agree with the panel's disposition of the case. We therefore affirm and reinstate the panel opinion. The district court's order granting Barclays' motion to dismiss is REVERSED, and the case is REMANDED for further proceedings.

RONEY, Circuit Judge, dissenting, with whom TJOFLAT, JAMES C. HILL, FAY and R. LANIER ANDERSON, III, Circuit Judges, join:

The Court holds first that the contract is expressly contrary to the federal statute and regulations comprising the federal preemption scheme because it permits the creditor to foreclose, repossess, or accelerate upon the debtor's default "without notice" and second, that the plaintiff is entitled to the remedies available under Georgia usury law. I dissent from both of these decisions. Although not a model of clarity, the contract is not necessarily contrary to the federal scheme. The provisions of the contract are at worst ambiguous. Being ambiguous, the contract cannot be held invalid on a motion to dismiss. To the extent the contract is contrary to the conditions required by federal preemption law, there are more suitable remedies that the district court should consider before giving the plaintiff the state usury remedies.

I

As to the provisions of the contract, there are substantial arguments that the contract does not violate the law at all. As noted by the Federal Home Loan Bank Board (FHLBB) in its amicus curiae brief, both the preemption Act and the agency regulations provide circumstances in which the creditor may repossess, accelerate, or foreclose "without notice." The Act directs FHLBB to issue a regulation that requires

a 30-day notice prior to instituting any action leading to repossession or foreclosure (except in the case of abandonment or other extreme circumstances).

Pub.L. No. 96-221, Title V, Sec. 501(c)(2), 94 Stat. 161 (1980) (codified at 12 U.S.C.A. Sec. 1735f-7 note). The implementing regulations provide:

Except in the case of abandonment or other extreme circumstances, no action to repossess or foreclose, or to accelerate payment of the entire outstanding balance of the obligation, may be taken against the debtor until 30 days after the creditor sends the debtor a notice of default in the form set forth in paragraph (h)(2) of this section.... The debtor is not entitled to notice of default more than twice in any one-year period.

12 C.F.R. Sec. 590.4(h)(1). Thus, in three separate situations a creditor may in fact accelerate, repossess, or foreclose without giving the 30-day notice otherwise required under section 590.4(h): (1) abandonment; (2) other extreme circumstances; and (3) upon the debtor's third default in a one-year period. Consequently, the contract's assertion that creditor may take action "without notice" upon debtor's default is not, as the court suggests, an "affirmative misrepresentation as to [the debtor's] statutory guarantees." 727 F.2d at 1072.

In all other default situations, the creditor is required to give the 30-day notice. The contract provides that the creditor's express powers to foreclose, accelerate, or repossess are "subject to any notice of right to cure." The court notes that "[t]he qualification would, at most, inform the debtor that he may have a right to cure, but the law guarantees him an absolute right to cure." 727 F.2d at 1072 (emphasis in original). As pointed out above, however, the right to cure is not "absolute" in at least three specified circumstances. Given that the court concedes that the qualifying clause informs the debtor that he may have a right to cure, that is all that is necessary. For the court to hold that the creditor had to use language more specific than "subject to any notice of right to cure" undercuts the court's holding that "to qualify for federal preemption under the Act the financing agreement need not contain an express term guaranteeing the debtor thirty days notice before repossession or foreclosure." 727 F.2d at 1071.

It would be inconsistent with federal law for a preemption contract to claim an unqualified right to acceleration, repossess, or foreclosure "without notice." But because in some situations a creditor may indeed exercise such powers without notice, it is not inconsistent with federal law for a preemption contract to claim such a right "subject to any notice of right to cure," the express qualification contained in the Quiller contract. The contract language therefore does not prevent the loan from meeting the "terms and conditions" of the federal statute and regulations.

II

At most the contract would be ambiguous. With that determination, the court should remand for the district court to determine the intent of the parties. The contract was written to be a federal preemption contract. The words "FEDERAL PREEMPTION CONTRACT" appear in the contract in the bottom left corner of the very same page as the language held to be contrary to the federal preemption scheme. The conduct of the parties, the intention to make the agreement a federal preemption contract, and the intent of the borrower to make a legal contract and to pay the higher interest rate become relevant.

In holding that the agreement is contrary to the statute and regulations, the court characterizes the offending provisions as "inaccurate statements of the creditor's rights under federal law." Id. at 1072. Be that as it may, the contract does contain the "vague qualification" that its claimed powers to immediately foreclose, repossess, and accelerate are "subject to any notice of right to cure." The court acknowledges that "[t]he qualification would, at most, inform the debtor that he may have a right to cure." Id. at 1072 (emphasis in original). In view of the ambiguity created by this "inconsistent language," this case should be remanded to the district court to conduct an evidentiary hearing, if necessary, to determine whether the parties intended to enter a federal preemption contract, and, if so, what was intended by the ambiguous language.

This is not to say, however, that the creditor could receive the benefits of federal preemption were it in fact to exercise its powers upon a debtor's default in a manner inconsistent with the federal statute and regulations. Nor would contract language that, unlike the language in the contract here, was indeed contrary to the consumer protections provided by the Act and regulations be saved by a creditor's actual compliance with the Act and regulations. The case before us, however, on appeal from the district court's order granting defendant's motion to dismiss, presents neither of those situations.

III

Once the "terms and conditions" are established, then the relief a party is entitled to obtain in court is to have the contract enforced according to those "terms and conditions." For a class, this may either be a declaratory decree or an injunction requiring the creditor to follow the contract's "terms and conditions."

In any event, the problem with notice might be easily curable by remedies not as harsh as that held by the court. At most, the case should be remanded to the district court to consider remedies that would preserve the bargain the parties intended to make. There is no question but that the parties intended to contract for a legal interest rate under the federal preemption law. The Georgia law of usury under O.G.C.A. Sec. 10-1-33 makes the civil penalties of the Georgia Motor Vehicle Sales Finance Act applicable:

A violation of Code Section 10-1-33 by the seller or holder shall bar recovery of any finance charge, delinquency, or collection charge on the contract.

O.C.G.A. Sec. 10-1-38(b). Asserting that the violation was wilful, the Quillers seek to recover double the time price differential under O.C.G.A. Sec. 10-1-38(c). The penalty provisions do not authorize forfeiture of the unpaid principal of loans held violative of section 10-1-33. See Bozeman v. Tifton Federal Savings & Loan Ass'n, 164 Ga.App. 260, 297 S.E.2d 49 (1982); Kelly v. Sylvan Motors, Inc., 160 Ga.App. 420, 287 S.E.2d 359, 360 (1981); Ford Motor Credit Co. v. Spann, 153 Ga.App. 535, 265...

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