Slenk v. Trans World Sys.
| Citation | 236 F.3d 1072 |
| Decision Date | 10 January 2001 |
| Docket Number | No. 99-16231,99-16231 |
| Parties | (9th Cir. 2001) ROBERT D. SLENK; CHRIS SLENK, Plaintiffs-Appellants, v. TRANS WORLD SYSTEMS, INC., Defendant-Appellee |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
John Harris Paer, Honolulu, Hawaii, for the plaintiffs appellants.
Neil F. Hulbert, Alston Hunt Floyd & Ing, Honolulu, Hawaii, for the defendant-appellee.
Appeal from the United States District Court for the District of Hawaii Helen Gillmor, District Judge, Presiding. D.C. No.CV-98-00430-HG
Before: Procter Hug, Jr., Chief Judge, Stephen S. Trott, and Kim McLane Wardlaw, Circuit Judges.
Robert D. Slenk ("Slenk") and his wife, Chris Slenk, appeal the United States District Court for the District of Hawaii's ("the district court") order granting summary judgment to Transworld Systems ("Transworld"). Slenk brought this consumer protection action alleging that Transworld had engaged in abusive debt collection practices violative of the Fair Debt Collection Practices Act ("FDCPA"), the Hawaii Unfair and Deceptive Acts and Practices Act ("UDAP"), and Hawaii's statutory prohibition on monopolies and illegal restraints of trade. Transworld argues that Slenk is precluded from invoking the protections afforded by the foregoing statutes because the debt at issue was not a consumer debt. We have jurisdiction under 28 U.S.C. 1291, and REVERSE and REMAND the case to the district court for further proceedings.
Slenk is the owner and sole employee of Slenk's Builders. Slenk's Builders is licensed as a general contractor to do carpentry work in Hawaii. On December 9, 1993, Slenk purchased a backhoe from Hawaii Tractor, Ltd. Slenk contends that he purchased the backhoe for the sole purpose of building his family home and driveway. It is undisputed that the backhoe was ultimately used by Slenk for this purpose only and was sold immediately thereafter. The backhoe was never used by Slenk's Builders, nor has Slenk's Builders ever been licensed to use a backhoe.
However, the record reflects substantial documentary evidence suggesting that the backhoe was purchased for business purposes. The invoice documenting the sale ("Invoice") lists "Slenk Bldrs" as the purchaser, and shows that Slenk's Builders paid the lower 0.5% sales tax applicable to business purchases, rather than the customary 4% sales tax charged for consumer purchases.
In an application for a city building permit for the construction of his home and driveway, dated April 4, 1994, Slenk identified the building contractor as "Slenk's Bldrs." By mak-ing this representation, Slenk was able to streamline the permit process by avoiding additional procedural requirements that are required of a private owner-builder who does not have a contractor's license.
Moreover, on Slenk's tax returns for 1993, the backhoe was listed as the property of Slenk's Builders. This characterization permitted Slenk and his wife to expense the total cost of the backhoe. See 26 U.S.C. 6065.
On January 14, 1994, Slenk obtained a loan from the Honolulu Fire Department Federal Credit Union ("Credit Union Loan") in an attempt to finance the previously purchased backhoe. It was this loan that gave rise to the present controversy. The loan agreement was signed by Slenk as an individual, rather than as Slenk's Builders, and identified the intended use for the loan as the purchase of "excavation equipment [and] other personal goods." Despite the loan agreement's reference to "other personal goods, " it is undisputed that Slenk used the entire loan to finance the purchase of the backhoe.
Slenk subsequently failed to repay the Credit Union Loan, causing his account to be assigned to Transworld Systems, a national collection agency. Between June and September of 1997, Transworld sent seven collection letters to Slenk in his capacity as an individual, and called him and his wife at home on numerous occasions.
In response to Transworld's actions, Slenk filed the instant suit alleging that Transworld's collection practices violated: (1) the FDCPA, 15 U.S.C. 1692-1692o;1 (2) its Hawaii state law counterpart, the UDAP, HAW. R EV. STAT. 443B; and (3) HAW. REV. STAT . 480, dealing with monopolies and restraints of trade. Transworld moved for, and was granted, summary judgment by the district court on the ground that the Credit Union Loan was commercial in nature, and, as such, did not fall within the protective purview of these statutes.
A grant of summary judgment is reviewed de novo . See Weiner v. San Diego County, 210 F.3d 1025, 1028 (9th Cir. 2000). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether (1) there are any genuine issues of material fact, and (2) whether the district court correctly applied the relevant substantive law. See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc).
The district court erred in concluding that no genuine issue of material fact existed as to whether Slenk's Credit Union Loan was a consumer debt for purposes of the FDCPA and the UDAP. The FDCPA precludes debt collectors from implementing unlawful debt collection tactics against consumers. "Consequently, the [FDCPA] applies to consumer debts and not business loans." Bloom v. I.C. System, Inc., 972 F.2d 1067, 1068 (9th Cir. 1992). The FDCPA defines a consumer debt as, "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the . . . property . . . which [is] the subject of the transaction [is] primarily for personal, family, or household purposes. . . ." 15 U.S.C. S1692a(5) (emphasis added).
Both the UDAP and Hawaii's statutory prohibition on unfair trade practices implement a definition of consumer debt that parallels the definition used by the FDCPA. See HAW. REV. STAT. 443B-1 (); HAW. REV. STAT. 480D-2 (). Thus, the threshold issue in this case is whether Slenk has raised a genuine issue of material fact as to whether his Credit Union Loan was a consumer debt, as that phrase is defined by the FDCPA. We hold that he has.
We have found it necessary when classifying a loan to " `examine the transaction as a whole,' paying particular attention to `the purpose for which the credit was extended in order to determine whether [the] transaction was primarily consumer or commercial in nature.' " Bloom , 972 F.2d at 1068 (quoting Tower v. Moss, 625 F.2d 1161, 1166 (5th Cir. 1980)). In making this determination, we have elevated substance over form, holding that "[n]either the lender's motives nor the fashion in which the loan is memorialized are dispositive of this inquiry." Id. We must therefore "look to the substance of the transaction and the borrower's purpose in obtaining the loan, rather than the form alone." Riviere, et al. v. Banner Chevrolet, Inc., 184 F.3d 457, 462 (5th Cir. 1999).
Slenk's use of the loan money is not in dispute. Slenk concedes that the Credit Union Loan was used exclusively to finance the backhoe. Thus, the sole determination we must make is whether the district court correctly found as a matter of law that Slenk purchased the backhoe for commercial use and not "primarily for personal, family, or household purposes." Viewing the transaction as a whole, we find that Slenk has raised a genuine issue of material fact as to whether the backhoe was purchased primarily for consumer purposes.
The district court relied upon numerous facts in concluding as a matter of law that the backhoe was purchased strictly for commercial purposes. First, the Invoice states that the backhoe was sold to "Slenk Bldrs." As a business, Slenk's Builders was charged a significantly lower sales tax than Slenk would have paid had he purchased the backhoe as an ordinary consumer. Second, the building permits and accompanying documentation for the construction of Slenk's house and driveway state that the work would be done by Slenk's Builders, rather than by Slenk as an individual. Third, the Slenks' 1993 tax returns characterized the backhoe as a business asset belonging to Slenk's Builders, thus enabling the Slenks to expense the backhoe's cost. While...
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