State ex rel. Salazar v. The Cash Now Store

Decision Date10 September 2001
Docket NumberNo. 00SC489.,00SC489.
Citation31 P.3d 161
PartiesSTATE of Colorado; ex rel. Ken SALAZAR, Attorney General For The State of Colorado; and Laura E. Udis, Administrator, Uniform Consumer Credit Code, Petitioners, v. THE CASH NOW STORE, INC., Respondent.
CourtColorado Supreme Court

Ken Salazar, Attorney General, Paul Chessin, Assistant Attorney General, Consumer Credit Unit Consumer Protection Section, Denver, CO, Attorneys for Petitioners.

Horowitz & Wake, Jay S. Horowitz, Philip L. Gordon, Denver, CO, Attorneys for Respondent.

Manuel A. Ramos, Colorado Legal Services, Denver, CO, Attorneys for Amicus Curiae.

Kathleen Keest, Assistant Attorney General, Des Moines, IA, Attorneys for Amici Curiae State Of Alaska by and through Bruce M. Botelho, Attorney General; State Of Arizona, by and through Janet Napolitano, Attorney General; State Of Connecticut, by and through Richard Blumenthal, Attorney General; State Of Georgia, by and through Thurbert E. Baker, Attorney General; State Of Hawaii, Office Of Consumer Protection, by and through Stephen H. Levins, Acting Executive

Director; State Of Illinois, by and through James E. Ryan, Attorney General; State Of Iowa, by and through Thomas J. Miller, Attorney General and Administrator, Iowa Consumer Credit Code; Kansas Uniform Consumer Credit Code, by and through Kevin Glendening, Administrator; State Of Louisiana, by and through Richard P. Ieyoub, Attorney General; State Of Maryland, by and through J. Joseph Curran, Jr., Attorney General; Commonwealth Of Massachusetts, by and through Thomas F. Reilly, Attorney General; State Of Mississippi, by and through Michael Moore, Attorney General; State Of Nevada, by and through Frankie Sue Del Papa, Attorney General; State Of New Mexico, by and through Patricia A. Madrid, Attorney General; State Of North Carolina, by and through Michael F. Easley, Attorney General; State Of Ohio, by and through Betty D. Montgomery, Attorney General; State Of Oklahoma, by and through W.A. Drew Edmondson, Attorney General; State Of Oregon, by and through Hardy Myers, Attorney General; State Of South Carolina, Department Of Consumer Affairs, by and through Philip Porter, Administrator; State Of Tennessee, Department Of Financial Institutions, by and through Bill C. Houston, Commissioner; Commonwealth Of Virginia, Commissioner Of Financial Institutions, by and through E.J. Face, Jr., Commissioner; Commonwealth Of Virginia, by and through Mark L. Earley, Attorney General; State Of West Virginia Commissioner Of Banking, by and through Sharon G. Bias, Commissioner; and State Of West Virginia, by and through Darrell V. McGraw, Jr., Attorney General.

Lynn Drysdale, Florida Legal Services, Inc. Jacksonville, FL, Attorneys for Amici Curiae AARP (American Association of Retired Persons); Consumer Federation of America; Consumers Union; National Association of Consumer Advocates; and National Consumer Law Center. Justice RICE delivered the Opinion of the Court.

We issued a writ of certiorari to review the court of appeals' judgment in State ex rel. Salazar v. Cash Now Store, Inc., 12 P.3d 321 (Colo.App.2000). In 1998, the state Administrator ("Administrator") of the Uniform Consumer Credit Code ("UCCC"), § 5-1-101 to -9-103, 2 C.R.S. (2000), determined that Respondent, The Cash Now Store, Inc. ("Cash Now"), had conducted business activities constituting usurious consumer loans in violation of the UCCC and the federal Truth in Lending Act ("TILA") and demanded that Cash Now cease and desist from its activities. When Cash Now continued to engage in its transactions, Petitioners, the State of Colorado ex rel. Ken Salazar, Attorney General, and the Administrator (collectively, "the State") brought suit against it to enjoin it from its activities. This suit was later consolidated with a declaratory action Cash Now commenced to determine whether its transactions constituted "loans" subject to the UCCC. Because the district court concluded that Cash Now's transactions were purchases and not loans, it denied the State's motion for a preliminary injunction.

The court of appeals affirmed the trial court's judgment on the ground that Cash Now's transactions did not create debt requiring an unconditional obligation to repay and thus did not constitute "loans" under the UCCC. We granted certiorari to determine whether the transactions engaged in by Cash Now constituted loans under the UCCC rather than purchases and assignments, and whether the court of appeals erred in affirming the trial court's denial of the State's motion for a preliminary injunction. We now reverse the judgment of the court of appeals and hold that Cash Now's transactions constituted "loans" governed by the UCCC. We remand the case to the trial court for a hearing to determine whether there is reasonable cause to believe that Cash Now is engaging in conduct prohibited by the UCCC.

FACTS AND PROCEDURAL HISTORY

Cash Now enters into contracts with individuals under which Cash Now pays to an individual an immediate sum of money in return for an assignment of the individual's rights to receive federal or state tax refunds that have been independently determined to be due, but which are generally not yet payable. The amount advanced by Cash Now is generally 50-60% less than the face value of the anticipated tax refund. If the amount of the refund actually received by Cash Now is lower than the anticipated refund, the individual may be required to pay Cash Now for the deficiency.

In 1998, the Administrator investigated Cash Now's business practices and determined that they constituted usurious consumer loans in violation of the UCCC and TILA. When Cash Now failed to cease its transactions, the State filed a complaint in district court, seeking a preliminary injunction preventing Cash Now from making disguised loans in violation of the UCCC. Cash Now later filed a complaint for declaratory judgment, seeking a determination as to whether its business transactions violated the UCCC. The State filed a motion for summary judgment in the declaratory judgment action, which was later consolidated with the injunctive action. The trial court determined that Cash Now's activities were purchases of choses in action rather than "consumer loans" subject to the UCCC. Thus, the trial court denied the State's motion for a preliminary injunction and its motion for summary judgment.

On appeal, the State argued that the trial court had erred by applying the C.R.C.P. 65 standard, rather than the standard set forth under the UCCC in reviewing its motion for a preliminary injunction. Although the court of appeals agreed, it concluded that the trial court's error was harmless, since it found that the trial court had properly determined that Cash Now's transactions were not "loans" under the UCCC. Cash Now, 12 P.3d at 325. Instead, the court of appeals held that Cash Now's transactions involved the sale and assignment of the taxpayers' rights to receive a tax refund. Id. at 326. The court of appeals denied Petitioners' petition for rehearing.

We granted certiorari to determine whether Cash Now's transactions, involving the advance of money in exchange for a taxpayer's assigning his rights to an anticipated refund, constitute "loans" under the UCCC.1

ANALYSIS

We have not previously addressed whether the type of transactions at issue in this case are subject to the UCCC. As this is an issue of first impression, our analysis includes an examination of cases from other jurisdictions.

A. Standard of Review

A trial court's ruling on a motion for preliminary injunction should be reviewed with deference to the conclusion reached by the trial court and will be not overturned unless it is manifestly unreasonable, arbitrary, or unfair. Evans v. Romer, 854 P.2d 1270, 1274 (Colo.1993). If, however, the issue being reviewed concerns only legal, rather than factual questions, a trial court's preliminary injunction ruling is subject to de novo appellate review. Bloomer v. Bd. of County Comm'rs of Boulder County, 799 P.2d 942, 944 (Colo.1990). Contract interpretation is a question of law. Agritrack, Inc. v. DeJohn Housemoving, Inc., 25 P.3d 1187, 1193 (Colo.2001). Moreover, interpretations of statutes are matters of law also subject to de novo review. Fowler Irrevocable Trust 1992-1 v. City of Boulder, 17 P.3d 797, 802 (Colo.2001). Because this case presents issues of both contract and statutory construction, we apply a de novo standard in reviewing the trial court's denial of the State's motion for a preliminary injunction.

B. Applicability of the UCCC

The UCCC regulates the law governing retail installment sales, consumer credit, small loans, and usury. § 5-1-102, 2 C.R.S. (2000). Among other restrictions, the UCCC limits the finance charge that a creditor may impose on consumer credit transactions. §§ 5-2-201 to -213, 2 C.R.S. (2000). The UCCC also requires that a creditor obtain a license before making certain types of high-interest loans. § 5-2-301, 2 C.R.S. (2000). Finally, the UCCC imposes certain disclosure requirements on consumer loans. § 5-2-101, 2 C.R.S. (2000).

Cash Now argues that its transactions do not constitute "loans" governed by the UCCC. According to Cash Now, the court of appeals correctly interpreted the UCCC as requiring an unconditional obligation to repay under its definition of "loan." Cash Now reasons that because it does not require the taxpayer to repay the money it has advanced unless the amount of the refund received is less than the amount anticipated, its transactions do not constitute "loans" under the UCCC. We disagree.

Under the version of the code applicable to this case, a "consumer loan" is defined as:

a loan made or arranged by a person regularly engaged in the business of making loans in which:
(a) The debtor is a person other than an organization;
(b) The debt is incurred primarily for a personal, family, or household purpose;
(c) Either the debt is payable in installments
...

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