Villegas v. Transamerica Financial Services, Inc.
| Decision Date | 31 October 1985 |
| Docket Number | No. 2,CA-CIV,2 |
| Parties | Jose R. VILLEGAS and Carmen Villegas, husband and wife, Plaintiffs/Appellants, v. TRANSAMERICA FINANCIAL SERVICES, INC., an Arizona corporation, Defendant/Appellee. 5363. |
| Court | Arizona Court of Appeals |
Plaintiffs, Jose and Carmen Villegas, obtained a $19,550 loan in late 1979 from defendant Transamerica Financial Services, Inc. Interest on the loan was at an annual percentage rate of 18 percent, and the loan agreement called for monthly payments of $353.00. The loan was secured by a deed of trust on plaintiffs' house. In order to avoid the existing usury laws on fixed-term loans, this loan took the form of a revolving loan agreement; its term, therefore, was indefinite, being contingent on the nature of plaintiffs' payments and whether any further money was borrowed. If the $353.00 monthly payments were made and nothing more was borrowed, the loan would have been paid off in ten years.
Because of the unemployment of Mr. Villegas in late 1980, payments on the loan became delinquent. Transamerica informed the plaintiffs that it would either foreclose on its deed of trust or offer the plaintiffs a new loan at an interest rate of 19.9 percent, with a loan finance fee of 9 "points" and monthly payments of $420 for a period of fifteen years. It did not tell them the existing loan would be paid off in ten years. Plaintiffs accepted the new loan. Because the second loan would cost the plaintiffs nearly twice as much as the first, they brought an action alleging that the transaction was usurious, that it violated the Arizona Consumer Fraud Act, and that it was in breach of a duty of good faith and fair dealing by defendant. Plaintiffs appeal from summary judgments against them on each of their claims.
Plaintiffs' contention that adding the loan fee to the annual percentage rate rendered it usurious under A.R.S. § 44-1201 was answered adversely to them in Layne v. Transamerica Financial Services, Inc., 146 Ariz. 559, 707 P.2d 963 (1985).
Plaintiffs next contend that the trial court erred in holding that the Arizona Consumer Fraud Act, A.R.S. §§ 44-1521 through 1534, does not apply to the lending of money. Section 44-1522 forbids deceptive acts "in connection with the sale or advertisement of any merchandise." Put shortly, Transamerica's position is that the lending of money is not the sale or advertisement of merchandise. Given ordinary usage, that claim has plausibility. Because "merchandise," "sale," and "advertisement" all have special definitions in the statute, not comporting with ordinary usage, we hold that the lending of money is subject to the provisions of the Arizona Consumer Fraud Act.
First, we must determine whether money is merchandise. "Merchandise" is defined in Section 44-1521(5) as "any objects, wares, goods, commodities, intangibles, real estate or services." To determine whether that which the plaintiffs obtained fits within this definition, we must analyze their contract with Transamerica. In return for their promise to repay, they obtained $1,888.95 in cash plus a contractual right that Transamerica make certain payments to others. We hold that money is an "object" or "good" or "commodity" and that the contractual right to have Transamerica make those payments is an "intangible" under the statutory definition of merchandise. The broad definition of merchandise, covering both tangibles and intangibles, and the broadly remedial purposes of the legislation require this result. Transamerica argues that the legislature intended to exclude lending institutions because they...
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...Loan transactions constitute a sale within the meaning of the Arizona Consumer Fraud Act. Villegas v. Transamerica Fin. Servs., Inc., 147 Ariz. 100, 708 P.2d 781, 783 (Ariz.Ct.App.1985). Plaintiffs allege that after inquiring with USB about the prospect of entering into a loan modification ......
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