Wilson v. World Omni Leasing, Inc.

• Decision Date: 13 January 1989
• Citation: 540 So.2d 713
• Parties: 8 UCC Rep.Serv.2d 628 Jane WILSON v. WORLD OMNI LEASING, INC., and Toyota Alabama, Inc. 87-1186.
• Court: Alabama Supreme Court

Page 713

540 So.2d 713

8 UCC Rep.Serv.2d 628

Jane WILSON v. WORLD OMNI LEASING, INC., and Toyota Alabama, Inc.

87-1186.

Supreme Court of Alabama.

Jan. 13, 1989.

Rehearing Denied Feb. 17, 1989.

James H. Faulkner, Birmingham, for appellant.

Susan Lynne Stephens and Andrew Campbell of Leitman, Stephens & Campbell, Birmingham, for appellees.

HOUSTON, Justice.

This is an appeal from a summary judgment in favor of the defendants, World Omni Leasing, Inc., and Toyota Alabama, Inc., ¹ against Jane Wilson. We affirm.

Ms. Wilson leased a Toyota pick-up truck from World Omni, through Toyota Alabama, in October 1986. The lease provided for a term of 60 months with payments of $296.88 per month plus $4.45 use tax for a total of $301.33 per month, and an option to purchase the truck at the termination of the lease for $3,716.00. In addition, the lease required Ms. Wilson to provide and pay for insurance coverage. After Ms. Wilson had made eight payments totaling $2,410.64, the truck was demolished in a two-vehicle collision. The insurance proceeds, which were paid to World Omni as a named insured on Ms. Wilson's insurance policy, were insufficient to cover the outstanding balance due, as calculated by World Omni, thereby leaving the amount of $4,067.23 as the remaining balance due.

Ms. Wilson filed suit against World Omni and Toyota Alabama for a claim based on Ala.Code 1975, § 5-19-16, which reads as follows:

"With respect to a consumer credit sale, consumer lease or consumer loan, if the court as a matter of law finds the agreement or any provision of the agreement to have been unconscionable before, after or at the time it was made, the court may refuse to enforce the agreement, or it may enforce the remainder of the agreement without the unconscionable provision, or it may so limit the application of any unconscionable provision as to avoid any unconscionable result."

She contended that to require her to pay the balance due under the lease agreement as computed by World Omni, which included the estimated residual value of the truck even though she was not obligated to purchase the truck when the lease terminated, was oppressive, unreasonable, unconscionable, and against public policy; that the lease agreement should be declared void and unenforceable; and that World Omni extracted a finance charge in excess of that permitted by the Alabama Mini Code.

Both Ms. Wilson and World Omni filed motions for summary judgment. The trial court granted World Omni's motion and denied Ms. Wilson's. Wilson appeals from World Omni's summary judgment.

At this point, we should note that this action was commenced after June 11, 1987; therefore, the applicable standard of review is the substantial evidence rule. See Ala.Code 1975, § 12-21-12. However, as the following discussion will show, Ms. Wilson failed to offer even a scintilla of evidence in support of each element of her causes of action to rebut the defendants' prima facie showing that they were entitled to a judgment as a matter of law.

The dispositive issues before us are:

(1) Whether the lease agreement was unreasonable, unconscionable, and unenforceable; and

(2) Whether the charge to Ms. Wilson for the estimated residual value of the truck was unreasonable, unconscionable, and unenforceable.

The leasing of consumer goods has become a widely used substitute for purchase. As a result, courts have held UCC § 2-302 applicable to leases either on the basis of statutory interpretation or by analogy. See 1 J. Fonesca, Handling Consumer Credit Cases, § 4:7 (3d ed. 1986). We affirmatively established in Lloyd v. Service Corp. of Alabama, Inc., 453 So.2d 735 (Ala.1984), that Ala.Code 1975, § 7-2-302, applies, by analogy, to lease agreements. Section 7-2-302, in pertinent part, reads as follows:

"s 7-2-302. Unconscionable contract or clause.

"(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result."

Comment (1) of the official comments to § 7-2-302 sets out the basic test to determine unconscionability:

"[W]hether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.... The principle is one of the prevention of oppression and unfair surprise ... and not of disturbance of allocation of risks because of superior bargaining power."

The intention of this section is to allow the courts to pass directly on the unconscionability of the contract or the particular clause therein and to make a determination as to its unconscionability. Id. It is within the court's discretion to refuse to enforce the contract as a whole if it is permeated by unconscionability, or to strike any single clause or group of clauses that are so tainted or that are contrary to the essential purpose of the agreement, or to simply limit the unconscionable clause so as to avoid unconscionable results. Comment 2, Ala.Code 1975, § 7-2-302; 1 J. Fonesca, Handling Consumer Credit Cases § 4:9 (3d ed. 1986).

With a choice between a valid and an invalid construction, the court has a duty to accept the construction that will uphold, rather than destroy, the validity of the contract. West Point-Pepperell, Inc. v. Bradshaw, 377 F.Supp. 154 (M.D.Ala.1974).

"It is fundamental, of course, that parties may contract as they see fit so long as they do not offend some rule of law or contravene public policy, and a court will not attempt to alter the expressed intentions of the parties if they are clear and unambiguous. Vardaman v. Benefit Association of Railway Employees, 263 Ala. 236, 82 So.2d 272 (1955)."

Advertiser Co. v. Electronic Engineers, 527 So.2d 1317 (Ala.Civ.App.1988), at 1319.

In West Point-Pepperell, supra, the United States district court took the position that the question of unconscionability of a contract before the court was a matter of law; that an unconscionable bargain or contract was one that no man in his senses, not under delusion, would make on the one hand, and that no fair and honest man would accept on the other, Hume v. United States, 132 U.S. 406, 10 S.Ct. 134, 33 L.Ed. 393 (1889); that unconscionability includes an absence of meaningful choice on the part of one of the parties, together with contract terms that are unreasonably favorable to the other party. Williams v. Walker-Thomas Furniture Co., 121 U.S.App.D.C. 315, 350 F.2d 445, 18 A.L.R.3d 1297 (D.C.Cir.1965). The court in West Point-Pepperell, supra, citing Williams v. Walker-Thomas Furniture Co., supra, further stated:

"The presence of a meaningful choice can only be determined by consideration of all the circumstances surrounding the transaction, and might be negated by 'gross inequality of bargaining power', it being relevant to ascertain whether 'each party * * * considering the obvious education or lack of it (had) a reasonable opportunity to understand the terms of the contract or (whether) the important terms (were) hidden in a maze of fine print and minimized by deceptive sales and practices.' "

377 F.Supp. at 158.

Rescission of a contract for unconscionability is an extraordinary remedy usually reserved for the protection of the unsophisticated and the uneducated. E & W Building Material Co. v. American Savings & Loan Association of Brazoria County, Texas, 648 F.Supp. 289 (M.D.Ala.1986). However, Alabama law provides no explicit standard of unconscionability and each case must be considered on its own facts. Id. In Lloyd v. Service Corp. of Alabama, Inc., supra, we held that it was the unequal bargaining power of the parties that gave rise to an unconscionable contract. Ms. Wilson contends that she was placed in an unequal bargaining position because she lacked experience in leasing or purchasing vehicles. However, in considering her educational background, her line of employment, and her past experience in commercial transactions, as revealed in her deposition testimony, we conclude that Ms. Wilson was not in an unequal bargaining position at the time the contract was made.

Ms. Wilson also contends that the lease agreement was unconscionable because she had no opportunity to read and understand the terms of the contract. In her deposition, however, she testified that she clearly understood that her agreement with World Omni defined the rights and duties of the parties; that in prior transactions she had read the contracts before signing them; and that in this case she did not review the contract although no one stopped her from reading it or told her she could not read it or misled her in any way. Furthermore, the record showed that Ms. Wilson signed the "Lease Acknowledgement Form," which in pertinent part reads as follows:

"I acknowledge that if I turn this vehicle in before the end of my lease term, I will remain obligated under the provisions of the Vehicle Lease Agreement concerning Early Termination and Default, which could result in significant penalties and costs. I understand that this form does not change any provision in the Lease Agreement I am signing as well.

"I CERTIFY THAT I HAVE READ AND THAT I UNDERSTAND EACH ITEM MENTIONED ABOVE." (Emphasis added.)

In Munroe v. Pritchett, 16 Ala. 785, 789 (1849), this Court stated: "If the purchaser blindly trusts, where he should not, and closes his eyes where ordinary diligence requires him to see, he is willingly deceived, and the maxim applies, 'volenti non fit injuria.' " ²

In an effort to discourage negligence and inattention to one's own interest, this Court in Torres v. State Farm Fire & Casualty Co., 438 So.2d 757, 759 (Ala.1983), held that the right of...