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COURT OF APPEALS DECISION DATED AND RELEASED DECEMBER 17, 1996 |
NOTICE |
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A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62(1), Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 96-1606
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT III
MARVIN DEGRAVE
AND KAREN DEGRAVE,
Plaintiffs-Respondents,
v.
DOOR COUNTY
COOPERATIVE,
Defendant-Appellant.
APPEAL from judgment of
the circuit court for Door County:
PETER C. DILTZ, Judge. Affirmed
in part; reversed in part and cause remanded with directions.
LaROCQUE, J. The Door County Cooperative appeals a
judgment finding it liable to Marvin and Karen DeGrave for violations of the
Wisconsin Consumer Act. Chapters 421
through 427, Stats. The co-op argues that its transactions with
the DeGraves were not subject to the Act and that it did not violate the Act
regardless. The co‑op
alternatively argues that if they did violate the Act, the trial court imposed
an improper remedy.
This court concludes
that the credit arrangement between the parties subjected the co‑op to
the Act, which the co‑op violated by failing to disclose in advance the
information required by § 422.308, Stats. However, this court concludes that the co‑op
did not violate the Act by taking possession of the DeGraves' stock and
patronage dividends in the co‑op.
The judgment of the circuit court is therefore affirmed in part and
reversed in part.
The DeGraves' claim was
tried to the court. The court made
findings of fact, which this court accepts unless they are clearly
erroneous. Section 805.17(2), Stats.
This court may assume that a missing finding on an issue was determined
in support of the circuit court's judgment if there is evidence in the record
to support such a finding. Sohns
v. Jensen, 11 Wis.2d 449, 453, 105 N.W.2d 818, 820 (1960).
The DeGraves were
members of the co‑op for over twenty years, periodically making purchases
for use on their farm. Some purchases
were paid for in cash, while others were made on credit, for which the DeGraves
would receive an invoice. Each invoice
included language substantially similar to the following:
TERMS: ALL PURCHASES ARE DUE WITHIN
THE FOLLOWING MONTH. A FINANCE
CHARGE OF 1.5% PER MONTH, OR 18% PER YEAR, WILL BE ACCESSED TO THE PREVIOUS
BALANCE LESS CREDITS AND PAYMENTS. I
AGREE TO THESE TERMS FOR ALL PAST AND FUTURE PURCHASES.
For
each purchase made, the DeGraves accumulated stock and patronage dividends in
the co‑op.
Beginning in 1993, the
DeGraves failed to pay the full amount of their co‑op bills. Each month, the co‑op charged the
stated amount of interest on the DeGraves' unpaid balance. Later, the parties agreed that the co‑op
would not take further collection action against the DeGraves provided the
DeGraves make monthly payments of at least $50.[1] However, interest at the stated rate would
continue to accrue. On December 30,
1993, the co‑op took possession of the DeGraves' stock in the co‑op,
which was valued at $796.76 at the time, as security for the DeGraves' indebtedness.[2] The co‑op also took possession of the
stock and patronage dividends earned by the DeGraves for 1993, valued at $48.38
and $12.10, respectively, and charged the DeGraves $45 as a "Small Claims
filing fee." The co‑op did
not notify the DeGraves of these actions.
The DeGraves made
monthly payments of $50 from January to November of 1994. In January of 1995, the DeGraves requested a
statement of their account. Upon
receipt of this statement, the DeGraves were first notified that the co‑op
had in 1993 taken possession of their stock and patronage dividends and had
charged them the $45 small claims filing fee.
The DeGraves filed this action alleging that the co‑op violated
the Wisconsin Consumer Act by charging 18% annual interest on their unpaid
balance and by taking possession of their stock and patronage dividends. The trial court entered judgment in favor of
the DeGraves and the co‑op appeals.
The
construction of a statute in relation to a given set of facts is a question of
law this court reviews de novo. Severson
Agri-Service v. Lander, 172 Wis.2d 269, 272, 493 N.W.2d 230, 231 (Ct.
App. 1992). This court concludes that
the co‑op violated the Act by failing to disclose in advance the
information required by § 422.308, Stats. However, this court concludes that the co‑op
did not violate the Act by taking possession of the DeGraves' stock and
patronage dividends in the co‑op.
The trial court found
that the parties' payment arrangement constituted an open-end credit plan
within the meaning of the Act. This
court agrees. Section 421.301(27)(a), Stats., defines an open-end credit plan
as follows:
"Open-end credit plan" means
consumer credit extended on an account pursuant to a plan under which:
1. The creditor may permit the
customer to make purchases or obtain loans, from time to time, directly from
the creditor or indirectly by use of a credit card, check or other device, as
the plan may provide;
2. The customer has the
privilege of paying the balance in full or in installments;
3. A finance charge may be
computed by the creditor from time to time on an outstanding unpaid balance;
and
4. The
creditor has treated the transaction as open-end consumer credit for purposes
of any disclosures required under the federal consumer credit protection act.
All
of these elements must be present before a transaction is properly classified
an open-end credit plan. The co‑op
argues that the second element is absent because the DeGraves were never
extended "the privilege of paying the balance" to the co‑op in
installments.[3] This court disagrees.
Within the context of
the Act, "payable in instalments" includes situations where payment
is permitted to be made in two or more installments where a finance charge is
or may be imposed. See §
421.301(30)(a), Stats.[4] In this case, the terms described on the co‑op's
invoices implies permission for a member to pay in multiple payments, including
payments after the designated due date.
The only consequence of making payments after the due date would be the
addition of a finance charge.
The co‑op argues
that the terms described on the invoices unambiguously required payment by a
certain date and that therefore the DeGraves were not granted the privilege of
paying in installments. This court
disagrees and concludes that a reasonable person reading those terms could
believe the co‑op permitted payments after the due date. Because the terms are ambiguous, it is
appropriate to examine whether the parties intended to allow payments after the
due date. See Capital Invests. v.
Whitehall Packing Co., 91 Wis.2d 178, 190, 280 N.W.2d 254, 259
(1979). This court concludes that the
invoice terms expressed an intent to authorize payments after the specified
date, merely with the consequence of the application of the stated finance
charge.
In addition to the
agreement set forth on the invoices, the October 1993 agreement with the
DeGraves confirms such a privilege.
That agreement explicitly allowed the DeGraves to pay their debt in $50
installments, with the addition of an 18% annual finance charge on any unpaid
balance. Because the DeGraves were
extended the privilege of paying their balance in installments, the
transactions constituted an open-end credit plan.
Because the transactions
were pursuant to an open-end credit plan, the co‑op was required to
disclose the interest rate to be charged as well as all charges and fees that
may be levied upon the account. See §
422.308, Stats.[5] Under § 422.302(2), Stats., these disclosures must be made
"before the transaction is consummated." The circuit court concluded that the co‑op did not comply
with these disclosure provisions and this court agrees. It is undisputed that the DeGraves did not
sign a credit application when opening their account with the co‑op. The co‑op points to the terms recited
on its invoices to establish that they complied with § 422.308. These documents are insufficient to
constitute prior notice because they were presented to the DeGraves after
the transaction. Invoices presented to
the customer after a transaction has been consummated do not satisfy the prior
notification requirements of § 422.302(2).
See Severson, 172 Wis.2d at 273-74, 493 N.W.2d at
232. In addition, these notices do not
disclose the $45 small claims filing fee imposed upon the DeGraves' account.[6]
Because the co‑op
violated the Act's disclosure provisions, it is subject to penalties under §
425.304, Stats.[7] See § 422.308(4), Stats.
This court therefore affirms the circuit court judgment imposing the
minimum $100 fine upon the co‑op.
However, this court
concludes that the co‑op did not violate the self-help provisions of the
Act by seizing the DeGraves' stock and 1993 patronage dividends.[8] The circuit court concluded that the co‑op
violated § 425.206, Stats., by
seizing the DeGraves' stock and dividends.[9] In doing so, the court concluded that the
stock and dividends were "collateral" as defined by § 425.202, Stats.
That section defines collateral, for purposes of ch. 425, to mean "goods
subject to a security interest in favor of a merchant which secures a
customer's obligations under a consumer credit transaction." (Emphasis added.) The definition of "goods" contained in the Act refers
to § 409.105, Stats., which gives
the following definition of the term:
(h) "Goods" includes all things which
are movable at the time the security interest attaches ... but does not include
money, documents, instruments, accounts, chattel paper, [or] general
intangibles ....
Under
this definition, the DeGraves' stock and dividends in the co‑op cannot be
considered "goods" or "collateral." Because the self-help provisions of the Act
only prohibit taking possession of collateral or other goods, the co‑op's
actions in taking possession of the stock and dividends does not violate the
Act.
Because the circuit
court determined that the co‑op violated the self-help provisions of the
Act, the court ordered the DeGraves' debt canceled and ordered the co‑op
to pay the DeGraves the fair market value of the stock and dividends pursuant
to § 425.305, Stats.[10] Because this court concludes that the co‑op
did not violate the self-help provisions of the Act, that portion of the
judgment is reversed.
The final issue raised by
the parties relates to the circuit court judgment awarding attorney fees to the
DeGraves pursuant to § 425.308, Stats.[11] This court affirms that portion of the
judgment. A party is entitled to
reasonable attorney fees if the party "prevails in an action arising from
a consumer transaction." Section
425.308(1), Stats. Because the DeGraves prevailed in
establishing the co‑op's violation of the Act's disclosure requirements,
they are entitled to fees.
To conclude, that part
of the judgment imposing a $100 fine upon the co‑op pursuant to §
425.304, Stats., is
affirmed. Furthermore, because the 18%
interest rate was not authorized, enforcement of the co‑op's 18% annual
interest claim is barred by § 425.306, Stats.[12] However, that part of the judgment imposing
sanctions pursuant to § 425.305, Stats.,
is reversed. The DeGraves' debt is
therefore reinstated. On remand, the
circuit court shall recalculate interest retroactively at 5% annually on the
total obligation pursuant to § 138.04, Stats.,
and render judgment accordingly.[13] Finally, upon full payment of the debt, the
DeGraves are entitled to the stock and patronage dividends, or their fair
market value.
By the Court.—Judgment
affirmed in part; reversed in part and cause remanded with directions. No costs on appeal.
This opinion will not be
published. Rule 809.23(1)(b)4, Stats.
[1] The co-op filed an action in small claims court to recover the amount owed; however, that action was voluntarily dismissed when the parties agreed to the payment schedule.
[2] The co-op's articles of incorporation state that it has "a prior lien, with the usual right of enforcement for ordinary liens, upon all outstanding stock, certificates of interest, revolving fund certificates, credits, letters of advice, and all other evidence of patronage equities outstanding on [the co-op's] books, for any indebtedness due [the co-op]."
[3] The circuit court implicitly found all elements contained in § 421.301(27)(a), Stats., present in this case. However, on appeal the parties merely discuss the existence of the second element. Neither party discusses the existence of the other three elements. Because neither party has discussed the existence of the other elements, we consider those arguments waived, see W.H. Pugh Coal Co. v. State, 157 Wis.2d 620, 637, 460 N.W.2d 787, 793 (Ct. App. 1990), and the elements established.
[4]
Section 421.301(30(a), Stats.,
states as follows:
"Payable in
installments" means that the payment is required or permitted by agreement
to be made in:
(a) Two or more installments, excluding the downpayment in a consumer
credit sale, with respect to an obligation arising from a consumer credit
transaction for which a finance charge is or may be imposed;
(b) More than 4 installments, excluding the downpayment in a consumer
credit sale, in any other consumer credit transaction; or
(c) Two or more installments if any instalment other than the downpayment is more than twice the amount of any other instalment, excluding the downpayment.
[5]
Section 422.308, Stats.,
provides in relevant part:
(1) With regard to
every open-end credit plan between a creditor, wherever located, and a customer
who is a resident of this state and who is applying for the open-end credit
plan from this state, every application for the open-end credit plan, including
every application contained in an advertisement, shall be appropriately divided
and captioned by its various sections and shall set forth all of the following:
(a) The annual
percentage rate or, if the rate may vary, a statement that it may do so and of
the circumstances under which the rates may increase, any limitations on the
increase and the effects of the increase.
(b) The date or
occasion upon which the finance charge begins to accrue on a transaction.
(c) Whether any annual
fee is charged and the amount of the fee.
(d) Whether any other
charges or fees may be charged, what they may be charged for and the amounts of
the charges or fees.
(2) With regard to
every open-end credit plan between a creditor, wherever located, and a customer
who is a resident of this state and who is given the opportunity to enter into
an open-end credit plan while present in any establishment located in this
state but who is not required to complete an application under sub. (1), the
customer shall be given a notice prior to entering into the open-end credit
plan. The notice shall be appropriately
divided and captioned by its various sections and shall set forth all of the
information in sub. (1)(a) to (d).
....
(4) A violation of this section is subject to s. 425.304 unless the violation was the result of an unintentional good faith error.
[6] The co-op argues that a 1991 invoice bearing Marvin DeGrave's signature constitutes prior notice of the terms required by § 422.308, Stats. This court disagrees. As stated in Severson Agri-Service v. Lander, 172 Wis.2d 269, 273-74, 493 N.W.2d 230, 231 (Ct. App. 1992), invoices presented after a transaction cannot satisfy the prior notice requirement of § 422.302(2), Stats. Furthermore, there is no allegation in the record that this invoice, or one containing the same language, was presented to the DeGraves before transactions between the parties occurred.
[7] The co-op does not argue that it violated § 422.308, Stats., due to an unintentional good faith error. See § 422.308(4), Stats.
[8] The parties dispute whether the co-op "took possession" of the stock and dividends within the meaning of § 425.206, Stats. Because we conclude that the stock and dividends were not "collateral" within the meaning of the Act, it is not necessary that we resolve this issue.
[9]
Section 425.206, Stats.,
states as follows:
(1) Notwithstanding any other
provisions of law, no merchant may take possession of collateral or goods
subject to a consumer lease in this state by means other than legal process in
accordance with this subchapter except when:
(a) The customer has surrendered
the collateral or leased goods;
(b) Judgment for the merchant has
been entered in a proceeding for recovery of collateral or leased goods under
s. 425.205, or for possession of the collateral or leased goods under s.
425.203(2);
(c) The merchant has taken
possession of collateral or leased goods pursuant to s. 425.207(2); or
(d) The merchant has taken possession of collateral in accordance with s. 425.114.
[10] The DeGraves argue that the court did not award remedies under § 425.305, Stats. This court disagrees. The record reflects that while the court expressed some difficulty with applying remedies under subsec. (2), the court did state that the DeGraves were entitled to the fair market value of their stock and dividends under § 425.305(1). This court concludes that the court also canceled the DeGraves' debt pursuant to that subsection.
[11] In their brief, the DeGraves state that the co-op's actions were unconscionable and not in good faith. Because they do not develop these arguments further, this court declines to address them. See State v. Pettit, 171 Wis.2d 627, 647, 492 N.W.2d 633, 642 (Ct. App. 1992).
[12]
Section 425.306, Stats.,
states as follows:
(1) Any charge, practice, term, clause, provision security interest
or other action or conduct in violation of chs. 421 to 427, to the extent that
the same is in violation of chs. 421 to 427, shall confer no rights or obligations
enforceable by action.
(2) This section shall not affect the enforcement of any provision that is not prohibited by chs. 421 to 427.