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COURT OF APPEALS DECISION DATED AND RELEASED July 6, 1995 |
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, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No.
95-0148-FT
STATE
OF WISCONSIN IN COURT OF
APPEALS
DISTRICT IV
RIVER BANK OF DE SOTO
f/n/a DE SOTO STATE BANK,
Plaintiff-Appellant,
v.
RAYMOND FISHER,
Defendant,
KAREN FISHER DUNCAN,
Defendant-Respondent.
APPEAL from a judgment
and an order of the circuit court for Vernon County: Michael J. Rosborough, Judge.
Reversed and cause remanded.
Before Eich, C.J.,
Gartzke, P.J., and Sundby, J.
GARTZKE, P.J. River Bank of De Soto appeals from an order
dismissing its claim against Karen Duncan and a judgment in her favor of $100
damages and $2,251.09 attorney fees and expenses. The issue is whether, as the trial court concluded, the bank's
conduct was unconscionable under the Wisconsin Consumer Act, ch. 425, Stats.
The offending conduct was the bank's mailing[1]
to Duncan's ex-husband, Raymond Fisher, car titles. The cars themselves were security for the bank's loan to Duncan
and Fisher. We conclude the bank's
conduct was not unconscionable. We
therefore reverse.
When Fisher and Duncan
divorced in 1990, they were indebted to the bank. The divorce judgment assigned to Fisher the responsibility to pay
the debt. Fisher's two antique cars
secured the debt. The bank had
possession of the titles to the cars.
Each title shows Fisher as the owner and the bank as "first
lienholder." Subsequently, the
loan was renewed twice, with Fisher and Duncan signing the renewal notes.
In August 1991, after
Fisher told Duncan he intended to move to Texas, she told the bank she was
concerned that he might hide the cars.
Fisher moved to Texas in September 1991 and he continued making payments
to the bank. When the debt came due on
June 26, 1992, he signed a consumer loan agreement for its renewal. In August 1992, the bank asked Duncan to
sign the "renewal documents" but she refused because of Fisher's past
payment history and his plan to move the cars to an undisclosed location.
Fisher made monthly
payments on the renewed loan until May 1993.
In early June 1993, when the debt was delinquent, he told the bank that
he was arranging refinancing in Texas to pay the debt in full. He said he needed to use the cars for
collateral for the new loan, and he asked the bank to forward the car titles to
him to facilitate refinancing. The bank
complied, without signing the titles or intending to release the
collateral. In July 1993, Fisher told
the bank that he did not intend to make further payments and that the cars were
in Mexico. In October 1993, the bank
brought this action against Fisher and Duncan on the debt. The record fails to disclose whether the
bank has ever proceeded against the security.
It did not do so in this action.
Fisher did not appear in the action.
Following a bench trial,
the trial court found that Duncan reasonably expected that if she did not sign
the renewal loan the bank would be forced to call it due and the cars would be
sold to relieve her of most, if not all, liability. The court also found that although the bank was not required to
have the car titles in its possession, it had them as additional protection on
the loan. The court further found that
the bank had obvious options available to it rather than sending the titles to
Fisher in Texas: it could have sent
them directly to a new lender.
The loan was a consumer
credit transaction under ch. 425, Stats. Section 425.107(1), Stats., provides that if a court as a matter of law finds
"unconscionable" any aspect of a consumer credit transaction, any
conduct directed against the customer by a party to the transaction or any
result of the transaction, the court shall refuse to enforce the transaction
against the customer and shall provide the customer with the remedy provided in
§ 425.303, Stats. Section 425.303 makes the party who
acted unconscionably liable to the customer for $100 plus actual damages. No statute defines
"unconscionable," although § 425.107(3) lists factors pertinent
to the issue of unconscionability.
The trial court
concluded that because the bank's conduct in "releasing" (i.e.,
mailing) the titles to Fisher left Duncan in a position where she had "an
absence of meaningful choice," the bank had treated her unconscionably and
she should be relieved of any liability on the loan. The court concluded it was appropriate to impose against the bank
the remedies available to Duncan under § 425.303(1), Stats., and her reasonable attorney
fees pursuant to § 425.308(1), Stats. The court made no findings that the provisions
in the loan documents are unconscionable.
The trial court took its
definition of unconscionability from Discount Fabric House v. Wisconsin
Tel. Co., 117 Wis.2d 587, 601, 345 N.W.2d 417, 424 (1984). The Discount Fabric court held
that an exculpatory provision in an advertising contract between the plaintiff
and the telephone company, to the effect that the company was not liable for
errors or omissions in telephone directory advertising, was void as against
public policy. The court relied on Allen
v. Michigan Bell Tel. Co., 171 N.W.2d 689, 692-94 (Mich. App.
1969). The Allen court
recited from Williams v. Walker-Thomas Furniture Co., 350 F.2d
445, 449 (D.C.Cir. 1965), which said:
"Unconscionability has generally been recognized to include an
absence of meaningful choice on the part of one of the parties together with
contract terms which are unreasonably favorable to the other party."
The note which both
Fisher and Duncan had signed provided in part:
Without affecting my liability or the liability
of any endorser, surety, or guarantor, Lender may, without notice, grant
renewals or extensions, accept partial payments, release or impair any
collateral security for this Note or agree not to sue any party liable on
it. Presentment, protest, demand and
notice of dishonor are waived.
(Emphasis
added.)
The bank asserts that
its loan documents are identical to Wisconsin Bankers Association form 455,
which the Wisconsin Commissioner of Banking approved by letter on March 4,
1991. The commissioner stated that the
approval may not be construed as an approval of any business practice utilized
in a transaction involving an approved form.
However, the bank asserts that its conduct cannot be considered
unconscionable when every action it took was explicitly allowed under the loan
document the commissioner had approved.
Section 426.104(4)(b), Stats.,
provides that any act, practice or procedure submitted to the administrator in
writing and approved by the administrator shall not be deemed to be a violation
of chs. 421 to 427, Stats., the
consumer-transactions chapters.
The trial court referred
to the quoted provision in the note as "boilerplate fine print
language" having "no benefit or value whatsoever to the
consumer." The court's
characterization is irrelevant. First,
we cannot accept the proposition that when the quoted provision has been
approved by the commissioner of banking and is not, in and of itself
unconscionable, release by the bank of the car titles, without more, is
unconscionable. Second, the provision itself
is irrelevant to this dispute. The bank
did not release or impair its security.
It mailed the titles to Fisher, but the titles were not security. Fisher could not sell the cars without the
titles, but each title showed on its face that the bank had a lien on the
vehicle.
Duncan argues that when
the bank sent the car titles to Fisher without informing her, it breached its
duty to her under a document separate from the note, the loan agreement, which
provided in part,
You acknowledge that we are under no duty to
preserve or protect any Collateral until we are in actual, or constructive,
possession of the Collateral.... We
shall only be considered in "constructive" possession of the
Collateral when we have both the power and intent to exercise control over the
Collateral.
Duncan
claims that the bank had constructive possession of the cars by holding their
titles, and therefore owed her a duty to preserve and protect the
collateral. The trial court made no
findings on the constructive-possession issue.
Indeed, it made no findings whatever with regard to the quoted
provision. In particular, it did not
decide whether this provision is for the benefit of Fisher, who was the sole
owner of the collateral, or for the benefit of Duncan, who had no interest in
the collateral. Duncan has not shown
how the bank's turning over the titles to Fisher breached a duty to her.
We turn to the grounds
relied on by the trial court: whether,
as the court found, the bank's conduct in mailing the titles to Fisher indeed
"left Duncan in a position where she had an `absence of meaningful choice'
...." Because the court did not
explain how or why Duncan was left in a position of having no meaningful
choice, we review the question de novo.
It is, on the undisputed facts before us, a question of law. We disagree with the trial court's
conclusion.
Duncan has not shown
that before the bank mailed the titles to Fisher, she had a "meaningful
choice." She has shown no right to
compel the bank to commence an action against Fisher or to compel the bank to
apply the security to the debt. She has
never explained how she had the right to prevent Fisher from taking the
security out of Wisconsin.[2] She cites no statutory or case-law authority
supporting such rights.
Because Duncan failed to
show she had a "meaningful choice" regarding the security before the
bank mailed the titles to Fisher, she failed to show the bank's conduct in that
regard affected her choices after that event.
We conclude that the bank's conduct did not deprive Duncan of a
meaningful choice. For that reason we
conclude that the bank's conduct was not "unconscionable."
Our conclusion requires
that we reverse the judgment and order.
By the Court.--Judgment
and order reversed and cause remanded.
Not recommended for
publication in the official reports.
No. 95-0148-FT(D)
EICH, C.J. (dissenting). It may be, as the majority opinion
indicates, that the bank did not "release" its security interest in
Fisher's automobiles, but its act of returning the title documents to him
facilitated his sale or other disposition of the cars in Mexico.
It is also true that the
note permitted the bank to release or impair the collateral security for the
loan. But the ancillary loan agreement
indicated that once the bank had actual or constructive possession of the
collateral--which I believe it did when it had possession of the titles to the
automobiles--it undertook the duty "to preserve or protect" that
collateral.
It is undisputed that
the value of the automobiles exceeded the loan balance; and I believe the
inference is inescapable that when Fisher, then living in Texas, asked for the
title documents it was for the purpose of disposing of the cars. In my opinion, when the bank complied with
Fisher's request without any notice to Duncan, it left her in a position where
she lacked any "meaningful choice" because the bank could, as it did,
proceed against her for the full amount of the loan balance under circumstances
in which, according to the trial court's unchallenged findings of fact, she
could reasonably expect that any liability she might have on the original note
would be satisfied by the bank's sale of the collateral.
I believe the trial
court could properly rule as it did and would affirm the judgment and order.