Arthur QUILLER, Lilliе Mae Quiller, and all other persons similarly situated, Plaintiffs-Appellants, v. BARCLAYS AMERICAN/CREDIT, INC., Defendant-Appellee.
No. 83-8455.
United States Court of Appeals, Eleventh Circuit.
March 19, 1984.
Opinion on Granting of Rehearing En Banc May 22, 1984.
727 F.2d 1067
The policy against rate discrimination is evident in the prohibition contained in Section 16 of the Shipping Act,
An unjust or unfair device under Section 815 must employ some fraud or concealment. Capital Transportation, Inc. v. United States, 612 F.2d 1312, 1323-24 (1st Cir. 1979). The majority finds no concealment from the consolidation of cargo because, in its effort to find shipments for consolidation, Union Camp contacted some of the members of its trade association. Disclosure to somе shippers, however, does not mean that no concealment has occurred. When the law requires that tariffs filed with the FMC reflect the rate actually charged for specified transportation services, and when the tariff does not indicate whether combined cargoes are permitted, then, when cargoes are combined to achieve the lower rate, concealment is avoided only by the filing of an appropriate tariff revision to reflect the amended agreement. In the absence of a filed revision, the consolidation involves concealment and constitutes an unjust device under Section 815. The same principles apply when the amended agreement between shipper and carrier provides for a renegotiation of deadfreight penalties.
Thus, by means of the undisclosed cоnsolidation of cargo and renegotiation of deadfreight penalties, Union Camp obtained ocean carriage for its cargo at a rate lower than otherwise applicable, in violation of
Douglas N. Campbell, Elise M. Bloom, Atlanta, Ga., for defendant-appellee.
Before GODBOLD, Chief Judge, RONEY and KRAVITCH, Circuit Judges.
KRAVITCH, Circuit Judge:
To finance their purchase of a nеw mobile home, plaintiff-appellants entered into a retail installment sales contract, which the mobile home dealer then assigned to the defendant-appellee credit corporation, Barclays American/Credit, Inc. The Quillers’ agreement obligated them to pay finance charges exceeding a thirteen percent add-on rate, in apparent violation of the Georgia Motor Vehicle Sales Finance Act,
The applicability of state usury laws, however, has been greatly curtailed by federal legislation. Financing agreements that satisfy the requirements of the Depository Institutions Deregulation and Monetary Control Act,
Barclays moved to dismiss for failure to state a claim, contending that the cause of action was barred as a matter of law by the Act and the statute of limitations. Pretermitting the statute of limitations question, the district court dismissed the action as precluded by the federal statute. We disagree and reverse the order dismissing the Quillers’ claim.
Our threshold inquiry is whether the district court‘s dismissal was procedurally premature. The Quillers’ contract states a claim for relief under Georgia law—the charging of a usurious interest rate, which, if proved, would entitle them to relief for violation of the Georgia Motor Vehicle Sales Finance Act. Barclays’
Because the Quillers attached the installment sales contract to their pleadings, the district court properly examined the document to determine whether the defense of federal preemption was apparent on the face of the complaint. If the contract and complaint demonstrate that Georgia law does not apply because the agreement is governed by the Act, the action should be dismissed because it would appear beyond doubt that the Quillers could prove no set of facts in support of their claim. The district court therefore was procedurally correct in looking at the contract to determine whether it complied with the requirements of the federal statute.
Turning to the substance of the motion to dismiss, we first observe that the Act preempts state law limits on finance
shall not аpply to a loan, mortgage, credit sale, or advance which is secured by a first lien on a residential manufactured home unless the terms and conditions relating to such loan, mortgage, credit sale, or advance comply with consumer protection provisions specified in regulations prescribed by the Federal Home Loan Bank Board. Such regulations shall—
. . . .
(2) require a 30-day notice prior to instituting any actiоn leading to repossession or foreclosure . . . .
. . . .
and (4) include such other provisions as the Federal Home Loan Bank Board may prescribe after a finding that additional protections are required.
The regulation implementing subsection (c)(2) states:
[N]o action to repossess or foreclose, or to accelerate payment of the entire outstanding balance of the obligation, may be taken against the debtor until 30 days after the creditor sеnds the debtor a notice of default . . . .
We reject the Quillers’ interpretation of the statute and regulation. Neither requires that a thirty-day notice provision appear in the contract. The plain language of the regulation prohibits only the act of foreclosure or repossession without giving notice. The words “no action . . . may be taken” regulate the conduct of creditors attempting to exercise their rights upon default, not the written financing agreements themselves. When subsection 590.4(h) is read in conjunction with other regulations implementing the Act, it becomes clear that the Federal Home Loan Bank Board (the “Board“) did not intend to require that the debtor‘s right to thirty days notice be recited in the contract. Subsections 590.4(d) (prepayment without penalty),2 (e) (terms of balloon payments),3 (f) (late charges),4 and (g) (agreement for deferral of fees)5 all contain express, unambiguous statements requiring speсific rights of the debtor to be delineated in the written agreement. Subsection (h) contains no similar requirement. If an express contractual notice provision had been intended, the Board would have so provided in unambiguous terms.
Our construction of regulation 590.4(h) and the statute is consistent with the Board‘s own interpretation. An opinion letter of the Board‘s general counsel concludes, “This requirement [§ 590.4(h)] refers only to the act of giving notice; neither paragraph (h) nor the Congressional legislation that it implements . . . expressly requires that а covered credit agreement recite the purchaser-borrower‘s right to notice.” 5 Fed.Banking L.Rep. ¶ 83,027 (1983). In an amicus brief filed by the Board in this case, the agency has embraced the conclusion of its general counsel. Since the agency‘s view of its own regulation and the statute it oversees is not “demonstrably irrational,” we should give great weight to its interpretation. Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 100 S.Ct. 790, 797, 63 L.Ed.2d 22 (1980); see also Sage v. Freedom Mortgage Co., 704 F.2d 1519, 1521 (11th Cir.1983) (en banc). We therefore hold that to qualify for fedеral preemption under the Act the financing agreement need not contain an express term guaranteeing the debtor thirty days notice before repossession or foreclosure.
Although federal law does not mandate a contractual notice provision, the creditor cannot obtain the benefits of preemption if the financing agreement contains express provisions authorizing conduct сontrary to the statute or regulations. While there is no affirmative duty to disclose to the debtor his statutory right to notice before repossession or foreclosure, if the contract permits the creditor to repossess or foreclose immediately upon default, the “terms and conditions” relating to the loan agreement do not comply with regulation
In determining whether the terms and conditions of this agreement comply with the Board‘s consumer protection regulations, we should keep in mind that Congress included manufactured home financing in its preemption scheme only on the condition that consumer-debtors would be guaranteed certain safeguards. See H.Conf.Rep. No. 96-842, 96th Cong., 2d Sess. 79, reprinted in 1980 U.S.Code Cong. & Ad.News 298, 309. Because purchasers of mobile homеs frequently are unaware of complicated rules of contract construction, we should examine the contract through the eyes of the typical consumer and determine whether the lender could use the terms of the contract to impose illegal burdens on a debtor with no knowledge of his statutory rights. It would be unrealistic to assume that every illegal act will be corrected through litigation. See General Finance Corp. of Georgia v. Sprouse, 577 F.2d 989 (5th Cir.1978) (when interpreting сontracts in light of consumer legislation, court should consider actual operation of contract in commercial world, effect upon consumer not familiar with legal rights, and risk that contract might allow lender to employ ambiguous provisions to his advantage). The rule of construction that ambiguities and inconsistencies should be resolved against the drafter, Landale Enterprises, Inc. v. Berry, 676 F.2d 506 (11th Cir.1982), is particularly appropriate in the areas prоtected by consumer legislation.
The Quiller contract provides in part:
If Customer defaults on any obligation under this contract, or if Holder shall consider the indebtedness or the Collateral insecure, the full balance may, upon election of Holder, without notice, subject to any notice of right to cure, become due and payable, less the required
rebate of the Finance Charge.... Customer agrees in any such case to pay said amount or, at Holder‘s election, to deliver the Collateral to Holder, and Holder may, without notice or demand for performance or legal process, peaceably enter any premises, but not into any dwelling, where the Collateral may be found, peaceably take possession of it and custody of anything found in it.
The agreement includes language that, on its face, is contrary to the requirements of the statute and regulations. It permits the creditor (1) to foreclose on the loan “without notice;” (2) to repossess “without notice or demand for performance or legal process;” and (3) to demand payment of the full balance upon the debtor‘s default or the creditor‘s insecurity “without notice.” These provisions are inaccurate statements of the creditor‘s rights under federal law. The only language that might apprisе the debtor of his statutory right to notice is the vague qualification that the creditor‘s express, contractual powers to immediately foreclose, repossess and accelerate are “subject to any notice of right to cure.” Unless the debtor has acquired knowledge of his statutory right to cure from some outside source, however, this language will not accurately notify him of his contractual rights. The qualificаtion would, at most, inform the debtor that he may have a right to cure, but the law guarantees him an absolute right to cure. This inconsistent language goes further than simply remaining silent on the debtor‘s right to notice upon default; by declaring the creditor‘s unauthorized power to foreclose immediately, the consumer is given an affirmative misrepresentation as to his statutory guarantees.
Barclays contends that its contract does comply with the regulations because
RONEY, Circuit Judge, dissenting:
I respectfully dissent from the Court‘s holding that the Quiller contract does not qualify for рrotection under the Federal Preemption Statute. I agree with the Court that the thirty-day notice provision is not required to be in the contract. I cannot agree that the remedy applied here is suitable because of the language in the contract concerning the notice requirement.
When the contract is obviously drawn and intended by all parties to permit them to take advantage of the Federal Preemption Statute, it is unduly harsh to throw the whole contract out just because it contains language which appears to violate the thirty-day notice requirement. Rather than applying state usery laws to a contract which could not have been validly made thereunder, it would be more equitable to simply invalidate this contract clause to the extent it violates the consumer regulations, and enjoin enforcement if that remedy is deemed necessary to protect the consumer.
This result would further the twin aims of the Federal Preemption Act, assuring the availability of consumer credit for the purchase of manufactured housing and according protection to consumer borrowers, without interfering so unnecessarily with a carefully conceived financing program established to meet the needs of both parties in a time of rising monеy cost.
ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC
Before GODBOLD, Chief Judge, RONEY, TJOFLAT, HILL, FAY, VANCE, KRAVITCH, JOHNSON, HENDERSON, HATCHETT, ANDERSON and CLARK, Circuit Judges.
A member of this Court in active service having requested a poll on the application for rehearing en banc and a majority of the judges in this Court in active service having voted in favor of granting a rehearing en banc,
IT IS ORDERED that the cause shall be reheard by this Court en banc with oral argument on a date hereafter to be fixed. The Clerk will specify a briefing schedule for the filing of en banс briefs.