FIRST VIRGINIA BANK v. Angelia C. SETTLES, Steven Muenze and Kimberly Muenze, Carla R. Royal.
Nos. 73, 74 and 75, Sept. Term, 1990.
Court of Appeals of Maryland.
April 17, 1991.
588 A.2d 803
KARWACKI, Judge.
Cheryl L. Hystad (Donna B. Bernstein, Baltimore), both on brief, for Legal Aid Bureau, Inc., for amicus curiae.
Argued before ELDRIDGE, RODOWSKY, MCAULIFFE, CHASANOW and KARWACKI, JJ., and MARVIN E. SMITH, Jr. and CHARLES E. ORTH, Jr., Judges of the Court of Appeals (Retired), Specially Assigned.
KARWACKI, Judge.
The respondents in these three cases, which were consolidated for argument in this Court, each purchased a motor vehicle under an installment sales agreement subject to Maryland‘s Retail Installment Sales Act (RISA),
I.
Angelia Settles purchased a used automobile on February 29, 1988. After making a cash down payment, she agreed to pay the balance due the seller, $7,699, together with finance charges at an annual rate of 12.9% in 41 equal installments. The installment sales agreement which she executed was immediately assigned without recourse by the seller to the Bank.
After Settles defaulted on September 15, 1988, the Bank repossessed the automobile on October 27, 1988. It was sold at public auction on November 29, 1988. The proceeds of that sale, a return of finance charges which accrued after September 15, 1988, and the proceeds of certain insurance claims were credited against the balance due by Settles to the Bank. Settles was charged with certain expenses related to the repossession and sale, making the adjusted balance due the Bank $3,016.41.
The Bank filed suit on July 20, 1989, in the District Court of Maryland, sitting in Prince George‘s County, requesting judgment in the amount of $3,016.41 plus prejudgment interest from September 15, 1988, at the rate set forth in the installment sales agreement, 12.9%, and attorney‘s fees. When Settles did not give notice of an intention to defend the suit, the District Court, on November 10, 1989, without holding a hearing, entered judgment on affidavit in favor of the Bank pursuant to
On September 27, 1986, Steven and Kimberly Muenze executed an installment sales agreement for the purchase of a new truck, which agreement was immediately assigned without recourse by the seller to the Bank. The agreement required that the balance due on the purchase, $13,215.41, together with a finance charge at an annual rate of 12.75% would be paid by the buyers in 60 monthly payments. The Muenzes defaulted on December 15, 1988, and the truck was repossessed by the Bank on December 20, 1988. The Bank resold the truck on January 17, 1989.
The balance then due the Bank was reduced by the proceeds from the resale, a refund of finance charges
The Bank brought suit on June 7, 1989, in the District Court in Prince George‘s County claiming $3,463.75, plus prejudgment interest from December 15, 1988, at the contract rate of 12.75%, and attorney‘s fees. When no notice to defend this suit was filed, on October 11, 1989, the Bank was summarily granted judgment on affidavit pursuant to
The case involving Carla R. Royal followed a similar course. She executed an installment sales agreement for the purchase of a used automobile on September 5, 1985, which the seller immediately assigned without recourse to the Bank. The agreement required that she pay the balance of the purchase price, $10,267.90 together with a finance charge at an annual rate of 15.50% in 48 monthly installments. When she defaulted on March 15, 1987, the automobile was repossessed on June 3, 1987, and resold by the Bank on June 30, 1987. The balance then due the Bank under the installment sales agreement was reduced by the proceeds of the resale, a refund of finance charges accruing after March 15, 1987, and the refund of certain insurance costs. The expenses of repossession and sale were added, leaving an adjusted balance due by Royal of $6,019.73.
The Bank, on August 19, 1988, sued Royal in the District Court, in Prince George‘s County, seeking judgment in the amount of $6,019.73, plus prejudgment interest from March 15, 1987 and attorney‘s fees. Royal did not defend and on November 11, 1989, without holding a hearing, the District Court granted judgment on affidavit in favor of the Bank pursuant to
We granted the Bank‘s petition for a writ of certiorari to review the judgments of the Circuit Court in each of these cases.
II.
When a buyer under an agreement subject to RISA defaults,
- The actual and reasonable cost of the sale;
- The actual and reasonable cost of retaking and storing the goods; and
- The unpaid balance owing under the agreement at the time the goods are repossessed.
Section 12-626(e)(2) .
“. . . any remaining balance shall be paid to the buyer, . . .”
- The agreement provides for liability for a deficiency; and
- The holder has complied with all requirements of this subtitle, including the notice requirement of
§ 12-624(d) .
In Union Trust Co. v. Tyndall, 290 Md. 102, 428 A.2d 428 (1981), we held that the “unpaid balance owing under the agreement” specified in
The statute obviously contemplates that the longer the period of time over which the deferred balance will be paid, the greater is to be the total amount of the finance charge. If the buyer elects to prepay all or any part of the unpaid time balance he is entitled to a readjustment of the finance charge. As we have indicated, § 12-626(e)(2) provides for the order of payment of the proceeds of sale including “[t]he unpaid balance owing under the agreement at the time the goods are repossessed.” Then subsection (e)(3) provides that after application of the proceeds and deposit in accordance with ¶ (2) of that subsection, “any remaining balance shall be paid to the buyer.” It surely must have been contemplated by the General Assembly in this consumer protection statute that the balance to be satisfied would be determined by treating the sale and resulting payment as a prepayment under § 12-620. To hold otherwise would be to reach an absurd, unreasonable, or illogical result, one inconsistent with common sense. Our cases tell us this should be avoided. See, e.g., Cider Barrel Mobile Home v. Eader, 287 Md. 571, 583, 414 A.2d 1246 (1980); Curtis v. State, 284 Md. 132, 149, 395 A.2d 464 (1978); Grosvenor v. Supervisor of Assess., 271 Md. 232, 242, 315 A.2d 758 (1974); and Coerper v. Comptroller, 265 Md. 3, 6, 288 A.2d 187 (1972). Having reached that point in our reason
ing, it certainly must follow that the sum to be satisfied and hence the sum used in determining the deficiency for which the buyer is liable under § 12-626(e)(4) if the proceeds and deposits are insufficient must be one determined using the same type of computation. This was a four year contract. Under Maryland Rule 642 judgments bear interest. To hold as Union Trust would have us hold would permit the potentially absurd result of a default, repossession, and judgment for the balance within several months of the execution of the contract, thereby permitting interest on a judgment the amount of which would include more than three years of unearned finance charges. Given the fact that whether one talks in terms of finance charges or interest one is speaking economically in terms of compensation for the use of capital and the further fact that this statute obviously was intended to protect unsophisticated consumers such as Tyndall (who confessed that he had trouble understanding the contract), we hold that when the General Assembly in 1965 changed the statute so as to render buyers such as Tyndall potentially liable for a deficiency it could not and did not intend to make such persons responsible for unearned finance charges.
Tyndall is dispositive of the Bank‘s contention in the instant cases that it was entitled to recover prejudgment interest on the deficiency due by the buyer at the same rate as the finance charge provided in the agreement under which each motor vehicle was sold. The Bank is not entitled to recover finance charges beyond the date of resale of the repossessed goods as prejudgment interest just as it is not entitled to recover such charges as part of the “unpaid balance owing under the agreement” pursuant to
III.
Alternatively, the Bank asserts that the District Court erred in not awarding prejudgment interest at the
We observed in I.W. Berman Prop. v. Porter Bros., 276 Md. 1, 16-17, 344 A.2d 65, 75 (1975):
Generally, interest is not an inseparable and invariable incident of claims for money or unliquidated accounts, City Pass. Rwy. Co. v. Sewell, 37 Md. 443, 452 (1873), it is recoverable as a matter of right under contracts in writing to pay money on a day certain, such as bills of exchange or promissory notes, Isle of Thye Land Co. v. Whisman, 262 Md. 682, 708-09, 279 A.2d 484, 498 (1971); Robt. C. Herd & Co., Inc. v. Krawill Mach. Corp. [256 F.2d 946 (4th Cir.1958)], supra; Affiliated Distillers Brands Corp. v. R.W.L. Wine & Liquor Co., Inc., 213 Md. 509, 516, 132 A.2d 582, 586 (1957); in actions on bonds, Mullan Contracting Co. v. International Business Machs. Corp., 220 Md. 248, 262, 151 A.2d 906, 914 (1959), Kasten Constr. Co. v. Anne Arundel County, 262 Md. 482, 489-90, 278 A.2d 282, 286-87 (1971); Affiliated Distillers Brands Corp. v. R.W.L. Wine & Liquor Co., Inc., supra; in actions under contracts providing for the payment of interest, Isle of Thye Land Co. v. Whisman, supra, see Robt. C. Herd Co., Inc. v. Krawill Mach. Corp., supra; in cases where the money claimed has been actually used by the other party, Charles County Broadcasting Co., Inc. v. Meares, 270 Md. 321, 332, 311 A.2d 27, 34 (1973); Affiliated Distillers Brands Corp. v. R.W.L. Wine & Liquor Co., Inc., supra; and in cases upon sums payable as rent, Eidelman v. Walker & Dunlop, Inc., 265 Md. 538, 545, 290 A.2d 780, 784 (1972). See also Brown v. Bradshaw, 245 Md. 524, 539, 226 A.2d 565, 573 (1967).
And in Sloane, Inc. v. House & Associates, 311 Md. 36, 53-54, 532 A.2d 694, 702-03 (1987) we commented:
Generally, prejudgment interest is a matter left to the discretion of the court when sitting as a jury. Id. [I.W. Berman Prop. v. Porter Bros., 276 Md. 1] at 18, 344 A.2d [65] at 75. This Court has, on occasion, reversed a trial judge‘s discretionary determination not to allow prejudgment interest, but in those instances the obligation to pay and the amount due had become certain, definite, and liquidated by a specific date prior to judgment so that the effect of the debtor‘s withholding payment was to deprive the creditor of the use of a fixed amount as of a known date. See Atlantic States Constr. Co. v. Drummond & Co., 251 Md. 77, 85, 246 A.2d 251, 255 (1968); Affiliated Distillers Brands Corp. v. R.W.L. Wine & Liquor Co., 213 Md. 509, 519, 132 A.2d 582, 586 (1957).
Atlantic States Constr. Co. v. Drummond & Co., supra, involved a suit on a subcontract for paving against the general contractor of a shopping center project. The paving was completed, and in accordance with the subcontract payment was due the subcontractor no later than September 18, 1966. The general contractor failed to make payment, and the subcontractor brought suit. The summary judgment rendered in favor of the subcontractor on October 11, 1967, allowed interest from the date of the judgment. Upon the subcontractor‘s appeal, we modified the judgment, allowing prejudgment interest on the balance due the subcontractor from September 18, 1966.
In Affiliated Distillers Brands Corp. v. R.W.L. Wine & Liquor Co., supra, a seller of alcoholic beverages brought suit against the company which had been its Maryland distributor for five years. In April of 1955, the seller notified the distributor that its franchise would be terminated as of July 5, 1955. On that date the distributor owed the seller approximately $955,000. The seller agreed to credit the return of inventory of its products held by the distributor to that indebtedness. The return of the inventory and the computations of the credit due on the indebtedness were not completed until September 19, 1955. The distributor unjustifiably delayed in its payment of $73,465.10 of the
The agreements executed by the buyers in the instant cases all contained an identical provision by which the buyers promised:
If I am in default, you may consider all my remaining payments to be due and payable, without giving me notice. I agree that your rights of possession will be greater than mine. I will deliver the property to you at your request, or you may use lawful means to take it yourself without notice or other legal action. You may sell the property after giving proper notice to my address listed on the front of this agreement. You may apply the proceeds of the sale toward what I owe you. I‘ll pay the difference between the sale proceeds and what I owe you. You may add to what I owe you any fees paid to a public official for the costs of repossession and sale or for enforcing my obligations. I will also pay you for your court costs and reasonable attorneys’ fees (equal to 15% of the unpaid balance if the cash price is $25,000 or less.)
Consequently, under
The records in the cases sub judice are inadequate for us to determine the date on which the several buyers’ deficiencies were established. No hearing was conducted in the District Court in any of the cases which were resolved by judgment on affidavit pursuant to
Finally, any prejudgment interest which is awarded should be at the rate of 6% per annum.
The Legal Rate of Interest shall be Six per cent, per annum; unless otherwise provided by the General Assembly.
The General Assembly has not provided otherwise with regard to a buyer‘s liability for a deficiency under
JUDGMENTS OF THE CIRCUIT COURT FOR PRINCE GEORGE‘S COUNTY VACATED; CASES REMANDED TO THE CIRCUIT COURT WITH INSTRUCTIONS TO REMAND THE CASES TO THE DISTRICT COURT FOR FURTHER PROCEEDINGS IN ACCORDANCE WITH THIS OPINION. COSTS TO BE PAID ONE-HALF BY PETITIONER AND ONE HALF BY RESPONDENTS.
ELDRIDGE, Judge, dissenting:
In awarding First Virginia Bank prejudgment interest on deficiencies owed to it by consumers under the Retail Installment Sales Act (RISA),
(1)
This Court, a decade ago in Union Trust Co. v. Tyndall, 290 Md. 102, 428 A.2d 428 (1981), provided an exhaustive analysis of RISA, stating that “whether one talks in terms of finance charges or interest one is speaking economically in terms of compensation for the use of capital” and holding unequivocally that neither may be imposed on the buyer after the sale of the repossessed goods. 290 Md. at 113, 428 A.2d at 433 (emphasis added). The majority quotes extensively from Tyndall but misses the point of the case when, in one breath, it disallows First Virginia Bank prejudgment interest on the deficiencies owed at the same rate as the finance charge provided in the contracts, but, in the next breath, allows an award of prejudgment interest at the legal rate. Nothing in the Tyndall opinion limited the holding of that case to the interest rate provided in the agreement. Furthermore, such limitation is inconsistent with the reasoning in Tyndall.
The majority‘s holding today improperly erodes the protection of RISA as interpreted by this Court in Tyndall, implying that, in Tyndall, we misinterpreted the Legislature‘s purpose when it amended RISA in 1965. The majority, however, overlooks the principle that “the General Assembly is presumed to be aware of this Court‘s interpretation of its enactments and, if such interpretation is not legislatively overturned, to have acquiesced in that interpretation.” Williams v. State, 292 Md. 201, 210, 438 A.2d 1301, 1305 (1981). See also, Nationwide v. USF & G, 314 Md. 131, 143-144, 550 A.2d 69, 75 (1988); Farmers & Merchant Bank v. Schlossberg, 306 Md. 48, 60, 507 A.2d 172, 178 (1986). If this Court‘s interpretation of RISA in Tyndall was other than what the General Assembly intended, then the Legislature presumably would have amended the Act in the ten years since the Tyndall case was decided.
This Court emphasized in Tyndall that the purpose of RISA “obviously is to protect unsophisticated buyers” and that the statute “is a carefully constructed and carefully thought out piece of consumer protection legislation enacted by the Maryland General Assembly many years before the more recent concerns relative to consumer protection.” 290 Md. at 105, 110, 428 A.2d at 429, 432. See also, 63 Op.Att‘y Gen. 92 (1978). Nevertheless, the majority today has accommodated First Virginia Bank, the holder in this case, at the expense of the consumers, the very class of individuals the Act was enacted to protect. For the most part, the majority overlooks the fact that this case is governed by statute and that our function is to ascertain the General Assembly‘s intent. After quoting Tyndall and stating that the case is dispositive with regard to the rate of interest set forth in the agreement, the majority relies on cases having nothing to do with RISA in order to justify awarding First Virginia Bank prejudgment interest.
(2)
Moreover, although I am convinced that RISA does not allow prejudgment interest on deficiency judgments, at the very least such interest should only be awarded where it is specifically provided for in the installment sales contract. The 1965 Amendments to RISA, if nothing else, provided that, in connection with a deficiency judgment, the buyer would only be liable for what was provided for in the contract.
Finally, if prejudgment interest were allowable under
The majority today holds that prejudgment interest must be awarded, as a matter of law, where at the time of breach the sum owed is not known and can not be ascertained. In the case before us, at the time of breach the amount owed by the buyers could not be calculated until the sale of the collateral, an event occurring subsequent to breach. The Maryland cases cited by the majority do not require the allowance of prejudgment interest under these circumstances.
CHASANOW, J., has authorized me to state that he dissents for the reasons set forth in Part (3) of this opinion.
Notes
(a) Time for Demand-Affidavit and Supporting Documents.-In an action for money damages a plaintiff may file a demand for judgment on affidavit at the time of filing the complaint commencing the action. The complaint shall be supported by an affidavit showing that the plaintiff is entitled to judgment as a matter of law. The affidavit shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit. The affidavit shall be accompanied (1) by supporting documents or statements containing sufficient detail as to liability and damages, including the precise amount of the claim and any interest claimed; and (2) if the claim is founded upon a note, security agreement, or other instrument, by the original or a photocopy of the executed instrument, or a sworn or certified copy, unless the absence thereof is explained in the affidavit. If interest is claimed, the plaintiff shall file with the complaint an interest worksheet.
(b) Subsequent Proceedings.- . . .
(2) When No Notice of Intention to Defend Filed.-If the defendant fails to file a timely notice of intention to defend, the plaintiff need not appear in court on the trial date and the court may determine liability and damages on the basis of the complaint, affidavit, and supporting documents filed pursuant to section (a) of this Rule. If the defendant fails to appear in court on the trial date and the court determines that the pleading and documentary evidence are sufficient to entitle the plaintiff to judgment, the court shall grant the demand for judgment on affidavit. If the court determines that the pleading and documentary evidence are insufficient to entitle the plaintiff to judgment on affidavit, the court may deny the demand for judgment on affidavit or may grant a continuance to permit the plaintiff to supplement the documentary evidence filed with the demand.