680 N.E.2d 698 | Ohio Ct. App. | 1996
Appellant, Joshua P. Milchen, appeals from the decision of the Lorain County Court of Common Pleas granting the Civ.R. 12(B)(6) motion of appellee, Bank One, to dismiss. We reverse and remand.
Appellant filed suit against Bob Morris Pontiac-GMC Truck and two salespersons employed by the automobile dealership (collectively, "the dealer"). In his complaint, appellant stated that the dealer fraudulently obtained appellant's signatures on documents that resulted in the purchase of a vehicle. Bank One, which provided the loan documents and financing for the purchase, was also joined as a party. The case against the dealer remains, pending trial; but the trial court granted Bank One's 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted. Appellant asserts that this dismissal was in error or, in the alternative, he should have been permitted to amend his complaint, and that the dismissal was against public policy.
Appellant's complaint contains a number of factual allegations upon which he relies to state his cause of action. "In considering a complaint upon a motion to dismiss for failure to state a claim, we must presume that all factual allegations of the complaint are true and make all reasonable inferences in favor of the non-moving party." Mitchell v. Lawson Milk Co.
(1988),
On May 27, 1995, appellant and his fiancee visited the dealer to inquire about a 1991 Grand Prix that had been advertised in the newspaper. Appellant informed the dealer that he could not purchase the $11,800 vehicle without financial *193 assistance from his father and grandfather, as he was only nineteen years old, and had just recently started a job that paid only $5 per hour. The dealer urged appellant to take the vehicle home for a three-day "test drive" over the Memorial Day weekend to show his father and grandfather and obtain their consent. He was then given a stack of mostly blank documents, piled one on top of the other, and was told that he needed to sign them and leave a deposit "on hold" prior to taking the vehicle for the "test drive." Appellant signed the blank forms and contracts, without having the opportunity to read them, and gave the dealer two checks totalling $3,000.1 The dealer assured appellant that the paperwork was not for the purchase of the vehicle, but was only required as a precaution before he could take the vehicle off the lot, in the event that "something happened" while it was with him.
After consulting with his family, appellant realized he could not afford the vehicle and attempted to return it on May 30. The dealer refused to accept the vehicle, stating that appellant had purchased it and could not return it. Appellant left the vehicle on the dealer's lot, only to discover it parked in front of his residence a few days later. Further efforts by appellant and his family to rescind the alleged purchase proved futile.
Appellant eventually received fully completed, typed copies of the paperwork concerning the transaction. Although some of the documents were the ones that appellant had signed in blank, it appeared as if his signature had been forged on some of the agreements. One of the documents he received was a Bank One Consumer Installment Loan and Security Agreement. Appellant stated that he did not recall seeing a Bank One loan application among the many blank forms he had signed. In fact, he had informed the dealer that he would obtain his own loan if he decided to go forward with the purchase. The Bank One loan document stated that appellant would owe a total of $16,998.66, in addition to a $3,000 down payment. This total included $12,026.692 as the amount financed, and $4,971.97 in finance charges over a period of fifty-four months, at a 16.15 percent annual interest rate.
Appellant filed a complaint against the dealer for numerous violations of the Consumer Sales Practices Act, R.C.
Assignment of Error I
"The trial court abused its discretion and erred as a matter of law in granting defendant-appellee Bank One's motion to dismiss for failure to state a claim upon which relief may be granted."
The standard for granting a motion for dismissal based solely on the pleadings is well established and very stringent. Before a court may dismiss a complaint for failure to state a claim upon which relief may be granted under Civ.R. 12(B)(6), "it must appear beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery." O'Brien v.Univ. Community Tenants Union, Inc. (1975),
Bank One based its motion for dismissal on the assertion that financial institutions are specifically exempted from liability under the CSPA; thus, appellant could not prove any set of facts which would permit any claim for relief against Bank One. See,e.g., Blon v. Bank One, Akron, N.A. (1988),
Appellant, however, does not base his CSPA claims against Bank One on the basis of a direct bank-customer transaction, but rather under a theory of derivative liability based upon the inclusion of the following language in the Bank One finance agreement, as stated in Count I, item 4 of his complaint:
"The Defendant Lender, Assignee or Holder, Bank One, is liable to [Appellant] for all claims and defenses which [Appellant] could assert against the original Seller of the goods, including the claims under the Consumer Sales Practices Act asserted herein, by virtue of the following clause in the contract:
"ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."
The above notice is required by the Federal Trade Commission ("FTC") and is a part of appellant's contract with Bank One. Section 433.2(a), Title 16, C.F.R. This "preservation of claims and defenses" clause, sometimes known as the "FTC holder rule," is designed to abrogate the holder-in-due-course doctrine in order to protect consumers when purchasing goods or services on credit. Ambre v. Joe Madden Ford (N.D.Ill. 1995),
Bank One argues that the inclusion of the FTC language in the bank note still does not render a financial institution liable under the CSPA for the acts of third parties. In Vannoy v.Capital Lincoln-Mercury Sales, Inc. (1993),
Appellant cites Nations Credit v. Pheanis (1995),
Ohio courts have generally recognized the validity of such claim preservation provisions and permitted debtors to assert any claim or defense against the *197
assignee of the contract that could have been asserted against the seller. Cox v. First Natl. Bank of Cincinnati (S.D.Ohio 1986),
The clear implication of the language in the FTC clause is that Bank One, as the holder of a consumer credit contract, is subject to any defense which appellant could assert against the dealer. Appellant is not attempting to hold Bank One accountable as a "financial institution"; rather, he is asserting a claim concerning a consumer transaction based upon the actions of the seller of the goods. See Nations Credit v. Pheanis,
Bank One based its motion for dismissal entirely upon the premise that a financial institution could not be held liable for any violations of the CSPA. It did not address the fact that appellant articulated several other causes of action in his complaint, unrelated to the CSPA, which are applicable to Bank One either directly or under a derivative theory of liability.
In Count I, item 5(w), appellant states:
"The loan application that was presented to [Appellant] for his signature was blank and the defendant Bank One or [the dealer] after the Plaintiff left and without ever obtaining his consent filled out the interest rate on the installment contract to be 16.15 percent. * * *"
If this fact is true, which we must assume it is for our purposes in reviewing a Civ.R. 12(B)(6) motion, Bank One would also be implicated for claims arising out of violations of the Truth-in-Lending Act, Section 1601 et seq., Title 15, U.S. Code ("TILA"). The TILA, which was referred to in appellant's Count I, item (9)(i), requires a meaningful disclosure of credit terms to enable the consumer to compare various options available and to avoid the uninformed use of credit and unfair credit practices.Hamilton v. Ohio Sav. Bank (1994),
Appellant also enumerated complaints alleging forgery (Count I, item 10), lack of contract (Count I, item 14), and fraud (Count II). Thus, even if Bank One *198 was exempt from liability under the CSPA, it would still be accountable for other claims.
Based on the above, we cannot say that there is no cause of action alleged against Bank One. Appellant's first assignment of error is sustained.
Appellant's second and third assignments of error assert that the trial court abused its discretion when it denied appellant's motion for reconsideration, leave to amend, injunction and oral argument, and that dismissal of Bank One from this case is against public policy. Based upon our disposition of the first assignment of error, these issues are moot and need not be addressed. See App.R. 12(A)(1)(c).
Appellant's first assignment of error is well taken. We reverse the trial court's dismissal of appellant's complaint against Bank One and remand for further proceedings.
Judgment reversedand cause remanded.
REECE, P.J., and DICKINSON, J., concur.