Rent-A-Center, Inc. v. Hall

Rent-A-Center, Inc., Plaintiff-Appellant,†

v. Defendant-Respondent. Flora Hall, Court of Appeals 21, 1993. No. 92-2650. argument Oral October Decided 21, 1993. December (Also 789.) reported in 510 N.W.2d to review †Petition denied. the cause was

On behalf plaintiff-appellant, Shriner, L. Jr., on the briefs of Thomas submitted Foley Caragher Lardner Milwaukee. James M. & of of Shriner, L. Thomas Jr. was oral argument by There the cause On behalf of defendant-respondent, Cavey, of Patricia M. on was submitted the briefs Legal Aid Walrath, James A. Society and James M. Brennan oí Stephen Milwaukee, Inc., of Milwaukee; and of Representation, Inc., E. Meili of Center Public of argument by Jeffery Myer There Madison. was oral R. Legal of Action Wisconsin of Milwaukee. of Doyle,

Amicus Curiae brief was filed James E. attorney general, Gilíes, and David J. assistant attor- ney general, Department for the Wisconsin of Justice Banking and the Commissioner of of the State of Wisconsin. by Jeffery Myer

Amicus Curiae brief was filed R. Legal Action ofWisconsin, Inc., Milwaukee, Rob- ert Center, Hobbs of National Inc., Consumer Law Carolyn Boyd. Boston, Massachusetts, for L. Wedemeyer,

Before P.J., Fine and Schudson, JJ. appeal judgment FINE, J. This an from a dis- missing replevin brought against a small-claims action by Flora Hall Rent-A-Center, Inc. After trial, a bench underlying court trial held that the transaction replevin action violated the Act, Wisconsin Consumer chapters 421 to 427 of the Statutes, Wisconsin see sec. 421.101, Stats. We affirm.1

I. appliances Rent-A-Center rents and other mer- generally, to who, chandise customers cannot afford to filed, Amici briefs have been a submission, in consolidated by Department the Wisconsin of Justice and the Office Com of and, missioner Banking, by separately, Legal Action of Wisconsin, Inc., Center, Inc., and National Consumer Law on Carolyn Boyd. Boyd's behalf of L. motion for leave to file her brief characterizes her as "a low-income consumer who cur rently a has rent-to-own company contract" with a other Rent-A-Center, contract, but whose according motion, to her is in identical all respects material to the Rent-A-Center's con tract with Hall.

purchase William A. the items when are new. manager for com- Ritter, zone Jr., Rent-A-Center's pany's side, north stores on Milwaukee's seven many company's explained to the trial court that opportunity mer- "don't to own nice customers have an go option [s]o without or ... their to either chandise rent to from Rent-A-Center." signed agreement April rental 6, 1991, Hall a

On a disclosure statement with Rent-A-Center lease agreed rent a and a new which she to new washer agreement dryer renewable, one month. The was monthly payment monthly, option. Hall's at The expense sales and a $77.96, set at exclusive of tax was liability- with Rent-A- waiver fee.2 Her appliances gave Hall the Center at their "then after "19 months successive renewals" $161.91, total, fair market value" not exceed liability-waiver excluding fee, of no more tax and the than $1643.15.3 stopped making monthly payments Rent-

Hall April agreement termi- and her A-Center According testimony, May nated on 1992. to Ritter's paid Rent-A-Center that she felt she had told enough appliances. for the

2The lease disclosure statement listed the sales tax at $4.29 liability-waiver fee, in per month. There was also a return for property not hold if the which Rent-A-Center would Hall liable fire, damaged windstorm, lightening, was or lost because of flood, smoke, liability-waiver per or theft. The fee was $5.35 month, and was discontinued in October of 1991 at Hall's insis monthly tence. payments, per $87.60 Her which had been month, fell to $82.25. monthly payments, The nineteen exclusive of tax

liability-waiver fee, equalled $1,481.24. would have stopped paying April

Hall testified that she rent in thought only of 1992 because she that she was obli- gated pay to for twelve months order to own the appliances. hap- She related to the trial court what pened when she called Rent-A-Center to tell company that she would no more: my

Then when I took all receipts out and added up I paid paid, what had I I had [sic] saw over I had $1,069. [paid] I called store and told them that I'm paying dryer. finished for the washer and They oh, say good, let me check. And so checked — you're their no You supposed not. to pay for 21 I months. And said I never agreed to 21 I months. can't afford 21 months.4

Hall told the trial court that she needed the washer and dryer renting just own, "was to not to rent." According twenty-one monthly pay- to calculations, her equalled though, ments would have $1,839.60 even according testimony, dryer to her a washer and should approximately Although par- cost more no $600. a agraph of the lease disclosure statement indicates that option purchase only to can be exercised after "19 (upper months successive renewals" case and strike- omitted), entry outs a handwritten insertion above that = explained "+ 2 reads: 21 months." Ritter the inser- tion:

The we reason do that help to the customer option purchase. understand Typically they have, earlier, as I said is a specified there [sic] timeframe [sic] for them to continue making [monthly] payments. renewal At the end of that seen, will 4As be employee explained Rent-A-Center equivalent was the two payments. additional monthly option to they enter into an [sic]

timeframe realize what that A lot of customers don't purchase. simplify by explaining we it means. So kind worth of it's two months equivalent them that payments. rental agreement warned her that with Rent-A-Center

Hall's by renting property purchasing it would be more purchasing outright expensive property from sources: alternative A RENTAL AGREEMENT

THIS IS FOR RENTAL THIS AGREEMENT IS ONLY. YOU THE PROPERTY ONLY. WON'T OF ACQUIRE EQUITY BY ANY IN THE PROPERTY HAVE RENTAL PAYMENTS. YOU NOT MAKING PROPERTY, BUT TO PURCHASE THIS AGREED INIT THE MAY CHOOSE TO PURCHASE YOU OF IF YOU MEET THE CONDITIONS FUTURE TO PURCHASE THE OPTION. IF YOU WANT NOW, YOU MAY PROPERTY THIS OR SIMILAR TERMS ABLE TO CASH OR CREDIT BE GET OTHER SOURCES WHICH WILL RESULT FROM THE TOTAL COST THAN RENTAL IN A LOWER OPTION PLUS THE PURCHASE PAYMENTS. PROVIDED FOR PRICE ABOVE. underlining original).5

(Bolding, capitalization testified she never read the various forms she that although acknowledged signed, she that some documents least, them, parts at were read her. She also claimed that signed the not that she when she documents did disclose rent before appliances would have to for nineteen months being exercise the docu option, able to specify paying. ments not the total amount she would be did finding Although Hall "could not read and did not under signed papers, stand the contract" when she trial court findings made no as to whether the lease term or the total The trial court concluded that Rent-A-Center's gov- awas consumer credit sale and was by, comply erned but did not with, the Wisconsin Act. Consumer Our review of the trial court's conclu- sion is de novo. Palacios v. ABC TV Rental, & Stereo (Ct. App. 2d 79, 83, 882, 123 Wis. 1985). 365 N.W.2d 885 II. agreement Rent-A-Center concedes that its with comply Hall did not with the Wisconsin Consumer Act argues compliance required but that was not because agreement its with Hall was not a "consumer credit subject Accordingly, sale" to the Act. we must decide agreement by governed the whether is that Act. We conclude that it is. by

A "consumer credit sale" is defined the Wiscon- goods sin Consumer Act as a "sale of ... to a customer payable [sic] on credit where is the debt in instalments any agreement . . . and includes in form of a . the . . goods pays agrees pay lease of if ... the ... or to lessee compensation equiva- substantially as for use a sum aggregate goods lent to or in of excess the value of the payments had signed been added after Hall the documents. paragraph Each numbered on of each the documents has a companion indicating box for customers initial read paragraph. and understood the initialed of all the paragraphs. "firmly that, It is the fixed" state law this absent fraud, person may a signed not avoid the clear terms con- by claiming tract that he or she or did not read understand the Knight Moore, contract. 540, 542-543, & v. Bostwick 203 Wis. 902, 234 (1931); Esser, N.W. see also v. Bank Sun Prairie (1990). 724, 732-734, 155 Wis. 2d 456 N.W.2d 588-590 agreed . lessee will that the . . it is . . . involved has consideration or a nominal become, or for no other upon goods . . . the owner of the become, agreement." compliance Sec- the terms with full 421.301(9), as thus credit sale" Stats. A "consumer tion subject Act. Consumer to the Wisconsin defined N.W.2d at 885. 2d at Palacios, 123 Wis. prereq- purposes there are two case, of this For 421.301(9), applicability Stats., section to the uisites Act, to Consumer therefore, the Wisconsin and, agreement First, and Hall. Rent-A-Center between paid agreed "a sum either have Hall must aggre- substantially equivalent in excess of the to or by goods." Rent-A- gate conceded This is value of provide must Second, Center.6 phrased become, or for subsection, "will Hall, as option to has the consideration or a nominal no other compliance upon goods... full of the become, the owner agreement." is not conceded This terms of the with the by Rent-A-Center. agreement the that trial court concluded

The option gave the Hall and Rent-A-Center between appliance consid- no other or a nominal the "for to own on two alternative It this conclusion eration." based the determined First, the trial court rationales. disclosure state- notation on the lease handwritten = "appears to indicate 2 21 months" ment that"+ payment upon rent Ms. Hall of 21 installments of ownership" appliances gained further the without of omitted.) agreement (Uppercase payment. is a so, If the governed by the Wiscon- credit sale" and is "consumer 6 court, Rent- argument the trial counsel for At oral before disputing in this company that the was "not A-Center indicated — the paid equivalent the of paid that she the that she case goods." value of the

250 Palacios, sin See 84, Consumer Act. 123 Wis. 2d at 365 Second, N.W.2d at 885. trial the court decided that if agreement between Hall and Rent-A-Center "is interpreted to call for 19 of installments rent an with option pay- at the conclusion those option payment ments," was, in $161.91 the context case, "nominal consideration." interpretation legal The is a contract issue that we decide de novo. See Borchardt v. Wilk, 156 Wis. (Ct. 1990). App. 427, 653, 420, 2d 456 656 N.W.2d Con unambiguous tracts that are must be enforced as Dykstra are written. v.Arthur G. McKee& Co., Wis. (Ct. 1979), App. 38, 2d 17, 284 N.W.2d 692, 702-703 (1981). aff'd, 120, 100 Wis. 2d N.W.2d Contrac language ambiguous only "reasonably tual when it is fairly susceptible of more than one construction." Borchardt, 156 Wis. 2d at at 456 N.W.2d 656. monthly payment Here, Hall's base for the nineteen- month term was Two additional months at this $77.96. equalled Adding rate would have $155.92, not $161.91. responsible, in the tax sales for which she was $4.29 monthly payment previously of, results in a as explained Accordingly, irrespec in footnote $82.25. monthly payments tive ofwhether Hall's are calculated tax, include or exclude sales did not permit appliances Hall to become owner of the twenty-one payments monthly return for of her rent. paying Indeed, had Hall exercised at the end of "19 $161.91 months of successive dryer renewals," she would have owned the washer and immediately would not have had to for the wait —she expiration twenty-one period implicitly of a month as by assumed the trial Our court. conclusion that Hall appliances could have not become the owner of the monthly payments, twenty-one however, for return analysis; Act Consumer the Wisconsin not end our does governs payment if the $161.91 the transaction 421.301(9), sec. Stats. See consideration." "nominal findings not be over- of fact will A trial court's "clearly findings appeal are unless those on turned 805.17(2), the trial Here, Stats. Section erroneous." ultimately own wanted that Hall court found appliances, merely term, rent them for a rather than regard testimony The is uncontested. in that her if Hall had made all found that trial court also payments option, her total cost for her and exercised appliances of sales tax and exclusive $1,643.15, according uncontro- to Hall's been, have fees, would testimony, approximately three times their verted price concluded, trial court alter- new. The retail when (1) having natively, made the nineteen that after either monthly payments had no sensible Hall would have $161.91, that, the additional but to alternative exercising was "nomi- therefore, the cost of (2) was "nominal" the additional nal"; $161.91 appliances permitted Hall to own the it because monthly rental-payment only percent total 11% $1,481. case has decided whether No Wisconsin type lease, a or a of transaction is Hall/Rent-A-Center 421.301(9), Stats. sale as defined section credit 421.301(9) provision similar section Under prior appeared to a in the Uniform Commercial Code however, were, leases that function- amendment, "governed by ally, the same credit sales were held to be apply security See In re rules that to other interests." (7th Packing Co., 1139, 1142 Cir. 674 F.2d Marhoefer 1982).7 the form of a to Cutting through get transaction See to its is consistent Wisconsin law. substance with Studios, Bush v. Sch. National 635, Wis. 2d 651, (1987) 655-656, 890, 407 N.W.2d 891-893 (court look of agreement). must at core The Uniform Code provided: Commercial clause security Whether lease is intended as is be to (a) case; determined the facts of each however, option of an purchase the inclusion to does not the one itself make lease intended security, (b) upon compliance an the with the terms of lease the lessee shall or the become has become option property to the owner of the for no additional consideration or for a nominal considera- security. make tion does the lease one intended for 1-201(37) (1989).8 (1978); U.C.C. 1 U.L.A. 68-69 § pre-1987 1-201(37), Under the version of the section view was that general option payment whether an was disguised Marhoefer, were often leases. Purchases as See because, (arrangement among 674 F.2d at 1145 lease was a true reasons, pay other "the total amount of Marhoefer to rent was substantially under the lease was than" less what Marhoefer pay purchase); would to have had if it had the see financed also (10th 1981) Optical, Ltd., 1385, 1390 In re Fashion 653 F.2d Cir. (the payments rental excess of over the cost to property tending is "one factor to payments indicate interest sale"). a financed installment 1-201(37) provide, §

8U.C.C. was amended in 1987 to inter alia, that: security merely A transaction does not create a interest provides

because it (a) present value of the consideration the lessee obligated pay right possession is lessor for goods substantially equal greater of the use to or is goods fair market value at the time the into, is entered lease (b) goods, or assumes risk of loss the lessee insurance, regis- taxes, filing, recording, agrees fees, respect or maintenance costs with tration or service goods, to the (c) or to to renew the lease the lessee has an goods, of the

become the owner (d) option for a has an to renew the lease the lessee reasonably equal greater or than the rent that is fixed goods the predictable rent for the use ofthe for fair market per- option time the is to be of the renewal at the term formed, or (e) option to the owner of the lessee has an become price equal greater goods is to or for a fixed that the goods reasonably predictable fair market value of the the performed. option the is to be at the time (37): purposes of this subsection For (i) (x) is not nominal if when the Additional consideration granted is stated option is to the lessee the rent to renew the lease goodsfor term of the market rent for the use of the the to be the fair (ii) option performed, at the time the is be renewal determined goods granted option to the when the to become the owner goods price to be the fair market value of the lessee the is stated option performed. is to be Additional determined at the time the reasonably if less than the lessee's consideration is nominal it is performing agreement predictable under the lease if the cost of exercised;.... option is not (1989). 1-201(37); adopted 1 U.L.A. 67-68 Wisconsin U.C.C. § July 1,1992.1992 amendment, Act 148 23- §§ this effective Wis. 24, part chap The amendment was of the creation of a new 62. leases, dealing Uniform the Commercial Code with Article ter of 2A, designed sophisti the needs of and was to accommodate light merchants of the Official Comment terms cated what federal, change "the rather in the state and local considerable accounting goods" tax laws and rules as relate to leases of Indeed, years. opined the 1 one over U.L.A. 73. court has 1-201(37) may appropriate "1987 version well be $500,000 100,000 draglines, equipment, etc. but not for con $ Burton, In re goods." sumer rentals of small items of household (Bankr. aff'd, 807, 1989), 128 B.R. 815 N.D. Ala. 128 B.R. 820 (N.D. 1989). adopted Ala. Article 2A was in Wisconsin 1992 not on the depend merely "nominal" did payment's value. See to the fair market relationship goods' Rental, Priority National Ltd. v. Elecs. Equip. Corp., 1977) (E.D.N.Y. ("[T]he 435 F. Code Supp. talks in terms of 'nominal consideration' regardless whether the consideration the fair market represents not."). value or the other factors were: the rela Among between the and the total tionship option price rentals, id., see cases); 435 F. at 238 the relation Supp. (citing original between ship price price Pro-Printers, see FMA Financial v. Corp. goods, (Utah 1979) P.2d 805 & n.1 (citing cases); whether the lessee has sensible alternative to exer any id., see 590 P.2d at 806 & n.2 cising option, (citing cases).9 factors, of these which are Application equally here, conclude, leads us to as did the trial applicable court, between Hall and Rent-A- appears Wis. Act 148 and in the Wisconsin Statutes as § Although legislature chapter 411. the also modified the Wiscon- conformity Act bring sin Consumer to it into with the new chapter, Uniform Commercial Code see 1992 Wis. Act 148 49- §§ 55, it left intact the act's definition of "consumer credit sale." legislative the This indicates intent not to narrow broad reach of reject suggestion by act. We the consumer Rent-A-Center usurp legislative engraft that we should function and onto 421.301(9), Stats., section the new Uniform Commercial Code provisions. 9 requires analy The "sensible alternative" factor often an the others: if the option price compared sis of is minimal when to goods, value, either the of the cost their fair market or what has already use, paid reality" been for their the "economic is that no "right purchase lessee mind" would "fail to exercise the Burton, option." especially where, 128 B.R. at 813. This is true here, using payments as the lessee is purchase the rental property. sale," a "consumer credit as the term is

Center was 421.301(9), by section Stats. defined no evidence in the record as to what the There is dryer was at the fair market value washer end of the nineteen-month lease term. We thus have no way pegging us, that value.10 The record tells how- compliance in "full ever, that in order to be with the 421.301(9), agreement," Stats., terms of the sec. pay appliances had to for the over would have $1481.24 period. the nineteen-month is "nominal" when $161.91 compared Although to that sum.11 is not $161.91 only compared original to the "nominal" when value given dryer in for the washer and the record —Hall's comparable products of what have estimate would cost from more traditional outlets —it is clear on this record anyone seeking appli- at least that paid already, has ances, Hall, as was who $1481.24 would have "no sensible alternative" but to an their additional become owner. $161.91 By Judgment affirmed. Court.— (concurring). SCHUDSON, J. Given the uncertain facts of I case, this discern no basis to conclude that

10 mayWe not estimate their value per based on our own experiences. Friedli, sonal See In re the Estate 164 Wis. 2d (Ct. 1991) 178, 189-190, 473 N.W.2d App. (judge's notice). personal knowledge improper judicial basis for argues and, Rent-A-Center repairing its cost of if necessary, replacing dryer the washer and if malfunc monthly tioned was included in the rental fee. There is no record, however, any evidence in the value for this service. It may very obligation well be that if the cost of Rent-A-Center's repair replace and defective significant merchandise was so payments that the rental reflected use rather than might result of this case be different.

Hall had "no sensible alternative" but to $161.91 washer/dryer, any that, for the on basis, other is "nominal." $161.91

Tracing by majority, the factors mentioned see majority op. very at we see that this record reveals (1) original price little information about: (2) goods; goods the fair market value nineteen (3) relationship later; months between the option price original price and the or the fair market although fact, value. In we do know the total rental payments, relationship even the between the price payments very and the rental remains much in percentage doubt without information about what ancillary rental went to the maintenance and other services which Hall and Rent-A-Center contracted. using Even Hall's estimate that "a washer and dryer approximately should cost no $600," more than nothing see id. at the record reveals further about: (1) washer/dryer how much less this would $600 (2) washer/dryer cost; have how much this was (even worth after nineteen months if worth as much as originally). Without this information, $600 as well as information about the cost of new and used washer/dryers, comments on Hall's "sensible alterna- purely speculative. depending tives" are Indeed, on paying facts absent from record, this for this $161.91 washer/dryer might nineteen month old have been a most foolish alternative. I

Nevertheless, concur in the because, result majority, unlike the I believe that the record ade- quately supports the trial court's conclusion: "On its appears face, as modified, the contract to indicate that upon payment of 21 installments of rent Ms. Hall clearly

gained ownership a con- and the transaction sale ...." sumer

Case Details

Case Name: Rent-A-Center, Inc. v. Hall

Court Name: Court of Appeals of Wisconsin

Date Published: Dec 21, 1993

Citation: 510 N.W.2d 789

Docket Number: 92-2650

Court Abbreviation: Wis. Ct. App.