United States Court of Appeals,
Fifth Circuit.
No. 94-60754.
Juanita B. FAIRLEY, Plaintiff-Appellant,
v.
TURAN-FOLEY IMPORTS, INC., d/b/a Turan-Foley Mitsubishi, Defendant-Appellee.
Oct. 3, 1995.
Appeal from the United States District Court for the Southern District of Mississippi.
Before E. GRADY JOLLY and BENAVIDES, Circuit Judges, and FITZWATER*, District Judge.
E. GRADY JOLLY, Circuit Judge:
Congress designed the Truth-in-Lending Act ("TILA"), 15
U.S.C. § 1601 et seq., to protect consumers from inaccurate and
unfair credit practices. Juanita Fairley took advantage of the Act
and sued Turan-Foley Imports, Inc. ("Turan-Foley"), alleging
violations of the TILA and state law against misrepresentation
related to Fairley's purchase of a car. Her financing agreement
listed 8.5 percent as the annual percentage rate, when the actual
rate was 11.75 percent annually. When she took possession of the
car, she was also under the impression that she had obtained credit
life and disability insurance, as well as an extended warranty.
After denying Turan-Foley's motion for summary judgment, the
district court, acting on a motion for reconsideration, found that
because no contract existed between the parties, it lacked subject
* District Judge for the Northern District of Texas, sitting by designation.
1 matter jurisdiction over the case, and subsequently dismissed the
case. Fairley appealed. Contrary to the district court's action,
we believe this is the type of case for which Congress tailored the
TILA. For the reasons explained below, we hold that the district
court erred when it determined that a contract between the parties
did not exist under Mississippi law, and, thus, the district court
erred when it dismissed the case for lack of subject matter
jurisdiction. Accordingly, we reverse and remand for further
consideration.
I
This case comes to us in a rather unusual posture. A thorough
discussion of the facts and procedural history therefore will help
to explain the result we reach today.
On July 24, 1992, Juanita Fairley went to Turan-Foley to shop
for a new automobile. Finding a 1992 Mitsubishi Eclipse sports car
that she liked, Fairley completed and signed a credit application
form from General Motors Acceptance Corporation ("GMAC") that had
been given to her by a Turan-Foley finance and insurance manager,
Thomas Matherne. Matherne promised Fairley a competitive interest
rate of 8.5 percent. Wishing to check her credit union for a
better interest rate, Fairley left the dealership. Matherne,
however, called Fairley before she had time to check other rates
and convinced her to return to Turan-Foley to see what he could
offer her through GMAC.
On July 27, 1992, Fairley returned to Turan-Foley and spoke
with Matherne and Jimmy Yelverton, the general manager of the
2 dealership. Fairley told them that she wanted her payments to be
between $250 and $267 per month for sixty months, and that she
wanted credit life and disability insurance, as well as an extended
warranty. She took the Eclipse for a test drive, and signed forms
for credit life and disability insurance, an application for a
certificate of title, and a sheet stating that Turan-Foley would
install air conditioning and provide other services (the "We owe"
document). The record also indicates that Fairley made a
downpayment on the car in the amount of $1,000, which was received
by the dealership on July 29. Fairley did not take the car home
after the July 27 visit, but instead arranged to pick it up on
Friday, July 31.
When Fairley arrived to claim the car on Friday, she spoke
with Matherne and reminded him that they still had to complete an
agreement regarding financing. Matherne told her that it was all
taken care of and that a copy was in the glove compartment. When
Fairley examined the supposed agreement, she found that it was not
satisfactory for several reasons. First, the piece of paper that
was called an agreement by Matherne was actually a partial copy of
a finance agreement; that is, the lower portion of the page was
missing. Second, this lone piece of paper was not what Fairley
anticipated as a contract for the sale of the car. She expected
the contract to be in a "pack" of documents. Third, the space on
the agreement where the annual percentage rate and the finance
charge were located was completely covered by a white sticker, so
that the area was blank. When Fairley confronted Matherne with
3 these shortcomings and demanded a complete agreement, Matherne
first told her that he could not give her the contract because, as
it was late on a Friday afternoon, everything was already locked
for the evening. When this information did not appease her, he
agreed to write in the area reserved for the annual percentage rate
and the finance charge that the annual percentage rate was 8.5
percent for 60 months, he noted on the paper that the original
contract could be obtained on Monday, August 3, and he signed this
notation. Despite Matherne's assurances that everything was okay,
Fairley was bothered by the fact that she had not actually signed
what she considered to be a contract, the financing agreement.
On Monday, August 3, 1992, Fairley tried repeatedly by phone
to contact Matherne, but he could not be reached. She did,
however, leave a message that she wanted her contract. After
several unsuccessful attempts to reach Matherne that week, Fairley
was phoned by a representative of the dealership on Saturday,
August 8, about returning to Turan-Foley to sign papers. Fairley
could not go to the dealership at that time because she was about
to travel out of town for the remainder of the weekend, but she
told the representative that she wanted the papers so that she
could consult a lawyer about the transaction. During the
conversation, the representative said that he did not want to give
the papers to her if she planned to visit a lawyer, but that she
should still come to the dealership to sign everything.
While Fairley was away for the weekend, representatives of
Turan-Foley paid several visits to her family and friends,
4 harassing them and demanding that Fairley sign the papers. On
Monday, August 10, after returning from her trip, Fairley consulted
a lawyer about the situation. The attorney recommended that she go
to the dealership and obtain copies of all the documents in her
file so that the attorney could examine them before Fairley signed
the documents. When Fairley and a neighbor visited the dealership,
Yelverton, the general manager of the dealership, told Fairley that
everything was okay because Turan-Foley had her signature on a
financing contract with Mitsubishi, dated July 27. Fairley
immediately protested that she had never signed a contract with
Mitsubishi, and declared the signature a forgery when Yelverton let
her look at the contract. Yelverton refused to give Fairley a copy
of the signed contract, and he asked her to leave.1
In August, the first payment on the car became due. Fairley
hand-delivered to Yelverton a check payable to Turan-Foley.
Yelverton first accepted the check, but when he noticed that the
payee was Turan-Foley, he returned the check to Fairley's attorney.
Fairley sent the check and all future payments directly to
Mitsubishi Credit Corporation in Casselberry, Florida, and,
according to the record, has never missed a payment. Fairley
eventually obtained a copy of the financing contract from
Mitsubishi, and learned that she was being charged the annual
percentage rate of 11.75 percent rather than 8.5 percent, that she
1 The record indicates that the retail installment contract was assigned to Mitsubishi Credit Corporation as early as July 30 because Turan-Foley received payment for the car from Mitsubishi on that date.
5 had no disability nor credit life insurance coverage, and that she
had not received an extended warranty on the car.
Fairley soon filed a complaint in federal district court
alleging violations under the Truth-in-Lending Act, and a state
claim of fraudulent inducement into the transaction. After some
discovery, Turan-Foley filed a motion for summary judgment. The
district court denied the motion, finding that genuine issues of
material fact existed. Turan-Foley then filed a motion to
reconsider the denial of summary judgment or, in the alternative,
to dismiss for lack of subject matter jurisdiction. Upon
reconsideration, the district court found that, because Fairley
never signed a contract, she was not contractually obligated to
purchase the vehicle under Mississippi law. Fairley v. Turan-Foley
Imports, Inc., 864 F.Supp. 4, 6 (S.D.Miss.1994). Relying on Jensen
v. Ray Kim Ford, Inc., 920 F.2d 3 (7th Cir.1990), the district
court found that, because there was no contract under state law,
the TILA was inapplicable. Fairley, 864 F.Supp. at 7.
Accordingly, the district court found that there remained no basis
for jurisdiction over the state claim of misrepresentation and
dismissed the suit. Id.
On appeal, Fairley argues that a contract was consummated
under Mississippi law. We agree and reverse and remand for trial.
II
From the district court's memorandum order, it is unclear
whether it dismissed the case by reconsidering and granting Turan-
Foley's motion for summary judgment, or by granting the defendant's
6 motion to dismiss for lack of subject matter jurisdiction. In any
event, we review de novo the district court's action. See
Musslewhite v. State Bar of Texas, 32 F.3d 942, 945 (5th Cir.1994),
cert. denied, --- U.S. ----, 115 S.Ct. 2248, 132 L.Ed.2d 256 (1995)
(de novo review of Fed.R.Civ.P. 12(b)(1) motion); Little v. Liquid
Air Corp., 37 F.3d 1069 (5th Cir.1994) (en banc) (de novo review of
Fed.R.Civ.P. 56 motion for summary judgment).
A
(1)
The purpose of the TILA is to protect the consumer from
inaccurate and unfair credit practices, and "to assure a meaningful
disclosure of credit terms so that the consumer will be able to
compare more readily the various credit terms available to him and
avoid the uninformed use of credit." 15 U.S.C. § 1601(a). "The
TILA reflects a transition in congressional policy from a
philosophy of "Let the buyer beware' to one of "Let the seller
disclose.' By erecting a barrier between the seller and the
prospective purchaser in the form of hard facts, Congress expressly
sought "to ... avoid the uninformed use of credit.' " Mourning v.
Family Publications Serv. Inc., 411 U.S. 356, 377, 93 S.Ct. 1652,
1664, 36 L.Ed.2d 318 (1973). To that end, Congress, through the
Act, gave the Federal Reserve Board the "authority normally given
to administrative agencies to promulgate regulations designed to
"carry out the purposes of the Act.' " Mourning, 411 U.S. at 365,
93 S.Ct. at 1659. The language of the Act's enabling provision
also emphasized the Board's authority to prevent evasion of the
7 rules. Id. at 371, 93 S.Ct. at 1661. Congress has, therefore,
"delegated expansive authority to the Federal Reserve Board to
elaborate and expand the legal framework governing commerce in
credit." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559-60,
100 S.Ct. 790, 794, 63 L.Ed.2d 22 (1980).
Accordingly, the Board of Governors of the Federal Reserve
System promulgated Regulation Z to implement the TILA. 12 C.F.R.
§ 226.1(a). A creditor is required by Regulation Z to make certain
disclosures to the consumer, "clearly and conspicuously in writing,
in a form that the consumer may keep." 12 C.F.R. § 226.17(a)(1).
Regulation Z sets out certain guidelines for creditors to follow
when disclosing the amount financed, the finance charge, and the
annual percentage rate to the consumer and demands that these
disclosures be accurate. 12 C.F.R. §§ 226.18, 226.22.
To promote the Act's purpose of protecting consumers, our
court has made clear that creditors must comply strictly with the
mandates of the TILA and Regulation Z.
Only adherence to the strict compliance standard will promote standardization of terms which will permit consumers readily to make meaningful comparisons of available credit alternatives. Strict compliance does not necessarily mean punctilious compliance if, with minor deviations from the language described in the Act, there is still a substantial, clear disclosure of the fact or information demanded by the applicable statute or regulation.
Smith v. Chapman, 614 F.2d 968, 971 (5th Cir.1980) (citations
omitted). Consistent with its purpose, the statute is meant to be
construed liberally in favor of the consumer. Cody v. Community
Loan Corp., 606 F.2d 499, 505 (5th Cir.1979), cert. denied, 446
U.S. 988, 100 S.Ct. 2973, 64 L.Ed.2d 846 (1980). Even so, the
8 "remedial scheme of TILA is designed to deter generally
illegalities which are only rarely uncovered and punished, and not
just to compensate borrowers for their actual injuries in any
particular case." Williams v. Public Finance Corp., 598 F.2d 349,
356 (5th Cir.1979).
(2)
We look to Regulation Z to determine whether Fairley's claim
is one to which the TILA should apply. "Regulation Z obliges
creditors to make the statutorily-mandated disclosures before the
transaction is consummated." Davis v. Werne, 673 F.2d 866, 869
(5th Cir.1982) (internal quotation and footnote omitted).
Consummation is defined under Regulation Z as "the time that a
consumer becomes contractually obligated on a credit transaction."
Clark v. Troy and Nichols, Inc., 864 F.2d 1261, 1264 (5th
Cir.1989); 12 C.F.R. § 226.2(a)(13). State law determines when a
contractual obligation is created that binds the consumer to the
credit terms. Clark, 864 F.2d at 1264; 12 C.F.R. § 226, Supp. 1,
Official Staff Interpretations, Section 226.2(a)(13).
B
Because "consummation" is defined by Regulation Z as the
point under state law when a "contractual obligation on the
consumer's part is created," our focus in this analysis is on
Fairley. Thus, "[w]e must examine the transaction through the eyes
of the consumer." Cody, 606 F.2d at 505. The question of
consummation of a contract in Mississippi is determined by
statutory and common law. Mississippi has adopted the Uniform
9 Commercial Code, and whether there is an enforceable contract that
satisfies the statute of frauds is governed by Miss.Code Ann. § 75-
2-201 (1981). Generally, a contract for the sale of goods for $500
or more is not enforceable unless there is some writing. Miss.Code
Ann. § 75-2-201(1). "A writing must meet three requirements to
satisfy the statute of frauds: 1) the writing must be sufficient
to indicate that a contract for sale has been made between the
parties, 2) the writing must be signed by the party against whom
enforcement is sought, and 3) the writing must specify a quantity."
Migerobe, Inc. v. Certina USA, Inc., 924 F.2d 1330, 1333 (5th
Cir.1991) (internal quotations and citations omitted). "The
statute of frauds can be met through the integration of several
documents, each of which alone might not be sufficient to meet
these three requirements." Id. A contract that does not meet the
three requirements but is valid in other respects is enforceable
"if the party against whom enforcement is sought admits in his
pleading, testimony or otherwise that a contract for sale was
made." Miss.Code Ann. § 75-2-201(3)(b). Further, a contract that
does not satisfy the statute of frauds is nevertheless enforceable
"with respect to goods for which payment has been made and accepted
or which have been received and accepted." Miss.Code Ann. § 75-2-
201(3)(c).
In making the determination that Fairley, the consumer, had
become contractually obligated, we find that additional sections of
the Mississippi Code are relevant to the facts in this case.
Section 75-2-204 states that "a contract for the sale of goods may
10 be made in any manner sufficient to show agreement, including
conduct by both parties which recognizes the existence of such a
contract." Additionally, section 75-2-607 states that the effect
of acceptance of goods is that the buyer must pay at the contract
rate for any goods accepted and acceptance precludes rejection of
the goods accepted. Miss.Code Ann. § 75-2-607 (1972). Finally,
"Acceptance of goods occurs when the buyer (a) after reasonable
opportunity to inspect the goods, signifies to the seller that the
goods are conforming or that he will take or retain them in spite
of their nonconformity; ... or (c) does any act inconsistent with
the seller's ownership." Miss.Code Ann. § 75-2-606.
Whether an enforceable contract exists and whether defenses to
the enforceability of that contract exist should not be confused.
"Questions of the validity, enforceability, and construction of
contracts—whether the parties have satisfied the law's formal
requisites—are committed to the court as distinguished from the
trier of facts." Leach v. Tingle, 586 So.2d 799, 801 (Miss.1991).
While in this case we must determine whether an enforceable
contract exists, we pass no judgment on whether any defenses may
exist to the contract.
C
Turning to the case before us, we first examine whether the
integration of the writings is sufficient to meet the requirements
of the statute of frauds, and thus sufficient to constitute a
contract between the parties. To make this determination, we look
11 to the various documents of record: Fairley's signed check for
$1,000 accepted by Turan-Foley as a downpayment; the extended
warranty agreement with Turan-Foley signed by Fairley, requiring
her to pay $300 for coverage on a 1992 Eclipse with a specified
vehicle number; the application for a certificate of title,
describing the buyer, seller, and specific automobile, signed by
Fairley and Matherne; the Turan-Foley "We owe" document signed by
Fairley and a dealer representative; and the record of
Mitsubishi's payment of the balance due on the car, indicating that
the financing agreement had been assigned to Mitsubishi Credit
Corporation. Finally, Matherne signed the first retail installment
contract that Fairley received the day she picked up the car. On
this document, Matherne noted that Fairley would receive an 8.5
annual percentage rate, when the figures on the document are, in
fact, consistent with financing at an 11.75 annual percentage rate.
In sum, because the dealer accepted Fairley's downpayment on the
car, and because the integration of the documents, various of which
the parties executed jointly or individually, indicate there was
agreement on the specific vehicle for sale, the car's retail price,
the interest rate and various coverages in the eyes of the
consumer,2 we hold that the parties had entered into an enforceable
contract.
2 See Cody v. Community Loan Corp., 606 F.2d 499, 505 (5th Cir.1979), cert. denied, 446 U.S. 988, 100 S.Ct. 2973, 64 L.Ed.2d 846 (1980) ("[W]e must examine the transaction through the eyes of the consumer.").
12 Furthermore, the parties' actions in this particular case
support our conclusion that Fairley had incurred contractual
obligations. "A contract for sale of goods may be made in any
manner sufficient to show agreement, including conduct by both
parties which recognizes the existence of such a contract."
Miss.Code Ann. § 75-2-204 (1972). Such a contract, though not
satisfying the requirements of the statute of frauds, is
nonetheless enforceable with respect to those goods for which
payment has been made and accepted. Miss.Code Ann. § 75-2-
201(3)(c). Fairley and Matherne had discussed financing the car at
an 8.5 annual percentage rate along with insurance and warranty
coverages and had arrived at an oral contract. The car and initial
payments on it were delivered and accepted, and Fairley has
continued to make monthly payments on her car faithfully.
Furthermore, Turan-Foley's quick assignment of the retail
installment contract to Mitsubishi Credit Corporation before
Fairley even picked up the car is an act inconsistent with the
dealership's argument that it did not enter into a contract for the
sale of the car. Turan-Foley's argument, that the absence of
Fairley's signature on either financing agreement indicates there
was no consummation, is fully inconsistent with its conduct
indicating the sale of the car at a specified interest rate, and is
not well taken.3 Thus, the conduct of the parties in this
3 Turan-Foley, furthermore, asserted for the first time at oral argument that because Fairley did not sign the contract, no contract exists under Mississippi's Motor Vehicle Sales Finance Act. Miss.Code Ann. §§ 63-19-1 et seq., 63-19-31(1)(a). Because Turan-Foley did not make this argument at the district court, we
13 particular case, indicating intent and understanding, viewed in
combination with the various writings between the parties, fully
satisfies us that the jurisdictional requirements of the Act and
its implementing regulations have been met.
III
Because we hold that a contract between the parties for the
sale of the car was consummated, the district court erred in
finding to the contrary. The district court, moreover, erred when
it found that it did not have subject matter jurisdiction to
consider the TILA claims, and, therefore, we reverse.4 See
Williamson v. Tucker, 645 F.2d 404, 415 (5th Cir.), cert. denied,
454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981) ("Where the
defendant's challenge to the court's jurisdiction is also a
challenge to the existence of a federal cause of action, the proper
will not consider it on appeal. Earvin v. Lynaugh, 860 F.2d 623, 627-28 (5th Cir.1988), cert. denied, 489 U.S. 1091, 109 S.Ct. 1558, 103 L.Ed.2d 861 (1989). 4 The district court's reliance on Jensen v. Ray Kim Ford, Inc., 920 F.2d 3 (7th Cir.1990), was misplaced. The enforceable contract in the case before us is the contract created by the integration of the several documents discussed in section II, infra. Fairley relies on this transaction for creation of her obligation, not on the second, allegedly forged retail sales document. In Jensen, the plaintiffs relied upon a second, forged document as a basis for their allegations of TILA violations. Because a forged note under the applicable state law, Illinois, was void, the Jensen Court found that the plaintiffs were not obligated under the contract. Thus, because the Jensens were not "obligated" under the second contract, the Seventh Circuit, relying on 15 U.S.C. § 1631, reasoned that the TILA's disclosure requirements were inapplicable. The case at bar can be plainly distinguished from Jensen, because Fairley does not rely on the allegedly forged, second retail sales contract as a basis for her claim that Turan-Foley violated the TILA. Instead, she relies on the integration of documents that do not contain a forgery.
14 course of action for the district court ... is to find that
jurisdiction exists and deal with the objection as a direct attack
on the merits of the plaintiff's case."). Because we hold that the
district court had subject matter jurisdiction to consider the TILA
claims, on remand it necessarily can consider the pending state
claims. See 28 U.S.C. § 1367. The TILA is to be enforced strictly
against creditors and construed liberally in favor of consumers,
and, thus, we REMAND for disposition not inconsistent with this
opinion.
REVERSED and REMANDED.