Schlenk v. Ford Motor Credit Co

Opinion

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

(/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB

:,//,$0 3 6&+/(1. ; 3ODLQWLII$SSHOODQW    1R Y  !  )25' 02725 &5(',7  &203$1<  'HIHQGDQW$SSHOOHH   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI.HQWXFN\DW/RXLVYLOOH 1Rn(GZDUG+sRKQVWRQH6HQLRU 'LVWULFWsXGJH $UJXHG$XJXVW 'HFLGHGDQG)LOHG2FWREHU %HIRUH68+5+(,15,&+DQG%$7&+(/'(5&LUFXLW sXGJHV/,77/('LVWULFWsXGJH

7KH +RQRUDEOH ) $ /LWWOH sU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH :HVWHUQ 'LVWULFW RI /RXLVLDQD VLWWLQJ E\ GHVLJQDWLRQ

  6FKOHQNY)RUG0RWRU&UHGLW&R 1R

BBBBBBBBBBBBBBBBB &2816(/ $5*8('  5LFKDUG $ &RUGUD\ *URYH &LW\ 2KLR IRU $SSHOODQW7KRPDV0%\UQH687+(5/$1'$6%,// %5(11$1$WODQWD*HRUJLDIRU$SSHOOHH21%5,() 0DUN')LVFKHU0DUN0F&OXUH6DQGPDQQ5$:/,1*6 $662&,$7(6/RXLVYLOOH.HQWXFN\IRU$SSHOODQW7KRPDV 0%\UQH.ULVWLQ%:LOKHOP687+(5/$1'$6%,// %5(11$1$WODQWD*HRUJLDIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB )$/,77/(s5'LVWULFWsXGJH7RGD\ZHFRQVLGHUDQ DSSHDOE\:LOOLDP36FKOHQNIURPWKHGLVWULFWFRXUWjVRUGHU JUDQWLQJ)RUG0RWRU&UHGLW&RPSDQ\jVm)0&&lPRWLRQWR GLVPLVV  7KH GLVWULFW FRXUW JUDQWHG )0&&jV PRWLRQ WR GLVPLVV6FKOHQNjVFODLPVXQGHUWKH&RQVXPHU/HDVLQJ$FW DQG WKH .HQWXFN\ &RQVXPHU 3URWHFWLRQ $FW  7KH GLVWULFW FRXUW DOVR GLVPLVVHG D GHFHSWLYH DGYHUWLVLQJ FODLP DQG WKHUHE\WHUPLQDWHGWKHFDVH )RUWKHIROORZLQJUHDVRQVZH$)),50WKHGLVWULFWFRXUWjV GHFLVLRQ ,%$&.*5281' $6WDWHPHQWRI)DFWV 6FKOHQNHQWHUHGLQWRDYHKLFOHOHDVHDJUHHPHQWZLWK%LOO &ROOLQV )RUG ,QF  $ OHDVH DJUHHPHQW OLNH D SXUFKDVH DJUHHPHQWLVQHJRWLDEOHDQGVXEMHFWWRVWDWXWRU\UHJXODWLRQ DVZHVKDOOODWHUGLVFXVV+HUH6FKOHQNQHJRWLDWHGDOHDVHIRU D QHZ WUXFN KDYLQJ D WRWDO YDOXH RI   7KH GHDOHU DVVLJQHGWKHOHDVHWR)0&&,QRUGHUWRFDOFXODWH6FKOHQNjV PRQWKO\SD\PHQWV)0&&VXEWUDFWHGWKHYDOXHRIWKHYHKLFOH 6FKOHQNWUDGHGDQGWKHDJUHHGXSRQUHVLGXDOYDOXHRIWKHWUXFN  6FKOHQNY)RUG0RWRU&UHGLW&R 1R 1R 6FKOHQNY)RUG0RWRU&UHGLW&R 

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jVYHKLFOHDPRXQWHGWR ZLWKWKLVNQRZOHGJHFRQVXPHUVFDQQHJRWLDWHWKHUHQWFKDUJH WR ORZHU RYHUDOO PRQWKO\ SD\PHQWV RU VLPSO\ FRPSDULVRQ $W LVVXH LQ WKLV FDVH LV D  DGPLQLVWUDWLYH IHH WKDW LV VKRSIRUDEHWWHUOHDVH(LWKHUZD\DQLWHPL]DWLRQRIWKHUHQW LQFOXGHGLQWKHUHQWFKDUJH7KHDGPLQLVWUDWLYHIHH FKDUJH GRHV QRW QHFHVVDULO\ DIIHFW WKH OHVVHHjV DELOLW\ WR LVDW\SHRIKDQGOLQJIHHWKDW)0&&FKDUJHVWRSURFHVVWKH UHFHLYHDIDLUGHDO OHDVH)0&&FDOFXODWHVWKHUHQWFKDUJHE\WDNLQJWKRI RIWKHYHKLFOHjVQHWFDSLWDOL]HGFRVWPXOWLSOLHGE\WKHWHUPRI &6WDWH/DZ&ODLPV:HUH&RUUHFWO\'LVPLVVHG WKH OHDVH  )0&& FROOHFWV WKH IHH RQ D SUR UDWD EDVLV HDFK PRQWK7KLVFDVHGRHVQRWLQYROYHWKHDPRXQWRIWKHIHHRU $SSHOODQW EULQJV VWDWH FODLPV XQGHU WKH .HQWXFN\ WKHIDFWWKDW)0&&FKDUJHG6FKOHQNDQDGPLQLVWUDWLYHIHH &RQVXPHU3URWHFWLRQ$FWm.&3$l.56HWVHT 7KLVGLVSXWHLQYROYHVZKDWOHYHORILWHPL]DWLRQ)0&&PXVW 7KH .&3$ VWDWHV WKDW m>X@QIDLU IDOVH PLVOHDGLQJ RU GLVFORVHE\ODZLQUHJDUGVWRWKHDGPLQLVWUDWLYHIHHVDQGUHQW GHFHSWLYH DFWV RU SUDFWLFHV LQ WKH FRQGXFW RI DQ\ WUDGH RU FKDUJH FRPPHUFHDUHKHUHE\GHFODUHGXQODZIXOl.56† 6HFWLRQUHTXLUHVmDVFHUWDLQDEOHORVVRIPRQH\RU %3URFHGXUDO+LVWRU\ SURSHUW\UHDORUSHUVRQDOlIRUDFWLRQVEURXJKWXQGHU.&3$ YLRODWLRQV+HUH6FKOHQNKDVIDLOHGWRVKRZDQ\ORVVVXIIHUHG 6FKOHQN LQLWLDWHG D FODVV DFWLRQ FRPSODLQW LQ WKH 8QLWHG DV D UHVXOW RI )0&& QRW LWHPL]LQJ WKH UHQW FKDUJH  $IWHU 6WDWHV'LVWULFW&RXUW:HVWHUQ'LVWULFWRI.HQWXFN\VHHNLQJ FRQFOXGLQJWKDWWKH)0&&jVGLVFORVXUHVZHUHVXIILFLHQWXQGHU GDPDJHV DQG LQMXQFWLYH UHOLHI EDVHG RQ IHGHUDO DQG VWDWH WKHVWDWXWRU\UHTXLUHPHQWVZHIDLOWRVHHDQ\mGHFHSWLYHDFWV VWDWXWHV6FKOHQNDOOHJHG)0&&jVSUDFWLFHRILQFOXGLQJWKH RUSUDFWLFHVlWULJJHULQJWKH.&3$:HDJUHHZLWKWKHGLVWULFW DGPLQLVWUDWLYHIHHXQGHUWKHKHDGLQJmUHQWFKDUJHlYLRODWHG FRXUWjVGLVPLVVDORIWKHVWDWHODZFODLPV &RQVXPHU/HDVLQJ$FWm&/$l86&†HWVHTLWV LPSOHPHQWLQJUHJXODWLRQ)HGHUDO5HVHUYH%RDUG5HJXODWLRQ ,9&21&/86,21 0 m5HJXODWLRQ 0l  &)5 †  HW VHT DQG WKH .HQWXFN\ &RQVXPHU 3URWHFWLRQ $FW m.&3$l .56 )RUWKHIRUJRLQJUHDVRQVZH$)),50WKHGLVWULFWFRXUWjV HWVHT1RFODVVZDVFHUWLILHG RUGHUWRGLVPLVVDOORIWKH$SSHOODQWjVFDXVHVRIDFWLRQ )0&&PRYHGWRGLVPLVVWKHFRPSODLQWSXUVXDQWWR)HGHUDO 5XOHRI&LYLO3URFHGXUHE 7KHGLVWULFWFRXUWJUDQWHG )0&&jVPRWLRQWRGLVPLVVWKH&/$FODLPVDQGWKH.&3$ IDLOXUH WR GLVFORVH FODLP EXW UHWDLQHG WKH .&3$ GHFHSWLYH DGYHUWLVLQJ FODLP  7KH GLVWULFW FRXUW ODWHU FRQFOXGHG WKH GHFHSWLYH DGYHUWLVLQJ SURQJ ZDV SUHPLVHG RQ WKH VDPH VWDWXWRU\YLRODWLRQVSUHYLRXVO\GLVPLVVHG7KHGLVWULFWFRXUW FRQFOXGHGWKDWERWKRI6FKOHQNjVFDXVHVRIDFWLRQWXUQHGRQ )0&&jVFRPSOLDQFHRUODFNRIFRPSOLDQFHZLWK5HJXODWLRQ  6FKOHQNY)RUG0RWRU&UHGLW&R 1R 1R 6FKOHQNY)RUG0RWRU&UHGLW&R 

0  +DYLQJ GHFLGHG WKDW )0&& PHW WKH GLVFORVXUH YLHZWKHLVVXHDVZKHWKHUWKH&/$DQG5HJXODWLRQ0UHTXLUH UHTXLUHPHQWVRI5HJXODWLRQ0WKHGLVWULFWFRXUWWHUPLQDWHG )0&&WRGLVFORVHWKHDGPLQLVWUDWLYHIHHVWRWKHFRQVXPHUE\ WKHFDVH6FKOHQNILOHGDWLPHO\DSSHDO LWHPL]LQJWKHIHHVVHSDUDWHIURPWKHUHQWFKDUJH ,,s85,6',&7,21 2QWKHIDFHRIWKHVWDWXWHWKH&/$GRHVQRWPDQGDWHDQ\ GLVFORVXUHRIWKHDGPLQLVWUDWLYHIHHRULWHPL]DWLRQRIWKHUHQW 7KHGLVWULFWFRXUWKDGMXULVGLFWLRQRYHUWKHDFWLRQSXUVXDQW FKDUJH8QGHUVHFWLRQD&RQVXPHU/HDVH'LVFORVXUHV WR86&†DV6FKOHQNILOHGDFODLPDULVLQJXQGHUD WKHVWDWXWHOLVWVLQIRUPDWLRQWKDWWKHOHVVRUVKRXOGSURYLGHWR IHGHUDOVWDWXWH&/$86&†HWVHT7KHGLVWULFW WKHOHVVHHmLQDFOHDUDQGFRQVSLFXRXVPDQQHUl86& FRXUW KDG VXSSOHPHQWDO MXULVGLFWLRQ RI 6FKOHQNjV VWDWH ODZ †D7KHOLVWRIUHTXLUHGGLVFORVXUHVGRHVQRWLQFOXGH FODLPVXQGHU86&†7KLVFRXUWKDVMXULVGLFWLRQWR DGPLQLVWUDWLYHIHHVRUWKHUHQWFKDUJH:HWXUQWR5HJXODWLRQ KHDUWKHDSSHDOSXUVXDQWWR86&† 0 WR ILQG VXSSRUW IRU $SSHOODQWjV  FODLPV  5HJXODWLRQ 0 SURYLGHVDOLVWRIGLVFORVXUHVIRUFRQVXPHUOHDVHV&)5 ,,,$1$/<6,6 †5HJXODWLRQ0VSHFLILFDOO\PHQWLRQVmUHQWFKDUJHl 7KHUHJXODWLRQGHVFULEHVUHQWFKDUJHDVmµWKHDPRXQWFKDUJHG $6WDQGDUGRI5HYLHZ LQDGGLWLRQWRWKHGHSUHFLDWLRQDQGDQ\DPRUWL]HGDPRXQWVj 7KLVDPRXQWLVWKHGLIIHUHQFHEHWZHHQWKHWRWDORIWKHEDVH :HUHYLHZGHQRYRDGLVWULFWFRXUW VGLVPLVVDORIDFODLP SHULRGLFSD\PHQWVRYHUWKHOHDVHWHUPPLQXVWKHGHSUHFLDWLRQ SXUVXDQWWR)HGHUDO5XOHRI&LYLO3URFHGXUHE 6HH DQG DQ\ DPRUWL]HG DPRXQWVl   &)5 †  I  8QLWHG)RRG &RPPHUFLDO:RUNHUV,QWjO8QLRQ/RFDO 5HJXODWLRQ0UHTXLUHVWKDWWKHSD\PHQWFDOFXODWLRQFRQWDLQ Y 8QLWHG )RRG  &RPPHUFLDO :RUNHUV ,QWjO 8QLRQ WKHUHQWFKDUJHEXWVHFWLRQI GRHVQRWREOLJDWHWKH 1R   :/  DW  WK &LU $SU  ILQDQFLQJFRPSDQ\WRLWHPL]HWKHUHQWFKDUJH FLWLQJ,QJHY5RFN)LQ&RUS)GWK &LU ,QGRLQJVRZHmDFFHSWDOOZHOOSOHDGHGIDFWXDO 7R VXSSRUW KLV FODLP 6FKOHQN FLWHV  &)5 †  DOOHJDWLRQV RI WKH FRPSODLQW DV WUXH DQG FRQVWUXH WKH I 6HFWLRQI UHTXLUHVm>D@QLWHPL]DWLRQRI FRPSODLQWLQWKHOLJKWPRVWIDYRUDEOHWRWKHSODLQWLIIl,G DQ\RWKHUFKDUJHVWKDWDUHSDUWRIWKHSHULRGLFSD\PHQWl:H GRQRWDJUHHZLWK$SSHOODQWWKDWWKHUHQWFKDUJHIDOOVXQGHU % )HGHUDO6WDWXWHV'R1RW5HTXLUHDQ,WHPL]DWLRQRIWKH WKHKHDGLQJmRWKHUFKDUJHVlDQGWKXVUHTXLUHVLWHPL]DWLRQ 5HQW&KDUJH 7KHWHUPUHQWFKDUJHLVVSHFLILFDOO\PHQWLRQHGHDUOLHULQWKH 6FKOHQNGHQLHVWKDWWKLVFDVHWXUQVRQZKHWKHUWKHIHGHUDO UHJXODWLRQLQVHFWLRQI :HDJUHHZLWKWKHGLVWULFW VWDWXWHVUHTXLUHLWHPL]DWLRQRIWKHUHQWFKDUJH6FKOHQNZDQWV FRXUWjV DVVHUWLRQ WKDW m>W@KH ZRUG µRWKHUj LQGLFDWHV WKDW WKH WKHFRXUWWRGHFLGHWKHFDVHEDVHGRQmZKHWKHULWHPVZKLFK LWHPL]DWLRQ PDQGDWHG E\  &)5 † I  RQO\ DUHUHTXLUHGWREHGLVFORVHGDVSDUWRIWKHFDSLWDOL]HGFRVWRI DSSOLHVWRFKDUJHVWKDWZHUHQRWVSHFLILFDOO\GLVFXVVHGHDUOLHU DOHDVHFDQEHDGGHGWRWKHUHQWFKDUJHWRDYRLGWKH&/$jV LQWKHUHJXODWLRQl6FKOHQNY)RUG0RWRU&UHGLW&R1R GLVFORVXUHUHTXLUHPHQWl)LQDO5HSO\%URI$SSHOODQWVDW &9+:'.\$XJ7KHUHIRUHQHLWKHU $SSHOODQWjV IUDPLQJ RI WKH LVVXH EHJV WKH TXHVWLRQ  ,I ZH WKH&/$QRU5HJXODWLRQ0UHTXLUHV)0&&WRGLVFORVHWKH ZHUHWRDJUHHZLWKWKLVLQWHUSUHWDWLRQRIWKHLVVXHZHZRXOG DGPLQLVWUDWLYHIHHVDQGLWHPL]HWKHUHQWFKDUJH ILUVWKDYHWRDVVXPHWKDWWKHVWDWXWHVUHTXLUHGLVFORVXUHRIWKH 6FKOHQNDUJXHVIXUWKHUWKDWZLWKRXWVXFKDQLWHPL]DWLRQRI DGPLQLVWUDWLYHIHHVHSDUDWHIURPLQFOXGLQJLWXQGHUWKHUHQW WKHUHQWFKDUJHILQDQFLQJFRPSDQLHVZRXOGKDYHIUHHUHLJQWR FKDUJH6XFKDQDVVXPSWLRQQHFHVVDULO\GHFLGHVWKHFDVH:H