No. 1910 October Term, 1975 Appeal from the Order of the Court of Common Pleas, Trial Division, Equity, of Philadelphia County, at No. 3277 September Term, 1971.
Theodore Clattenburg, Jr., Philadelphia, with him John C. Firmin, Philadelphia, for appellant.
Alan C. Gershenson, Philadelphia, with him John B. Brumbelow, Philadelphia, for appellee, Avco Financial Services, Inc.
James D. Crawford, Philadelphia, submitted a brief for appellee, A. B. C. Credit, Inc.
John J. Robinson, Upper Darby, submitted a brief for appellee, Springfield Dodge, Inc.
Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Van der Voort, J., files an opinion in support of affirmance and remand in which Cercone and Price, JJ., join. Spaeth, J., files an opinion in support of reversal in which Jacobs, President Judge, and Hoffman, J., join. Watkins, former President Judge, did not participate in the consideration or decision of this case.
The six Judges who decided this case being equally divided, the order is affirmed.
OPINION IN SUPPORT OF AFFIRMANCE AND REMAND
On June 2, 1971, appellant Elizabeth Kutna and her husband John met with representatives of appellee Avco Financial Services, Inc. and Springfield Dodge, Inc. to finance and take possession of a car which the Kutnas had previously agreed to purchase. Avco was one of at least seven lenders to whom Springfield regularly referred prospective car buyers, referrals being made (according to Springfield's answers to interrogatories) to the lender who would provide the buyer with the best terms for the amount of money and the year of car involved. Springfield had provided Avco prior to June 2 with the information needed by Avco for a credit check of the Kutnas, and Avco's representative arrived at Springfield's place of business on June 2nd prepared to consummate the loan. The final loan agreement was signed by Avco and the Kutnas, and a check for the purchase price less the down payment, made payable either to the Kutnas alone or to the Kutnas and Springfield as co-payees,*fn1 was presented to the Kutnas. The Kutnas endorsed the check, completed their purchase, and proceeded to drive the car home. On the way, the car began to smoke and buck and otherwise misbehave; the next day the car refused to run at all.
Unable to obtain satisfaction from Springfield Dodge, the Kutnas, after making only two payments to Avco, refused to make any further payments and instituted an action in equity against Avco and Springfield. Plaintiffs alleged in the complaint that Avco and Springfield had conspired to process and had processed the loan under the Consumer
Discount Company Act (C.D.C.A.)*fn2 and the Small Loan Act*fn3 rather than under the Motor Vehicle Sales Finance Act (M.V.S.F.A.)*fn4 in order to obtain higher interest rates, cut off personal defenses of borrowers, and avoid certain disclosure requirements of the M.V.S.F.A. Plaintiffs also alleged various violations by Avco and Springfield of the Truth in Lending Act.*fn5 For violation of the M.V.S.F.A. and the Truth in Lending Act, the Kutnas demanded recission of the loan and car purchase agreements, return by Springfield of the Kutnas' $200.00 down payment, compensation by Springfield in the amount of $45.00 for out-of-pocket car expenses, return by Avco of payments made under the loan agreement, money damages, and injunctive relief. Avco counterclaimed for $792.00 (the unpaid portion of the loan) plus "interest on the unpaid but due portions from September 2, 1971." On motion by the Kutnas for partial summary judgment, the lower court, by Order of April 22, 1975, found against Springfield Dodge on the Truth in Lending claims, but in favor of Springfield on the Motor Vehicle Sales Finance Act claims. These findings for or against the Kutnas and Springfield are not involved in this appeal. The court also found in favor of Avco against the Kutnas. Avco moved for partial summary judgment on Avco's counterclaim against the Kutnas, and the lower court granted the motion on July 24, 1975, and entered judgment against the Kutnas in the amount of $792.00 plus interest. (The question of interest will be dealt with later in this opinion. Elizabeth Kutna brought this appeal from the Order of July 24, 1975.
Appellant first argues that since Springfield Dodge rather than the Kutnas arranged for financing of the automobile, the transaction was, in purpose and effect, an installment
sale, and as such came within the terms of the M.V.S.F.A. Section 3(10) of the M.V.S.F.A. defines "installment sale contract" as "any contract for the retail sale of a motor vehicle, or which has a similar purpose or effect under which part or all of the price is payable in two or more scheduled payments subsequent to the making of such contract, or as to which the obligor undertakes to make two or more scheduled payments or deposits that can be used to pay part or all of the purchase price . . . ." The loan agreement between Avco and the Kutnas was not a contract for the retail sale of a motor vehicle. Although it is possible that Avco would not have loaned money to the Kutnas for any other purpose than to buy a car from Springfield Dodge, the loan contract itself did not mention the use to which the proceeds were to be put, and Avco did not even take a security interest in the car. On the face of the loan contract then, a straight loan, not an installment sale, was involved. Three members of our court, however, would "collapse" the loan agreement between the Kutnas and Avco and the purchase agreement between the Kutnas and Springfield into one transaction, would find that this "collapsed" transaction had a purpose or effect similar to that of the usual installment sale contract, and would thus bring the total transaction within the § 3(10) definition of "installment sale contract". In Waterbor, Inc. v. Livingood, 179 Pa. Super. 610, 616, 117 A.2d 790 (1956), our court ruled that the M.V.S.F.A. was to be strictly construed.*fn6 Collapsing the two contracts into one would not constitute a mere failure to construe the M.V.S.F.A. strictly, it would require us to stretch the definition of "installment sale contract".
Another definition that would have to be extended is Section 3(4)'s definition of "seller". That section defines a "seller" as a "person engaged in the business of selling, hiring or leasing motor vehicles under installment sale contracts or any legal successor in interest to such person." Although Avco could not reasonably be termed a "seller"
under this definition (Avco was not involved in selling the car and did not succeed to any legal interest of Springfield), Springfield was in the business of selling cars and would come within the definition. Unless the definition of "seller" were distorted to include Avco, the anomalous situation would exist in which Springfield, the seller, could be convicted of violating § 19 of the M.V.S.F.A. for imposing excessive finance charges, and could be ordered to pay a fine or even have some employees imprisoned, while Avco, the lender, the party actually imposing the finance charges, would not be subject to these criminal penalties.
Whether or not the definition of "installment sale contract" might be stretched to include the transaction in the case before us, Section 2 of the M.V.S.F.A. makes it clear that the Act was directed primarily at the "bailment lease" type of contract which was being used for the sale of motor vehicles in Pennsylvania in order to circumvent existing laws.*fn7 In addition, Section 36 of the M.V.S.F.A. makes it clear that the legislature specifically intended that the M.V.S.F.A. should not apply to business conducted lawfully under license issued pursuant to the C.D.C.A.*fn8 The C.D.C.A., which has its own licensing requirements, bonding requirements, limits on interest rates, notice and disclosure requirements, and criminal penalties, has broad application. The Act applies to any individual or group of individuals however organized that engages in this Commonwealth as
[ 258 Pa. Super. Page 10]
principal, employee, agent, or broker, in the business of negotiating loans or advances of money on credit in the amount or value of five thousand dollars or less, and that charges, collects, contracts for, or receives interest, discount, bonus, fees, fines, commissions, charges, or other considerations which aggregate in excess of the interest that the lender would otherwise be permitted by law to charge. The Kutnas did not contend in the loser court that the C.D.C.A. did not apply, but rather alleged that Avco and Springfield conspired to finance loans under the terms of the C.D.C.A. in order to avoid having to comply with the terms of the M.S.V.F.A. As evidenced by Avco's answers to interrogatories, Avco was licensed under the C.D.C.A. and had to comply with the requirements of that Act. The loan was for an amount less than five thousand dollars, and the interest rate was greater than the standard legal rate of interest. The C.D.C.A. would clearly seem to cover the loan agreement between the Kutnas and Avco.
On considering a motion for summary judgment, a lower court can rely on the pleadings and answers to interrogatories for uncontroverted facts, but must ignore controverted facts which are not supported by separate affidavits. Phaff v. Gerner, 451 Pa. 146, 303 A.2d 826 (1973); Pa. Rule of Civil Procedure 1035. In the case before us, the lower court concluded that no material facts were in dispute, that the transaction came within the scope of the C.D.C.A., and that because the loan was covered by the C.D.C.A. it was exempted from coverage under the M.V.S.F.A. by § 36 of the M.V.S.F.A. An examination of the pleadings and answers to interrogatories reveals that the lower court was correct in its determination that there were no material controverted facts. Under the uncontroverted facts of this case as set forth in the pleadings and answers to interrogatories, the loan transaction as a matter of law either fell within the scope of the C.D.C.A. or it did not. If the loan fell within the terms of the C.D.C.A., it would be excluded from coverage under the M.V.S.F.A. by § 36 of the M.V.S.F.A. I would find that the lower court was correct in its
[ 258 Pa. Super. Page 11]
determination that the loan agreement between the Kutnas and Avco came within the scope of the C.D.C.A. and was excluded (because of § 36 of the M.V.S.F.A.) from the scope of the M.V.S.F.A.
Appellant next argues that the lower court erred in finding that Avco was not obligated to make the disclosures required of creditors by the Federal Truth in Lending Act and by regulations promulgated pursuant to that Act (Regulation Z).*fn9 Section 121 of the Act, 15 U.S.C. § 1631, provides that "[e]ach creditor shall disclose clearly and conspicuously, in accordance with the regulations of the Board, to each person to whom consumer credit is extended and upon whom a finance charge is or may be imposed, the information required under this part"; § 226.8 of Regulation Z provides that "[a]ny creditor when extending credit other than open end credit shall, in accordance with § 226.6 and to the extent applicable, make the disclosures required by this section . . . ." Section 103(f) of the Act, 15 U.S.C. § 1602(f), states that the term "creditor" shall refer to "creditors who regularly extend, or arrange for the extension of, credit for which the payment of a finance charge is required . . ."; section 226.2(m) of Regulation Z defines a "creditor" as one who "in the ordinary course of business regularly extends or arranges for the extension of consumer credit, or offers to extend or arranges for the extension of such credit." In Manning v. Princeton Consumer Discount Co., Inc., 533 F.2d 102 (3rd Cir. 1976), cert. denied, 429 U.S. 865, 97 S.Ct. 173, 50 L.Ed.2d 144 (1976), the Third Circuit ruled that a seller would be ...