Rosemary Higgins Cass, J.s.c.
The question before this court, raised by summary judgment motions in two similar cases and not previously decided in this jurisdiction, is whether an authorized buyer on another's credit card account can be held liable for purchases made on the account.*fn1 Sears Roebuck & Co., a national retail store chain, seeks summary judgment on unpaid purchases against defendants Janet Ragucci and Christine Laday, who were "authorized buyers" on their respective spouses' Sears credit card accounts.
To obtain a Sears credit card account a person must fill out a standard application form. The applicant obligates himself to pay for all purchases made on his account. If approved, the applicant is issued a credit card to make purchases at any Sears store. The card designates the person who is issued the account and his account number. The application also permits the cardholder to designate family members, such as a spouse, to be authorized buyers, who can make purchases on the account. However, the application does not state that the authorized buyer is directly liable for his purchases or any other purchases made on the account. In addition, the authorized buyer is not required to sign the application, making him liable for purchases, his own or others, made on the account.
In the one case, Sears sues Christine Laday for six separate purchases she made with her husband's Sears account between
August 19, 1982 and May 31, 1983, totaling $614.72. Her husband, James, had obtained the account in his name prior to their marriage. After their marriage, Mrs. Laday was added as an authorized buyer on the account. James Laday died on July 30, 1983. Mrs. Laday contends that her husband's estate is liable for the balance due on the account because he agreed to pay for all credit purchases made on his account and she made no agreement obligating her to pay for such purchases.
In the other case, Sears sued Ernest and Janet Ragucci for purchases totaling $2,141.50 made on Ernest's account. Sears obtained a default judgment against Mr. Ragucci and now seeks summary judgment against Mrs. Ragucci. On February 1, 1978, Mr. Ragucci was issued a Sears account in his name, with Mrs. Ragucci listed as an authorized buyer. Between October 10, 1979 and December 3, 1979, Mrs. Ragucci made eight separate purchases totaling $1,184.89. On May 9, 1980, the Raguccis were divorced and a settlement agreement therein obligated Mr. Ragucci to pay for all Sears purchases. Mrs. Ragucci contends her husband alone is liable to Sears pursuant to the divorce decree and his agreement with Sears. She, too, contends that she never agreed to pay for any purchases made on her husband's account.
Retail charge accounts come within the purview of the Retail Installment Sales Act of 1960 by amendments in 1971. N.J.S.A. 17:16C-1 et seq.; The Singer Co. v. Gardner, 65 N.J. 403 (1974). Pursuant to N.J.S.A. 17:16C-34.1 a person authorized by the retail buyer to make purchases can activate the retail buyer's charge account. The retail buyer is a person who agrees to buy goods or services from a retail seller pursuant to a retail charge account. N.J.S.A. 17:16C-1(d). By a fair interpretation of these provisions the retail buyer and his authorized buyer have a principal and agent relationship. A known agent acting within the scope of his authority for a disclosed principal is not personally liable unless he expressly agrees to perform
his principal's obligation. Stopford v. Boonton Molding Co., 56 N.J. 169 (1970).
The Sears credit card accounts in dispute are retail charge accounts. The holder of the account, or retail buyer, agrees to pay for all purchases made on his account. A sales slip, which must be signed by the cardholder or authorized buyer for purchases made on the credit account, states the cardholder agrees to pay for all charges made by him or his authorized buyers. Both Mrs. Laday and Mrs. Ragucci, when signing the sales slip for the goods purchased on their husbands' accounts, acted as known agents for disclosed principals. Neither of them made an express agreement to pay their husband's obligation.
There are no New Jersey cases involving a creditor's attempt to impute liability to an authorized buyer of a credit card account. However, research has revealed one reported case in another jurisdiction, which is directly on point.
In Cleveland Trust Co. v. Snyder, 55 Ohio App.2d 168, 380 N.E.2d 354 (Ohio Ct.App.1978), the suit involved unpaid advances to the credit card account of the defendant's former husband. As in the Ragucci case, a default judgment was entered against the husband, but the plaintiff continued to litigate its claim against his wife. Id., 380 N.E.2d at 357. The ex-husband was issued a credit card account with the plaintiff, Cleveland Trust Co. As cardholder of the account, he was authorized to receive cash advances to his checking account with the bank and purchase goods and services on credit. The defendant was a holder of a related card, which permitted her to sign for cash advances to her husband's checking account and purchase goods and services with his credit card. The credit account was issued to the husband and he agreed to pay for all purchases on his credit ...