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Jefferson Loan Co. Inc. v. Session

January 15, 2008


On appeal from the Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-0026-02.

The opinion of the court was delivered by: Gilroy, J.A.D.



Argued on October 9, 2007

Before Judges Weissbard, Gilroy, and Baxter.

Defendant Shameka N. Grandberry, a co-signor of a retail installment sales contract (RISC), appeals from the July 20, 2006, order of the Law Division, which granted partial summary judgment in favor of plaintiff Jefferson Loan Company, dismissing Counts Three and Four of her counterclaim, alleging violations of the Consumer Fraud Act*fn1 (CFA) and the Truth-In-Consumer, Contract Warranty and Notice Act*fn2 (TCCWNA). Although there does not appear to be a separate order, the effect of that order also denied Grandberry's cross-motion for summary judgment on those two counts of her counterclaim.

Plaintiff cross-appeals from the July 10, 2006, order that:

1) granted Grandberry's motion for partial summary judgment on Counts One and Two of her counterclaim, alleging violations of Article 9 of the New Jersey Uniform Commercial Code*fn3 (UCC); and 2) dismissed plaintiff's complaint for failure to state a claim upon which relief could be granted.*fn4 Plaintiff also appeals from the amended order of July 28, 2006, which entered judgment in favor of Grandberry in the amount of $7,347.21 on the UCC claims.

The primary question presented on appeal is whether an assignee of a RISC can be held liable under the CFA for the assignee's own unconscionable commercial practices and activities related to the assignee's repossession and collection practices, in connection with the subsequent performance of the RISC. Because we answer the question in the affirmative, we reverse that part of the order of July 20, 2006, which dismissed Count Three of Grandberry's counterclaim alleging violations of the CFA, and remand that count to the trial court for further proceedings consistent with this opinion. We affirm that part of the order of July 20, 2006, which dismissed Count Four of the counterclaim. We also affirm the orders of July 10, 2006, and July 28, 2006.


Plaintiff is a finance company that engages in the financing of automobiles by purchasing RISCs from automobile dealers. Plaintiff also offers credit life and credit disability insurance through the dealers, insuring the life and health of the borrowers, as well as property insurance on the financed automobiles. Plaintiff receives a commission on each policy of insurance sold.

On July 24, 2000,*fn5 Rubena Session entered into a RISC with National Auto Sales, Inc., for the purchase of a 1992 Honda Accord automobile for $10,091.20. Session paid $1,000 down at the time of purchase and financed $11,996.43, representing $9,091.20 principal; $257.64 for credit life insurance; $502.59 for credit disability insurance; $200 for property insurance; $145 for title registration fees; and $1,800 for GAP insurance*fn6 and additional un-itemized "dock fees." Although National, not plaintiff, sold the GAP insurance, plaintiff was named as the lender thereon. The RISC also included a $6,147.57 finance charge at the rate of 22.007% interest per annum, for a total sales price of $19,144. The RISC required that the total sales price (less the $1,000 down payment) be repaid in forty-eight monthly payments of $378 each, commencing August 23, 2000, and ending July 23, 2004.*fn7 Grandberry co-signed the RISC on behalf of Session.

Plaintiff provided RISC forms to National. Under the RISC, plaintiff was required, upon default, to provide a rebate for unearned interest.*fn8 The RISC contemplated compliance with Article 9 of the UCC, providing that upon default, the creditor would have "all the remedies of a secured party under the [UCC]" and that any notice required under the UCC "will be reasonable if we send it to your address shown [on the contract] at least five days before the event with respect to which notice is required." On the day of the installment sale, plaintiff advanced National the funds for the purchase and assignment of the RISC. On assignment, plaintiff became the holder of the title to the automobile.

Session made two payments, totaling $1,115, on the RISC: $737 on August 24, 2000; and $378 on October 3, 2000. After Session defaulted, plaintiff, without prior notice to either Session or Grandberry, arranged for Professional Process Services (PPS) to repossess the automobile on December 19, 2000. Plaintiff charged Session's account $500 as a repossession fee, paying $380 to PPS for its services. Plaintiff cannot explain the additional $120 charged to Session's account. Although plaintiff sold the credit life and credit disability insurance, which had a term of 48 months, it failed to cancel the insurance policies, saving the unearned premiums, notwithstanding the RISC provided an assignment from the borrowers of "unearned premiums" to the holder of the RISC.

On December 19, 2000, plaintiff sent a notice to Session and Grandberry, stating that because the car payments had not been made, plaintiff had repossessed the automobile. The notice, however, was only sent to Session's residence as indicated on the RISC, not to Grandberry's address, which had been provided to National on other loan documents. The notice provided in pertinent part "[t]o redeem your vehicle, you will have to pay the entire amount owed and expenses. You may purchase your vehicle back at any time before it is sold. Information on the sale date will be supplied to you upon request." The notice further provided that "[i]f you wish to buy back your vehicle, the following list shows the entire amount you owe and all other expenses." The notice then set forth the total amount required for Session and Grandberry to purchase the automobile back from plaintiff: $17,029 for the gross unpaid balance; $20 for late charges; and $500 for repossession expenses, for a total amount of $17,549, together with storage fees assessed at $25 per day.

Notwithstanding the December 19, 2000 notice, plaintiff did not sell the automobile at a public or private sale, but rather, returned the automobile to National "with no recourse." Under the arrangement, National was obligated to make all remaining monthly payments on the automobile. When the last payment was made, plaintiff would assign the automobile title over to National, which could then resell the motor vehicle. After repossession, plaintiff did not send any further notices to Grandberry or Session, informing them of their rights of redemption or of plaintiff's intended method of disposition.

On receiving possession of the automobile from plaintiff in December 2000, National made five payments on the account, totaling $1,612, the last payment having been made on August 29, 2001. When National made two payments after the due date, plaintiff assessed a $10 late fee on each payment and charged the fees to Session's account, not National's account. Although plaintiff was aware that National had ceased making payments, plaintiff never attempted to retrieve the automobile from National or arrange for a sale of the collateral.

During the time National was making the loan payments, it fraudulently obtained a duplicate motor vehicle title, sold the automobile, and retained the funds. Plaintiff first learned that the automobile had been unlawfully sold by National five years after the event, when it received copies of the motor vehicle's title documents from Grandberry during the course of discovery in this action.

On January 4, 2002, plaintiff filed a complaint against Session only for monies due under the RISC. Session defaulted, and a judgment was entered against her on March 7, 2003, in the amount of $20,758.22. Because plaintiff was not able to collect from Session on the judgment, plaintiff caused that judgment to be vacated by order of court on August 6, 2003. On the same day, plaintiff filed an amended complaint, adding Grandberry as a defendant. The complaint did not state that plaintiff had repossessed the motor vehicle; rather, it only demanded judgment in the amount of $19,649.93, "plus accruing interest to the date of judgment[,] plus costs." This amount was itemized as "$17,544.00, plus interest from 1/11/2001 to 7/25/2003 in the sum of $157.61 for a total of $17,701.61" from a "money loaned account . . . in default," and $1,948.32 for "attorney fees of 20% of the first $500 and 10% of the excess."*fn9

On August 23, 2005, Grandberry filed a second amended answer and counterclaim for damages, alleging violations of the UCC (Counts One and Two); of the CFA (Count Three); and of the TCCWNA (Count Four). After discovery, Grandberry moved for summary judgment on all counts of her counterclaim and for dismissal of plaintiff's complaint for failure to state a cause of action. Plaintiff cross-moved for dismissal of Counts Three and Four of the counterclaim only.

Following oral argument on March 31, 2006, the trial judge granted plaintiff partial summary judgment, dismissing Counts Three and Four of the counterclaim. The judge determined that plaintiff had not directly participated in the sale of the automobile with National, and that the CFA only applied to unconscionable commercial practices in connection with the sale or advertisement of merchandise or real estate, not to the loan collection or repossession activities of an assignee of a RISC. The judge also dismissed the TCCWNA claim on the basis that the Act only applied to express contracts or offerings, not to the failure of a secured party to provide a notice to a debtor concerning the repossession and disposition of collateral. A confirming order was entered on July 20, 2006. In the interim, the matter was continued, with the parties directed to submit additional briefs on Grandberry's motion pertaining to the UCC claims.

On July 10, 2006, the judge issued a written opinion, determining that plaintiff had violated the UCC by: 1) not disposing of the repossessed motor vehicle in a commercially reasonable manner, thereby depriving Grandberry of the resale value of the motor vehicle; and 2) not providing an explanation of the deficiency forming the basis of the action against Grandberry. The judge also dismissed the complaint for failure to state a claim on which relief could be granted, based on the absence of any facts in the complaint supporting the cause of action, "[t]he plaintiff's complaint fails to provide any statement of facts. There is no information about the repossession or disposition [of the automobile]. It only makes the conclusionary allegation that money is due." A confirming order was entered the same day. An amended order was entered on July 28, 2006, directing plaintiff pay Grandberry the statutory penalty of $7,347.21 pursuant to N.J.S.A. 12A:9-625. This appeal and cross-appeal followed.

On appeal, Grandberry argues:




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