Whildon L. Moyer v. Citicorp Homeowners, Inc.

KRAVITCH, Circuit Judge,

dissenting:

I respectfully dissent from section A2 of the majority’s opinion which determines that the district court erred by holding the contract inconsistent with the notice requirements of the Depository Institutions Deregulation and Monetary Control Act, 12 U.S.C. § 1735Í-7 note (DIDMCA). In Quiller v. Barclays American/Credit, Inc., 727 F.2d 1067 (11th Cir.1984), reinstated en banc, 764 F.2d 1400 (11th Cir.1985), cert. denied, — U.S. —, 106 S.Ct. 1993, 90 L.Ed.2d 673 (1986), we recognized that federal law did not require that a contract explicitly inform a debtor of his right to thirty days notice prior to foreclosure in order for a creditor to avoid state usury laws under the DIDMCA. We held, nonetheless, that a contract containing terms contrary to the DIDMCA does not entitle a creditor to the benefits of federal preemption. 727 F.2d at 1071; see also Grant v. General Electric Credit Corp., 764 F.2d 1404, 1406 (11th Cir.1985) (en banc) (creditors entitled to benefits of federal preemption where contract provisions “not clearly contrary” to DIDMCA), cert. denied, — U.S. —, 106 S.Ct. 1993, 90 L.Ed.2d 673 (1986).

Although a contract need not include the thirty day foreclosure notice, the contract should not be ambiguous or misleading as to foreclosure notice. In Quiller, 727 F.2d at 1071, we relied on General Finance Corp. v. Sprouse, 577 F.2d 989 (5th Cir.1978).1 Sprouse teaches that courts must interpret agreements subject to consumer protection legislation in light of the operation of the contract in the commercial world, the effect upon a consumer unfamiliar with legal rights and the risk that a lender might take advantage of ambiguous provisions. Id. at 993. The rationale of Sprouse is that “[i]t is naive to assume that every controversy culminates in litigation.” Id.2 As in all contract cases, we must construe ambiguities against the drafter, Landale Enterprises, Inc. v. Berry, 676 F.2d 506 (11th Cir.1982), and in agreements subject to consumer protection legislation, we must accord , contract provisions the interpretation a reasonable consumer would give them. Quiller, 727 F.2d at 1071; Sprouse, 577 F.2d at 993.

The only notice provision in the instant contract is on the back of the document. While it states that foreclosure and acceleration of payments are “[sjubject to Buyer’s *1454Right to Notice of Default and Right to Cure” it further states that the seller enjoys the remedies of a secured party under the Uniform Commercial Code (U.C.C.) and where the U.C.C. requires notice, “such notice shall be deemed reasonably and properly given if mailed ... at least five (5) days before the event with respect to which notice is required.” The majority concludes that this provision is consistent with the DIDMCA because the U.C.C. provisions address the notice that must be provided before foreclosed collateral may be disposed of whereas the DIDMCA regulations mandate only that thirty days notice precede foreclosure and acceleration of payments.3 As such, the majority tacitly assumes that consumers have an intimate working knowledge of the U.C.C. and will realize that the only notice period explicitly enumerated in their contracts applies to the disposal of foreclosed collateral and not to foreclosure itself. The uncontroverted evidence, however, as found by the district court, demonstrates that neither debtors nor Citicorp’s agents construe the contract as the majority does: Citicorp’s agents have attempted to foreclose with no prior notice whatsoever.

In my view, the foreclosure notice provision is patently inconsistent with Quiller, Sprouse and the spirit of the DIDMCA.4 The clause' is ambiguous and misleading. A consumer would reasonably construe it as providing, at most, five days foreclosure notice. Fundamental rules of contract interpretation require us to construe the contract’s ambiguities against its drafters. I agree with the district court: the notice provisions here are inconsistent with the requirements of the DIDMCA and the creditors cannot, therefore, benefit from federal preemption of state usury laws. Although the U.C.C. is a masterpiece of legal craftsmanship, we should not assume that consumers are versed in its intricacies and therefore not misled by contract provisions readily interpretable and actually exploited in a manner inconsistent with consumer protection legislation.

. The Eleventh Circuit, in the en banc decision Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981), adopted as precedent decisions of the former Fifth Circuit rendered prior to October 1, 1981.

. In the present case, the district court’s oral findings of fact, based on uncontroverted evidence, amply illustrate abuses contemplated by Quiller and Sprouse. The district court found:

Here we have a situation where the lender has gone somewhat further than a situation where it has merely attempted [as in Quiller ] to utilize contractual provisions which are contrary to the statute and regulations. We have a situation where the lender through its operatives has gone beyond the contract and demanded immediate possession and taken action by telephone to repossess and to foreclose.
The district court found that Citicorp’s agents engaged in a "definite pattern” of threatening repossession and foreclosure with no prior notice whatsoever. During the course of telephone conversations with debtors, Glenda Burris, a collection agent, would call out to coworkers to "put some axles on the truck” indicating that, at her direction, a truck was departing at that moment to foreclose on the debtor’s mobile home. In several instances debtors were told that their personal belongings would be taken along with their homes. Several debtors fled their homes after these calls. None of these debtors received the federally required thirty days written notice of foreclosure.
Unlike Sprouse and Quiller, which addressed the hypothetical abuse of contract provisions inconsistent with consumer protection legislation, the instant case presents actual abuse of contract provisions whose ambiguities tire exploited by creditors in a manner directly contrary to federal regulations.

. O.C.G.A. § 11-9-503 (1982), Georgia’s codification of U.C.C. § 9-503, provides in part:

Unless otherwise agreed a secured party has on default the right to take possession of the collateral.

The majority contends that the contract provision setting U.C.C. required notice at five days does not apply to § 9-503 foreclosure notice because § 9-503 permits, but does not require, notice prior to foreclosure.

I do not share the majority’s narrow reading of § 9-503. A fair application of that section here is: where parties agree that thirty days notice will precede foreclosure, then that notice is a prerequisite to foreclosure. By invoking the DIDMCA, Citicorp has agreed to provide thirty days notice prior to foreclosure. It is not overstating § 9-503 by interpreting it as requiring pre-foreclosure notice where a creditor has so agreed. Therefore, I would hold that Citi-corp’s provision setting U.C.C. notice at five days is explicitly contrary to the requirements of the DIDMCA.

. The DIDMCA provides for simplification of Truth-In-Lending Act disclosures and encouraged the promulgation of model forms for common credit transactions in order to achieve further clarity. S.Rep. No. 368, 96th Cong., 2nd Sess. 16-17, 25-26 reprinted in 1980 U.S.Code Cong. & Ad. News 236, 251-52, 260-61. Pursuant to § 501 of the DIDMCA, federal regulations provide a default notification form for use in all but extreme cases such as property abandonment or repeated default. 12 C.F.R. § 590.4(h). The form explicitly sets out the thirty day right to cure. Congress went to great lengths in the Truth-In-Lending Act and the DIDMCA to ensure that debtors are fully aware of the protections afforded them by federal law. The congressional goal of clarity and consumer awareness in credit contracts is ill served by the majority’s conclusion that the provision before us is consistent with the DIDMCA.