Monday, March 4, 2013
This case is part of a very unfortunate trend in this Court's docket. Generally speaking, the fact pattern tends to be as follows: A person goes into a store and contemplates making a purchase for an amount of money that is beyond his or her means. The store offers to set him or her up with financing and induces the purchaser to enter into the deal. Any attempt to back out of the deal either before the goods are delivered or immediately thereafter is rebuffed by the store as the store now claims that all sales are final. The financing company pays the store and, when inevitably the poor quality, shoddily constructed furniture, appliances, or whatnot, begin to break, the buyer calls the store — unhelpful since they were already paid — and the financing company which argues that it is merely a lender and has no obligations as to the merchandise. These conversations, unfortunately, seem to happen long before the credit payments are complete and the purchaser often defaults. The financing company sues the buyer and the Court is faced with a quandary. On one hand, the financing company did pay the store for the goods and the buyer got some use of the same. On the other hand, the purchaser is getting charged interest at a high rate for goods that were never worth the purchase price and, often, has no recourse against the store which, even if it is still in business, rarely is impleaded in the case.
Capitol Discount does business with furniture stores in the NYC metro area, financing the customers’ purchases. Anna Rivera went to Universal Furniture to purchase a couch and the financing was from Capital Discount. Capital Discount sued Rivera for $3292.01 plus interest. Rivera answered pro se and the court dismissed the complaint, holding that no contract was formed and, in any event, is was unconscionable.
The uncontradicted story (record citations omitted):
In August of 2007, Anna Rivera, then working for New York City Housing, went to Universal Furniture looking to purchase furniture for her living room. According to her version of events, she expressed potential interest in certain couches and was told that they would do a credit check and, if approved, they would call her. Under the impression that she was applying for a credit check, she signed a document entitled "Security Agreement — Retail Installment Contract". At that point the various blanks on the form — the store's information, her information, the articles purchased, the prices, and payment terms — were not yet filled in and she did not read the document before signing it. Plaintiff's Vice President (and part-owner), Adam Greenberg, suggested that the rest was filled out by the store since Plaintiff received a completed contract from the store. That is a logical supposition, but speculation nonetheless in the absence of any representative from the store. Contemporaneously, Defendant also signed a Credit Application, according to her, filling out only the section seeking her references. The top portion of that document clearly was filled out in a different handwriting, Plaintiff's counsel admitting that portion could easily have been filled out by the store.
Thereafter, Defendant got a call that the furniture was going to be delivered. Even following delivery, no one told Defendant how much the furniture cost nor the payment terms. It was one week afterward that she received a filled-in copy of Plaintiff's Exhibit 1 in the mail reflecting a base cost of $3500, $3300 of which were financed at 24.9 percent, and a total outstanding balance of $4463.10 to be paid in 30 monthly installments of $148.77. Once she saw the amount that they intended to charge her, Defendant called the store and told them to take back the furniture since, now that they provided a price, she thought that the furniture was too expensive. The store refused to comply with her request telling her that all sales are final. Having made only one payment to Plaintiff and a $200 down payment to the store, Defendant defaulted.
The court held that there was no contract:
In this case, Defendant's uncontradicted testimony makes it clear that, when she was in the store, there was no offer to sell the furniture or at a minimum no price was given, she did not accept an offer to sell the furniture, she did not assent to the terms of the contract, and she did not intend to be bound. It is undisputed that she received consideration — the furniture. Nonetheless, no contract was formed in the absence of most of the elements for forming a contract. By accepting the furniture, Defendant still did not enter into a contract to pay. Material terms, most notably the price, were still not agreed upon and, when she learned what they were thereafter, Defendant called the store and expressed her unwillingness to enter into the agreement.
Even so, the court also held that it was both procedurally and substantively unconscionable:
With respect to the first prong, examples of procedural unconscionability include "high pressure commercial tactics, inequality of bargaining power, deceptive practices and language in the contract, and an imbalance in the understanding and acumen of the parties" (Emigrant Mortg. Co., Inc. v. Fitzpatrick, 95 A.D.3d 1169, 1170 [2d Dept 2012][citations omitted]). Crediting Defendant's testimony in the absence of a witness from the store to rebut her account, such elements appear to be present here. Steps were taken by the store to force her into the deal — she left the store without any intention of getting the furniture, they called her and delivered the furniture without her agreeing to acquire it, they failed to give her a price repeatedly until a week after delivery, and then they refused to take back the furniture when she promptly complained. The store and financing company certainly had greater bargaining power, understanding, and acumen than someone of limited means who could not easily get credit elsewhere and who is a stranger to this sort of transaction. Further, the agreement itself is difficult to read and understand. The front contains various provisions in different areas of the paper and in different size fonts. The terms on the rear are printed in light ink and are virtually unreadable. Thus, the procedural unconscionability prong is certainly met here.
The substantive unconscionability requirement, that is unconscionable terms within the contract, is also met. "Examples of unreasonably favorable contractual provisions are virtually limitless but include inflated prices, unfair termination clauses, unfair limitations on consequential damages and improper disclaimers of warranty" (Emigrant Mortg. Co., 95 A.D.3 at 1170 [citations omitted]). As Defendant herself noted, to pay $3500 for a couch and loveseat, especially for furniture of a quality that lasted barely two years, is ridiculous. Further, there is a clause limiting liability on behalf of the seller to the amount paid by the buyer. This too is unreasonably favorable to one party. Thus, the substantive prong is also met and the alleged agreement is unconscionable.
Capitol Discount Corp v. Rivera, CV-6114-12, NYLJ 1202590031804, at *1 (Civ., KI, Decided February 25, 2013).
[Meredith R. Miller]