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Chrysler Credit v. Silva, Inc., 93-1851 (1994)

Court: Court of Appeals for the First Circuit Number: 93-1851 Visitors: 8
Filed: Oct. 11, 1994
Latest Update: Mar. 02, 2020
Summary: UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT ____________________ No. 93-1851 MICHELE MAYES, Defendant, Appellant, v. CHRYSLER CREDIT CORPORATION, Plaintiff, Appellee. The borrower was to be Rainbow Motors, Jean Mayes being its president and sole shareholder. ________ -9- -9-
USCA1 Opinion









UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________

No. 93-1851

MICHELE MAYES,

Defendant, Appellant,

v.

CHRYSLER CREDIT CORPORATION,

Plaintiff, Appellee.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Edward F. Harrington, U.S. District Judge]
___________________

____________________

Before

Breyer,* Chief Judge,
___________

Torruella and Boudin, Circuit Judges.
______________

____________________

Christopher C. Trundy for appellant.
_____________________
Paul Marshall Harris with whom Lynne F. Riley and Powers & Hall
_____________________ ______________ _____________
were on brief for appellee.


____________________

October 11, 1994
____________________






____________________

*Chief Judge Stephen Breyer heard oral argument in this matter, but
did not participate in the drafting or the issuance of the panel's
opinion. The remaining two panelists therefore issue this opinion
pursuant to 28 U.S.C. 46(d).















BOUDIN, Circuit Judge. In 1984, Jean Mayes purchased
______________

Albert L. Silva, d/b/a Rainbow Motors ("Rainbow Motors"), a

Nantucket car dealership. In May 1985 he then entered into

financing arrangements with Chrysler Credit Corporation

("Chrysler") to finance his car inventory. The "borrower"

was to be Rainbow Motors, Jean Mayes being its president and

sole shareholder.

To support the financing, Chrysler required not only

Jean Mayes but also his wife, Michele Mayes, to sign a

"Continuing Guaranty," a document imposing unconditional

joint and several liability on the guarantors for the debts

of Rainbow Motors to Chrysler. Michele Mayes was a well-

compensated corporate attorney and also owned or co-owned

land rented to Rainbow Motors. She assertedly did not

participate in managing the dealership, although she was

listed as a director and officer. Allegedly, it was

Chrysler's practice to seek spousal guaranties as a matter of

course.

Rainbow Motors thereafter accumulated a large debt to

Chrysler and, in December 1990, Chrysler brought the present

action against Rainbow Motors and Michele Mayes in the

district court seeking payment of an outstanding debt of

$750,126.41. Michele Mayes did not dispute the existence of

the guaranty but pleaded waiver and estoppel as affirmative





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defenses to Chrysler's claim against her. Michele Mayes did

not assert any counterclaim.

A non-jury trial was held in the district court on May

25 and 26, 1993. In a brief memorandum and order on May 26,

1993, the district court said that Michele Mayes had not

presented adequate evidence at trial to support her equitable

defense of waiver or estoppel. The court also said that

Mayes had argued at trial that the guaranty violated the

Equal Credit Opportunity Act, 15 U.S.C. 1691 et seq., but
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the court said that this defense had been waived because not

asserted in the answer, and was in any event without merit.

The district court entered judgment in favor of Chrysler and

against both Rainbow Motors and Michele Mayes in the amount

of $750,126.41. Michele Mayes alone has appealed.

We address first her principal argument, based on the

Equal Credit Opportunity Act. Michele Mayes' brief does not

respond directly to the district court's ruling that the

statutory defense has been waived for failure to assert it in

the answer. See Fed. R. Civ. P. 8(a). The indirect response

appears to be two-fold: first, that the district court did

resolve the issue on the merits; and second, that, at least

in the indirect "public policy" version in which the defense

is urged, it is embraced by the "estoppel" defense that was

properly pleaded.





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We have some doubt about either branch of this response.

In its final decision, the district court prefaced its

footnoted discussion of the merits by saying that it did not

need to reach the issue. As for the estoppel defense, the

answer merely said as an affirmative defense that Chrysler

"because of its own actions" should be estopped, without

identifying any such actions or mentioning the statute.

Nevertheless, we think that Mayes has no defense on the

merits and prefer to rest our decision on that ground.

The district court said that a violation of the statute

could not be asserted as a defense but only as a

counterclaim. There appears to be more than one view on this

issue, but Michele Mayes does not challenge the ruling

directly. Instead her brief responds that she has not

argued "that there was a violation of the ECOA, but rather

that the policy of the act should be applied to the guarantee

by the Court sitting in equity." This rather awkward

formulation, casting the defense as one of public policy, is

apparently designed to meet yet another concern.

The Equal Credit Opportunity Act pertinently provides,

in general terms, that a creditor may not "discriminate

against any applicant, with respect to any aspect of a credit

transaction . . . on the basis of . . . sex or marital

status." 15 U.S.C. 1691(a)(1). At the time Chrysler

secured Mayes' guaranty in 1985, a regulation of the Federal



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Reserve Board--the then-operative version of 12 C.F.R.

202.2(e)--expressly provided that a guarantor was not an

"applicant." See Morse v. Mutual Federal Savings & Loan
___ _____ _______________________________

Ass'n, 536 F. Supp. 1271, 1278 (D. Mass. 1982) (Aldrich, J.).
_____



This regulation apparently reflected the Federal Reserve

Board's understanding of the statute's original purpose. The

statute was initially designed, at least in part, to curtail

the practice of creditors who refused to grant a wife's

credit application without a guaranty from her husband. See
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Anderson v. United Finance Co., 666 F.2d 1274, 1277 (9th Cir.
________ __________________

1982). Under the original Federal Reserve Board regulation,

a wife (or a husband) who was denied credit because the

spouse refused to guarantee the loan might have a cause of

action, depending on the circumstances; but where the spouse

did guarantee the loan, that spouse--not being an applicant--

had no basis for a claim or any defense against collection.

Eventually the Federal Reserve Board revised its

regulation, effective on October 1, 1986, extending the

definition of an "applicant" to include "guarantors . . . and

similar parties." 12 C.F.R. 202.2(e), adopted 50 Fed. Reg.

48026 (Nov. 20, 1985). Michele Mayes does not claim that the

regulation applies retroactively to her case. Cf. Boatman's
___ _________

First National Bank v. Koger, 784 F. Supp. 815 (D. Kan. 1992)
___________________ _____

(holding that the regulation is not retroactive). Instead--



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to put the best face on her argument--she can be taken to

urge that Chrysler's conduct was unlawful, both before and

after the new regulation, even if a pre-October 1, 1986,

guarantor had no standing to assert a direct claim under the

statute. Public policy, in effect, is offered as a

substitute for standing.

Assuming arguendo a violation by Chrysler, we think that
________

Mayes' contention has some weight but not quite enough. If

Chrysler's conduct in seeking the spousal guaranty was

unlawful when the financing arrangement was made, Michele

Mayes' defense would not directly affront the general precept

that a party's conduct should be judged by the rules in

effect when the conduct occurred. See generally Bowen v.
_____________ _____

Georgetown University Hospital, 488 U.S. 204, 208 (1988). On
______________________________

the other hand, there remains a strong element of

retroactivity in what Mayes seeks in this case, and her

argument depends on a rather loose description of what was

arguably unlawful in Chrysler's conduct.

At the time Chrysler made the financing arrangements in

question and secured the guaranty, Chrysler might have had

reason to believe that it should not seek the guaranty and

might be liable to the de facto borrower (Jean Mayes) if it
________

refused to extend credit to him without a spousal guarantee.

But at that time the core of the conduct made unlawful was

withholding or conditioning the loan to the borrower. Under



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the regulation as it then stood, Chrysler had no reason to

think that it would be unable to collect on any spousal

guaranty since the regulation said that the guaranteeing

spouse was not a protected party.

The Federal Reserve Board has changed its position now,

the guarantor is protected by the terms of the regulation,

and Chrysler is now on notice that such a defense might be

attempted. But we think it stretches public policy too far

to bar Chrysler from collecting now on a guaranty made in

1985 when in 1985 its right to collect on the guaranty would

not reasonably have been thought in doubt. Put differently,

the regulation's change in "standing" is actually a surrogate

for an enlarged view of what is unlawful about Chrysler's

conduct.

One might imagine cases where a public policy that

arises after the event is of such a force and character that
_____

it should be applied even to conduct that occurred prior to

the new regime; after all, the presumption against

retroactive statutes can be overcome when Congress provides

for retroactivity. E.g., Pension Benefit Guaranty Corp. v.
____ ______________________________

R. A. Gray & Co., 467 U.S. 717 (1984). But in this appeal we
_______________

are given no reason to think that our case presents such a

rare and exigent situation. Accordingly, we have no reason

to consider Chrysler's defense of its conduct on the merits.





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Two remaining claims of error can be answered quickly.

First, Michele Mayes argues that Chrysler introduced

irrelevant and prejudicial information into the proceeding by

referring to the bankruptcy of her husband, by claiming that

her statutory defense was belatedly pled, and by attempting

to show that Chrysler had good reason for requiring her own

guaranty in this instance. All of these matters are

irrelevant to our own legal determination which is based on

the fact that the guaranty predated the change in the

regulation.

Second, Michele Mayes renews on appeal an argument that

she has an equitable defense because Chrysler itself, by

cutting off credit temporarily to Rainbow Motors in 1988,

caused the financial hardships that led to its default on the

debt. This argument rests entirely on the brief's central

proposition that "the uncontroverted testimony of [Michele

Mayes'] witnesses was that Chrysler Credit wrongfully

withheld agreed upon financing for the 1989 selling season."

Although there are no findings on this point, a brief review

of the record shows that the situation is far more

complicated than the "uncontroverted testimony" reference

would suggest.

It appears that Chrysler also financed another

dealership of Jean Mayes located in Hingham, Massachusetts,

that the credit arrangements were in certain respects



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interrelated, and that the "hold" placed on Rainbow Motors'

financing was connected to alleged problems with the Hingham

dealership. Whether or not the cutoff of credit to Rainbow

Motors was wrongful, wrongfulness was certainly not a

conceded issue at trial. It is the obligation of one who

appeals on such grounds to address the evidence. The

treatment of this point offered in Michele Mayes' brief does

not attempt the task.

Affirmed.
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Source:  CourtListener

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