USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 93-1851
MICHELE MAYES,
Defendant, Appellant,
v.
CHRYSLER CREDIT CORPORATION,
Plaintiff, Appellee.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge]
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Before
Breyer,* Chief Judge,
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Torruella and Boudin, Circuit Judges.
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Christopher C. Trundy for appellant.
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Paul Marshall Harris with whom Lynne F. Riley and Powers & Hall
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were on brief for appellee.
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October 11, 1994
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*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
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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
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Ass'n, 536 F. Supp. 1271, 1278 (D. Mass. 1982) (Aldrich, J.).
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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.
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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
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First National Bank v. Koger, 784 F. Supp. 815 (D. Kan. 1992)
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(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
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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.
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Georgetown University Hospital, 488 U.S. 204, 208 (1988). On
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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
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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
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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.
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R. A. Gray & Co., 467 U.S. 717 (1984). But in this appeal we
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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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