Case Name: WALKER BANK & TRUST COMPANY, a Utah Banking corporation, nka First Interstate Bank of Utah, Plaintiff and Respondent, v. Betty JONES, Defendant and Appellant; WALKER BANK & TRUST COMPANY, a Utah Banking corporation, Plaintiff and Respondent, v. Gloria HARLAN, Defendant and Appellant
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1983-09-08
Citations: 672 P.2d 73
Docket Number: Nos. 18110, 18111
Parties: WALKER BANK & TRUST COMPANY, a Utah Banking corporation, nka First Interstate Bank of Utah, Plaintiff and Respondent, v. Betty JONES, Defendant and Appellant. WALKER BANK & TRUST COMPANY, a Utah Banking corporation, Plaintiff and Respondent, v. Gloria HARLAN, Defendant and Appellant.
Judges: OAKS, J., and J. ROBERT BULLOCK, District Judge, concur.
Reporter: Pacific Reporter 2d
Volume: 672
Pages: 73–79

Head Matter:
WALKER BANK & TRUST COMPANY, a Utah Banking corporation, nka First Interstate Bank of Utah, Plaintiff and Respondent, v. Betty JONES, Defendant and Appellant. WALKER BANK & TRUST COMPANY, a Utah Banking corporation, Plaintiff and Respondent, v. Gloria HARLAN, Defendant and Appellant.
Nos. 18110, 18111.
Supreme Court of Utah.
Sept. 8, 1983.
Ron Nehring, Bruce Plenk, Salt Lake City, for defendants and appellants.
Roy A. Williams, Suzanne West, Salt Lake City, for plaintiff and respondent.

Opinion:
HALL, Chief Justice:
At issue in these consolidated cases is the liability of defendants to plaintiff Walker Bank for expenses allegedly incurred by defendants' separated spouses upon credit card accounts established by the plaintiff bank in the names of the defendants. Defendants appeal from adverse summary judgment orders on the grounds that their rights under the Federal Truth in Lending Act were violated.
A. . Defendant Betty Jones
In 1977, Defendant Jones established VISA and Master Charge accounts with plaintiff Walker Bank (hereinafter "Bank"). Upon her request, credit cards were issued on those accounts to herself and her husband in each of their names.
On or about November 11, 1977, defendant Jones informed the Bank, by two separate letters, that she would no longer honor charges made by her husband on the two accounts, whereupon the Bank immediately revoked both accounts and requested the return of the credit cards. Despite numerous notices of revocation and requests for surrender of the cards, both defendant Jones and her husband retained their cards and continued to make charges against the accounts.
It was not until March 9, 1978, that defendant Jones finally relinquished her credit cards to the Bank, and then only after a persuasive visit to her place of employment by a Bank employee. At the time she surrendered her cards, the balance owing on the combined accounts (VISA and Master Charge) was $2,685.70. Her refusal to pay this balance prompted the Bank's institution of this suit to recover the same.
B. Defendant Gloria Harlan
In July, 1979, defendant Harlan, who was prior to that time a VISA cardholder at plaintiff Bank, requested that her husband, John Harlan, be added to the account as an authorized user. The Bank honored this request and issued a card to Mr. Harlan. Shortly thereafter, at some point between July and the end of 1979, the Harlans separated and defendant (Mrs.) Harlan informed the Bank by letter that she either wanted the account closed or wanted the Bank to deny further extensions of credit to her husband.
Notwithstanding'the explicit requirement in the account agreement that all outstanding credit cards be returned to the Bank in order to close the account, defendant Harlan did not tender either her card or her husband's at the time she made the aforementioned request. As to her card, she informed the Bank that she could not return it because it had been destroyed in the Bank's automated teller. Notwithstanding, however, she returned the card to the Bank some three months later (March, 1980).
In the interim period, i.e., after defendant's correspondence with the Bank regarding the exclusion of her husband from her account and prior to the relinquishment of her card, several charges were made (purportedly by Mr. Harlan) on the account for which the Bank now seeks recovery. The Bank has sued only Mrs. Harlan, as owner of the account.
Defendants' sole contention on appeal is that the Federal Truth in Lending Act (hereinafter "TILA") limits their liability, for the unauthorized use of the credit cards by their husbands, to a maximum of $50. The specific section of the Act upon which this contention rests is 15 U.S.C. § 1643. In pertinent part, it reads thus:
(a) A cardholder shall be liable for the unauthorized use of a credit card only if the card is an accepted credit card, the liability is not in excess of $50.00 . . and the unauthorized use occurs before the cardholder has notified the issuer that an unauthorized use of the credit card has occurred or may occur as the result of loss, theft, or otherwise.

(d) Except as provided in this section, a cardholder incurs no liability from the unauthorized use of a credit card.
The Bank's rejoinder is that § 1643 does not apply, inasmuch- as defendants' husbands' use of the credit cards was at no time "unauthorized use" within the meaning of the statute. Whether such use was unauthorized, as that term is contemplated by the statute, is the pivotal question in this case.
The term "unauthorized use" is defined in 15 U.S.C. § 1602(o) (1974) as:
[U]se of a credit card by a person other than the cardholder who does not have actual, implied, or apparent authority for such use and from which the cardholder receives no benefit.
A "cardholder" is described in 15 U.S.C. § 1602(m) as:
[A]ny person to whom a credit card is issued or any person who has agreed with the card-issuer to pay obligations arising from the issuance of a credit card to another person.
Defendants contend that they alone occupied the status of "cardholder," by reason of their request to the bank that credit cards be issued to their husbands and their assumption of liability therefor. Accordingly, they maintain that their husbands were no more than authorized users of defendants' accounts.
Defendants' further aver that the effect of their notification to the Bank stating that they would no longer be responsible for charges made against their accounts by their husbands was to render any subsequent use (by their husbands) of the cards unauthorized. This notification, defendants maintain, was all that was necessary to revoke the authority they had once created in their husbands and thereby invoke the § 1643 limitations on cardholder liability.
The Bank's position is that unauthorized use within the meaning of § 1643 is precisely what the statutory definition (§ 1602(o) supra) says it is, to wit: "[U]se . by a person . who does not have actual, implied, or apparent authority .," and that notification to the card issuer has no bearing whatsoever on whether the use is unauthorized, so as to entitle a cardholder to the statutory limitation of liability. We agree with this position.
Where § 1643 governs, the liability of the cardholder for unauthorized charges is limited to $50 regardless of any notification to the card issuer. Notification, if given prior to the unauthorized charges, serves only to eliminate the $50 liability and not, as defendants argue, to render a use unauthorized. Unless and until the unauthorized nature of the use has been established, the notification provision, as well as the statute itself, is irrelevant and ineffectual.
The language of the statute defining unauthorized use (§ 1602(o) supra) is clear and unambiguous. It excludes from the category of unauthorized users, any person who has "actual, implied, or apparent authority."
The Bank maintains that defendants' husbands clearly had "apparent" authority to use the cards, inasmuch as their signatures were the same as the signatures on the cards, and their names, the same as those imprinted upon the cards. Accordingly, it contends that no unauthorized use was made of the cards, and that defendants therefore cannot invoke the limitations on liability provided by the TILA.
Again, we find the Bank's position to be meritorious. Apparent authority exists:
[WJhere a person has created such an appearance of things that it causes a third party reasonably and prudently to believe that a second party has the power to act on behalf of the first person .
As previously pointed out, at defendants' request their husbands were issued cards bearing the husbands' own names and signatures. These cards were, therefore, a representation to the merchants (third parties) to whom they were presented that defendants' husbands (second parties — card-bearers) were authorized to make charges upon the defendants' (first parties — eard- holders) accounts. This apparent authority conferred upon defendants' husbands by reason of the credit cards thus precluded the application of the TILA.
In view of our determination that the TILA has no application to the present case, we hold that liability for defendants' husbands' use of the cards is governed by their contracts with the Bank. The contractual agreements between defendants and the Bank provided clearly and unequivocally that all cards issued upon the accounts be returned to the Bank in order to terminate defendants' liability. Accordingly, defendants' refusal to relinquish either their cards or their husbands', at the time they notified the Bank that they no longer accepted liability for their husbands' charges, justified the Bank's disregard of that notification and refusal to terminate defendants' liability at that time.
The dissent expresses concern that the decision of the Court imposes an unreasonable burden on the cardholder. We disagree because in our opinion justice is better served by placing the responsibility for the credit escapades of an errant spouse (or son, daughter, mother, father, etc.) on the cardholder rather than the Bank. The cardholder is not left powerless to protect against misuse of the card. He or she need only surrender the cards and close the account, just as the defendants in the instant case were requested by the Bank to do.
Affirmed. No costs awarded.
OAKS, J., and J. ROBERT BULLOCK, District Judge, concur.
. 15 U.S.C. § 1601, et seq.
. By the terms of the credit card account agreement, an account can be closed by returning to the Bank all outstanding credit cards.
. In support of this position, defendants cite: 15 U.S.C. § 1642, and FRB Official Staff Interpretation, No. FC-0070, May 11, 1977, 42 Fed. Reg. 25,491 (1977).
. See Martin v. American Express, Inc., Ala.Civ.App., 361 So.2d 597 (1978).
. Wynn v. McMahon Ford Co., Mo.App., 414 S.W.2d 330, 336 (1967).