Case Name: Vernice ANDERSON, et al. v. FORD MOTOR CREDIT CORPORATION
Court: Court of Appeals of Maryland
Jurisdiction: Maryland
Decision Date: 1991-08-15
Citations: 323 Md. 327
Docket Number: No. 68
Parties: Vernice ANDERSON, et al. v. FORD MOTOR CREDIT CORPORATION
Judges: 
Reporter: Maryland Reports
Volume: 323
Pages: 327–338

Head Matter:
593 A.2d 678
Vernice ANDERSON, et al. v. FORD MOTOR CREDIT CORPORATION
No. 68,
Sept. Term, 1990.
Court of Appeals of Maryland.
Aug. 15, 1991.
Louise M. Carwell, Legal Aid Bureau, Inc., Baltimore, both on brief, for petitioners.
Robert J. Thieblot, Robert D. Harwick, Jr., Thieblot, Ryan, Martin & Ferguson, Baltimore, all on brief, for respondent.
Argued before ELDRIDGE, RODOWSKY, McAULIFFE, CHASANOW and KARWACKI, JJ., and CHARLES E. ORTH, Jr., and MARVIN H. SMITH, Judges of the Court of Appeals (retired, specially assigned), JJ.

Opinion:
McAULIFFE, Judge.
In this case we are concerned with whether a lease of an automobile was entered in violation of the Federal Consumer Leasing Act, 15 U.S.C. § 1667 through 1667e (1988). Because we hold that a violation did occur, we do not reach the second question raised by petitioners regarding whether the Maryland Consumer Protection Act (CPA), Maryland Code (1975,1990 RephVol.), § 18-101 et seq. of the Commercial Law Article, was violated.
I.
On 26 September 1985, Vernice Anderson and her mother, Betty Yancey, leased a new 1985 Ford Tempo from Koons Ford of Baltimore for four years. The transaction was evidenced by a form lease which stated that Koons Ford would immediately assign its interest in the automobile and its rights under the lease to Ford Motor Credit Company (Ford Credit). The assignment was made in consideration of a payment by Ford Credit to Koons Ford in the amount of $11,827.06.
The terms of the form lease were printed on both sides of a single page with blanks to be filled in by hand to reflect the specifics of this particular transaction. The clause evidencing the assignment of the lease from Koons Ford to Ford Credit appeared on the lower one-half of the reverse side of the form. In that clause there was a blank to be filled in with the lease-end residual value of the vehicle. The predetermined value of $3,881.88 appears in that blank on the original of the lease, which was retained by Ford Credit. Ford Credit contends that the blank was filled in on the original lease before the lessees signed, and it points to a statement that was printed at the end of the lease, providing:
The Lessee states that he has been given a filled-in copy of the Lease at the time he signs it and notice of the assignment of this Lease to Ford Credit.
Although both lessees signed their names below this statement in the lease, and both received a copy of the lease, neither of them received a copy that had the residual value blank filled in, nor were they otherwise informed that $3,881.88 was the predetermined residual value of the vehicle.
Under the terms of the lease, the lessees agreed to make rental payments, including rental- taxes, of $247.04 per month for 48 months or a total of $11,857.92. At the conclusion of the lease term, lessees promised to return the automobile to Ford Credit. It was expressly provided that "[t]his Lease is one of leasing only. The Lessee does not have an option to buy the Vehicle."
In the event of a default by the lessees, the parties agreed:
If the Lessee fails to make any payment under this Lease when it is due, or if the Lessee fails to keep any other agreement in this Lease, the Lessor may terminate this Lease and take back the Vehicle. The Lessor may go on the Lessee's property to retake the Vehicle. Even if the Lessor retakes the Vehicle, the Lessee must still pay at once the monthly payments for the rest of the lease term and any other amounts that the Lessee owes under this Lease. The Lessor will subtract from the amount owed sums received from the sale of the Vehicle in excess of what the Lessor would have had invested in the Vehicle at the end of the lease term. The Lessee must also pay all expenses paid by the Lessor to enforce the Lessor's rights under this Lease, including reasonable attorney's fees as permitted by law, and any damages caused to the Lessor because of the Lessee's default. The Lessor may sell the vehicle at public or private sale with or without notice to the Lessee.
This clause appeared on the upper one-half of the reverse side of the lease form.
After making payments for 20 months, the lessees defaulted. Ford Credit repossessed the vehicle on 24 July 1987, and notified the lessees of the date, time, and place of a public auction sale of the automobile. It was sold on 14 August 1987, for $4,900.
Ford Credit deducted from the total of the 28 unpaid monthly rental payments the amount by which the proceeds of the auction sale of the vehicle exceeded $2,409.60. It then charged lessees' account with unpaid late charges and expenses incident to the repossession and sale of the vehicle. Lessees were given credit for the security deposit of $500 which they made when they entered the lease, and the resulting deficiency balance so computed by Ford Credit was $3,893.34.
In January of 1989, Ford Credit brought suit against the lessees in the District Court of Maryland in Baltimore City, claiming the alleged deficiency balance and attorney's fees authorized by the lease. Lessees contested the suit, but after a trial, the District Court entered judgment in favor of Ford Credit. That judgment was affirmed on appeal to the Circuit Court for Baltimore City. We granted the lessees' petition for a writ of certiorari to address the issues raised by the lessees under the Federal Consumer Leasing Act (CLA).
II.
The CLA was enacted by Congress in 1976 to supplement the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (1988), which had no application to most consumer leases. S.Rep. No. 590, 94th Cong., 2d Sess. 1, reprinted in 1976 U.S.Code Cong. & Admin.News 431-441; Brothers v. First Leasing, 724 F.2d 789, 791 (9th Cir.1984), cert. denied, 469 U.S. 832, 105 S.Ct. 121, 83 L.Ed.2d 63 (1984). The purpose of the CLA is expressed in 15 U.S.C. § 1601(b):
The Congress also finds that there has been a recent trend toward leasing automobiles and other durable goods for consumer use as an alternative to installment credit sales and that these leases have been offered without adequate cost disclosures. It is the purpose of this subchapter to assure a meaningful disclosure of the terms of leases of personal property for personal, family, or household purposes so as to enable the lessee to compare more readily the various lease terms available to him, limit balloon payments in consumer leasing, enable comparison of lease terms with credit terms where appropriate, and to assure meaningful and accurate disclosures of lease terms in advertisement.
Lessees contend that the default clause of the lease, which we have quoted above, fails to comply with 15 U.S.C. § 1667a which provides, in pertinent part:
Each lessor shall give a lessee prior to the consummation of the lease a dated written statement on which the lessor and lessee are identified setting out accurately and in a clear and conspicuous manner the following information with respect to that lease, as applicable:
* #
(11) A statement of the conditions under which the lessee or lessor may terminate the lease prior to the end of the term and the amount or method of determining any penalty or other charge for delinquency, default, late payments, or early termination.
Ford Credit challenges this contention on two grounds. It argues that the formula for determining the lessees' liability upon default is not covered by 15 U.S.C. § 1667a(ll), but even if it is, that lessees' liability upon default is properly disclosed.
We reject Ford Credit's first alternative response that the formula for computing the lessee's liability upon default is not covered by 15 U.S.C. § 1667a(ll). Considering the plain language of this section in light of the legislative history of the CLA, we hold that the lessor is required to disclose "the amount or method of determining any . charge . for default . or early termination" and that Ford Credit failed to do so properly. Id. The Senate Report accompanying the CLA states that the bill will require "full disclosure of any charges incident to such termination." S.Rep. No. 590, 2d Sess. 5, reprinted in 1976 U.S.Code Cong. & Admin. News 435. Additionally, Regulation M, issued to assist in the implementation of the CLA, states that the "amount or method of determining the amount of any penalty or other charge for early termination" must be disclosed. 12 C.F.R. § 213.4(g)(12) (1991). Finally, Truth in Lending, a treatise analyzing the CLA, discusses the early termination and default requirements and comments that the disclosure "must be clear, conspicuous, and in a meaningful sequence____ Whenever a key number in the early termination formula is left blank or not discussed anywhere in the contract, this is a certain disclosure violation." K. Keest & E. Sarason, Truth in Lending, § 9.3.6.12, p. 339 (1989). The reference to formulas and numbers evidences that the method or amount in determining the charge must be furnished.
The relevant portion of the lease provides:
Even if the Lessor retakes the Vehicle the Lessee must still pay at once the monthly payments for the rest of the lease terms and any other amounts that the Lessee owes under this Lease. The Lessor will subtract from the amount owed sums received from the sale of the Vehicle in excess of what the Lessor would have had invested in the Vehicle at the end of the lease term.
The method of determining the lessees' liability upon default directly involves the lease-end residual value of the vehicle as predetermined by the lessor. The lease-end residual value assigned by the lessor in this case, and the amount the lessor's assignee was entitled to use in computing the lessees' liability upon default, was $3,881.88. Under the terms of the lease, the lessor had the right to deduct that figure from the net proceeds of the sale of the vehicle in order to establish the credit due the lessees. Disclosure of that figure, representing the lease-end residual value of the vehicle as established by the lessor, was therefore required by the mandate of § 1667a. Simply telling the lessees that their liability would be predicated upon the residual value, without disclosing that predetermined value in writing, does not satisfy the requirements of § 1667a.
We further hold that the requirement of disclosure of a predetermined residual value which is a key factor in the determination of a lessee's liability upon default is not satisfied by including that figure on the original of the lease at the time it is signed, yet not including it on the copy of the lease given to the lessees or on a separate statement furnished to the lessees prior to consummation of the lease. Section 1667a precisely defines the manner in which the required disclosures must be made. It provides that "[e]ach lessor shall give a lessee prior to the consummation of the lease a dated written statement " containing the required disclosures. (Emphasis added.) This was not done.
Section 1667a also provides that "[t]he disclosures required under this section may be made in the lease contract to be signed by the lessee." The proper interpretation of the concluding language in this section is to permit the lessor to comply with the requirement of delivery of a written statement by delivering to the lessee, prior to the consummation of the lease, a copy of the lease that contains all the required disclosures. See Regulation M, 12 C.F.R. § 213.4(a)(2) (1991) (disclosures may be made prior to the consummation "either in the contract or other instrument evidencing the lease, or on a separate statement which identifies the lease transaction"). Thus, the lessor is given an alternative method of complying with the clear mandate of the statute, and a duplication of documents may be avoided. This interpretation harmonizes the two provisions of § 1667a, rather than viewing one as eviscerating the other, and is consistent with the apparent remedial purpose of the statute. See State v. Fabritz, 276 Md. 416, 421, 348 A.2d 275 (1975), cert. denied, 425 U.S. 942, 96 S.Ct. 1680, 48 L.Ed.2d 185 (1976) ("statutes are to be construed reasonably with reference to the purpose to be accomplished").
The lessor in this case did not avail itself of either of the permitted methods of providing the lessees with a written statement containing the required disclosures, and thus it failed to comply with 15 U.S.C. § 1667a. Accordingly, we shall reverse the judgment below, and remand this case for further proceedings. As a result, we do not reach the question of whether there has been a violation of the Maryland Consumer Protection Act.
JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE CITY REVERSED; CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO VACATE THE JUDGMENT OF THE DISTRICT COURT OF MARYLAND AND REMAND THE CASE TO THAT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION; COSTS IN THIS COURT AND IN THE CIRCUIT COURT TO BE PAID BY RESPONDENT.
Dissenting Opinion by KARWACKI, J., in which SMITH and ORTH, JJ., join.
. The form of this lease is very similar to that of the lease we recently discussed in Keeling v. Ford Motor Credit, 314 Md. 311, 550 A.2d 932 (1988).
. Under the terms of the default clause of the lease, which we quoted above, Ford Credit agreed to reduce the balance due by the lessees by the proceeds of the sale of the vehicle "in excess of what the Lessor would have had invested in the Vehicle at the end of the lease term." In the lease, Ford Credit had estimated the lease-end residual value of the vehicle at $3,881.88. The reason why it used the lower figure of $2,409.60 instead is not apparent from the record. Counsel for Ford Credit in oral argument before us suggested that it was simply an error. In any event, it is of no legal significance that the Lessor erroneously applied a lower figure to the ultimate advantage of lessees.
. In fact the model forms accompanying Regulation M contain a question asking "the amount or method of determining the amount of any default charges." Appendix C to Part 213-Model Forms, C-2, Instructions to Question 13.
. Ford Credit raised a question of limitations before the District Court, which was not considered below nor by us, but which must be considered on remand.