Court Opinion

ID: 9742835
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:21:24.536659+00
Date Added: 2024-06-11T07:24:37.106142
License: Public Domain

PATIENCE DRAKE ROGGENSACK, J.
¶ 98. (dissenting). I agree with the majority opinion's statement of the rule of law that is employed when a court determines whether a contract provision is unconscionable. Majority op., ¶¶ 29, 30.1 agree that both procedural and substantive unconscionability must be present before a clause will be held to be unenforceable. Id., ¶ 29. I also agree with the majority opinion's conclusion that the arbitration clause in the contract between Wisconsin Auto Title Loans and Kenneth Jones is substantively unconscionable, as a matter of law. Id., ¶ 69.1 write separately because I conclude that there are not sufficient facts of record to support the majority opinion's conclusion that the arbitration provision of the contract is procedurally unconscionable. Therefore, I would reverse the court of appeals decision and remand to the circuit court for arbitration of the counterclaims. I also would allow the circuit court to *563consider whether to stay the replevin action until the arbitration is complete. Accordingly, I respectfully dissent from the majority opinion.
I. BACKGROUND
¶ 99. There was no evidentiary hearing before the circuit court and no affidavits were filed by the parties relative to procedural unconscionability. In regard to the potential sources for facts, the record contains a complaint1 seeking replevin of Jones's automobile based on his alleged default on the loan repayment obligation; an affidavit showing an inability to personally serve Jones; proof of service by publication; an answer that denied default; counterclaims asserting that Wisconsin Auto Title Loans deliberately concealed loan costs, that Jones was unemployed and in need of cash for personal and household needs, that Jones's only income at the time he took out the loan came from unemployment benefits, that the loan form Jones signed was a pre-printed, non-negotiable, standardized contract, that Jones did not have "meaningful access to traditional credit resources, or conventional consumer loans"; a notice of motion and motion to compel Jones to arbitrate the issues raised by his counterclaims, while staying the counterclaims but not the replevin action; a petition for waiver of filing and service fees for the counterclaims as well as the jury fees; an order granting the waiver of fees based on Jones's indigence; amended counterclaims with the same factual allegations; an objection to the arbitration clause as being unconscionable; a notice of motion and motion to limit the issues before the circuit court "to the single question of *564whether the issues raised in defendant's answer and counterclaims are subject to arbitration rather than judicial process"; the recitation of an agreement between the parties that no reply to the counterclaims would be due until the court decided the pending motions; and the circuit court order concluding that the arbitration provision is unconscionable.
¶ 100. None of the factual allegations in the counterclaims was admitted. However, notwithstanding the lack of such admissions and the failure to hold an evidentiary hearing, the circuit court concluded that the arbitration provision was procedurally unconscionable because:
The plaintiff is experienced in the business of supplying auto loans, drafting agreements, was in a position of greater bargaining power than the defendant. The agreement was presented to defendant in a take it or leave it manner, and the terms of the arbitration agreement were not explained to the defendant.
The court of appeals affirmed that decision. Wis. Auto Title Loans, Inc. v. Jones, 2005 WI App 86, ¶ 1, 280 Wis. 2d 823, 696 N.W.2d 214. The majority opinion affirms the court of appeals. Majority op., ¶ 9.
II. DISCUSSION
A. Standard of Review
¶ 101. Whether a contract clause is unconscionable is a question of law. First Fed. Fin. Serv., Inc. v. Derrington's Chevron, Inc., 230 Wis. 2d 553, 559, 602 N.W.2d 144 (Ct. App. 1999). "However, because the elements of procedural unconscionability are so intertwined with the factual findings, we give weight to the *565[circuit] court's conclusions on that prong." Id. We will uphold a circuit court's findings of fact unless they are not supported by the record, in which case those findings are clearly erroneous. Schreiber v. Physicians Ins. Co. of Wis., 223 Wis. 2d 417, 426, 588 N.W.2d 26 (1999).
B. Procedural Unconscionability
¶ 102. Procedural unconscionability occurs when the contracting parties have not had a true meeting of the minds. Leasefirst v. Hartford Rexall Drugs, Inc., 168 Wis. 2d 83, 89-90, 483 N.W.2d 585 (Ct. App. 1992). Procedural unconscionability has also been described as arising from "the process of the parties' assent to contract." Kohler Co. v. Wixen, 204 Wis. 2d 327, 340, 555 N.W.2d 640 (Ct. App. 1996).
¶ 103. Facts that are relevant to the issue of procedural unconscionability are the "age, intelligence, business acumen, business experience and relative bargaining power of the parties." Id. (citation omitted). Courts have also considered the print size of the contractual provision under consideration; whether the provision was disclosed and explained; whether all the parties to the contract were disclosed and their relationship to one another explained; and whether both parties had a sufficient opportunity to read the contract. Leasefirst, 168 Wis. 2d at 90. Whether alterations in the terms of the contract were possible and whether there was any alternate source for the item for which the contract was made are relevant facts, as well. Disc. Fabric House of Racine, Inc. v. Wis. Tel. Co., 117 Wis. 2d 587, 602, 345 N.W.2d 417 (1984) (citations omitted).
¶ 104. "[A]n evidentiary hearing is required to enable the court to make the necessary findings of fact to support a conclusion that a [contract] clause is *566unconscionable." Datronic Rental Corp. v. DeSol, Inc., 164 Wis. 2d 289, 294, 474 N.W.2d 780 (Ct. App. 1991). This is so because procedural unconscionability is a fact-driven determination that cannot be ascertained solely from the written contract.2 Kohler, 204 Wis. 2d at 340. The burden of proof is on the person claiming that the contract clause is unconscionable to prove facts sufficient to support that contention. Wassenaar v. Panos, 111 Wis. 2d 518, 526, 331 N.W.2d 357 (1983).
¶ 105. Jones had the burden of proof to develop facts sufficient to support the legal conclusion that the arbitration clause was unconscionable. Id. The court of appeals noted that there was no evidentiary hearing to support the necessary facts, but concluded that the circuit court made factual findings, "apparently based on the record and representations made by the attorneys at oral argument." Wis. Auto Title Loans, 280 Wis. 2d 823, ¶ 17. The court of appeals then decided that Wisconsin Auto Title Loans "waived its objections" to the circuit court's having made factual findings in this manner. Id. In so doing, the court of appeals shifted the burden of proof from Jones to Wisconsin Auto Title Loans and permitted the circuit court to avoid its obligation as the fact-finder for the issues now before us on review.
¶ 106. The facts upon which the circuit court relied were not uncontested facts. The facts upon which the circuit court relied were not stipulated facts. The facts upon which the circuit court relied were not admitted by the pleadings. The facts upon which the circuit court relied were not developed in an evidentiary *567hearing. Nonetheless, the circuit court made findings of fact in regard to procedural unconscionability. Because the facts employed by the circuit court were not uncontested facts, or stipulated facts, or facts admitted by the pleadings, or facts developed through an evidentiary hearing, they are clearly erroneous. Schreiber, 223 Wis. 2d at 426.
¶ 107. The majority opinion provides a detailed justification for its reliance on the circuit court's inferences, along with its own inferences from the record, to support its conclusion of procedural unconscionability. Majority op., ¶¶ 41-52. We have previously held that "it is impermissible to base a judgment on 'conjecture, unproved assumptions, or mere possibilities.'" Merco Distrib. Corp. v. Commercial Police Alarm Co., 84 Wis. 2d 455, 461, 267 N.W.2d 652 (1978). We have also held that arguments of counsel are an insufficient foundation for fact finding. Dane County v. McManus, 55 Wis. 2d 413, 425-26, 198 N.W.2d 667 (1972). Notwithstanding years of precedent in this regard, that is exactly what the circuit court, the court of appeals and this court have done.
¶ 108. The record does not contain undisputed facts regarding any of the following considerations: real and voluntary meeting of the minds; Jones's age, education or intelligence; whether the terms were explained to him; whether alterations in the printed terms were possible; and whether Jones could have gotten a loan elsewhere. We do not know whether Jones previously had taken loans from Wisconsin Auto Title Loans, or from a similar lender. Therefore, contrary to the majority opinion, we do not know his level of "sophistication"3 relative to a transaction of this type.
*568¶ 109. The borrower's financial circumstances at the time when the loan was made are relevant to determining procedural unconscionability. Disc. Fabric, 117 Wis. 2d at 601. However, we do not know what Jones's financial circumstances were when the loan was made. The majority opinion infers that he was indigent then because he was indigent six months later. Majority op., ¶ 50. While that may be true, it is not the only inference that may be made from the record. The majority opinion also infers that because Jones took this loan after being advised that the interest rate was 300% per year and that if he could borrow at a lower rate he should do so, he had no other alternative but to borrow from Wisconsin Auto Title Loans. Id. Again, while this may be true, it may also be true that Jones never looked for another lender. It may also be true that Jones would have been better served if he had taken no loan at all from any lender. And finally, the majority opinion finds that the loan agreement was presented to Jones on a "take-it-or-leave-it" basis. Majority op., ¶ 52. This is not an undisputed fact. There is no testimony about any of the circumstances that surrounded the making of the loan.
¶ 110. The majority opinion does note that the circuit court's finding that the borrower was unemployed and needed funds for household expenses is not supported by evidence in the record and cannot be reasonably inferred. Majority op., ¶ 54. It makes the same conclusion about the circuit court's finding that the terms of the agreement were not explained to Jones. Majority op., ¶ 55. I agree with the majority that the record contains no support for those findings. However, I also point out that a court may make factual inferences only when the basic facts are first found or are undisputed. It is that initial step that is missing here.
*569¶ 111. We have long-standing rules that guide the circuit court, the court of appeals and our own decisions in regard to which court is to make factual findings and how that is to occur. Datronic, 164 Wis. 2d at 294 (concluding that an evidentiary hearing is required before the issue of unconscionability can be decided); McManus, 55 Wis. 2d at 425-26 (concluding that oral representations of counsel are not a sufficient basis on which to base facts needed for a circuit court finding or a supreme court's decision); Wis. State Employees Union v. Henderson, 106 Wis. 2d 498, 501-02, 317 N.W.2d 170 (Ct. App. 1982) (concluding that the court of appeals is without jurisdiction to make factual findings); Schreiber, 223 Wis. 2d at 426 (concluding that facts found without a record to support them are clearly erroneous).
¶ 112. Although it is easy to understand the emotional tug that Jones's claims exert on the courts, employing consistent procedures in each case protects against arbitrary decision making in all cases. Because I conclude that the rules of evidence were not applied in accord with long-standing precedent, I would reverse the decision of the court of appeals.
III. CONCLUSION
¶ 113. I conclude that there are not sufficient facts of record to support the majority opinion's conclusion that the arbitration provision of the contract is procedurally unconscionable. Therefore, I would reverse the court of appeals decision and remand to the circuit court for arbitration of the counterclaims. I also would allow the circuit court to consider whether to stay the replevin action until the arbitration is complete. Accordingly, I respectfully dissent from the majority opinion.
*570¶ 114. I am authorized to state that Justice JON E WILCOX joins this dissent.

 Copies of portions of the loan documents and the notice of default are attached to the complaint.

 Because substantive unconscionability addresses the reasonableness of the contract terms to which the parties agreed, it often can be determined from the face of the contract. Kohler Co. v. Wixen, 204 Wis. 2d 327, 340-41, 555 N.W.2d 640 (Ct. App. 1996).

 See majority op., ¶ 49.