Court Opinion

ID: 9549502
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:19:48.134957+00
Date Added: 2024-06-11T15:20:25.104874
License: Public Domain

VAN CISE, Judge,
dissenting:
I respectfully dissent from both I and II of the majority opinion.
I.
In Varady I, this court remanded this case for the trial court to determine whether the Whites’ sale of their home was a “consumer credit sale” as defined in § 5-2-104(l)(a), C.R.S.1973. The court correctly found that it was not.
Under the statute, to be a “consumer credit sale” of an interest in land, credit must have been “granted or arranged by a person who regularly engages as a seller in credit transactions of the same kind.’’ (emphasis supplied) Relying primarily on Eby v. Reb Realty, Inc., 495 F.2d 646 (9th Cir.1974), the majority holds that the Whites were “regularly engaged” in sueh transactions.
However, as described by the court, the seller in Eby was a real estate broker and, as such, constantly dealt with credit, either as principal or in assisting purchasers, and could be expected to be familiar with the general requirements of the statute and to be capable of implementing its requirements. By contrast, the Whites were not realtors, he was employed full time as an electronic technician and she was a housewife. Neither had had any prior financing experience. Hence neither qualify as a person “regularly engaged” in credit transactions. See Dorsey v. Beads, 288 Md. 161, 416 A.2d 739 (Md.1980).
Further, the sale of their home was not a “credit transaction of the same kind.” In *2881969, the Whites bought about 90 acres of land in Douglas County and built their house on that land. In 1974, they subdivided the acreage into about 16 lots, including their home site. By the time of the 1976 sale of their home to the Varadys, they had sold five of the unimproved lots, in each instance taking back first deeds of trust for the unpaid balance of the purchase price.3
At the time of the home sale, that property was subject to a first deed of trust to secure a loan from Mr. White's credit union. Therefore, as found by this court in Varady I, the Whites took back a second deed of trust from the Varadys — and it did not become a first until the credit union loan was paid off and released two months later.
Therefore, the home sale and credit transaction incident thereto was not “of the same kind.” “Same” means “resembling in every way,” “not different in relevant essentials at one time,” “conforming in every respect,” “identical,” “corresponding so closely as to be indistinguishable.” Webster’s Third New International Dictionary. Here, it was unlike any other transaction. It was the only sale of a residence. It was the only sale that did not include a release of a preexisting first deed of trust at or about closing time. The loan terms were different.
I would affirm the judgment of the trial court.
II.
If this was a consumer credit sale, the Varadys have a right to rescission under § 5-5-204(1), C.R.S.1973. The Varadys notified the Whites that they were rescinding. Under a belief (shared by both trial judges in this case) that they had no such duty, the Whites have not returned the $25,000 down payment and (until a cash sale, release, and escrow without prejudice were stipulated to during this litigation) have taken no action to terminate the $135,000 security interest in the property. The Varadys retained possession of the property (until the stipulated sale) and have made no payments on the loan. At no time have the Varadys offered to return the property or the sale proceeds.
The statute, § 5-5-204(2), C.R.S.1973, does not say what should happen if the creditor, because of a good faith belief that the debtor has no right to rescind, does not return the money paid and terminate the security interest within ten days after receipt of the notice of rescission. The majority holds that since the “Whites did not return the Varadys’ payments and terminate their security interest within ten days of the notice of rescission, the Whites must return all money paid to them by the Vara-dys, and ownership of the property vests in the Varadys without their obligation to pay for it.” I do not agree that the Varadys are entitled to keep the property or its proceeds.
The majority relies on Sosa v. Fite, 498 F.2d 114 (5th Cir.1974), and Strader v. Beneficial Finance Co., 191 Colo. 206, 551 P.2d 720 (1976),4 which in turn relied on Sosa. Sosa can be distinguished from the present case in that the debtor in Sosa included in his notice of rescission an offer to pay to the creditor the reasonable value of the property involved. Also, Sosa is no longer followed, even in the Fifth Circuit. See Bustamante v. First Federal Savings & Loan Ass’n, 619 F.2d 360 (5th Cir.1980); Harris v. Tower Loan of Mississippi, Inc., 609 F.2d 120 (5th Cir.1979), cert. denied, 449 U.S. 826, 101 S.Ct. 89, 66 L.Ed.2d 30 (1980); Gerasta v. Hibernia National Bank, 575 F.2d 580 (5th Cir.1978).
*289To the same effect, holding that even where, as here, the debtor sued to enforce his rights to return of the money paid and cancellation of the security interest, the debtor still had to tender back the property upon the creditor’s performance of his duties, see Rudisell v. Fifth Third Bank, 622 F.2d 243 (6th Cir.1980); LaGrone v. Johnson, 534 F.2d 1360 (9th Cir.1976); Palmer v. Wilson, 502 F.2d 860 (9th Cir.1974); Anderson v. Lester, 382 So.2d 1019 (La.App.1980); Turner v. West Memphis Federal Savings & Loan Ass’n, 266 Ark. 530, 588 S.W.2d 691 (Ark.1979).
The statute does not void the principal obligation along with the security. Section 5-5-204(1), C.R.S.1973. The debtor still has the duty to tender the property or its reasonable value, although he can retain possession until the creditor has performed. Only if the creditor does not take possession of the property within ten days after tender does the debtor become the owner free of any obligation to pay for it. Section 5-5-204(2), C.R.S.1973.
An action to rescind is an equitable proceeding and the court should seek an equitable solution to the problem. Palmer v. Wilson, supra; Gerasta v. Hibernia National Bank, supra; Rudisell v. Fifth Third Bank, supra. In Strader v. Beneficial Finance Co., supra, the creditor’s violations of the disclosure requirements were so flagrant and continuous that cancelling the debt without necessity for repayment was a fair and equitable result, although questionable under the strict wording of the statute requiring tender. However, in the instant case none of the parties performed their obligations, none acted in bad faith, and it is inequitable to require the creditors to return the money paid plus giving the debtors the property (or the proceeds) free and clear without allowing the creditors to retrieve their property after proper tender. See Bustamante v. First Federal Savings & Loan Ass’n, supra.
On the assumption that this was a consumer credit sale and in view of the fact of the stipulated sale and escrow of the proceeds, this court should remand the cause to the trial court with directions (1) to determine the reasonable value of the property at the time the notice of rescission was received and (2) to enter an order (a) confirming the release of the Varadys’ deed of trust, (b) directing payment out of the es-crowed funds of the $25,000 down payment with interest from date of receipt of notice of rescission plus all of the Varadys’ costs in this litigation, (c) to pay the balance of the escrowed funds (up to the figure determined to be the value of the property) to the Whites. See Palmer v. Wilson, supra; LaGrove v. Johnson, supra; Rudisell v. Fifth Third Bank, supra; Harris v. Tower Loan of Mississippi, Inc., supra; Gerasta v. Hibernia National Bank, supra. This result would give to both parties the substantial equivalent of what they had before entering into the transaction, with any loss to be on the Whites — which is what rescission is intended to accomplish. The contrary result, as provided for in the majority opinion, bestows a huge windfall on the Varadys while unfairly penalizing and imposing an unconscionable forfeiture on the Whites.

. In two instances, releases of a preexisting deed of trust were obtained with the purchase money and recorded not more than seven days after closing. It was unrefuted that this procedure is customary and that the release is considered to be in effect simultaneous with the closing transaction.

. In 1981 the general assembly amended the statute under which Strader was decided to provide that the section on debtor’s rights to rescind does not apply to “[a] transaction in which a mortgage, deed of trust, purchase money security interest arising under an instalment sales contract, or equivalent consensual security interest is created or retained against the debtor’s dwelling to finance the acquisition or initial construction of such dwelling.” Section 5-5-204(5), C.R.S.1973 (1981 Cum.Supp.).