Court Opinion

ID: 5167275
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:48:36.197623+00
Date Added: 2024-06-11T08:25:55.081409
License: Public Domain

RAPP, J.,
dissenting
¶ 1 I dissent. I am required to state, as a prelude to my analysis, that, in my view, the majority fails to consider and give effect to the parties’ written contract and to the consumer protection that the Uniform Consumer Credit Code (“UCCC”) was designed *1081to provide. The effect of the majority in discussing what is permissible under the UCCC is to condone what the Bank actually did in total disregard of its contract. The real issues here are twofold. First, is the Bank required to conform to its contract which, on close reading, does not authorize the Bank’s purchase and charge back to buyer/debtor of insurance? Second, what authority gives the Bank the right to have force placed insurance extending beyond the period of default and overlapping prior coverage it obviously initially approved? The answer to the first is “yes” and the answer' to the second is “none.”
¶ 2 Each of the Plaintiffs bought a used car from a dealer. Each signed a retail installment contract containing the same terms on a form approved by the Bank. The Plaintiffs were required by their contracts to provide casualty insurance on the cars. At some point in the contracts’ lives, the Plaintiffs failed to maintain insurance. The Bank obtained insurance using TBA as the insurance agency.2 This matter arises from the Plaintiffs’ allegation that Boatmen’s National Bank (“Bank”), in conjunction with T.B.A. of Oklahoma, Inc. (“TBA”) wrongfully charged Plaintiffs for the Bank’s purchase of unwarranted insurance, together with interest, in excess of the Bank’s authority.3
I. BACKGROUND
¶ 3 Bank obtained force-placed insurance through TBA, an insurance agency. The record shows plaintiff Brannon borrowed about $7,717.67 on July 30, 1993, payable in 24 monthly installments of $399.99 for a total of payments of $9,699.76. The Bank obtained force-placed insurance on October 1, 1993, in the amount of $1,934, covering a two-year period dating back to the loan inception date. Plaintiff Thomas borrowed $7,604.24 on October 26, 1991, payable in 36 installments of $276.97 for a total of payments of $9,970.92. The Bank obtained $1,310 in force-placed insurance on February 26, 1992, covering a one-year period again dating back to the loan inception date.
¶ 4 Bank added the insurance costs to the balances due and began charging interest on the funds advanced by the Bank to purchase the insurance at the note rate. Plaintiffs received notice of this insurance cost in a form letter from TBA, stating Bank had purchased insurance and added the amount to each loan. The letter stated that if Plaintiffs wished to purchase other insurance, they could do so and have the force-placed insurance canceled. Plaintiffs also received a copy of the insurance certificates, which stated the insurance provided physical coverage protecting only the interest of the insured, and not the borrower. The policy sent Bran-non stated:
INTEREST: WILL ACCRUE BASED ON APR: 21.000
ADDED TO LOAN: 1,934.4
Plaintiffs asserted when they attempted to make what they thought were the final payments on their contracts, they learned they owed more than $4,000 apiece due to the force-placed insurance and interest.
II. PROCEDURAL HISTORY
¶ 5 Plaintiffs brought a class action against Bank, its holding company, and TBA. Essentially, Plaintiffs asserted Bank:
* * * changed them more than the cost of the insurance;
*1082* * * obtained “additional and unauthorized coverage, including covering default by the consumers on their payment obligations;”
* * * bought insurance at exorbitant prices (by purchasing policies with no deductible);
* * * obtained a commission on the insurance it purchased; and,
* * * acted to defraud customers.
¶ 6 Plaintiffs asserted Bank breached their contracts and violated the Oklahoma Consumer Protection Act, the Oklahoma Deceptive Trade Practices Act, the Uniform Consumer Credit Code, and the Uniform Commercial Code. Plaintiffs, as to TBA, asserted only violations of the Consumer Protection Act and the Deceptive Trade Practices Act.
¶ 7 Defendants filed motions to dismiss for failure to state a claim upon which relief can be granted, under authority of 12 O.S. 1991 § 2012(B)(6), which the trial court granted and the Plaintiffs appealed.5
III. ANALYSIS AND REVIEW
1. Uniform Consumer Credit Code.
¶ 8 The Plaintiffs claim under the UCCC flows from their allegation that the Bank’s purchase of the force-placed insurance of the type obtained was not authorized by the parties’ contract. Plaintiffs further claim that the notices sent after the insurance was obtained were misleading under the Code. The Bank’s first defense is that it was authorized to purchase this particular insurance and charge Plaintiffs therefor both by the contract and the Code. Secondly, the Bank asserts that the petition and the notices attached reflect adequacy of notice.
¶ 9 The majority here fails to take account of the fact that there is a written contract which governs the respective rights and obligations of the parties. In so doing, the majority assumes that all the matters permitted by the UCCC are in fact included in the contract. The correct place of beginning here is with the full text of the relevant two paragraphs of the contract and what the Bank did and did not do pursuant to those paragraphs. These paragraphs state:
9. Adequate Insurance. Buyer at own expense shall insure Collateral with companies acceptable to Seller/Secured Party against such casualties and in such amounts as prudent and adequate to protect Seller/Secured Party or as Seller/Secured Party shall require. All insurance policies shall be written for the benefit of Buyer and Seller/Secured Party as their interests appear and such policies or certified copies thereof evidencing same shall be furnished to Seller/Secured Party within 10 days of date of this agreement. All policies of insurance shall provide for at least ten days prior written notice of cancellation to Seller/Secured Party. Seller/Secured Party may act as attorney for Buyer in the procuring of insurance, in making, adjusting, and settling claims under or canceling such insurance and in endorsing Buyer’s name on any drafts or checks drawn by insurers of Collateral.
10. Expenditures of Seller/Secured Party. At its option and after any written notice to Buyer required by law, which notice Buyer and Seller/Secured party hereby agree is sufficient if mailed, postage prepaid, to the address of Buyer provided for herein at least ten days before the commencement of the performance of the duties specified herein, it is agreed Seller/Secured Party may discharge taxes, liens, security interests or other encumbrances on the Collateral and may pay for the repair of any damage to the Collateral, *1083for the maintenance and preservation thereof and for insurance thereon. Buyer shall be liable for and agrees to pay Seller/Secured Party for all expenditures of Seller/Secured Party for taxes on the Collateral for the discharge of liens, security interest or other encumbrances on the Collateral, for the repair of any damage to the Collateral, and for all costs, attorney’s fees and other disbursements of Seller/Secured Party in connection with the foregoing. Buyer agrees promptly to reimburse Seller/Secured Party for all such expenditures and until such reimbursement the amounts of such expenditures shall be considered a liability of Buyer to Seller/Secured Party which is secured by this Security Agreement and shall be subject to a FINANCE CHARGE at a rate not exceeding the ANNUAL PERCENTAGE RATE provides herein. In addition, Buyer shall be liable for and agrees to pay Seller/Secured Party for all costs, attorney fees and other disbursements of Seller/Secured Party as allowed by law or provided for herein in the enforcement or collection of any note, warranty, or liability of Buyer to Seller/Secured Party, or in the realization upon or the enforcement or collection of any amount receivable, contract right, promissory note, chattel paper, instrument, document or other Collateral in which Seller/Secured Party has a security interest. Buyer agrees promptly to reimburse Seller/Secured Party for all such expenditures and until such reimbursement the amount of such expenditures shall be considered a liability of Buyer to Seller/Secured Party which is secured by this Security Agreement.
¶ 10 The Bank violated these paragraphs and obtained a policy which covered non-casualty losses as well as casualty losses with zero deductible. Moreover, taking the petition’s allegations as true, the Bank insured itself for the full amount of the loan and the full term of the loan in Brannon’s case, even though the Bank had been partially paid when the insurance was obtained and part of the loan period had elapsed for which Bank approved insurance existed. The result was a higher premium, greater interest income to the Bank and, in consideration of the loan amount coverages, constituted the purchase of insurance for coverage amounts larger than any claim could be made.
a. Authority Derived From Contract.
¶ 11 At outset it is to be observed that the contract here is Bank’s contract and is a contract of adhesion.6 Any contract language which is on a standardized or printed form or which is ambiguous or uncertain is construed most strongly against the drafter of the contract. Dismuke v. Cseh, 1992 OK 50, 830 P.2d 188; Wilson v. Travelers Insurance Company, 1980 OK 9, ¶ 8, 605 P.2d 1327; Vince Allen & Associates, Inc. v. Delhi Gas Pipeline Corp., 1989 OK CIV APP 56, 788 P.2d 414.
¶ 12 Examination of the Bank’s contract here focuses upon the paragraph’s dealing with the purchase and maintenance of insurance. Paragraph 9 of the Bank’s prepared contract requires that buyer obtain casualty insurance suitable to Bank as secured party. Not only does the contract specify “casualty” insurance but it also directs that the policy “shall be written for the benefit of Buyer and Seller/Secured Party.” The secured party is authorized to act as buyers attorney to procure this insurance. Paragraph 9 does not, however, authorize the Bank here to obtain the type of insurance it did, that is, insurance covering items other than “casualty” and which also did not cover the Plaintiffs as Buyers. Moreover, the phrase “as their interests appear” contained in this Paragraph does not authorize the Bank to “over-insure” or to insure for an interest that does not exist, that is, for a loan balance that exceeds the amount due and, by backdating the contract, create an insurance interest greater than the term remaining on the loan contract and resulting in duplication of insurance.
*1084¶ 13 Further, Paragraph 9, read together with Paragraph 10, does not, after the initial procurement of insurance at contract inception, require Plaintiff to pay for Bank’s insurance purchase as shown in the next Paragraph. Paragraph 10 does not assist Bank. This Paragraph states that the Bank “may pay ... for insurance” on the collateral and sundry other items such as taxes and liens. Then, the next sentence lists specifically those items which Buyer agrees to reimburse and pay. These items are subject to the lien of the security agreement and a finance charge. This specific list omits the purchase of insurance. Payment for an insurance purchase is not incorporated by the generality of the phrase “and other disbursements ... in connection with the foregoing.” When, as here, the enumeration of specific things is followed by general words or phrase, then such words or phrase is held to refer to things of the same kind. Cronkhite v. Falkenstein, 1960 OK 118, & 12, 352 P.2d 396; West v. Aetna Life Insurance Company, 1974 OK CIV APP 61, ¶ 21, 536 P.2d 393. Thus, under the contract, the Bank does not have the right to charge back the insurance it purchased to Buyer and add a finance charge therefore measured by the contract’s finance charge against the Plaintiffs.
b. Authority Derived From Code.
¶ 14 If the agreement requires the buyer to insure the collateral then the Code permits the seller to add to the debt amounts paid for performance of a contract. 14A O.S.1991 § 2-208(1). The term “seller” includes the seller’s assignee and thus the Bank. 14A O.S.1991 § 2-107. As shown above, Paragraph 9 requires the buyer to insure the collateral for casualty losses. However, the credit made for the sums advanced for insurance may not exceed the amount disclosed to Buyer “pursuant to the provisions on disclosure” under the Code. 14A O.S.1991, § 2-208(2).
¶ 15 Section 2-208 is not a blanket authority to the Bank to obtain insurance. Section 2-208 only authorizes the seller to perform the covenant of the buyer and then charge the buyer therefore plus interest at the disclosed contract rate. Here, the allegations of the petition, taken as true, reflect that the Bank acted both in excess of and outside its Code authority. Moreover, Bank’s purchase and notice thereof must comply with the Code. The record fails to show Bank acted accordingly.
¶ 16 Section 2-208 of the Code requires Bank, within a reasonable time after purchasing the insurance, to “state to the buyer in writing the amount of the sums advanced, any charges with respect to this amount, if required a revised payment schedule and, if the duties of the buyer performed by the seller pertain to insurance, a brief description of the insurance paid for by the seller including the type and amount of coverages.” The record shows the notice Bank gave Plaintiffs did not include a revised payment schedule. For example, though the notice did inform Brannon that $1,934 would be added to her loan balance, it did not inform her that by continuing her previously agreed-upon monthly payments, she would be liable for an additional amount of $4,000 at the end of the loan’s term — a sum ten times her monthly payment and over half of the amount originally borrowed. See Bank of Oklahoma v. Portis, 1997 OK CIV APP 32, 942 P.2d 249.
¶ 17 In a separate argument, Bank relies on the language of UCCC section 4-108(2)(c). That section does not require the creditor in some circumstances to account to the debtor for any portion of a separate charge for insurance where “the creditor receives directly or indirectly under any policy of insurance a gain or advantage not prohibited by law.” However, that section is not here dis-positive of the motion to dismiss. Plaintiffs have asserted this is a case where the Bank’s gain is “prohibited by law.” Besides, while the statute may allow Bank to retain certain gains, it does not allow Bank to do so at Plaintiffs’ expense.
¶ 18 Additionally, Plaintiffs asserted facts which, if true, would allow for recovery under section 4-301, which limits the costs of the purchased insurance to amounts “reasonable in relation to the character and value of the property insured.” Plaintiffs asserted Bank purchased insurance at unreasonably high levels by purchasing “no-deductible” insur-*1085anee. On this theory, then, the trial court also erred in granting the motion to dismiss.
2. Breach of Contract.
¶ 19 The Bank’s contractual authority for any action relative to insurance is specified in Paragraphs 9 and 10 of its form agreement. This authority is limited and specific.
¶ 20 The Bank had authority to only obtain a casualty insurance policy which bene-fitted both Buyer and Seller. The Bank did not have contractual rights to obtain the type of insurance it obtained; to “over insure”; or to insure for a non-existent risk, that is, for a loan amount previously paid and not due under the finance contract. Moreover, as set out earlier in section 1(a), the Bank did not have a right to charge for the insurance purchased upon expiration of the original insurance. Under the contract, the Bank became, at best, a gratuitous volunteer protecting its own interest evidenced by its contract purchase. Further, the Bank did not have a contractual right to collect a finance charge for any sums advanced for such excess and unauthorized insurance. The security agreement lien did not extend to the sum paid by the Bank for the unauthorized insurance and, therefore, the Bank had no right to foreclose for nonpayment of this sum.
¶ 21 Thus, insofar as review under a motion to dismiss is concerned, it is clear the Plaintiffs’ allegations establish several breaches of the contract by the Bank. These breaches began with procurement of type and scope of insurance not authorized and ended with foreclosure of a lien not held.
3. Remaining Claims.
¶ 22 The Plaintiffs’ petition alleges a cause of action under the Oklahoma Consumer Protection Act, 15 O.S.1991 §§ 751 et seq. The Bank asserts that the exemption provision of Section 754(2) justifies dismissal because the Bank is a regulated entity. However, the Bank’s argument does not point to any specific instance of regulation, but rather requires this Court to assume that the specific actions of which Plaintiffs complain are so regulated simply because the Bank is itself a regulated entity. This is specious.
¶ 23 The Bank’s argument at this stage is hopelessly flawed. The argument interjects a factual question into the decision-making process. An exemption is an affirmative defense which must be raised in the pleadings. 12 O.S.1991, § 2008(0(20). In light of the principles applicable to a review of a decision to dismiss for failure to state a claim, the trial court erred by sustaining the motion on the premise that the facts will support the Bank’s affirmative defense.
¶ 24 The trial court also erred in granting Bank’s motion to dismiss as to its potential liability under the UCC’s provisions regarding a secured party’s right to dispose of collateral after default, 12A O.S.1991 and Supp.1997 § 9-504 through 9-507. Every contract or duty within the UCC imposes an obligation of good faith in its performance or enforcement. 12A O.S.1991 § 1-203. This obligation, and the requirement that the disposition be in a commercially reasonable manner, are the principal limitations on the secured party’s right to dispose of collateral. See UCC comment to 12A O.S. Supp.1997 § 9-507. Plaintiffs assert Bank wrongfully inflated the cost of the insurance by purchasing “no-deductible” insurance and by purchasing more than the “casualty” insurance required in the Bank’s contract. This assertion, if Plaintiffs can prove it to the satisfaction of the trier of fact, would show a lack of good faith on Bank’s part and would obviously affect their right to redeem their cars.
IV. CONCLUSION
¶ 25 The Plaintiffs’ petition states a cause of action against the Bank. When the full relevant terms of the Bank’s contract are compared to what the Bank is alleged to have done it is clear that the Plaintiffs are entitled to the opportunity to prove their ease.
¶ 26 I would reverse and remand for further proceedings.

. This type of insurance is known as ‘'force-placed” insurance. The record does not show whether TBA was competitive with other agencies or brokers, nor does it show if there were any financial benefits to the Defendants other than the obvious financial charges earned by Bank and profits for TBA.

. Moreover, this is an appeal from an order sustaining a motion to dismiss for failure to state a claim. This court, on review, asks only whether relief is possible under any set of facts that could be established consistent with the allegations. Indiana National Bank v. State Department of Human Services, 1994 OK 98, 880 P.2d 371. The judgment may not be sustained unless it appears without doubt that the plaintiff can prove no set of facts in support of the claim entitling him to relief. Brown v. Founders Bank & Trust Company, 1994 OK 130, 890 P.2d 855.

.The policy sent Thomas included similar language, except it listed her interest rate at 18 per cent and the amount added to the loan at $1,310.

. I agree that the dismissal Plaintiffs' claims against both Defendants premised upon the Oklahoma Deceptive Trade Practices Act was correct. However, the reason is not that these claims derive from the UCCC theory. The Deceptive Trade Practices Act is designed to provide a remedy for injury incurred in the competitive arena. Moreover, by analogy to the concept of "goods” in secured sales, "forced-placed” insurance is not covered in the Act.
I also agree that the trial court correctly dismissed Plaintiffs' Consumer Protection Act claims against TBA because they did not allege any contractual or other relationship between them and TBA giving rise to any duty on the part of TBA to conform to the Act vis’ the Plaintiffs. Moreover, Plaintiffs declined the opportunity to amend their petition.
Therefore, the trial court correctly dismissed TBA.

. An "adhesion contract” is a standardized contract prepared entirely by one party for acceptance by the other on a "take it or leave it” basis without opportunity for bargaining. Max True Plastering Company v. United States Fidelity and Guaranty Company, 1996 OK 28, 912 P.2d 861.