Contracts; Consumer Protection; Retail Installment Security Agreements (RISA)

Jackson v Dewitt, 592 NW2d 262 (Ct of App 1999).

Facts: Homeowner entered into a contract for construction of an in-ground pool and financed most of the project through the retail installment security agreement (RISA), which contractor assigned to assignee. Homeowner made the final payment while the pool was still under construction. The pool failed to hold water, and the homeowner ordered it removed and began action against the contractor and assignee. Contractor and assignee filed competing motions for summary judgment. The trial court granted motion for summary judgment for assignee and held that the RISA entered into between owner and contractor was an "interlocking consumer loan" under Wis Stat § 422.408; that the loan assignee's liability was limited to the balance due at the time the assignee had notice of claim against the contractor; and since the homeowner had paid the amount due in full before learning of any claim against the contractor, the assignee was not liable to the homeowner. The trial court decided that the RISA was not a negotiable instrument, and therefore the homeowner could not state a cause of action under Wis Adm Code § ATCP 110.06. On appeal, the homeowner argued for an in pari materia reading of the two statutes and contended that these two provisions are supposed to protect the consumer. Homeowner also contends that the RISA was a negotiable instrument.

Holding: Reversed. Although the Court of Appeals agreed with the trial court's decision that the RISA was not a negotiable instrument, this was immaterial to the homeowner's claim for consumer protection regulations. The Court of Appeals advocated a common-sense reading of Wis Adm Code § 110.06 that allows the regulation to cover home improvement contracts and not be solely limited to negotiable instruments. Additionally, the court felt public policy dictated that consumer protection statutes and administrative rules must be read in pari materia to achieve the goal of providing protection and remedies to consumers. Finally, following State v Excel Management, an assignee of a non-negotiable home improvement contract takes the contract "subject to all claims and defenses of the buyer or his successor in interest." 111 Wis 2d at 479, 487, 331 NW2d 312, 316 (1983).

ILLINOIS ANALYSIS: There are no cases or statutes that are directly on point. However, Illinois allows a waiver of defense clause in a retail installment sales contract. Under 815 ILCS 405/17, a buyer can waive any claim or defense against the assignee or holder of a retail installment contract that he may have against the seller. Therefore, an assignee to a security agreement is protected by the waiver of defense clause and shielded from liability if the assignee purchases the contract for value, in good faith, and without notice of claim or defense. Personal Finance Co v Meredith, 39 Ill App 3d 695, 350 NE2d 781 (1976).

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