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2006-1061 and 2006-1069. Minster Farmers Coop. Exchange Co., Inc. v. Meyer, Slip Opinion No. 2008-Ohio-1259.
Shelby App. Nos. 17-05-32, 2006-Ohio-1886, and 17-05-28, 2006-Ohio-1887. Judgments reversed and causes remanded.
Moyer, C.J., and Pfeifer, O'Connor, O'Donnell, Lanzinger, and Bryant, JJ., concur.
Lundberg Stratton, J., concurs in judgment only.
Peggy L. Bryant, J., of the Tenth Appellate District, sitting for Cupp, J.
Opinion: http://www.supremecourtofohio.gov/rod/docs/pdf/0/2008/2008-Ohio-1259.pdf
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(March 26, 2008) The Supreme Court of Ohio ruled 7-0 today that a merchant’s notation on its invoices or account statements of a purported interest rate applicable to unpaid balances in its “book accounts” does not meet the requirement of a “written contract,” and therefore does not allow the merchant to charge customers a higher rate of interest than the statutory rate set forth in R.C. 5703.47.
In an opinion authored by Justice Paul E. Pfeifer, the Court limited the application of its ruling to the specific parties in this case and to transactions occurring after the announcement of today’s decision.
The case consolidated separate lawsuits filed against two Shelby County farmers, Roger Meyer and Robert Dues, by the Minster Farmers Cooperative Exchange Company, a farm cooperative from which both defendants purchased feed, fertilizer, fuel and other farming supplies on a regular basis over a period of more than 10 years. Both Meyer and Dues developed overdue balances in their accounts with the cooperative, and were assessed monthly finance charges on those balances. Both continued to make purchases and payments after interest charges were assessed against their accounts, but eventually stopped doing business with the co-op without paying off their accounts. The co-op continued to assess monthly interest charges on the overdue account balances. In 2005, the cooperative filed suits seeking recovery of more than $55,000 from Meyer and more than $40,000 from Dues.
Meyer and Dues sought dismissal or reduction of the co-op’s claims, arguing that the interest charges assessed against their accounts violated Ohio laws in effect at that time which limited the assessment of interest on an unpaid obligation to a statutory rate of 10 percent unless the creditor and debtor had entered into “a written contract” agreeing to a higher interest rate. The statutory maximum interest rate later became calculated through a formula set forth in R.C. 5703.47.
The Shelby County Court of Common Pleas rejected the debtors’ argument and granted summary judgment in favor of the cooperative, holding that the co-op and its members had a business-to-business relationship that was governed by provisions of the Ohio Uniform Commercial Code (UCC) rather than a borrower-lender relationship governed by the state’s usury laws. Under the UCC, the trial court held, a printed notice included in the co-op’s invoices and monthly statements stating that interest would be assessed on overdue balances at “2 percent per month/24 percent per year,” combined with the defendants’ continuing purchases and payments after interest was assessed against their accounts at that rate, constituted acceptance of the higher-than-statutory interest rate and created an enforceable “contract between merchants.”
On review, the 3rd District Court of Appeals affirmed the trial court’s holding that the interest charge notice printed on the cooperative’s statements and Meyer’s and Dues’ actions had created an enforceable contract. However, the court of appeals reversed the trial court’s money award to the co-op and remanded the case for recalculation of damages, holding that the cooperative had not assessed interest against the defendants at the stated 24 percent annual percentage rate, but had charged a significantly higher effective rate that resulted from monthly compounding. Meyer and Dues sought and were granted Supreme Court review of the 3rd District’s ruling.
Writing for the Court in today’s decision, Justice Pfeifer rejected the cooperative’s argument that its assessment of interest charges with Meyer and Dues should be analyzed under R.C. 1302.10, which states that when one party to a contract provides a written confirmation of a new condition to that agreement to the other party within a reasonable time, that confirmation operates as an acceptance of the new condition.
“When statutes conflict, the more specific provision controls over the more general provision. R.C. 1302.10 addresses generally how provisions may be added to a contract. R.C. 1343.03(A) specifically establishes how parties can agree to an interest rate higher than the maximum allowed under R.C. 5703.47. R.C. 1343.03(A) requires a written contract, not simply an additional term added to an invoice and met without resistance by another party, to establish an interest rate greater than that set forth in R.C. 5703.47.” wrote Justice Pfeifer. “Thus, R.C. 1343.03(A) is the statute that Minster Farmers must satisfy. That is, it could not collect from Meyer and Dues the interest rate it claims is due unless that rate had been set forth in a ‘written contract.’”
Citing multiple decisions of state courts of appeals and a ruling of the U.S. Sixth Circuit, Justice Pfeifer wrote: “(W)e agree with the view put forth by the clear majority of Ohio appellate courts that have addressed the question of whether invoices can serve as the written contract required by R.C 1343.03(A). Those courts have written that ‘in order for a written contract to exist for purposes of R.C. 1343.03(A), there must be a writing to which both parties have assented. ... An invoice or monthly statement does not constitute such a writing.’ ... A meeting of the minds as to the essential terms of the contract is a requirement to enforcing the contract. Minster Farmer’s placement of an interest rate on invoices constituted no promise by Meyer or Dues and demonstrated no meeting of the minds between the parties.”
Based on that analysis, Justice Pfeifer concluded that the cooperative “was limited by R.C. 1343.03(A) to charging the amount of interest set forth in R.C. 5703.47. Minster Farmer’s claim to interest charged above that rate is unenforceable.”
In limiting the application of today’s decision to the parties in this case and to transactions arising in the future, Justice Pfeifer cited the U.S. Supreme Court’s holding in Great Northern Railway Co. v. Sunburst Oil & Refining Co. that state courts have broad authority to determine whether their decisions shall apply prospectively only.
“We do not intend for this decision to create shock waves throughout the many sectors of Ohio’s economy that rely on book accounts to do business, nor do we wish to encourage a propagation of pleadings regarding past practices,” Justice Pfeifer wrote. “This decision establishes the proper method for implementing interest rates exceeding the statutory maximum on a book account pursuant to R.C. 1343.03(A) in these two cases and for transactions occurring after the date of this decision.”
The majority opinion was joined by Chief Justice Thomas J. Moyer, Justices Maureen O’Connor, Terrence O’Donnell and Judith Ann Lanzinger, and Judge Peggy L. Bryant of the 10th District Court of appeals, who sat in place of Justice Robert R. Cupp. Justice Evelyn Lundberg Stratton concurred in judgment only.
Contacts
Bryan A. Niemeyer, 937.492.1271, for Roger Meyer and Robert Dues.
Michael A. Burton, 419.738.8165, for the Minster Farmers Cooperative Exchange Co..