Maxwell v. Fidelity Financial Services

907 P.2d 51 (Ariz. 1995)


Maxwell (P) sued Fidelity (D) for a declaratory judgment seeking a ruling that a 1984 contract for the purchase and finance of a solar water heater was unconscionable. P bought the unit from a door to door salesman for National Solar Corporation for $6,512. The company the salesman represented was responsible for the installation, but the unit was never installed properly and was eventually ordered disconnected by the City of Phoenix. The unit was thus intrinsically worthless. The purchase was financed by D for ten years at 19.5% making the total cost $15,000. P earned $400 per month, and her husband earned $1,800 per month working of a local paper. At D’s request, an appraisal was made of P’s home. Their home had a market value of $40,000, and their home was in need of a significant amount of general repair and maintenance. P signed numerous documents including a loan contract, a deed of trust, a truth in lending form and a promissory note and security agreement. The agreement placed a lien on P's house to secure the loan agreement to purchase the solar heater. The forms and their terms were unambiguous and clearly indicated that D was placing a lien on their house. Included in the consumer credit contract between P and D was a clause that expressly stated that D was subject to all claims by and defenses that P could assert against National. Despite the fact that the solar heater never worked, P continued payments for three years with a remaining balance of $5733. In 1988, P approached D to get an additional loan for $800, and P signed a number of documents creating a new contract that included the $5733 balance and the new $800 request as well as a term life insurance charge of $313. A new balance of $6976 was financed for six years at 19.5% interest, making payments of $12,000. Thus, the combined absolute amount of payments to be made by Ps to D was nearly one-half the value of their home. P continued to make payments until 1990 when she brought a declaratory judgment action seeking a declaration that the 1984 contract was unenforceable on grounds that it was unconscionable. D moved for a summary judgment that the statute of limitations had run on the claim of unconscionability and if not the subsequent contract worked a novation. D's motion was granted. P appealed.