In re Williams, Bankruptcy No. 01-35563DWS.

• Decision Date: 03 April 2003
• Docket Number: Adversary No. 02-0433.,Bankruptcy No. 01-35563DWS.
• Citation: 291 B.R. 636
• Parties: In re Maryetta WILLIAMS, aka Mary Washington, Debtor. Maryetta Williams, Plaintiff, v. BankOne, National Association, Trustee, by its Servicer HomeComings Financial Network, Defendant.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

291 B.R. 636

In re Maryetta WILLIAMS, aka Mary Washington, Debtor Maryetta Williams, Plaintiff, v. BankOne, National Association, Trustee, by its Servicer HomeComings Financial Network, Defendant.

Bankruptcy No. 01-35563DWS.

Adversary No. 02-0433.

United States Bankruptcy Court, E.D. Pennsylvania.

April 3, 2003.

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Mary Jeffrey, Philadelphia, PA, for Debtor/Plaintiff.

Joseph Riga, Whittlesly, McDowell and Riga, Maple Shade, NJ, for Defendant.

Edward Sparkman, Philadelphia, PA, Chapter 13 Trustee.

Dave P. Adams, Office of the U.S. Trustee, Philadelphia, PA, United States Trustee.

OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge.

Before the Court is the Complaint of debtor/plaintiff, Maryetta Williams ("Debtor"), asserting violations of the Truth in Lending Act (referred to as the "TILA" or the "Act"), 15 U.S.C. § 1601 et seq., against defendant BankOne, National Association Trustee ("BankOne"). At the conclusion of the trial, I took this matter under advisement. Upon consideration, I grant judgment in favor of the Debtor and against BankOne.

BACKGROUND

Debtor is a sixty-one year old widow. Prior to the death of her husband, Deleven Williams, she and her husband entered into a loan (the "Loan") secured by a mortgage on their residence located at 3219 W. Dakota Street in Philadelphia, Pennsylvania. Joint Pre-Trial Statement of Maryetta Williams and BankOne, National Association ("Joint Pre-Trial Statement") at Section II, pg. 1; Transcript dated November 19, 2002 ("Transcript") at 4-5. The Loan closing, which occurred on November 13, 1999,¹ lasted approximately an hour and took place at an office on "B" Street in Philadelphia, Pennsylvania. Joint Pre-Trial Statement at Section II, pg. 2; Transcript at 12. Debtor and her husband were picked up at their home and driven to the closing by an employee of the company which originated the Loan, namely Aames Funding Corporation ("Aames"). Joint Pre-Trial Statement at Section II, pg. 1; Transcript at 7-8. The only people in the office at the closing were Debtor, her husband and a woman who acted on behalf of Aames named Ave Craig ("Ms. Craig"). Transcript at 8-9.

Ms. Craig provided Debtor and her husband with the documents to be signed for the Loan.² Transcript at 10, 12. According to Debtor, she did not read any of the documents because her husband "was taking care of all of it," id. at 12, and he did not "totally" read all of the documents either because he did not have enough time. Id.

When the closing was over, Debtor's husband was given a file folder containing copies of the Loan documents that were signed which included a Notice of Right to Cancel and a Federal Truth-In-Lending Disclosure Statement ("Disclosure Statement"). Debtor was not given her own folder or separate copies of the documents. Id. at 10-11; Exhibit P-1A; Exhibits P-2 & P-7. When they returned home, Debtor's husband put the file folder in a drawer where it remained until Debtor removed it in order to give it to her counsel in connection with this litigation. Id. at 13. Upon review, only one copy of each document was contained in the file folder.³ Exhibits P-1A & P-1 through P-16.

Both parties agree that Debtor and her husband were entitled to the pre-closing disclosures required by the Homeowner's Equity Protection Act ("HOEPA") amendments to TILA, 15 U.S.C. § 1639. While it appears that the Williamses signed a HOEPA notice on or before the Loan closing,⁴ Debtor was not provided with her own copy of the HOEPA notice.

The Disclosure Statement which Debtor signed at the closing for the Loan lists the "Annual Percentage Rate" as 17.935%, the "Finance Charge" as $75,562.18 and the "Amount Financed" as $17,148.62. Exhibit D-6. It further lists the number of payments for the Loan as 360, the amount of the payments as $257.53 and the beginning date for the payments as 01/01/00. Id.

Proceeds of the Loan were disbursed to the City of Philadelphia, PGW and Advantage Credit. See Exhibit D-7. The amount disbursed to the latter entity was $36.83.⁵ Debtor was unaware of any debt owed to Advantage Credit and did not request that any of the Loan proceeds be disbursed to it. Transcript at 15. However, before her husband's death, he handled the couple's "business in the house" and he was the one who decided "what debts should be paid off" with the Loan Id. at 22.

Not long after the Loan closing, Debtor learned that the Loan was sold to a different mortgage company which was BankOne. Id. at 14, 35-36, 39; Joint Pre-Trial Statement at Section II, pg. 1 ("The loan was ... assigned to BankOne."). In February of 2000, Homecoming Financial began servicing the Loan on behalf of BankOne. Transcript at 35.

Debtor subsequently defaulted on the Loan. Before the default, nine payments were made on the Loan. Id. at 40. Since the Loan payments were $257.53, a total of $2,317.77 ($257.53 × 9 payments) was paid on the Loan.⁶ In February, 2001, BankOne commenced a mortgage foreclosure action against Debtor and her husband. Exhibit D-12.

On November 8, 2001, Debtor filed a Voluntary Petition for Bankruptcy under Chapter 13 of the Bankruptcy Code. BankOne subsequently filed a Proof of Claim for a secured claim in the approximate amount of $27,300. Exhibit D-10. The attachment to the Proof of Claim identifies the "current principal balance" of the Loan as $20,027.34. Id. Since the original amount of the Loan was $20,150, Debtor's nine payments totaling $2,317.77 paid off only $122.66 of the principal amount of the Loan, Transcript at 54, which means that $2,195.11 of her payments went towards interest.

On or about February 4, 2002, Debtor's counsel forwarded a rescission notice ("Rescission Notice") to BankOne stating that she was rescinding the Loan on behalf of the Debtor pursuant to TILA. Joint Pre-Trial Statement at Section II, pg. 2; Exhibit P-17. Describing the TILA violations, Debtor's counsel stated as follows:

Please be advised that the notices provided to Ms. Williams do not comply with the TILA because, among other things, they do not state accurately the finance charge, the amount financed or the APR; nor was Ms. Williams given the notice of her rights required by the HOEPA provisions of the TILA.

Id.

In the absence of a response to the Rescission Notice, Debtor commenced the instant adversary proceeding against BankOne on March 26, 2002 seeking rescission of the Loan, statutory damages, and attorney's fees and costs. BankOne filed an answer to Debtor's complaint ("Complaint") and thereafter, seeking to comply with my Pre-Trial Order dated April 30, 2002 ("Pre-Trial Order"), filed a Pre-Trial Statement. See Pre-Trial Statement of BankOne, National Association. Doc. No. 10. Subsequently, the parties submitted their Joint Pre-Trial Statement which, except for a few minor changes, mirrors the Pre-Trial Statement which BankOne initially filed on its own. Doc. No. 17. Pursuant to my Pre-Trial Order, the parties' Joint Pre-Trial Statement "supersede[d] all prior pleadings in the case."

At the trial, two witnesses testified, namely Debtor and Anne Sweeney who is an employee of Homecoming Financial. Following the trial, each party submitted a post-trial brief.

DISCUSSION

Debtor brings this adversary proceeding against BankOne pursuant to the TILA which is a "a federal statute ... regulat[ing] the terms and conditions of consumer credit." Horizon Financial, F.A. v. Norris (In re Norris), 138 B.R. 467, 470 (E.D.Pa.1992). The purpose of the TILA "is to promote the `informed use of credit' by consumers." Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981) (quoting 15 U.S.C. § 1601). Through its enactment of the TILA, Congress sought "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit[.]" 15 U.S.C. § 1601(a). Since the TILA is a remedial statute, it should be construed liberally in favor of the consumer. Williams v. Empire Funding Corp., 109 F.Supp.2d 352, 357 (E.D.Pa.2000).

In 15 U.S.C. § 1604, Congress authorized the Federal Reserve Board to "prescribe regulations to carry out the purposes" of the TILA. Pursuant to this authority, the Federal Reserve Board promulgated "Regulation Z" which is located in 12 C.F.R. Pt. 226. Rossman v. Fleet Bank (R.I.) National Association, 280 F.3d 384, 389 (3d Cir.2002). The Board "also published extensive `Official Staff Interpretations.' 12 C.F.R. Pt. 226 Supp. I." Id. As the Third Circuit noted in Ortiz v. Rental Management, Inc., 65 F.3d 335 (3d Cir.1995), "the Supreme Court has emphasized the broad powers that Congress delegated to the Board to fill gaps in the statute." Id. at 339. The Supreme Court has instructed that "[c]ourts should honor that congressional choice. Thus, while not abdicating their ultimate judicial responsibility to determine the law ... judges ought to refrain from substituting their own interstitial lawmaking for that of the Federal Reserve, so long as the latter's lawmaking is not irrational." Ford Motor Credit Company v. Milhollin, 444 U.S. 555, 568, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980). Discussing this same point in Anderson Bros. Ford v. Valencia, supra, 452 U.S. at 219, 101 S.Ct. 2266, the Supreme Court stated that "absent some obvious repugnance to the statute," Regulation Z "should be accepted by the courts, as should the Board's interpretation of its own regulation." In analyzing the Debtor's contentions, I shall refer to statutory provisions of TILA as well as to Regulation Z and the Official Staff Interpretations.

Pursuant to § 1635 of the TILA, "in a credit transaction in which a security interest is or will be retained or acquired in property which is the principal dwelling of a consumer, each consumer whose ownership interest is or will be subject to the security interest has a...