Burgess v. Charlottesville Savings and Loan Ass'n, Civ. A. No. 71-C-33-C.
| Decision Date | 24 August 1972 |
| Docket Number | Civ. A. No. 71-C-33-C. |
| Citation | 349 F. Supp. 133 |
| Parties | Betty B. BURGESS, Individually and as Administratrix of the Estate of S. Reed Burgess, Jr., deceased, Plaintiff, v. CHARLOTTESVILLE SAVINGS AND LOAN ASSOCIATION, Defendant. |
| Court | U.S. District Court — Western District of Virginia |
McGuire, Woods & Battle, Charlottesville, Va., for plaintiff.
B. B. Woodson, Charlottesville, Va., and Garland M. Harwood, Jr., Shewmake & Gary, Richmond, Va., for defendant.
This action originally was brought in the Corporation Court of the City of Charlottesville, Virginia, and removed to this court on December 3, 1971, pursuant to 28 U.S.C.A. § 1441(c). The amount in controversy exceeds $10,000 and the case involves construction and interpretation of federal law, to-wit, the federal Truth-In-Lending Act, 15 U.S.C. §§ 1601 et seq.; 12 C.F.R. §§ 226.1 et seq., thereby satisfying the jurisdictional requirements of 28 U.S.C. § 1331(a).
Plaintiff's original action in the Corporation Court was an action for breach of contract, and under the Rules of Pleading in the State Court, plaintiff was barred from joining actions in tort and contract. Plaintiff, in a motion for leave to file an amended complaint, filed on March 17, 1972, in this court, seeks to join counts sounding in tort with the contract action initially pleaded.
Defendant states that the amended pleadings of the plaintiff do not allege a tort cause of action recognized in Virginia, and therefore the motion to amend should be dismissed.
This court must consider whether the amended pleadings of the plaintiff do, in fact, allege a tort cause of action. The court must then consider whether the plaintiff has established a valid case on the merits.
The facts of the case are as follows: An application for a $20,000 mortgage loan was made by plaintiff and her deceased husband, S. Reed Burgess, Jr., with the defendant, Charlottesville Savings and Loan Association on March 23, 1971. The loan was to be used to purchase a home in an Albemarle Co. sub-development near Charlottesville. Following a credit check of plaintiff and her husband, Charlottesville Savings and Loan, represented by William H. Grimm, Executive Vice-President, wrote their attorney, Miss Ellen V. Nash, on April 15, 1971, stating that it was ready to make a commitment and requesting the closing costs for the transaction. On May 10, 1971, Miss Nash furnished the closing costs in a memorandum to Mr. Grimm and requested closing by May 12, 1971. Mr. Grimm, upon receipt of Miss Nash's memorandum on May 10, prepared the loan commitment, closing instructions and Truth-In-Lending Statement (Regulation Z) and sent them to Miss Nash. These were subsequently signed by the plaintiff and her deceased husband, and on May 12 plaintiff and her attorney, Miss Nash, presented these forms to defendant and a check for $20,000 was issued by Mr. Grimm, payable to the order of Nash and Edelson. The plaintiff and her husband agreed to repay said loan in three hundred (300) monthly installments of one hundred forty-seven dollars and eighty cents ($147.80) and granted defendant a security interest in their home.
The plaintiff and her deceased husband purchased the home in the subdivision in Albemarle County with the loan money and there resided together until plaintiff's husband, who was a maintenance craftsman for Virginia Telephone and Telegraph Company, was killed on June 16, 1971, in an accident while installing an antenna. Within a week after his death, Mrs. Burgess, in a personal visit to Charlottesville Savings and Loan, made a claim of payment due from the credit life and disability income insurance, which she claimed should have paid the loan upon the death of her husband. Defendant denied that any payment was due since the necessary application for life and disability income insurance had never been filed by either the plaintiff or her deceased husband. In a letter to plaintiff, dated July 26, 1971, the defendant regretfully denied any claim of payment due. A motion for judgment was filed in the Corporation Court of the City of Charlottesville by the plaintiff on November 12, 1971, and removed to this court on December 3, 1971.
The plaintiff's complaint centers on the Truth-In-Lending Statement (Regulation Z) which was filled in by the defendant on May 10, mailed to plaintiff's attorney, Miss Nash, and subsequently signed by plaintiff and her deceased husband on May 12. Specifically, the section in question on the printed form (Regulation Z) is a paragraph entitled "OTHER INSURANCE" which states:
Credit life, accident, health or loss of income insurance is not required to obtain this loan. No charge is made for such insurance and no such insurance is provided unless the borrower signs the appropriate statement below. Credit Life & Disability Income Ins. is available at a cost of $3,585.00 for the 25 year term of the initial policy. $11.95 Per Month. Italicized portions typed in by defendant.
Defendant, S. Reed Burgess, Jr., and his wife, the plaintiff, completed and signed a statement immediately following the paragraph quoted above, which said "I desire Credit Life & Disability Income insurance coverage." italicized portion written in by decedent, S. Reed Burgess, Jr.. The signatures of plaintiff and her husband appear directly below this statement, opposite the date, May 12, 1971.
Certain discrepancies are apparent in the depositions as to whether Mr. Grimm informed plaintiff on May 12 that she and her husband would have to fill out an application for the insurance, and whether she was further contacted by telephone on May 20 by Mrs. Kathleen Davis, secretary for defendant, regarding setting up an appointment for making an application for insurance. According to the testimony of officers of the Savings and Loan, plaintiff was advised on May 12, upon delivering the Regulation Z disclosure statement included in the loan papers, that an application would have to be filled out by the Burgesses in order to obtain insurance. Plaintiff allegedly replied that she would call to make an appointment to fill out the insurance application after she had talked to her husband because it was difficult for him to be absent from work during business hours. In her testimony, plaintiff denies she was advised by the Savings and Loan of the necessity of filling out an insurance application.
On May 20, 1971, according to the testimony of Mrs. Kathleen Davis, secretary to Mr. Grimm, Mrs. Davis called plaintiff to determine where to send the monthly statement on their outstanding loan since the Burgesses were in the process of moving and had two addresses, one a post office box and the other a residence address. In the course of the resulting conversation, Mrs. Davis, according to her testimony, reminded plaintiff of the necessity of making an appointment to fill out an insurance application if the Burgesses still desired credit life insurance on their loan. In her testimony, plaintiff denies having any conversation with Mrs. Davis on the telephone.
However, on May 21, 1971, Charlottesville Savings and Loan sent to plaintiff and her deceased husband a form letter advising them of their monthly payments. The payments were itemized as follows:
Principal and Interest: $147.80
Real Estate Tax: 17.82
Hazard Insurance Premium: 10.38
Total Monthly Payment $176.00
The letter further stated that payments were due on the 12th of each month in defendant's office, and that the first payment was due on June 12, 1971. No mention was made in this letter of the credit life and disability insurance, nor were any premium payments to that effect itemized in the monthly payment section.
On June 2, 1971, the Savings and Loan received the first loan payment for the Burgesses and this payment did not include any premium for credit life insurance.
When plaintiff and her deceased husband completed and signed a Statement of Loan Settlement on May 12, 1971, the monthly payment box outlined the monthly payment as follows:
Interest and Principal $147.80
Taxes 17.00
Hazard Insurance 10.36
Mutual Mortgage Insurance 11.95
Total monthly payment $187.11
The $11.95 figure for mutual mortgage insurance is the same $11.95 figure cited in the Regulation Z statement for credit life and disability income insurance which plaintiff and her husband indicated they desired and signed on the closing date May 12, 1971. This $11.95 figure was omitted from defendant's monthly payment letter of May 21, 1971, and the monthly payments of which plaintiff and her husband were advised were approximately $11.00 less than the loan statement which plaintiff and her husband signed on May 12, 1971. The first payment which the Burgesses made on June 2, 1971, was approximately $11.00 less than the amount originally contracted for in the Statement of Loan Settlement, reflecting the omission of the credit life insurance payment.
Now the court must consider whether plaintiff's amended pleadings allege a tort cause of action. Under the Federal Rules of Civil Procedure, Rule 18, Joinder of Claims and Remedies, a contract cause of action and a tort cause of action may normally be joined in a civil suit in a Federal Court in cases in which the Federal Court applies state law, if both causes of action are recognized causes of action under state law. However, if state law does not recognize the tort cause of action pleaded, then the contract and tort action cannot be joined in Federal Court. Justice v. Prudential Insurance Co. of America, 351 F.2d 462 (4th Cir. 1965).
This court must now consider whether defendant was negligent in failing to forward the plaintiff's insurance application or in failing to procure insurance.
Defendant's executive vice-president, William H. Grimm, is licensed by the State of...
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