Johnson v. McCrackin-Sturman Ford, Inc., C.A. 73-458.

Citation381 F. Supp. 153
Decision Date23 May 1974
Docket NumberC.A. 73-458.
PartiesWilliam JOHNSON and Joan Johnson, his wife, Plaintiffs, v. McCRACKIN-STURMAN FORD, INC., and Ford Motor Credit Company, Defendants.
CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)

Lewis M. Taffer, Neighborhood Legal Services, Pittsburgh, Pa., for plaintiffs.

Robert W. Doty, and Edwin L. Klett, Eckert, Seamans, Cherin & Mellott, for Ford Motor Credit Co., Henry W. Fulton, Jr., Kenney, Stevens, Clark & Semple, Pittsburgh, Pa., for McCrackin-Sturman Ford, Inc.

MEMORANDUM AND ORDER GRANTING SUMMARY JUDGMENT IN PART

WILLSON, Senior District Judge.

This action was begun by William and Joan Johnson to recover statutory damages from McCrackin-Sturman Ford and Ford Motor Credit Company for allegedly inadequate credit disclosures in violation of the Truth-In-Lending Act, 15 U. S.C. § 1601 et seq., and Federal Reserve Regulation Z, 12 C.F.R. 226, made in the course of financing the automobile which the plaintiffs purchased from defendant McCrackin-Sturman and which financing was later assigned to defendant, Ford Motor Credit. Jurisdiction is conferred by 15 U.S.C. § 1640(e). Answers have been filed. Thereafter, pursuant to Rule 56, all parties have moved for partial summary judgment with respect to paragraphs 7(a) and 7(b) of the Amended Complaint claiming no genuine issue as to any material fact regarding these allegations and all parties believe they are entitled to judgment in their favor as a matter of law.

Paragraph 7(a) of the Amended Complaint charges that defendants' failure to disclose the acceleration clause contained in the retail installment contract in the disclosure statement was a violation of the Truth-In-Lending Act. Defendants maintain that this acceleration clause was merely a remedy available to the creditor in the event of a default by the buyer, that it was not the type of disclosure required by the Act or Regulation Z, since it was not the type of charge imposed automatically upon the occurrence of a late payment, delinquency or default, but was rather a type of charge which was conditional upon the creditor pursuing certain remedies in the event of default by the borrower.

Under the heading "20. Default." in the retail installment contract, in addition to granting the seller the right to repossess and making the buyer liable for attorney's and collection fees in the event of default, the following acceleration clause is included:

"In the event Buyer defaults in any payment, or fails to obtain or maintain the insurance required hereunder, or fails to comply with any other provision hereof, or a proceeding in bankruptcy, receivership or insolvency shall be instituted by or against Buyer or his property, or Seller deems the Property in danger of misuse or confiscation, Seller shall have the right to declare all amounts due or to become due hereunder to be immediately due and payable . . . ."

The presence of this acceleration clause was not indicated anywhere in the disclosure statement given to the plaintiffs. An inspection shows its absence.

Section 128(a)(9) of the Act, 15 U.S. C. § 1638(a)(9), requires that, in connection with each consumer credit sale not under an open end credit plan, the creditor must disclose "The default, delinquency, or similar charges payable in the event of late payments." Pursuant to the mandate of 15 U.S.C. § 1604, the Federal Reserve Board promulgated § 226.8(b)(4) of Regulation Z, which sets forth the same disclosure requirement:

"(b) In any transaction subject to this section, the following items, as applicable, shall be disclosed: (4) The amount, or method of computing the amount, of any default, delinquency, or similar charges payable in the event of late payments."

The only case dealing directly with the question of whether an acceleration clause is the type of disclosure required by the Act is Garza v. Chicago Health Clubs, Inc., 347 F.Supp. 955 (N.D.Ill. 1972), in which the court held that an acceleration clause is a default charge within the meaning of the Truth-In-Lending Act and therefore must be disclosed. After noting that the word charge was nowhere defined in the Act or regulations, the Court accorded the word its usual meaning of "an obligation" or "claim" and went on to hold that:

"Considering these definitions and the purpose of the statute and regulation to inform consumers of credit costs and terms so they can effectively choose between sources of credit (TIL § 102, 15 U.S.C. § 1601), it seems clear that the acceleration of the balance of the debt should be considered a `charge' . . . ." Id. at 959.

The defendants in the instant case...

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18 cases
  • Burley v. Bastrop Loan Co., Inc.
    • United States
    • U.S. District Court — Western District of Louisiana
    • 11 Febrero 1976
    ...for damages under the Act. Meyers v. Clearview Dodge Sales, Inc., 384 F.Supp. 722 (E.D.La., 1974). See also Johnson v. McCrackin-Sturman Ford, Inc., 381 F.Supp. 153 (W.D.Pa., 1974), Garza v. Chicago Health Clubs, Inc., 347 F.Supp. 955 (N.D.Ill., Defendant urges upon us Barksdale v. Peoples ......
  • Mirabal v. General Motors Acceptance Corp.
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 19 Abril 1976
    ...Jones, et al. v. East Hills Ford Sales, Inc., et al., 398 F.Supp. 402 (W.D.Pa.1975) (now on appeal). See also Johnson v. McCrackin-Sturman Ford, Inc., 381 F.Supp. 153 (W.D.Pa.1974), reaching a different result. The fundamental purpose of the Act was to protect consumers, but the courts shou......
  • Johnson v. McCrackin-Sturman Ford, Inc.
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 16 Diciembre 1975
    ...partial summary judgment. On May 23, 1974, the district court granted plaintiffs' motion for summary judgment against McCrackin-Sturman. 381 F.Supp. 153, 156 (W.D.Pa. 1974). The court held that McCrackin-Sturman's failure to set forth the acceleration provision in the disclosure statement w......
  • Martin v. Commercial Securities Co., Inc.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • 27 Septiembre 1976
    ...210 (10th Cir. 1962).10 Id.11 384 F.Supp. at 727, citing Garza v. Chicago Health Clubs, Inc., supra; Johnson v. McCrackin-Sturman Ford, Inc., 381 F.Supp. 153 (W.D.Pa., July 1, 1974); Pollock v. Avco Financial Services, Inc., 4 CCH Consumer Credit Guide P 98,766 (N.D.Ga., July 1, 1974); Bark......
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