566 F.2d 437 (3rd Cir. 1977), 76-2676, Gennuso v. Commercial Bank & Trust Co.

Docket Nº:76-2676.
Citation:566 F.2d 437
Party Name:Richard GENNUSO, Appellant, v. COMMERCIAL BANK & TRUST COMPANY.
Case Date:October 14, 1977
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

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566 F.2d 437 (3rd Cir. 1977)

Richard GENNUSO, Appellant,



No. 76-2676.

United States Court of Appeals, Third Circuit

October 14, 1977

Submitted Under Third Circuit Rule 12(6) Sept. 6, 1977.

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[Copyrighted Material Omitted]

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Jack H. Kudzma, Kudzma & Green, Pittsburgh, Pa., for appellant.

Harry Menzer, Pittsburgh, Pa., for appellee.

Before VAN DUSEN, ADAMS and HUNTER, Circuit Judges.



Plaintiff, Richard Gennuso, sought statutory damages from the defendant bank for its alleged failure to disclose fully the terms of a consumer credit transaction into which Gennuso entered while in the course of purchasing a new automobile. The district court granted the bank's motion for summary judgment. Since we conclude that the bank violated the disclosure provisions of federal law, we now reverse and remand.


Mr. Gennuso claims that the disclosure of the terms of a consumer loan by the Commercial Bank and Trust Co. (hereinafter Commercial Bank) was not in accordance with the requirements of the Truth-In-Lending Act, 15 U.S.C. § 1601 et seq., and more particularly was not in compliance

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with Federal Reserve Board Regulation Z, 12 CFR § 226.1 et seq. 1

First, Gennuso charges that Commercial Bank failed to identify properly in the Disclosure Statement and in the Note and Security Agreement the key documents used in the credit transaction a security interest in the proceeds and the unearned premium in a property insurance policy covering the automobile he purchased, and that such failure transgressed §§ 226.8(a) and 228.8(b)(5) of Regulation Z. Second, he maintains that Commercial Bank, in violation of these two sections, did not properly disclose a security interest in after-acquired property, namely, accessions to the automobile that was made available as collateral for the loan. Finally, Gennuso asserts that the inclusion of a reference to a warrant to confess judgment in the Note and Security Agreement, when in fact there was no such warrant, abridged § 226.6(c) of Regulation Z.

The first claim that of improper disclosure of a security interest in an insurance policy rests on the fact that the Disclosure Statement contains no mention of such an interest. Item 8 of the Disclosure Statement describes the interest of the Commercial Bank as a "new 1974 Chev. Monte Carlo." No description of any other security interest is given in the Disclosure Statement, although printed language under Item 8 refers the reader to ". . . the instrument evidencing the obligation for full description of property to which the security interest relates. . . ." The Note and Security Agreement describes the collateral for the loan as a 1974 Chevrolet Monte Carlo. There is no reference to any interest in insurance at the top of the Note where the collateral is described. However, paragraph 6 of the debtor's covenants included in the Note and Security Agreement does create a security interest in an insurance policy covering the automobile. 2 Gennuso alleges that these provisions, taken together, contravene the rule embraced in § 226.8(a) that disclosure of the terms of consumer loans be made on one document, 3 and also violate the principle articulated in § 226.8(b)(5) that descriptions of security interests be set forth clearly. 4

Gennuso's second argument that Commercial Bank improperly disclosed its security interest in after-acquired property is grounded on the proposition that there is no typewritten description of this security interest in the Disclosure Statement. 5 The only mention of such an interest in the Note and Security Agreement is in printed

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language stating that the collateral includes ". . . all attachments, accessories and parts used or intended to be used with the above described property ('Collateral') whether now or hereafter installed therein . . . ." Gennuso claims that the disclosure of the security interest in after-acquired property infringes upon the "one document" rule of § 226.8(a) and the "clear identification" principle of § 226.8(b)(5). And he maintains that the disclosure requirement in § 226.8(b)(5) dealing with a security interest in after-acquired property is not met here. 6

Gennuso's final contention that when a creditor makes reference to a non-existent warrant to confess judgment, he transgresses § 226.6(c) 7 is premised on the fact that the Note and Security Agreement has a clause, printed in bold-face type, referring to a "foregoing warrant of attorney to confess judgment," 8 even though there was no clause providing for a warrant of attorney to confess judgment. Indeed, Commercial Bank admitted that no such warrant existed. As a consequence, plaintiff insists, the inclusion of a reference to such a provision constituted "additional information" stated in such a manner as "to mislead or confuse the customer."

Rejecting each of these three arguments, the district court granted the defendant's motion for summary judgment. This appeal followed.


The purpose of the Truth-In-Lending Act, which was passed by Congress in 1968 to help correct what it perceived as widespread consumer confusion about the nature and cost of credit obligations, 9 is ". . . to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various terms available to him and avoid the uninformed use of credit." 10 The Federal Reserve Board is empowered to construe the Act's provisions and to prescribe regulations carrying out the legislative purpose. 11 Regulation Z was promulgated...

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