Anderson v. Wagner, 42789

• Decision Date: 15 August 1980
• Docket Number: No. 42789,42789
• Citation: 296 N.W.2d 455,207 Neb. 87
• Court: Nebraska Supreme Court
• Parties: Morris ANDERSON, doing business as Anderson Heating and Plumbing, Appellee, Impleaded with BCDJ Investments Inc., formerly Hillcrest Mobile Homes, Inc., et al., Appellants, v. Gayle A. WAGNER et al., Appellees.

Page 455

296 N.W.2d 455

207 Neb. 87

Morris ANDERSON, doing business as Anderson Heating and Plumbing, Appellee Impleaded with BCDJ Investments Inc., formerly Hillcrest Mobile Homes, Inc., et al., Appellants, v. Gayle A. WAGNER et al., Appellees.

No. 42789.

Supreme Court of Nebraska.

Aug. 15, 1980.

Syllabus by the Court

1. Federal Acts: State Courts. In the administration and interpretation of federal legislative acts, pertinent opinions of the federal courts are binding upon the state courts.

2. Consumer Credit: Contracts. Under the federal Truth in Lending Act, the possibility of a mechanic's lien can be a security interest retained or to be required which must be disclosed to the obligor by his creditor in a home improvement contract.

3. Consumer Credit: Contracts. In order for a materialman to become a "consumer creditor" of the homeowner under the federal Truth in Lending Act, there must be a credit agreement existing between the two parties.

4. Consumer Credit. The disclosure requirements of the Truth in Lending Act are imposed only upon creditors, or those who regularly extend or arrange for the extension of credit for which the payment of a finance charge is required.

David T. Schroeder, Ogallala, for appellants.

Schneider & Nisley, North Platte, for appellee Wagner.

Heard before KRIVOSHA, C. J., and BOSLAUGH, McCOWN, CLINTON, BRODKEY, WHITE, and HASTINGS, JJ.

HASTINGS, Justice.

This is an appeal from an order of the District Court for Keith County, Nebraska, which sustained the defendants Wagners' motion for summary judgment and dismissed the petitions to foreclose mechanic's liens of the various plaintiffs.

On July 24, 1975, the Wagners contracted with a builder by the name of Ed Roggasch to custom build a house for their use as a home. The various plaintiffs furnished, at Roggasch's request, materials or labor delivered to the job site for use in the construction process. The plaintiffs were not paid in full by the contractor, Roggasch, so they filed mechanic's liens and brought this action against the Wagners to foreclose those liens. In January of 1977, the defendants Wagners filed an answer in the nature of a general denial, as well as separate cross-petitions, alleging defective workmanship and breach of warranty by the plaintiffs. Later, in February of 1978, the Wagners filed an amended answer, containing an assertion that each of the mechanic's liens was the result of a consumer credit transaction within the meaning of 15 U.S.C. §§ 1601 et seq. (1976, Supp. II 1978), popularly known as the federal Truth in Lending Act, and Regulation Z, 12 C.F.R. Part 226 (1980), promulgated by the Board of Governors of the Federal Reserve System in accordance with 15 U.S.C. § 1604. It was their specific claim that such transaction resulted in the acquisition or retention by the plaintiffs of a security interest in the Wagners' home, in which event the Act required notice to the Wagners of their right to rescind, which was not given, causing the liens to become void.

The record on appeal consists of a very short bill of exceptions containing some oral stipulations identifying and consenting to receipt into evidence of various exhibits. The exhibits consist of the building contract between the Wagners and Roggasch, a copy of Regulation Z, answers of the plaintiffs to certain interrogatories propounded by the Wagners, and the entire trial court file, which appears as a 390-page transcript. A large portion of that transcript is wholly unnecessary for the purpose of this appeal.

The basic contract executed by Roggasch and the Wagners is not remarkable in any of its particulars. Roggasch agreed to build a house according to certain specifications and to furnish all materials and perform all work necessary to accomplish the same. The total price which the Wagners were obligated to pay was $37,500, payable in three 30 percent progress payments, and a final 10 percent payment on completion of the project. There was no provision in the contract requiring the payment of interest by the Wagners. For the purpose of this appeal, it can be assumed that the various plaintiffs furnished materials or labor to the project for which they have not been paid in full. The plaintiffs concede that they did not furnish any notice to the Wagners of any right to rescind, as required by the Act and Regulation Z, pertaining to any covered transactions. However, it is the plaintiffs' contention that they were not creditors of the Wagners within the meaning of the Act and that, therefore, its requirements did not apply.

The plaintiffs' petition does allege that the labor and materials were "furnished and delivered at the specific instance and request of Edwin Roggasch, a general contractor, who was acting on and in behalf of the defendants." However, this allegation was met with a general denial contained in the Wagners' pleadings. Additionally, the plaintiffs, in their answers to the Wagners' interrogatories, deny that any of them had any contact or agreement whatsoever with the Wagners to furnish materials or labor, but assert that all agreements were made with Roggasch; that he is the one for whom any credit was agreed to or, in fact, provided. There is no evidence that any of the plaintiffs were charging interest on any credit extended other than a prayer for interest at the legal rate from the time of filing their mechanic's liens.

The applicable federal statute, 15 U.S.C. § 1635 (1976), provides, in part, as follows: "(a) . . . (I)n the case of any consumer credit transaction in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any real property which is used or is expected to be used as the residence of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the disclosures . . . whichever is later . . . . The creditor shall clearly . . . disclose . . . to any obligor . . . the rights of the obligor under this section. . . .

"(b) When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor . . . becomes void upon such a rescission."

Several other portions of the Act should be helpful in the resolution of the issues in this case. Section 1601 (1976) contains the Congressional declaration of purpose, and provides, in part, as follows: "The Congress finds that economic stabilization would be enhanced and the competition among the various financial institutions and other firms engaged in the extension of consumer credit would be strengthened by the informed use of credit. . . . It is the purpose of this subchapter 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. . . ."

Appropriate definitions contained in § 1602 (1976) are as follows:

"(e) The term 'credit' means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.

"(f) The term 'creditor' refers only to creditors who regularly extend, or arrange for the extension of, credit . . . for which the payment of a finance charge is or may be required, whether in connection with loans, sales of property or services, or otherwise.

"(h) The adjective 'consumer,' used with reference to a credit transaction, characterizes the transaction as one in which the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the transaction are primarily for personal, family, household, or agricultural purposes."

Utilizing the plain meaning of the language employed in the statutory sections set forth above, several conclusions would appear to be inescapable. In the first place, the creditor's duty to disclose relates to his obligor only. Secondly, a creditor, within the meaning of the Act, is limited to a creditor who regularly extends or arranges for the extension of credit for which a finance charge is required. Thirdly, the person to whom credit is extended must be a consumer, i. e., the money, property, or services which are the subject of the transaction are primarily for the obligor's personal or household use. Finally, the entire purpose of the Act is to assure a meaningful disclosure of credit terms so that the consumer can compare the various credit terms available and eliminate the uninformed use of credit. Looking at the fact situation in this case, the creditors' (plaintiffs') obligor was Roggasch, not the Wagners. There is nothing to indicate that the plaintiffs are creditors who regularly extend credit for which a finance charge is required. The person to whom credit was extended by the plaintiffs was Roggasch, the contractor, who is not the one who contemplated use of the materials or services for his personal or household use. Lastly, inasmuch as there is no evidence of finance charges having been made, there would seem to be no "credit terms" to be compared with "various credit terms available" within the meaning of the purposes of the Act. Basic though these assertions may be, nevertheless we are obligated to examine any existing federal court cases because, in the administration and interpretation of federal legislative acts, pertinent opinions of the federal courts are binding upon the state courts. Bocian v. Union P. R. Co., 137 Neb. 318, 289 N.W. 372 (1939).

In further explaining the declared purpose of the Truth in Lending Act, contained in 15 U.S.C. §§ 1601 et seq., the Court of Appeals in N. C. Freed Co., Inc. v. Board of Governors of Fed. Res. Sys., 473 F.2d 1210, 1214 (2d Cir. 1973), stated that the Act was remedial in nature, "designed to remedy what...