Eby v. Reb Realty, Inc.

• Decision Date: 01 April 1974
• Docket Number: No. 72-2245.,72-2245.
• Parties: Betty EBY, a widow, Plaintiff-Appellee, v. REB REALTY, INC., an Arizona corporation, and Don Dailey Realty, an Arizona corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

495 F.2d 646 (1974)

Betty EBY, a widow, Plaintiff-Appellee, v. REB REALTY, INC., an Arizona corporation, and Don Dailey Realty, an Arizona corporation, Defendant-Appellant.

No. 72-2245.

United States Court of Appeals, Ninth Circuit.

April 1, 1974.

George W. Oglesby (argued), Phoenix, Ariz., for defendant-appellant.

James K. LeValley (argued), Phoenix, Ariz., for plaintiff-appellee.

Before ELY, CHOY and GOODWIN, Circuit Judges.

OPINION

CHOY, Circuit Judge:

Betty Eby brought an action in two counts under the Truth in Lending Act, 15 U.S.C. §§ 1601-1665, seeking (1) rescission of a secured real estate credit transaction under section 1635 of the Act and (2) twice the amount of the finance charge paid by her in the same transaction under section 1640. The suit was based on the admitted failure of the defendant, Reb Realty, to make certain disclosures of credit terms and rescission rights normally required by the Act. The parties filed cross motions for summary judgment, and the district court granted Eby both forms of relief she requested. Reb Realty appeals. We affirm.

Background

In October of 1969 Eby purchased a home from appellant for $16,700. The contract of sale provided that $600 would be paid as a down payment, that Eby would assume an existing Veterans' Administration mortgage for $11,900, and that a second mortgage would be executed in Reb Realty's favor for the balance of $4,200 payable in installments with 8% simple interest. Eby paid a total of $1,252 under the agreement: the down payment of $600, closing costs of $51, and $601 under the first mortgage, $239.41 of which represented interest. Nothing was paid towards the second mortgage. When this default occurred, Reb Realty instituted forcible detainer proceedings, successfully reentering possession in March, 1970. Eby then brought the present action.

In general, the Truth in Lending Act requires a "creditor" to disclose credit terms—for example, the annual interest rate—to a borrowing consumer. See 15 U.S.C. § 1638. Failure to make the requisite disclosures can subject the creditor to civil liability in an amount equal to double the finance charge paid in connection with the transaction, but in no event less than $100 or more than $1,000. 15 U.S.C. § 1640(a) (1). Additional duties are imposed on a creditor —and different borrower rights come into play—when a security interest is retained or acquired, as part of a credit transaction, in any real property "which is used or expected to be used as the residence" of the borrower. 15 U.S.C. § 1635(a). The debtor is given a right of rescission which must normally be exercised within three days of the consummation of the transaction. The lender must provide the borrower with written notice of this limited right to rescind in addition to making all the other usual disclosures required with any extension of credit. When the creditor fails to disclose any item of the requisite information, the right to rescind is not limited by the normal three day period but continues until all the disclosures are made. 15 U.S.C. § 1635(a).

Under the civil liability section, section 1640, the district court awarded Eby $478.82, twice the amount of interest she paid.¹ In granting rescission of the sale agreement and the two mortgages under the second count, the court ordered the return of the $1,252 paid by Eby under the agreement, an amount which included the principal and interest paid under the first mortgage.² By stipulation this was reduced by the rental value of the premises during appellee's possession, a sum of $830, resulting in a net rescission award of $422.

Propriety of Summary Judgment

The Act does not impose its disclosure duties on, nor accord a right of rescission against, every person extending credit, but applies only to those "who regularly extend, or arrange for the extension of, credit . . . whether in connection with loans, sales of property or services, or otherwise." 15 U.S.C. § 1602(f). Appellant raises two issues concerning the application of this definition to it: (1) that it was improper to decide its creditor status on summary judgment since that was a disputed issue of fact, see F.R.Civ.P.R. 56(c), and (2) that in any event it is not a creditor within the statutory definition.

As far as the record revealed at summary judgment, appellant is primarily a real estate broker acting as an intermediary between purchasers and sellers. However, between the date of its incorporation in February, 1969 and the pendency of this case below in September, 1970—a time span of nineteen months —Reb Realty sold seven parcels of property for its own account. In three instances, including the sale to appellee, credit was extended by Reb Realty. The credit sales were made in April, 1969, October, 1969, and August, 1970.

Summary judgment is, of course, appropriate only when there are no disputed issues of "fact," and only "legal" issues remain to be decided. And while the question of what is law or fact is one that has continually bedeviled courts, in this case it is neither analytically nor practically³ difficult to determine in which category the finding of creditor lies.⁴ The number of realty sales made by Reb Realty, the number that were on credit, etc., are facts. The application of the term "creditor" to those basic facts, a process requiring the court to look to statutory purpose and legislative intent, is a function of a court as law-finder and, hence, a legal conclusion appropriate for summary decision. See, e. g., Kentucky Rural Electric Cooperative Corp. v. Moloney Electric Co., 282 F.2d 481, 483-484 (6th Cir. 1960), cert. denied, 365 U.S. 812, 81 S.Ct. 692, 5 L.Ed.2d 691 (1961); Leas v. Courtney Co., 261 F.2d 13 (4th Cir. 1958); Koepfle v. Garavaglia, 200 F.2d 191, 192-193 (6th Cir. 1952); 10 C.A. Wright & A. Miller, Federal Practice and Procedure § 2725 at 501 (1973).

Nonetheless, even when the question is denominated one of law, it will not always be proper to enter summary judgment. In certain cases summary judgment may be inapposite because the legal issue is so complex, difficult, or insufficiently highlighted that further factual elucidation is essential for its prudently considered resolution. See, e. g., Kennedy v. Silas Mason Co., 334 U.S. 249, 68 S.Ct. 1031, 92 L.Ed. 1347 (1948); Palmer v. Chamberlain, 191 F.2d 532, 540 (5th Cir. 1951); 10 C. A. Wright & A. Miller, supra at § 2725, pp. 501-05. This is not such a case. Appellant suggests only that a trial might bring out what percentage of its profits are derived from credit transactions and the circumstances in which it acquired the properties it sold, whether by chance or design. We fail to see how knowledge of these facts would materially assist a court in applying the term "creditor."

"Creditor" Under The Act

The issue is then presented whether, on the facts of record, Reb Realty "regularly extended credit" and was thus a creditor within the Act. The question is one of first impression upon which there is little guidance. The statutory definition only focuses inquiry on the word "regularly." The Federal Reserve Board's definition, contained in its interpretive regulations on the Act—Regulation Z—goes but a little further: a creditor is one "who in the ordinary course of business" regularly extends credit. 12 C.F.R. § 226.2(m) (1973).

The legislative history, though sparse on this point, is of some help. In both the House and Senate reports, the only comment relevant to the definition of creditor indicates that the term is to have a broad scope. "Thus a small retailer who extended credit . . . in an isolated instance to accommodate a particular customer would not be covered by the Act." H.R.Rep.No. 1040, 90th Cong., 2d Sess. 20 (1968); S.Rep. No.392, 90th Cong., 1st Sess. 13 (1967). 1968 U.S.Code Cong. & Admin.News, p. 1962. Reading this along with the definitions in the statute and Regulation Z, the intent seems to have been to except from the Act only those lenders whose extensions of credit are an occasional, isolated, and incidental portion of their business.

Informal letters, issued by the staff of the Federal Reserve Board, are a further indication that the term "creditor" should be expansively read. While these letters are hardly binding on a court, they do represent an "experienced and informed judgment to which courts . . . may properly resort for guidance." Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944).⁵ Bone v. Hibernia Bank, 493 F.2d 135 (9th Cir. 1974); Taylor v. R. H. Macy & Co., 481 F.2d 178, 180 (9th Cir.), cert. denied 414 U.S. 1068, 94 S.Ct. 577, 38 L.Ed.2d 473 (1973). In one letter, for example, a homeowner was advised that he would not be a creditor simply because he accepted a mortgage in the sale of his own home. Letter from Milton W. Schober, Ass't Director, Nov. 4, 1969, reported at 4 CCH Consum. Credit Guide ¶ 30,206.⁶ More importantly, a 1970 staff letter opined that a corporation, distributing its stock on credit, would be a creditor for purposes of disclosing the credit terms of the sale. "It appears to us that the restriction of the application of the Act to `creditors' was included merely because of the unfairness in placing a burden on a private party to make disclosures in connection with his casual isolated sales." Letter from Milton W. Schober, Ass't Director, Feb. 19, 1970, reported at 4 CCH Consum. Credit Guide ¶ 30,313 (emphasis added).

The Truth in Lending Act is a remedial statute designed as much as possible to permit borrowers to make informed judgments about the use of credit. To effectuate this congressional purpose requires that the Act's terms be liberally construed. See N. C. Freed Co. v. Board of Governors, 473 F.2d 1210, 1214 (2d Cir.), cert. denied 414 U.S. 827, 94 S.Ct. 38 L.Ed.2d 61 (1973); Gardner & North Roofing & Siding Corp. v. Board of Governors, 150 U.S. App.D.C. 329, 464 F.2d 838, 841 (1972). Here, realty sales were a...