Fort v. First Citizens Bank & Trust Co.

• Decision Date: 17 March 1981
• Docket Number: No. C-77-316-WS.,C-77-316-WS.
• Citation: 526 F. Supp. 22
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Bickett Douglas FORT, Plaintiff, v. FIRST CITIZENS BANK & TRUST COMPANY, and Darrell Wiseman Imports, Inc. d/b/a Wiseman Imports, Defendants.

526 F. Supp. 22

Bickett Douglas FORT, Plaintiff, v. FIRST CITIZENS BANK & TRUST COMPANY, and Darrell Wiseman Imports, Inc. d/b/a Wiseman Imports, Defendants.

No. C-77-316-WS.

United States District Court, M. D. North Carolina, Winston-Salem Division.

March 17, 1981.

Herman L. Stephens of Badgett, Callaway, Phillips, Davis, Stephens, Peed & Brown, Winston-Salem, N.C., for plaintiff.

Michael P. Flanagan and Rodney A. Currin of Ward & Smith, Newburn, N.C., for defendant First Citizens Bank & Trust Co.

Thomas W. Moore, Jr., of Hutchins, Tyndall, Doughton & Moore, Winston-Salem, N.C., for defendant Darrell Wiseman Imports.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

HIRAM H. WARD, District Judge.

This is an action to recover for alleged violations of the Truth in Lending Act (the Act), 15 U.S.C. § 1601 et seq., and Regulation Z, 12 C.F.R. § 226.1 et seq., promulgated thereunder. Plaintiff Bickett Douglas Fort claims that defendants violated the Act in three respects on the disclosure statement provided him by (1) failing either to include the cost of credit life insurance in the finance charge or to clearly and conspicuously disclose that they did not require such insurance, 15 U.S.C. § 1605(b); 12 C.F.R. § 226.4(a)(5); (2) failing to properly identify their security interests, 15 U.S.C. § 1638(a)(10); 12 C.F.R. § 226.8(b)(5); and (3) failing to make required disclosures legibly, 12 C.F.R. § 226.6(a). Once the Clerk calendared this matter for trial, the parties agreed to submit it to the Court for decision upon stipulated facts and oral argument.¹ The parties filed their stipulated facts and briefs,² and the Court heard their arguments on March 5, 1981. It now enters its findings of fact and conclusions of law thereon. Fed.R.Civ.P. 52.

FINDINGS OF FACT

1. Plaintiff Fort is a natural person. Defendant Darrell Wiseman Imports, Inc. (Wiseman) was a North Carolina corporation which conducted business in Winston-Salem, North Carolina as Wiseman Imports. Defendant First Citizens Bank & Trust Co. (First Citizens), a North Carolina corporation, in the ordinary course of its business, regularly extends, offers to extend, arranges or offers to arrange for the extension of credit for which a finance charge is or may be imposed. The property or services subject to such credit transactions are intended primarily for personal, family, household or agricultural use. Stipulation of Facts ¶¶ 4-7 (October 20, 1980). Therefore, First Citizens is a creditor within the meaning of the Act. 15 U.S.C. § 1602(f); 12 C.F.R. §§ 226.2(p) & (s). Although the parties have not stipulated so, that Wiseman was a creditor, which arranged extensions of credit, is implicit in their stipulations and arguments. Thus, both defendants are subject to the requirements of the Act.

2. On June 29, 1976, Fort entered into a consumer credit sale with Wiseman to purchase a 1974 Chevrolet and incurred a finance charge in excess of $1,000. Wiseman acquired a security interest in the automobile. Fort executed a purchase money security agreement. Wiseman provided Fort a copy of that agreement as his Truth-in-Lending disclosure statement, Motion for Summary Judgment and Brief Exhibit A (August 26, 1980). Stipulation ¶ 8.

3. Wiseman immediately assigned its agreement and security interest to First Citizens pursuant to a course of dealing whereby Wiseman sold automobiles and arranged financing with First Citizens. First Citizens provided Wiseman with all contract forms which Wiseman ultimately assigned to First Citizens. Those preprinted forms designated First Citizens as assignee and subsequent creditor. First Citizens determined the general terms of all such credit sales, and Wiseman prepared the agreements substantially in accord with First Citizens' instructions. First Citizens gave final approval of such extensions of credit. Wiseman informed its customers that First Citizens was the true creditor. No employee or representative of First Citizens was present when Wiseman and Fort consummated their transaction. Stipulation ¶¶ 9-12.

4. Around April 1, 1977, First Citizens repossessed Fort's automobile. The day after repossession, Fort offered to make all payments in default plus two or more future payments in advance upon return of the automobile, but First Citizens refused his offer. Stipulation ¶¶ 14-15.

5. The credit life insurance terms contained in First Citizens' form security agreement clearly and conspicuously disclosed that defendants did not require Fort to purchase such insurance. See discussion pp. 4-9, infra.

6. The Court has examined Fort's copy of the disclosure statement. Although at this time some of the numerical figures contained in defendants' disclosures, 15 U.S.C. §§ 1605(b) & 1638(a); 12 C.F.R. §§ 226.8(b) & (c) & 226.4(a)(5), are arguably illegible, Fort has not proven by a preponderance of the evidence that they were illegible when Wiseman provided him with a copy. Therefore, the Court concludes that they were legible immediately before the transaction was consummated, 15 U.S.C. § 1638(b); 12 C.F.R. § 226.8(a). This lawsuit was filed on June 29, 1977, one year after Fort and Wiseman entered into their transaction. The Court does not know when Fort gave his attorney his copy of the statement. Obviously, he did not do so until First Citizens repossessed his automobile — the event which precipitated this lawsuit — around April 1, 1977. Thus, Fort had possession of his copy for nearly one year.³ His copy is significantly shopworn. A large vertical fold passes through several of the required disclosures. The Court fears that much of the carbon ink has worn off since the document was executed. In fact, a touch of a finger will further smudge the numerals. It has been folded in several other places so that its various sections would rub together. The copy of the disclosure statement provided First Citizens, on the other hand, contains clearly legible figures.⁴ Trial Brief of defendant First Citizens, Exhibit 6 (August 25, 1980). It is in significantly better condition than Fort's copy. It too has been folded, but only neatly. Fort did not request a more legible copy when he bought his automobile.⁵

DISCUSSION

Credit Life Insurance Disclosure

In connection with a consumer credit sale not under an open end credit plan, a creditor must disclose the amount of the finance charge involved. 15 U.S.C. § 1638(a)(6); 12 C.F.R. § 226.8(b)(2) & (c)(8)(i). The finance charge shall include charges or premiums for credit life insurance written in connection with the sale unless (1) the creditor does not require such insurance and clearly and conspicuously discloses that fact in writing; and (2) the customer gives specifically dated and separately signed affirmative written indication of a desire for such insurance after having received written disclosure of its cost. 15 U.S.C. § 1605(b); 12 C.F.R. § 226.4(a)(5).

Fort claims defendants here did not clearly and conspicuously disclose that they did not require credit life insurance. Defendants' disclosure statement contains a large rectangular block on the right front side entitled "INSURANCE DISCLOSURES." Besides being in capital letters, that title is in type nearly the same size and the same boldness as the disclosures required by 12 C.F.R. § 226.6(b) & (c), except for those required to be more conspicuous, 12 C.F.R. § 226.6(a). The top half of the block includes provisions unused in this transaction governing physical damage insurance. The term "PHYSICAL DAMAGE INSURANCE" is in bold face capitals but not as large as the "INSURANCE DISCLOSURES" title. In the middle of the block, one line states "LIABILITY AND BODILY INJURY INSURANCE NOT INCLUDED" in letters only surpassed in boldness and size by the required more conspicuous "FINANCE CHARGE" and "ANNUAL PERCENTAGE RATE" terms, 12 C.F.R. § 226.6(a), and in size by the additional terms "Payment Schedule" and "Balloon Payment," 12 C.F.R. § 226.6(c), and the identifying information at the top of the disclosure form. The lower half of this insurance block contains the credit life provisions. The term "Group Credit Life ... Insurance" is not in capitals or in boldface type. Those provisions provide as follows:

I request that Group Credit Life and/or Accident and Health Insurance be purchased through Bank. I understand that such insurance is not required by Bank for this credit extension and that such purchase is voluntary on my part. Any Credit Life and/or Accident and Health Insurance obtained in connection with this application will be subject to the terms and conditions of the policy issued therewith. The total premium cost appears below for the insurance purchased covering the term of the original credit: (See Footnote 1 Below) Credit Life Insurance Premium - Single Life $_______ Joint Life $_______ Credit Life and Accident and Health $_______ Total Insurance Premium $_______ Neither I nor any proposed Joint Insured Debtor has attained age 65 on this date and I/we are now in good health and free from physical disorder and do hereby authorize every physician and/or hospital to disclose all of my medical history prior to the date of this credit extension. (If any premium is not quoted above, then insurance is not requested for that coverage.) _________________________ _________________________________ Date of Birth Debtor (Person to be Insured with Credit Life and/or Accident & Health)

Wiseman filled in the cost of a single life credit life insurance premium for Fort⁶ and dated this statement. Fort signed it indicating his desire to purchase credit life insurance.⁷

Official Staff Interpretation No. FC-0084 (June 20, 1977) discusses the terms "clearly" and "conspicuously."⁸ Basically, it states that the meaning of "clearly" and "conspicuously" "must be determined by reference to the particular set of disclosures under consideration." Although that interpretation involves consumer leasing disclosures, its reasoning is equally...