Hinkle v. Rock Springs Nat. Bank

• Decision Date: 12 July 1976
• Docket Number: No. 75-1552,75-1552
• Citation: 538 F.2d 295
• Parties: Samuel HINKLE and Joan Hinkle, Appellants, v. ROCK SPRINGS NATIONAL BANK, a Bank Corporation chartered under the United States banking statutes, and Adams Sales, Incorporated, a Wyoming Corporation; Stockholders, Officers, Managers and Agents of the above Defendants, Individually, and in their official capacities, Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 295

538 F.2d 295

Samuel HINKLE and Joan Hinkle, Appellants, v. ROCK SPRINGS NATIONAL BANK, a Bank Corporation chartered under the United States banking statutes, and Adams Sales Incorporated, a Wyoming Corporation; Stockholders, Officers Managers and Agents of the above Defendants, Individually and in their official capacities, Appellees.

No. 75-1552.

United States Court of Appeals Tenth Circuit.

Argued and Submitted April 12, 1976.

Decided July 12, 1976.

Juan L. DeHerrera and Philip P. Whynott, Cheyenne, Wyo. (Bernard Q. Phelan, Cheyenne, Wyo., with them on the brief), for appellants.

Gary M. Greenhalgh, Rock Springs, Wyo., for appellee, Rock Springs National Bank.

Before HILL, SETH and DOYLE, Circuit Judges.

SETH, Circuit Judge.

The transaction here concerned was one within the Truth in Lending Act, 15 U.S.C. § 1601 et seq. There was one obvious failure to disclose matters required to be disclosed by the Act and under Regulation Z of the Federal Reserve Board. The sales agreement form either did not provide for some required entries, or if it did, no entries were made, and about all it did contain was the total amount to be financed.

Thus the only real question remaining is who is liable under the Act. The limitation issue was decided in the previous appeal (Stevens v. Rock Springs Nat'l Bank, 497 F.2d 307 (10th Cir.)), and no further consideration thereof seems necessary.

This action was brought against the Bank and Adams Sales. The record shows that Adams, as seller of the mobile home, used sales agreement forms provided by the defendant Bank, but Adams had much of the information which should have been included in the disclosures, as contemplated by the forms and otherwise. It appears that there was some sort of a continuing business relationship between Adams and the Bank. There was testimony that Adams relied on the Bank for guidance on meeting various legal requirements. It also appears that the plaintiffs had previous dealings with the Bank.

As to the Bank, it also was to provide information necessary for the completion of the disclosure requirements. It was to provide the interest rate upon which, of course, other computations basic to the cost of credit depended, including the amount of the installments and the total finance charges. Adams apparently did not have the interest rate at the time he negotiated with the plaintiffs. The fact that the seller, Adams, could have made inquiry to determine it, and make the computations, makes no difference in view of the fact it did not do so. The Bank was the payee of the installment note later executed by the plaintiffs, and delivered by Adams to the Bank.

It is apparent that Adams and the Bank each hid information required to be disclosed. Under the broad definitions in Regulation Z both were to be treated as creditors under the Act. The Regulation contemplates the existence of multiple creditors. It defines a "creditor" as ". . . a person who in the ordinary course of business regularly extends or arranges for the extension of consumer credit, or offers to extend or arrange for the extension of such credit . . ." 12 CFR § 226.2(s). Here Adams and the Bank both had a duty under the Act, and both failed to meet it. See Garza v. Chicago Health Clubs, Inc., 347 F.Supp. 955 (D.C.Ill.) and Meyers v. Clearview Dodge Sales, Inc., 384 F.Supp. 722 (D.C.La.). Regulation Z contemplates that when there are several "creditors" they each shall be responsible for disclosures which are within the scope of its relationship with the consumer. 12 CFR § 226.6(d) and of data they possess.

The Bank seeks to advance the unintentional violation defense or good-faith efforts to comply. See the broad considerations of the defense in Thrift Funds of Baton Rouge, Inc. v. Jones, 274 So.2d 150 (La.), and in Welmaker v. W. T. Grant Co., 365 F.Supp. 531 (N.D.Ga.). Other courts have construed the good-faith defense to apply only to mistakes of a clerical or mathematical nature. Ratner v. Chemical Bank New York Trust Co., 329 F.Supp. 270 (S.D.N.Y.). Palmer v. Wilson, 502 F.2d 860 (9th Cir.) and Ives v. W. T. Grant Co., 522 F.2d 749 (2nd Cir.).

The record before us shows only a complete failure to disclose. There were no clerical errors, and no misunderstanding of the requirements of the Act was shown. We cannot hold that good-faith or "procedures reasonably adopted to avoid any such error" as a defense can be here advanced.

The Act is clear as to the recovery where a violation is established as it provides for an amount equal to twice the finance charge, but not to exceed One Thousand Dollars. The Act also provides for the recovery of " reasonable attorney fees". It is apparent that no showing of actual damages is required and instead the recovery is fixed by statute. 15 U.S.C. § 1640(a)(3). See Redhouse v. Quality Ford Sales, Inc., 10 Cir., 511 F.2d 230 and rehearing at 523 F.2d 1 (10th Cir.)

Also the Act provides only for a single recovery, no provision is made for multiple recoveries, and the disclosures need only be made to one of several purchasers. Regulation Z. The courts which have considered the issue hold multiple creditors jointly liable. Philbeck v. Timmers Chev., Inc.,361 F.Supp. 1255 (D.C.Ga.) (reversed on other grounds 499 F.2d 971 (5th Cir.)). See also Meyers v. Clearview Dodge Sales, Inc., 384 F.Supp. 928 (D.C.La.).

A pendent claim is advanced by the plaintiffs based on the Wyoming Statute, 40-2-403 (2-403 of the UCCC). This states that negotiable promissory notes shall not be used in transactions such as this. The wording of the section, together with the sanctions therein provided, demonstrate that an instrument so used remains a valid promissory note, and under most circumstances it remains negotiable. Roy M. Circle v. Jim Walter Homes, 535 F.2d 583 (10th Cir.). Here the note was taken by Adams, and it was payable to the bank which obviously knew the origin of the instrument. Nothing in the record shows the note not to be valid. The matter of the state law penalty asserted in this pendent claim (Hanraty v. Ostertag, 470 F.2d 1096 (10th Cir.)) was not considered by the trial court. Also it was not determined...