In re Dangler
| Decision Date | 16 July 1987 |
| Docket Number | Adv. No. 87-0169S.,Bankruptcy No. 84-04157K |
| Parties | In re Stephen & Ursula DANGLER, Debtors. Stephen & Ursula DANGLER, Plaintiffs, v. CENTRAL MORTGAGE COMPANY, Defendant. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Mary Jeffrey, Philadelphia, Pa., for debtors/plaintiffs.
Lawrence T. Phelan, Philadelphia, Pa., for defendant/Central Mtg. Co.
Edward Sparkman, Philadelphia, Pa., Trustee.
The instant Adversary proceeding is in the form of an attack on the Proof of Claim of a Mortgagee filed by the Debtors, husband and wife in a joint Chapter 13 bankruptcy case. The Debtors assert that the Claim should be reduced by $2,000.00 due to their purported right to recoup this sum as against the Mortgagee due to alleged violations of the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. (), in the disclosure statement (hereinafter referred to as "the Statement") presented to the Debtors in the mortgage transaction.
The matter presents one novel question demanding our attention: does the recent decision by the Pennsylvania Superior Court in New York Guardian Mortgage Co. v. Dietzel, 362 Pa.Super. 426, 431, 524 A.2d 951, 953 (1987), interpretation of § 1640(e) and (h) of the TILA, that recoupment defenses "cannot be asserted as a counter-claim in a mortgage foreclosure action," impact adversely on the large body of case decisions of this district court and this bankruptcy court which allow recoupment from TILA violations to reduce mortgagee's claims? See, e.g., Werts v. Federal National Mortgage Ass'n, 48 B.R. 980, 983-84 (E.D.Pa.1985) (per LORD, CH. J.); In re Johnson-Allen, 67 B.R. 968, 972 (Bankr.E.D.Pa.1986) (per SCHOLL, J.); and In re Hanna, 31 B.R. 424, 425-26 (Bankr. E.D.Pa.1983) (per GOLDHABER, CH. J.). We answer this question in the negative and proceed to enter judgment in favor of the Debtors, reducing the Mortgagee's Proof of Claim by $2,000.00.
The instant Adversary proceeding was commenced against CENTRAL MORTGAGE COMPANY, now known as MERITOR MORTGAGE CORPORATION EAST (referred to hereinafter as "the Mortgagee"), on February 17, 1987. Pursuant to our Order of May 8, 1987, the parties filed a Stipulation of Facts on May 11, 1987, and Cross-Motions for Summary Judgment and supporting Memoranda were filed by the parties, respectively, on May 28, 1987, and June 18, 1987. The debtors saw fit to file an unsolicited Memorandum in reply to the Mortgage's Motion and Memorandum. See In re Jungkurth, Jungkurth v. Eastern Financial Services, Inc., 74 B.R. 323, 325-26 (Bankr.E.D.Pa., 1987) ().
Because of the Stipulation, the facts are not in dispute, and we can recite them in the course of an Opinion in narrative form, rather than rendering Findings of Fact. On November 30, 1976, the Debtors, STEPHEN AND URSULA DANGLER, signed a mortgage note in favor of the Mortgagee in a transaction to purchase their residence at 4731 Princeton Avenue, Philadelphia, Pennsylvania 19135. On that same date, the Mortgagee provided the Debtors with the Statement, designated as "Federal Truth-in-Lending Statement (as part of Disclosure/Settlement Statement)."
Eight years later, on December 3, 1984, the Debtors filed a petition seeking relief under Chapter 13 of the Bankruptcy Code. On or about April 16, 1985, the Mortgagee filed a Proof of Claim, alleging a secured claim for delinquent mortgage arrearages, plus attorneys fees and costs, amounting to $3,471.13. On September 5, 1985, this Court entered an Order confirming the Debtors' Chapter 13 Plan. This proceeding, as we noted previously, was commenced on February 17, 1987.
The Debtors' contend that the Mortgagee violated the TILA by failing to adequately disclose (1) the late charges which could be imposed; (2) the security interests taken in the Debtors' property in the transaction; and (3) the initial due date of payment.
It is perhaps instructive to observe that the Mortgagee tenders no defense, even in the alternative, that it has not violated the TILA, in its Memorandum. Instead it relies on the Dietzel decision as its sole line of defense.
We must, however, briefly examine the Debtors' allegations to determine whether viable violations of the TILA exist in the Statement. We note initially that, since the transaction pre-dated the amendments to the TILA effective in 1982, we must apply the "old" TILA. See P.L. No. 96-221, § 625 (1980), as amended, P.L. No. 97-25, § 301 (1981). Johnson-Allen, supra, 67 B.R. at 969-70.
Like the present version of the TILA, the "old" TILA required that a creditor disclose the default, delinquency, or similar changes payable in the event of late payments. Former 15 U.S.C. § 1638(a)(9). The "old" version of the pertinent Regulation Z also required, like the present version, that a creditor disclose "the amount, or method of computation of the amount, of any default, delinquency, or similar charges payable in the event of late payments." Former 12 C.F.R. § 226.8(b)(4).
Clause six of the Statement states as follows: "(I)n the event of late payments, charges may be assessed as follows: Late charges more than 15 days late 4% of amount due is payable by borrower to lender." We believe that the Debtors are correct in contending that it is unclear as to what this clause means, or, after reading it, how to determine the amount of the charges that may be assessed. The clause does not contain an amount of charges nor does it contain a comprehensive statement of the method for computing the late charges. A percentage is stated, but is unclear upon what figure the percentage is to be computed. The clause could mean a computation of four (4%) percent of the payment due that is late or of four (4%) percent of payment due or of four (4%) percent of the entire amount of the balance due. Therefore, we agree with the Debtors that this clause does not clearly explain the method of computing the amount of the late charge. Accord, In re Whitley, 772 F.2d 815 (11th Cir.1985); and Watts v. Key Dodge Sales, Inc., 707 F.2d 847 (5th Cir. 1983).
We also agree that the Statement fails to clearly identify the property to which the security interest relates, as required by former 15 U.S.C. § 1638(a)(10), and 12 C.F.R. § 226.8(b)(5). The disclosure statement provides as follows:
The security for this obligation is a first mortgage lien on the following property together with a lien on all fixtures, chattel and personal property other than household furniture now or hereafter attached to or used or useful in connection with said property: 4731 Princeton Street, Philadelphia, Pennsylvania. The judgment note or bond & warrant given in connection with the loan when recovered or recorded constitutes a lien on real property owned by borrower in the County where such judgment is recovered or recorded (emphasis added).
By way of contrast, the mortgage provides as follows:
Together with all and singular the buildings, improvements, and fixtures on said premises, as well as all additions or improvements now or hereafter made to said premises, streets, alleys, passages, ways, waters, water courses, rights, liberties, privileges, hereditaments, and appurtenances whatsoever thereunto, and the revisions and the remainders, rents, issues, and profits thereof, and in addition thereto the following described household appliances, which are, and shall be deemed to be fixtures and a part of the realty, and are a portion of the security for the indebtedness herein mentioned, namely Range, Wall to Wall Carpeting, A/C, Alum. SS & S & Drs. (emphasis added).
Thus, contrary to the language in the Statement, the mortgage does not purport to include "all personal property other than household furniture and furnishings . . ." in its description of the security interest. In fact, the mortgage references only certain specific household "appliances."1 Since the Statement indicates that a security interest will be taken in property that is not in fact covered by the mortgage, the Statement is over-inclusive and hence does not conform to the TILA requirements. See In re Martin, 72 B.R. 126, 128 (Bankr. E.D.Pa.1987); In re McCausland, 63 B.R. 665, 669 (Bankr.E.D.Pa.1986); In re Perry, 59 B.R. 947, 950-51 (Bankr.E.D.Pa.1986). See also Bizier v. Globe Financial Services, 654 F.2d 1, 3 (1st Cir.1981).
Finally, the Debtor asserts that the Mortgagee violated another TILA requirement in that the disclosure of the initial due date of payment is not made. Both the TILA and Regulation Z then in effect required disclosure of the "number, amounts and due dates" of payments (emphasis added). Former 15 U.S.C. § 1638(a)(8) and 12 C.F.R. § 226.8(b)(3). Clause four of the Statement states: "The repayment terms are: 300 monthly installments of $181.42 each on the first day of each month." However, nowhere on the form is there a month recited on which the initial underpayment is due and we could only guess at the appropriate month from review of the Statement.
As a result, the Debtors should each receive statutory damages of $1,000.00. Although an amendment to the TILA effective in 1982, 15 U.S.C. § 1640(d), expressly states that only one recovery is permitted even where there are multiple obligors in a contract, the courts in this Circuit, addressing the issue of whether the "old" TILA permitted multiple recoveries for multiple obligors, uniformly held that each obligor is entitled to recover for a violation of the TILA, as we held in Johnson-Allen, supra, 67 B.R. at 974. See Lee v. Fidelity Consumer Discount Co., C.A. No. 79-2160, slip op. at 18 (E.D.Pa. June 15, 1981) (per DITTER, J.); Griggs v. Provident Consumer Discount Co., 503 F.Supp. 246, 251 (E.D.Pa.1980, appeal dismissed after remand, 699 F.2d 642 (3d Cir.1983) (per LORD, CH. J.); and Cadmus v. Commercial Credit Plan, Inc., 437 F.Supp....
To continue reading
Request your trial