In re Johnson-Allen
| Decision Date | 18 December 1986 |
| Docket Number | Bankruptcy No. 86-01239K,Adv. No. 86-0781K. |
| Citation | 67 BR 968 |
| Parties | In re Lorraine JOHNSON-ALLEN, Debtor. Lorraine JOHNSON-ALLEN, Plaintiff, v. LOMAS AND NETTLETON COMPANY, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Gary Klein, Philadelphia, Pa., for debtor/plaintiff.
David B. Comroe, Philadelphia, Pa., for defendant.
James J. O'Connell, Philadelphia, Pa., Chapter 13 standing trustee.
The instant adversarial proceeding was initiated by the Debtor-mortgagor against the holder of the first mortgage on her residential real estate to reduce the amount of the mortgagee's secured claim, based upon alleged violations of the federal Truth-in-Lending Act and Regulations in the mortgage transaction documents and a contention that the attorney's fees sought by the Mortgagee in its claim were excessive. We find that we are guided in attaining the outcome of this matter by several convincing precedents of this Court in decisions by our senior brother, Chief Judge Emil F. Goldhaber. Following these decisions, with which we are in almost total agreement, we shall rule in favor of the Debtor on several of her contentions and reduce the Mortgagee's claim.
This bankruptcy case was filed by the Debtor on March 14, 1986. On May 8, 1986, the Mortgagee filed a Proof of Claim, seeking arrearages of $2,251.36, consisting of twenty (20) months of delinquent mortgage payments and late charges; attorney's fees of $875.00; and costs of $283.50.
The instant proceeding was filed on July 25, 1986, and contained four (4) "claims" or counts.
The first objected to a statement in the Proof of Claim that the Mortgagee had taken a pre-petition judgment against the Debtor. The Mortgagee subsequently has conceded that the statement that a judgment had been entered was in error and, although the Debtor originally pressed for damages on this basis under Bankruptcy Rule 9011 and Federal Rule of Civil Procedure 11 on this Count, the Debtor has apparently accepted the Court's preliminary ruling at trial that this count was not worth pursuing.
The second Count related to the alleged violations of the federal Truth-in-Lending Act, 15 U.S.C. § 1601, et seq., (hereinafter "TILA") and its Regulations, at 12 C.F.R. § 226.1, et seq. Because the operative documents in the mortgage transaction in issue were executed on December 9, 1970, the TILA and Regulations, as they existed on that date, control, rather than the present version of the TILA. See P.L. No. 96-221, § 625 (1980), as amended, P.L. No. 97-25, § 301 (1981).
The resolution of this issue, as is indicated below, is eased considerably by several precedents authored by Chief Judge Emil F. Goldhaber. For the most part, the Debtor's claims arose from disclosure statements and mortgage documents which were almost identical to those considered by Judge Goldhaber. However, one rather unique additional issue, described in the next paragraph, also surfaced.
At the time of the trial, conducted on September 30, 1986, neither party had a copy of a TILA disclosure statement. The Debtor testified, with less than absolute certainty, that she did not think that she ever received a disclosure statement, but that, since the transaction occurred almost sixteen (16) years ago and she had lost her original papers, it was possible that she had. Several days after the trial, during the course of which it had contended that it had "purged" the disclosure statement from the file, the Mortgagee advised that it had found the disclosure statement after all. Both parties argue, in the alternative to analyzing the form finally located, that the non-appearance of the disclosure statement until after the hearing strengthens their respective position. Specifically, the Debtor contends that there is no evidence that she did receive a disclosure statement on the record, and the Mortgagee contends (incorrectly we believe) that the Debtor's alleged insistence that she received no disclosure statement undermines the Debtor's credibility. However, we believe that the Debtor did receive the disclosure statement ultimately found, and that she was candid in relating her lack of certainty as to whether she received it at trial. We shall therefore decide this case on the basis of a finding that the Debtor did receive the document attached as Appendix "A" to the Debtor's Brief and Exhibit "B" to the Mortgagee's Brief, and determine whether this document provided the requisite disclosures. Both parties, in anticipation of this ruling, have proceeded to argue from this position, at least alternatively, in their respective Briefs.1
The third count invokes the so-called Pennsylvania Usury Law, 41 P.S. § 406, to challenge the Mortgagee's costs and attorney's fees, totalling $1,158.50. Although the Mortgagee claimed that the Debtor, by her Counsel, had agreed that an Attorney's fee in the sum of $500.00, as opposed to the $875.00 figure originally requested for such fees, would be allowed, we find that there were only unconsummated negotiations concerning this item.
Finally, in the fourth count, the Debtor sought permission to pay the entire secured claim of the Mortgagee, as opposed to only the arrearages, through her Plan. As we indicate hereinafter, the Debtor has a right do so, but either the Mortgagee, the Trustee, or the Debtor herself must file a Proof of Claim seeking to so treat the Mortgagee's Claim, and we therefore shall merely indicate same in our Order.
At the trial on September 30, 1986, the Debtor testified first, principally on the issue of whether she received a TILA disclosure statement or not. The Mortgagee's Counsel, David B. Comroe, Esquire, then took the stand to testify on the issue of the Mortgagee's requests for attorney's fees and costs. At the close of the testimony, the Court entered an Order of October 1, 1986, requiring the parties to file Briefs in support of their respective positions on or before October 24, 1986, and November 17, 1986, respectively. Although the parties agreed that no transcript of the testimony would be necessary, the Mortgagee in fact apparently did have the transcript prepared, as it is attached as Exhibit "A" to its Brief.
The Debtor alleged three (3) separate violations of the TILA in the disclosure statement. We are prepared to find a violation of the TILA on the basis of the first of these alleged violations — the failure of the disclosure statement to adequately describe the scope of the security interests taken in the mortgage — largely on the basis of Judge Goldhaber's precedents. Since the TILA has always been interpreted as providing the same statutory damages whether there was but one or multiple violations of the TILA in a separate transaction, even prior to the enactment of 15 U.S.C. § 1640(g), which specifically so provided in 1974, see Mirabal v. General Motors Acceptance Corp., 537 F.2d 871, 880 & n. 17 (7th Cir.1976), it is not necessary to determine whether the other two (2) alleged violations have any merit.2
The former provision of the TILA relative to disclosure of security interests taken in sale transactions, found in 15 U.S.C. § 1638(a)(10), is as follows:
The pertinent provision of the Regulations, former 12 C.F.R. § 226.8(b)(5), read as follows:
The mortgage in issue recites that the security interest taken by the Mortgagee's assignor is as follows:
The description of the security interest taken in the...
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