In re Jungkurth
| Decision Date | 27 May 1987 |
| Docket Number | 87-0016S.,86-04705S,Adv. No. 87-0015S,Bankruptcy No. 86-05358S |
| Citation | 74 BR 323 |
| Parties | In re Rhoda JUNGKURTH, Debtor. Rhoda JUNGKURTH, Plaintiff, v. EASTERN FINANCIAL SERVICES, INC., Defendant. In re Joyce GRUBER, Debtor. Joyce GRUBER, Plaintiff, v. EASTERN FINANCIAL SERVICES, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Henry J. Sommer, Philadelphia, Pa., for debtors.
Leonard Spear, Philadelphia, Pa., for Eastern.
Edward Sparkman, Philadelphia, Pa., Chapter 13 standing trustee.
The two adversarial proceedings to determine the amount of the common Defendant's secured and allowed claims against the Debtors, per 11 U.S.C. §§ 502(a), 506(a), and for damages, consolidated for trial, which are addressed in this Opinion present us with issues which involve interpretation of several provisions of Pennsylvania consumer protection legislation relating to usury and unfair trade practices which we note, as we did in our recent Opinion in In re Russell, Russell v. Fidelity Consumer Discount Company, 72 B.R. 855, 865, 869, 871 (Bankr.E.D.Pa., 1987), have not been the subject of many reported decisions and hence are virtually matters of first impression.
Interpreting two provisions of the Pennsylvania law defining and regulating usury, 41 P.S. §§ 301(f)(v) and 405, generally known as "Act 6 of 1974" (and hence referred to hereinafter as "Act 6"), and its interpretive Regulations promulgated by the Pennsylvania Department of Banking, we find that the transaction in issue is a "business loan" outside the scope of the interest rate limitation of Act 6, but involves "residential mortgage" obligations and is hence within the scope of that Act's prohibition on prepayment penalties. Accepting the Debtors' implicit claim that the actuarial method is the correct method for calculating a prepayment rebate in such a way as to not penalize a borrower, we hold that only $504.66 was due on the loan after a large prepayment on the loan in issue.
Following our decision in Russell on this point, we hold that the Pennsylvania version of a law punishing "unfair or deceptive acts or practices," the Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et seq. (), is to be broadly construed and does apply to this transaction even though it involves a "business loan." We further find that the aura of overreaching and unconscionability which pervaded the transaction in its inception, particularly the lack of explanation of the original loan documents and the misrepresentations made by the lender when it obtained the lump sum payment, and the lender's collection activity against the two ill and unsophisticated female Debtors, justifies the penalty of wiping out the $504.66 loan balance but, in view of the Debtors' failure to prove any other actual damages, justifies no further damages except allowance of reasonable attorney's fees to the Debtors' Counsel.
The Debtors and Plaintiffs in these adversarial proceedings are RHODA JUNGKURTH, the mother of the other Debtor-Plaintiff, who filed her Chapter 13 bankruptcy Petition on November 19, 1986 (referred to hereinafter as "the Mother"); and JOYCE GRUBER, the Mother's daughter, who had previously filed her own Chapter 13 bankruptcy Petition on October 8, 1986 (referred to hereinafter as "the Daughter").
On January 8, 1987, the Debtors each filed separate adversarial proceedings against a company from which they made the loan in issue on February 22, 1985, EASTERN FINANCIAL SERVICES, INC. (hereinafter referred to as "the Lender"). Both averred that the loan was usurious and that the Lender had imposed prepayment penalties, in violation of 41 P.S. § 502 and 41 P.S. § 405, respectively, and the Daughter additionally sought treble damages, under 41 P.S. § 502, as a penalty for an alleged payment of usurious interest to the Lender. Compare Russell, supra, at 864, 869-870. In addition, both Debtors contended that the Lender engaged in practices violative of UDAP in the transactions and in the Lender's subsequent series of collection practices.
A Summons was issued with each Complaint scheduling the trials on February 26, 1987. Answers to both Complaints were filed by the Lender on February 4, 1987. The Debtors engaged in discovery and, having not received full responses by the hearing date, filed a Motion to Compel Discovery. The Lender indicated that it would provide the documents requested forthwith, but the parties agreed that the trial could go forward, with the Debtors having the right to supplement the record with any relevant documents and, if necessary, to move to reopen the record on or before March 6, 1987. These developments prove what we suspect is frequently denied by other counsel despite its truth: if counsel prepares a case well and cooperates reasonably with opposing counsel, even hard-fought, difficult cases involving significant discovery can and will be tried rapidly in our Court, on the date originally listed for trial on the Summons.
At the close of the testimony, we issued an Order of February 27, 1987, incorporating the agreement set forth above regarding supplementation of the record, which we note resulted in the addition of a few documents and no request to reopen the proceedings, and reciting that, if no reopening was necessary, briefs were to be filed by the parties on March 19, 1987, and April 3, 1987, respectively.
After the parties submitted the briefing contemplated by this Order, the Debtors, on April 9, 1987, submitted an unsolicited Reply Memorandum. The Lender objected to this submission by letter, and we resolved this objection by allowing the Lender to file a Reply Brief, which it provided to us on April 24, 1987, and we note was quite substantial, approaching the length of its original Brief. This elicited two letters from the Debtors on April 27, 1987, and April 28, 1987, respectively, stating, in the first, that they believed, per Bankruptcy Rule 8009(a)(3), that they were entitled to file a Reply Brief and that this filing should have been the end of the briefing sequence; and, in the second, implicitly contradicting their own previous position and submitting a substantive letter Reply Brief to the Lender's Reply Brief.
This sequence is noted because it brings to light the irritating habit of some counsel of submitting unsolicited Reply Briefs, often simply to serve the lawyer-like habit of needing to get the last word. Our view is that, when we, by order, create a briefing schedule, this establishes the entire briefing sequence, whether "ordinary" or not. We do not wish to stifle enlightenment by discouraging the filing of additional Briefs, but we also believe that it is only good manners to contact one's opponent if any change in the established schedule is requested, and thereafter communicate any proposed changes to the court for its approval or resolution of any disagreements. We do not countenance unilateral submission of materials additional to those ordered, as submission of the matter then becomes totally out of our control, and could conceivably result in an endless stream of counter-replies. Counsel who neglect to heed the procedure set forth herein may find themselves subjected to sanctions in the future.
While these cases present interesting and unusual legal issues, there are also certain important issues of fact which must be resolved before we apply the law, and therefore we are preparing our Opinion in the classic mode, per Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52(a), of setting forth separate Findings of Fact, Conclusions of Law, and then a Discussion.
1. The Loan Agreement between the parties includes the following recitations:
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