Jackson v. Grant

• Decision Date: 22 November 1989
• Docket Number: No. 87-2801,87-2801
• Citation: 890 F.2d 118
• Parties: Edna JACKSON, Plaintiff-Appellant, v. Syd GRANT, Belle G. Grant, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 118

890 F.2d 118

Edna JACKSON, Plaintiff-Appellant, v. Syd GRANT, Belle G. Grant, Defendants-Appellees.

No. 87-2801.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Sept. 15, 1988.

Decided May 31, 1989.

As Amended Nov. 22, 1989.

Robert A. Goldstein, Oakland, Cal., for plaintiff-appellant.

Dave M. McGraw, Walnut Creek, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before CHOY, CANBY, and TROTT, Circuit Judges.

CANBY, Circuit Judge:

Edna Jackson appeals the district court's judgment denying her rescission under the Federal Truth in Lending Act, ("TILA"), 15 U.S.C. Sec. 1601 et seq. Jackson seeks to rescind a loan transaction entered into with

Union Home Loans ("Union"), a real estate loan broker. She contends that notice of her right to cancel the loan was not properly given and that other payment terms were insufficiently disclosed on the TILA Disclosure Statement. Reviewing the denial of rescission de novo, Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699, 703 (9th Cir.1986), we reverse the judgment of the district court.

BACKGROUND

In June of 1982, Union instituted foreclosure proceedings on a $26,000 loan made to Jackson in 1981. The loan was secured by a deed of trust recorded against Jackson's residence in Richmond, California. A trustee's sale was scheduled for February 9, 1983. In January of 1983, Jackson and Union discussed takeout financing to avoid the pending foreclosure. Union loan officer, Dennis Moore, ordered an appraisal of Jackson's property and foreclosure was postponed.

On February 18, 1983, Jackson received, read and executed the following documents:

(1) TILA Disclosure Statement;

(2) Mortgage Loan Disclosure Statement;

(3) Summary and Acknowledgment of the Terms of the Loan Transaction (hereinafter "Summary of Loan Terms");

(4) Deed of Trust;

(5) Promissory Note;

(6) Notice of Right to Cancel.

The TILA Disclosure Statement listed the annual percentage rate, the finance charge, the amount financed, the total payments, and the payment schedule for the loan. ¹ The Mortgage Loan Disclosure Statement and the Statement of Loan Terms informed Jackson that Union will not be the lender, that the lender is presently not known and that Jackson was not guaranteed a loan. The name of the lender was left blank on the Promissory Note and Deed of Trust. The Notice of Right to Cancel specified March 1, 1983 as the last date for cancellation.

Unable to find another lender, on April 28, 1983, Union sent a letter to Jackson advising her that the "loan will be made with funds owned or controlled by Union Home Loans." The terms of the loan were set out in the note and deed of trust executed, and the Disclosure Statement presented, on February 18, 1983, except that Jackson was required to pay an additional $700.00 and to delete credit life insurance from the loan. Jackson agreed to these changes and the loan closed on April 29, 1983.

On February 7, 1986, Jackson notified Syd and Belle G. Grant, assignees of the loan made by Union, of her election to cancel the loan transaction pursuant to the TILA. She filed a complaint seeking rescission on February 10, 1986. First, Jackson argued that the loan transaction was not "consummated" until April of 1983 and that she therefore did not receive proper notice of her right to cancel the transaction within three business days following consummation. ² Second, Jackson contended that the payment schedule for the loan as set forth in the TILA Disclosure Statement is insufficient. The district court made no findings with regard to the first contention but after a bench trial apparently stated on the record that the loan transaction had been consummated in February and therefore the Notice of Right to Cancel was properly given. In its order of November 26, 1986, denying the parties' cross-motions for summary judgment prior to trial, the district court held that the failure of the TILA Disclosure Statement to specify the exact payment due dates was not a material nondisclosure.

DISCUSSION

The TILA was enacted by Congress to "avoid the uninformed use of credit." Mourning v. Family Publications Serv. Inc., 411 U.S. 356, 377, 93 S.Ct. 1652, 1664, 36 L.Ed.2d 318 (1973) (quoting 15 U.S.C. Sec. 1601). In order to effectuate this purpose, the TILA has been liberally construed in this circuit. Eby v. Reb Realty, Inc., 495 F.2d 646, 650 (9th Cir.1974). Even technical or minor violations of the TILA impose liability on the creditor. Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699, 704 (9th Cir.1986). " 'To insure that the consumer is protected ... [the TILA and accompanying regulations must] be absolutely complied with and strictly enforced.' " Id. (quoting Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir.1983)).

Section 125(a) of the TILA, 15 U.S.C. Sec. 1635(a), provides that in credit transactions in which a security interest in a consumer's residence is retained:

the [consumer] shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later.

This right of rescission is further explained in Section 226.23(a)(3) of Regulation Z of the Federal Reserve Board:

The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice [of the right to rescind], or delivery of all material disclosures, whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation.

12 C.F.R. Sec. 226.23(a)(3) (emphasis added) (footnote omitted). ³ Notice of the right to rescind must specify the date the rescission period expires. 12 C.F.R. Sec. 226.23(b)(5). Jackson argues that because the loan transaction was not consummated until late April, the rescission period expired three business days after that date. Accordingly, the Notice of the Right to Cancel delivered to Jackson in February listed an incorrect expiration date of March 1, prior to the actual consummation of her loan. Therefore, the "required notice" was never delivered and the right to rescind the transaction extended until three years after the April consummation date.

Jackson's argument has merit. Under Regulation Z, consummation "means the time that a consumer becomes contractually obligated on a credit transaction." 12 C.F.R. Sec. 226.2(a)(13). When a consumer "becomes contractually obligated" is, in turn, determined by looking to state law:

1. State law governs. When a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation. Consummation, however, does not occur merely because the consumer has made some financial investment in the transaction ... unless, of course, applicable law holds otherwise.

12 C.F.R. Pt. 226, Supp. 1 (Official Staff Interpretations), Commentary 2(a)(13).

Cal.Civ.Code Sec. 1550 sets forth the required elements of a contract under California law. They include:

1. Parties capable of contracting;

2. Their consent;

3. A lawful object; and,

4. A sufficient cause or consideration.

If an essential element of the contract is reserved for the future agreement of both parties, there is generally no legal obligation created until such an agreement is entered into. Transamerica Equip. Leasing Corp. v. Union Bank, 426 F.2d 273 274 (9th Cir.1970); Ablett v. Clauson, 43 Cal.2d 280, 272 P.2d 753, 756 (1954); 1 Witkin Summary of California Law, Contracts Secs. 142, 156 (9th ed. 1987). It is essential not only that the parties to the contract exist, but that it is possible to identify them. Cal.Civ.Code Sec. 1558. See San Francisco Hotel Co. v. Baior, 189 Cal.App.2d 206, 11 Cal.Rptr. 32, 36 (1961) (names of seller and buyer are essential factors in considering whether contract is sufficiently certain to be specifically enforced); Cisco v. Van Lew, 60 Cal.App.2d 575, 141 P.2d 433, 437 (1943) (contract for sale of land must identify the parties to the transaction); Losson v. Blodgett, 1 Cal.App.2d 13, 36 P.2d 147, 149 (1934) (valid real property lease must contain names of parties).

In the present case, on February 18, 1983, Jackson executed a series of documents which designated herself as the borrower and Union as the "broker" or "arranger of credit." Several documents, including the Mortgage Loan Disclosure Statement and the Statement of Loan Terms, explicitly state that Union is not the lender and that Jackson was not guaranteed a loan by signing the loan documents. ⁴ The Deed of Trust and the Promissory Note signed by Jackson leave the name of the beneficiary/lender blank, although Jackson granted Union the authority to fill in those blanks when a lender was arranged. While it is not necessary to decide what, if any, binding agreement was created by and between Jackson and Union on February 18, one conclusion is inescapable. No one, including Union, had agreed to extend credit to Jackson as of that date and no loan transaction was "consummated." ⁵ The lender is unidentifiable and therefore no valid loan contract existed.

At most, the February 18 documents constituted an offer by Jackson to accept a loan under the terms specified. That offer was not "accepted" until Union agreed to fund Jackson's loan itself. See Cal.Civ.Code Sec. 1586 ("[a] proposal may be revoked at any time before its acceptance is communicated by the proposer, but not afterwards"). ⁶ Because no contract existed, Jackson was not "contractually...