Laubach v. Fidelity Consumer Discount Co., Civ. A. No. 87-2026.
| Decision Date | 31 March 1988 |
| Docket Number | Civ. A. No. 87-2026. |
| Parties | Mary LAUBACH, et al. v. FIDELITY CONSUMER DISCOUNT COMPANY, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
David Searles, Eric Frank, Philadelphia, Pa., for plaintiffs.
Jeffrey S. Saltz, Philadelphia, Pa., for defendants.
I have before me cross motions for summary judgment in this action. For the reasons stated below, I grant plaintiffs' motion in part and I also grant defendants' motion.
The complaint in this action seeks monetary damages for the plaintiffs pursuant to the Racketeer Influenced and Corrupt Organization Act, 18 U.S.C. § 1961 et seq. (Count I); the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. (Count II); the Pennsylvania Usury Law, 41 P.S. § 101 et seq. (Count III); and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq. (Count IV). Plaintiffs seek summary judgment on liability on Counts II and III. Defendants seek summary judgment on Counts I, III and IV.
The facts in the case are as follows: Each of the following plaintiffs is a homeowner in the City of Philadelphia. The defendant has loaned each plaintiff money, secured by a mortgage, at annual percentage rates varying from 31.77% to 41.10%.
Plaintiff, Annabelle Smith (hereinafter "Smith") purchased the home at 1253 North 54th Street in 1955. In January of 1984 she borrowed money from defendant Fidelity Consumer Discount Company at an annual percentage rate of 36.57%. Ms. Smith is 80 years old. Plaintiffs, Charles and Margaret Coplin ("the Coplins") are successors in interest to Mr. John Coplin (deceased) who purchased the home at 5537 Osage Avenue in 1957. In October of 1984 John Coplin borrowed money from defendant at an annual percentage rate of 41.10%. John Coplin was 71 years old at the time of the transaction. Plaintiff Gloria Young has owned the home at 5128 Chancellor Street since 1955. Plaintiff Tito Manor is Gloria Young's nephew. In July of 1986 plaintiff Manor borrowed money from Fidelity Consumer Discount Co. at an annual percentage rate of 33.62%. Plaintiff Young gave a mortgage and co-signed on the loan to plaintiff Manor.
Defendant Fidelity Consumer Discount Company ("Fidelity") is a Pennsylvania corporation engaged in the business of making home equity loans to the general public. Fidelity is a wholly owned subsidiary of an entity known as Equitable Credit and Discount Company. Defendant, Jerry Silver ("Silver") is an individual who is president and chief operating officer of Fidelity. Defendant, Marshall Gorson ("Gorson") is the majority stockholder of Equitable Credit and Discount Company which in turn owns 100% of the shares of Fidelity.
Because the facts of each particular plaintiff's case are important for the resolution of these motions, I will review them individually.
Plaintiff Charles and Margaret Coplin are the son and daughter-in-law of John Coplin. In 1984, Mr. Coplin was a 75 year old retired widower. He resided at 5537 Osage Avenue, Philadelphia, in a home he purchased in 1957. His income was derived from Social Security and a pension from the City of Philadelphia. Mr. Coplin could neither read nor write. He was assisted in managing his financial affairs by an individual named Malvina Jackson.
On October 31, 1984, Mr. Coplin entered into a loan transaction with Fidelity.1 The purpose of the loan was to finance the purchase of a used car from Paschall Auto. Included among the loan papers was a mortgage on Mr. Coplin's home.
There are two documents among those Mr. Coplin signed on October 31, 1984 which are of particular relevance. First, while he was in Fidelity's office, Mr. Coplin signed the reverse side of a check issued by Fidelity and payable to Mr. Coplin in the amount of $1,761.50. By signing that check, Mr. Coplin endorsed some of the loan proceeds to Paschall Auto. Second, Fidelity and Mr. Coplin signed a deed coveying his home to Fidelity's parent corporation, Equitable Credit and Discount Co. Fidelity had a practice of requiring its customers to sign a deed in its favor whenever the customer was too old to purchase life insurance. Fidelity also required Mr. Coplin to satisfy a number of obligations which were prior liens on his property. The cost to Mr. Coplin of doing so was as follows:
1983-84 delinquent real estate
taxes $ 521.14
Germantown Savings Bank 865.13
Fleet Consumer Discount Co. 362.09
Central Credit 1,681.14
In addition, Fidelity imposed a service charge of $1,072.00 in the transaction, a sum representing almost 20% of all the monies Fidelity claims to have advanced in connection with the loan.
Finally, to establish itself as the first lienholder on Mr. Coplin's home, Fidelity also required Mr. Coplin to pay filing fees totalling $91.00 in order to mark satisfied in the Department of Records many of the prior record liens on his home. Mr. Coplin even paid the filing fees for the satisfaction of two liens (held by Mid-Penn Consumer Discount Co. and Second Mutual Fund) which were not paid off with proceeds from Fidelity's loan but which had been previously paid by Mr. Coplin himself.
A property search conducted by Fidelity before granting the loan revealed 10 mortgages of record on Mr. Coplan's property in October, 1984. Five of the mortgages were held by Fleet Consumer Discount Co. At least two of these mortgages were not satisfied of record in the Department of Records until March 12, 1985, more than four months after the loan transaction. Similarly, the mortgage held by Hudson United Bank was not marked satisfied of record until March 12, 1985. The mortgage held by Second National Fund was marked satisfied on November 19, 1984. The record does not reveal when or if the mortgages held by Germantown Savings Bank, Mid-Penn Consumer Discount Co. and Central Credit were marked satisfied.
John Coplin passed away in December 1985. Plaintiffs Charles and Margaret Coplin have succeeded to his interest and now own the property at 5537 Osage Avenue. On November 3, 1986, the plaintiffs exercised their right to rescind the October 31, 1984 loan transaction described above pursuant to TILA. Fidelity received notice of the rescission and has not since then terminated its security interest in the subject property. Rather, Fidelity is continuing to try to enforce its security interest in the property.
Plaintiff Smith, age 81, resides at 1253 North 54th Street, Philadelphia, PA in a home she owns in trust for her son, Herbert Smith. The home was originally purchased in 1955.
In December, 1983, Herbert Smith applied to Century Chevrolet for financing to purchase a used car. A Century salesman named Lee telephoned defendant Fidelity and provided information regarding Mr. Smith's finances, including information about Mr. Smith's ownership interest in the residence of his mother and that the house was clear of unpaid liens. Fidelity informed Century that it would not extend a loan to Mr. Smith unless his mother consigned for the loan so that the loan would be secured by a mortgage.
Fidelity eventually approved the loan application for an approximate amount of $2,300.00, the cost of the car. A Fidelity salesman visited the Smiths at their home where they entered into a residential mortgage transaction. However, Mr. Smith cancelled the loan shortly thereafter because the car was not performing satisfactorily.
Mr. Leone from Fidelity then sent the Smiths' a letter stating that they now had a $7,500.00 "line of credit" they could use at any time. Actually, "line of credit" did not mean that the Smiths could draw the money as needed.
On January 27, 1984, the Smiths and Fidelity entered into a loan transaction in which Fidelity obtained a mortgage of $5,500.00 on Mrs. Smith's home. A property search Fidelity had ordered earlier had shown three mortgages on the property in favor of Commercial Banking Corporation, Second Consumer Discount Company and Troy Acceptance Corporation. Although these mortgages had been paid, they were never satisfied of record. In keeping with the company's policy on first lien loans, Fidelity had to satisfy these liens of record before it could make a loan to the Smiths.
Therefore, Fidelity included the sum of $39.00 for the Recorder of Deeds ($13.00 to satisfy each mortgage) in the loan to the Smiths. As set forth in the disclosure statement Fidelity included in the loan all the following charges:
$ 11.00— recording fee
$ 50.00— document preparation fee
$ 10.00— appraisal fee
$ 5.00— credit report
$ 6.00— search
$154.08— credit life insurance
$ 39.00— Recorder of Deeds
In addition to giving the Smiths a check for $4,216.59, Fidelity, out of loan proceeds, paid the City $11.00 to record the mortgage. Several months later, Fidelity sent a $26.00 check to the City to satisfy the Commercial Banking and Second Consumer mortgages. Fidelity's loan folder for this transaction shows no other disbursements until foreclosure proceedings in July, 1985. Fidelity never did pay the $13.00 fee for satisfying the Troy Acceptance mortgage; nor did it return that amount to the Smiths.
In May, 1986, Mrs. Smith sent a notice to Fidelity rescinding the loan transaction. Fidelity received the notice on May 14, 1986 but has refused to terminate its security interest in Mrs. Smith's home.
In September, 1986, Fidelity commenced a foreclosure proceeding against Mrs. Smith.
Plaintiff Gloria Young ("Mrs. Young") is a 59 year old divorced woman who lives at 5128 Chancellor Street, Philadelphia. She first purchased the property in 1955 while still married to her ex-husband and she became the sole owner in connection with her divorce in 1961. Plaintiff Tito Manor ("Mr. Manor"), who is 23 years old, is Mrs. Young's nephew.
In early July 1986, Mr....
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