Merchandise Nat. Bank of Chicago v. Scanlon

• Decision Date: 08 July 1980
• Docket Number: No. 78-1959,78-1959
• Citation: 41 Ill.Dec. 826,408 N.E.2d 248,86 Ill.App.3d 719
• Parties: , 41 Ill.Dec. 826, 29 UCC Rep.Serv. 1100 MERCHANDISE NATIONAL BANK OF CHICAGO, Plaintiff/Counterdefendant-Appellant, v. Joseph R. SCANLON, Defendant/Counterplaintiff-Appellee.
• Court: United States Appellate Court of Illinois

Page 248

408 N.E.2d 248

86 Ill.App.3d 719, 41 Ill.Dec. 826,

29 UCC Rep.Serv. 1100

MERCHANDISE NATIONAL BANK OF CHICAGO Plaintiff/Counterdefendant-Appellant, v. Joseph R. SCANLON, Defendant/Counterplaintiff-Appellee.

No. 78-1959.

Appellate Court of Illinois, First District, Second Division.

July 8, 1980.

Robert Handelsman and Howard D. Hollander, Chicago, for plaintiff/counterdefendant-appellant.

William P. Wilen, James O. Latturner, Legal Assistance Foundation, Chicago, Uptown Legal Services, fordefendant/counterplaintiff-appellee.

PERLIN, Presiding Justice:

Plaintiff, Merchandise National Bank of Chicago (hereinafter referred to as the Bank) obtained a judgment by confession on a collateral installment note against defendant, Joseph R. Scanlon, in the amount of a deficiency balance after a sale of collateral. On proceedings to confirm the judgment, defendant filed an answer and a counterclaim alleging violations of Article 9 of the Uniform Commercial Code as adopted in Illinois (Ill.Rev.Stat.1975, ch. 26, par. 9-101 et seq.), of the Illinois Interest Act (Ill.Rev.Stat.1975, ch. 74, par. 1 et seq.), and of the Federal Consumer Credit Protection Act popularly known as Truth in Lending Act (15 U.S.C. par. 1601 et seq. (1970) and Regulation Z ¹ (12 C.F.R. par. 226.1 et seq. (1973)). Pursuant to a trial on the merits, the circuit court vacated the judgment by confession against Scanlon and entered judgment against the Bank on the counterclaim. The trial court also awarded attorney's fees to Scanlon's attorney, the Legal Assistance Foundation of Chicago. The Bank appeals, presenting the following issues for review: (1) whether the remedies afforded in the instant case by the Illinois Commercial Code, the Illinois Interest Act, the Truth in Lending Act and Regulation Z are duplicative or cumulative; and (2) whether the trial court's award of attorney's fees was an abuse of its discretion.

For reasons hereinafter set forth, we affirm.

On February 8, 1977 Scanlon executed a collateral installment note in the principal amount of $753.99 ² plus a finance charge of $58.53. The total amount of $812.52 was to be payable to the Bank in 12 successive monthly installments of $67.71. Pursuant to the terms of the agreement, the Bank acquired a security interest in a 1971 Ford Country Squire (hereinafter referred to as the automobile). After Scanlon defaulted in making payments, the Bank repossessed the automobile on or about April 27, 1977. On May 2, 1977 the Bank sent to Scanlon a Notice of Intent to Debtor which indicated that the Bank intended to apply to the Secretary of State to transfer the title of the automobile from Scanlon to the Bank. The Notice of Intent to Debtor was returned, "unclaimed," to the Bank on or about May 14, 1977. ³ The automobile was sold on or about September 26, 1977. ⁴

On December 19, 1977 the Bank filed a complaint for confession of judgment against Scanlon in the amount of the principal due under the note ($729.33) plus attorney's fee ($104.50) for a total of $833.83. ⁵ Attached to the complaint was a copy of the collateral installment note executed by Scanlon. On December 20, 1977 the court entered a confession of judgment in the amount of $833.83 against Scanlon and a summons to confirm the judgment was issued to Scanlon.

Scanlon filed an answer, affirmative defense and counterclaim on February 2, 1978. In Count I of his counterclaim Scanlon alleged that the Bank had violated section 9-504(3) of the Uniform Commercial Code (Ill.Rev.Stat.1975, ch. 26, par. 9-504(3)) by failing to provide Scanlon with reasonable notification of the sale of the automobile, and by failing to sell the automobile in a commercially reasonable manner. He further alleged that section 9-507(1) of the Uniform Commercial Code (Ill.Rev.Stat.1975, ch. 26, par. 9-507(1)) entitled him to recover "not less than the credit service charge, plus 10% of the principal amount of the debt or the time price differential plus 10% of the cash price." In Count II of his counterclaim Scanlon alleged that the Bank had violated the provisions of the Truth in Lending Act and Regulation Z (15 U.S.C. pars. 1631 and 1639(a) and 12 C.F.R. pars. 226.6(a) and 226.8(b)(5)) by failing to clearly, conspicuously, and in a meaningful sequence describe and identify the type of security interests held, retained or acquired by the Bank in connection with the extension of credit. He further alleged that 15 U.S.C. par. 1640(a) entitled him to recover twice the amount of the finance charge imposed on the installment note, court costs and reasonable attorney's fees. ⁶ In Count III of his counterclaim Scanlon alleged that the Bank had failed to comply with section 4a(g)(i) of the Illinois Interest Act (Ill.Rev.Stat.1975, ch. 74, par. 4a(g)(ii)) because the installment note failed to contain, on both sides of the document, the statement: "NOTICE: See other side for important information." Scanlon also alleged that the Bank violated Ill.Rev.Stat.1975, ch. 74, par. 4a(c) by failing to deliver to him a copy of the credit life insurance policy for which he had paid, or otherwise comply with section 155.56 of the Insurance Code (Ill.Rev.Stat.1975, ch. 73, par. 767.56). He further alleged that Ill.Rev.Stat.1975, ch. 74, par. 6 entitled him to recover "twice the total of all interest, discount and charges determined by the contract or paid by the obligor, whichever is greater, plus such reasonable attorney's fees and court costs as may be assessed by a court against the lender."

On October 31, 1978 the trial court entered an order granting Scanlon's motion for directed verdict against the Bank on the Bank's complaint. In addition, the trial court found that Scanlon had proved all three counts of his counterclaim and entered judgment in the amount of $133.53 on Count I, $117.06 on Count II and $117.06 on Count III. The trial court also entered judgment in the amount of $3,625 on Scanlon's claim for attorney's fees pursuant to Counts II and III of his counterclaim. Scanlon was directed to pay said sum to the Legal Assistance Foundation of Chicago.

I.

The Bank initially contends that there can be only one satisfaction for an injury, irrespective of the availability of multiple remedies and actions. ⁷ The general proposition that there can be only one satisfaction for an injury is not disputed. However, in the case at bar Scanlon has suffered three separate and distinct injuries which will be discussed in detail below.

A.

In Count I of his counterclaim Scanlon alleged that the Bank had violated section 9-504(3) of the Uniform Commercial Code by failing to provide him with "reasonable notification" of the sale of the automobile, and by failing to sell the automobile in a "commercially reasonable" manner. The Bank does not contend that the evidence presented at trial was insufficient to support the trial court's finding that the Bank had violated the rights conferred upon Scanlon by this section. It is for these violations that Scanlon has, pursuant to section 9-507 "a right to recover in any event an amount not less than the credit service charge plus 10% of the principal amount of the debt or the time price differential." (Emphasis supplied.) This recovery provision, with its minimum limit, leaves no doubt that it was intended not as a means of compensating the debtor but rather to impose a civil penalty upon the lender. This interpretation is further reinforced by the fact that section 9-507 confers upon the debtor a right to recover from the lender any actual loss caused by a failure to comply with the provisions of section 9-504(3). The purpose of imposing such civil liability upon creditors is to force compliance with the protective provisions of section 9-504(3). To deny Scanlon his "right to recover" would be to undercut the effectiveness of the act without apparently furthering other policies.

B.

In Count II of his counterclaim Scanlon alleged that the Bank had violated the provisions of the Truth in Lending Act and Regulation Z (15 U.S.C. pars. 1631 and 1639(a) and 12 C.F.R. pars. 226.6(a) and 226.8(b)(5)) by failing to "clearly, conspicuously" and "in a meaningful sequence" describe and identify the type of security interests held, retained or acquired by the Bank. The Bank does not contend that the evidence presented at trial was insufficient to support the trial court's finding that the Bank had violated these provisions of the Truth in Lending Act and Regulation Z. It is for this violation that the Bank is liable to Scanlon pursuant to 15 U.S.C. par. 1640, for "any actual damage sustained" by Scanlon "twice the amount of (the) finance charge," court costs and reasonable attorney's fees.

The purpose of the Truth in Lending Act is to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and thus avoid the uniformed use of credit. (15 U.S.C. par. 1601.) The scheme of the statute is to create a system of private attorneys general to aid its enforcement (McGowan v. King, Inc. (5th Cir. 1978), 569 F.2d 845, 848) by conferring on the consumer a private cause of action. "The basis of § 1640(a) liability is the failure to disclose information required to be disclosed; there is no requirement that the plaintiff be deceived, in order to sue in the public interest." (Emphasis supplied.) (McGowan v. King, Inc. at 849.) Moreover, section 1640 is not "a remedy for breach of contract, designed to give the nonbreaching party the benefit of his bargain. The damage provision, providing minimum and maximum limits, is inconsistent with such a thesis. Rather, section 1640 provides a 'civil penalty.' Mourning v. Family Publications Service, Inc. (1973), 411 U.S. 356, 376, 93 S.Ct. 1652, 1664, 36 L.Ed.2d 318, 333-34. Accord, Eby v. Reb Realty, Inc. ((9th Cir. 1974), 495 F.2d 646.)" (Sellers v. Wollman (5th Cir. 1975), 510 F.2d 119, 122.) That the recovery...