Newton v. United Companies Financial Corp.

• Decision Date: 05 November 1998
• Docket Number: No. CIV. A. 97-5400.,CIV. A. 97-5400.
• Citation: 24 F.Supp.2d 444
• Parties: Margaret NEWTON, et al., Plaintiffs, v. UNITED COMPANIES FINANCIAL CORP., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

24 F.Supp.2d 444

Margaret NEWTON, et al., Plaintiffs, v. UNITED COMPANIES FINANCIAL CORP., et al., Defendants.

No. CIV. A. 97-5400.

United States District Court, E.D. Pennsylvania.

November 5, 1998.

COPYRIGHT MATERIAL OMITTED

Irv Ackelsberg, Alan White, Community Legal Services, Inc., Philadelphia, PA, David A. Searles, Donovan, Miller, LLC, Philadelphia, PA, for Plaintiff.

Alan C. Gershenson, Blank Rome Comisky & McCauley, Philadelphia, PA, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

KATZ, District Judge.

AND NOW, this 5th day of November, 1998, after a bench trial, the court makes the following findings of fact and conclusions of law:

Introduction

1. This is an action brought by four low-income homeowners against a lender with whom they each entered into high-priced mortgage loans to finance home improvements. They allege a "loan packing" scheme in which they ultimately borrowed amounts in excess of what they needed, wanted, or could afford; were charged substantial fees that were illegal and improper; and failed to receive various disclosures required by federal law. The complaint alleges violations of the Home Ownership and Equity Protection Act, the Truth in Lending Act, the Equal Credit Opportunity Act, the Pennsylvania Home Improvement Finance Act, and the Pennsylvania Uniform Trade Practices and Consumer Protection Law. Plaintiffs seek rescission of the loans and statutory damages pursuant to these several federal and state consumer protection laws.

2. Plaintiff Margaret Newton is a 76-year old homeowner who purchased her home in 1968. She purchased her home with a mortgage she obtained through a real estate office where she made payments on a weekly basis. That mortgage was paid off at the time she entered into the subject credit transaction with United. Stipulation ¶ 28. Mrs. Newton has suffered four strokes; she is unable to walk without assistance and has difficulty seeing, speaking, and concentrating. She is virtually homebound, and she is cared for on a daily basis by her daughter Claudette, who lives with her, along with Claudette's two children. M. Newton Statement; C. Newton Statement.

3. Sometime in 1995, Mrs. Newton decided to have her property improved with exterior siding and insulation. After being rejected for credit by several home improvement dealers and lenders during 1995 and 1996, she was solicited in late July 1996 by a home improvement salesman named Scott Kosit, who represented to her that he could do the job and get her the necessary financing. Kosit was acting on behalf of Affordable Vinyl Products, a home improvement dealer located in Mount Holly, New Jersey. Stipulation ¶ 29.

4. On July 25, 1996, Affordable and Mrs. Newton entered into a home improvement contract providing for the installation of siding and insulation by Affordable for a price of $9,990. Stipulation ¶ 30.

5. On or about July 24, 1996, Affordable contacted the Mt. Laurel, NJ branch of United about the possibility of extending credit to Mrs. Newton in order to fund the contract price of $9,990. During a four or five month period in 1996, the Mt. Laurel branch closed about five loans that began as telephone calls from Affordable to United. Stipulation ¶ 31.

6. The note and mortgage Mrs. Newton ultimately signed was for $15,500. At no time prior to the closing did United disclose to her in writing that this was the precise amount of the mortgage she was incurring. Included in this $15,500 figure were the following: $10,000 paid into a home improvement escrow fund maintained by the title insurance company; $1,581.65 required by United to be paid to the City of Philadelphia for delinquent real estate taxes and water bills, $525.67 in cash to Mrs. Newton, and $3,050 in points, fees, and settlement charges. Stipulation ¶¶ 43, 44.

7. On Mrs. Newton's $15,500 loan, her monthly payment was $241.33. She paid a total of $2,951.03, but she fell behind within the first year of the loan. Stipulation ¶ 48.

8. Plaintiffs Jasper and Catherine Sutton, who are both retired, obtained title to their home in 1982, after paying $100 per month for five years, on a lease-purchase basis. They also purchased a North Philadelphia row house on Ingersoll Street in 1991 for cash. Mr. and Mrs. Sutton both completed only an eighth-grade education. Stipulation ¶ 50. Prior to their loan from United, the Suttons had obtained several mortgage-secured consumer loans from Mid-Penn Consumer Discount Company. Stipulation ¶ 51.

9. In August 1996, the Suttons received a flyer offering home improvement work. They filled out the flyer indicating a desire to have doors and windows installed, sent it in, and as a result were visited by a salesman for Inner-City Community Home Improvements, Inc., a home improvement dealer. Stipulation ¶ 52. On September 4, 1996 the Suttons signed a written contract to have six new windows and two new doors installed in their home by Inner-City for $7,488. Stipulation ¶ 53.

10. The Suttons ultimately obtained a loan from United for $17,000. After their loan closing, the Suttons instructed their home improvement dealer not to proceed with the work. The funds borrowed from United were never paid out of the home improvement escrow account. Stipulation ¶ 75. The Suttons made no scheduled payments on the loan. They sent a money order to United in the amount of $111.97, which was the amount of the cash proceeds they had received. Stipulation ¶ 76. On December 27, 1996, the Suttons made a written request to United to rescind their loan. Stipulation ¶ 77. United did not accept the Suttons' payment or their rescission request, and has not satisfied the mortgage it holds on the Suttons' home. Stipulation ¶ 78. In July 1997, United commenced an action in mortgage foreclosure against the Suttons in the Philadelphia Court of Common Pleas. Stipulation ¶ 79.

11. Plaintiff Judith Fowler purchased her home in 1990 together with her mother, for cash. Ms. Fowler dropped out of school after the eleventh grade. Stipulation ¶ 80.

12. In the summer of 1996 Ms. Fowler decided that she needed work done on her home, including new doors, and contacted T & P Construction Contractors after seeing a T & P newspaper advertisement. A representative of T & P gave Ms. Fowler a contract proposal of $4,000 for four new doors and told her he would attempt to arrange a loan for her. On August 13, 1996 Ms. Fowler signed a written contract proposal for home improvement with T & P. Stipulation ¶ 81. It was understood between T & P and Ms. Fowler that no work would be done by T & P until she obtained financing. Stipulation ¶ 82.

13. T & P contacted a lender, Mego Mortgage Company, which did not agree to extend credit to Ms. Fowler. After its unsuccessful contact with Mego, T & P contacted United about the possibility of extending credit to Ms. Fowler in order to fund the contract price of $4,000. Stipulation ¶ 83. T & P completed portions of a form entitled "Borrower Information Screen" and then faxed it to Michael Borso, a loan officer at United. Stipulation ¶ 84.

14. Ms. Fowler's total loan from United was ultimately for $11,600. After Ms. Fowler's closing, only $2,000 was put into a home improvement escrow account, although the statement she signed at the closing stated that $4,000 would be put in the account. Stipulation ¶ 96. The additional amounts were used to satisfy other encumbrances on her home revealed during the title search but which were not discussed with her. The $2,000 was never paid out of the home improvement escrow account. Stipulation ¶ 99. T & P did not in fact perform any work, because there were insufficient funds in the account to pay the $4,000 contract price. Stipulation ¶ 100.

15. On May 17, 1997 Ms. Fowler made a written request to United to rescind her loan. Along with her written rescission request, Ms. Fowler returned the check for $49.93 that she had received from the closing agent, representing her cash loan proceeds. Ms. Fowler has not returned any other loan proceeds. Stipulation ¶¶ 101, 102. United has not satisfied the mortgage it holds on Ms. Fowler's home. Ms. Fowler made a total of two payments to United, totaling $409.31. Stipulation ¶¶ 103, 104.

16. Plaintiff Frauncine Lora Myers is a 54-year old homeowner who purchased her home in March 1982 for cash, using insurance proceeds she received following her husband's death. Ms. Myers dropped out of school in the eleventh grade. Stipulation ¶ 105. On three occasions between the time she bought her home and the 1995 loan transaction involving United, Ms. Myers financed home improvements through mortgage-secured extensions of credit. Stipulation ¶ 106.

17. In February 1995, Ms. Myers responded to a solicitation by All State Discount Builders and requested an estimate for a remodeling of her basement. Stipulation ¶ 107. On February 27, 1995 Ms. Myers signed a written contract proposal for home improvements with All State. The contract price was $14,995. The All State salesman told Ms. Myers that All State would attempt to obtain the financing for the work. It was understood between All State and Ms. Myers that no work would begin until she obtained financing. Stipulation ¶¶ 107, 108, 109.

18. The total amount Ms. Myers ended up borrowing from United was $40,300. Ms. Myers stopped making her loan payments to United after she and her son (who co-signed for the loan) lost their jobs over a year after the loan closed. She had paid United a total of $11,128.24. Stipulation ¶ 122. In February 1997, United instituted a foreclosure action against Ms. Myers in the Philadelphia Court of Common Pleas. Stipulation ¶ 123. On February 21, 1997, Ms. Myers sent United a written request to rescind her loan under the Truth in Lending Act. United has not accepted Ms. Myers's rescission request and has not taken action to cancel or satisfy the mortgage it holds on her home. Stipulation ¶¶ 124, 125.

19. Mrs. Newton, Ms. Myers, Ms. Fowler, and Mrs. Sutton are...