Ninth Liberty Loan Corp. v. Hardy

Citation368 N.E.2d 971,53 Ill.App.3d 601,11 Ill.Dec. 363
Decision Date27 September 1977
Docket NumberNo. 76-351,76-351
Parties, 11 Ill.Dec. 363 NINTH LIBERTY LOAN CORPORATION, Plaintiff, Counter-defendant, Appellee, v. Dayton HARDY, Defendant, Counter-complainant, Appellant.
CourtUnited States Appellate Court of Illinois

Lois J. Wood, Land of Lincoln Legal Assistance Foundation, Inc., East St. Louis, for defendant, counter-complainant, appellant.

No brief filed on behalf of appellee.

JONES, Justice:

Defendant, a lendee of plaintiff, a licensee under the Illinois Consumer Finance Act (Ill.Rev.Stat. 1969, ch. 74, par. 19 et seq.) appeals from a judgment of the trial court in favor of plaintiff in the amount of $526.01 and from denial of defendant's first and second counterclaims. Although plaintiff did not file a brief we have nevertheless elected to consider the appeal on its merits.

Plaintiff, Ninth Liberty Loan Corp., brought suit against defendant, Dayton Hardy, to recover the balance allegedly due on a promissory note given as payment for a personal loan. The defendant filed an answer alleging partial payment and that the note was void because it violated section 14 of the Illinois Consumer Finance Act. (Ill.Rev.Stat. 1969, ch. 74, par. 32.) Defendant also filed two counterclaims. The first alleged that the note was void for violations of the Illinois Consumer Finance Act and prayed for judgment in the amount of all money he had paid on the note, pursuant to section 19 of the Act. The second alleged that Liberty Loan had failed to make certain disclosures required by the Federal Truth in Lending Act (15 U.S.C., 1601 et seq.) and prayed for judgment in the amount of the statutory penalty provided for in section 1640(a) of the Act. Defendant signed a promissory note to Ninth Liberty Loan on March 29, 1971. The note was for the total amount of $725 which included precomputed interest of $169 at an "annual percentage rate" of 26%. Credit life insurance charges were $16.31 and credit accident and health was $22.43. The loan was to be repaid in 25 consecutive monthly installments of $29. At the time the loan was made Mr. Hardy was approximately 60 years of age. He became delinquent in his payments almost immediately because he was laid off from his job but he made reduced payments for many months. By the time the instant suit was commenced the remaining balance was $248.93, which included numerous default and late charges.

Section 14 of the Illinois Consumer Finance Act reads in pertinent part:

"Every licensee must disclose to the borrower before the loan is consummated a statement * * * in the English language disclosing the following items to the borrower:

(k) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest, or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained or acquired;. " (Ill.Rev.Stat. 1969, ch. 74, par. 32.)

Defendant contends that the disclosure statement given to him at the time the loan was consummated violated the statute in several respects. First, it failed to provide "a clear identification of the property to which the security interest relate(d)," in that the language used to describe the property was, in the first instance, vague and misleading and in the second, unintelligible. Second, the clause relating to after-acquired property was too broad to comply with the statute.

The disclosure statement read:

"SECURITY: The loan together with all other and future indebtedness will be secured by (1) a security interest in the property referred to immediately after each cross or checkmark, or in a description, entered by pen or typewriter below, and (2) a security interest in all after-acquired property of the same character."

A check mark was placed in the box by the line reading:

"All household furnishings and appliances on the Borrowers' premises at their address above stated."

The box headed "The following described property" was filled in by typewriter with the initials: "FN 1WA HHG INS." No further description was furnished or indicated.

We must agree with defendant that the disclosure statement does not comply with the requirement of section (k) of the Act. The subsection requires a "description or identification" of the type of any security interest held (not, as defendant alleges, a "clear identification and description.") We deem it a sufficient identification of the type of security held by indicating by check mark that it was "(a)ll household furnishings and appliances of the Borrowers'." However, the required "clear identification" of the property to which the security relates is not furnished by typing in a box styled "The following Described Property" the letters, "FN 1WA HHG INS." Such identification is not only unclear, it escapes us entirely. Perhaps these letters have a specific and well understood meaning within the small loan business community. But the benefit of the statute is not directed to the small loan business community, it is directed to the small loan patron. It is he who must understand and know just which of his goods he is furnishing as security for his loan. We note, too, that section 14 of the Act requires licensees to furnish borrowers a disclosure statement which sets forth the required information in the English language. "FN 1WA HHG INS" is not English language. Moreover, the initials are not abbreviations in common use; they are not found in the dictionary nor are they otherwise explained in the disclosure statement.

The clause in the disclosure statement dealing with the creation of security interests in after-acquired property also violates the statute. It was held in Pollock v. General Finance Corp., 535 F.2d 295, 299 (5th Cir.) and Johnson v. Associates Finance, 369 F.Supp. 1121, 1122-1123 (S.D.Ill.) that disclosure concerning a security interest in after acquired property was insufficient when it made no mention of the state statute which restricted security interests in after acquired property to property acquired within 10 days after the giving of value by the secured party. Illinois has such a statute and it applies in the instant case. (Ill.Rev.Stat. 1969, ch. 26, par. 9-204(4)(b).) Since the creditor here neglected to make mention of this restriction in the clause dealing with after acquired property, as in Pollock and Johnson, it was erroneous and misleading to defendant. He was informed that any and all household furniture and appliances he would subsequently acquire would become security for the loan. Such was not, and, because of the 10 day limitation of the statute, could not be, the case.

The penalty for failure to comply with section 14 of the Consumer Finance Act is provided in section 19 (Ill.Rev.Stat. 1969, ch 74, par. 37) and reads:

"Any contract or loan not invalid for any other reason, in the making * * * of which (this Act shall have been violated), shall be void and the lender shall have no right to collect or receive any principal, interest or charges thereon whatsoever."

Accordingly, we reverse the judgment of the trial court in favor of plaintiff and remand this cause to the trial court with directions to enter judgment for defendant on his first counterclaim against plaintiff for the amount he had paid on the note, $691.87. See Phoenix Finance Co. v. Papajeski, 2 Ill.App.3d 85, 276 N.E.2d 117.

Defendant also asserts that the court erred in entering judgment against him on his second counterclaim based on a violation of the Federal Truth in Lending Act. (15 U.S.C. § 1601 et seq.) We must deal at the threshold of the discussion with the question of whether this court has jurisdiction to consider the claim arising under the Federal Act. Illinois courts recognize the general principle of concurrent jurisdiction...

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  • Hall v. Riverside Lincoln Mercury-Sales, MERCURY-SALES
    • United States
    • United States Appellate Court of Illinois
    • 15 d3 Outubro d3 1986
    ...133 N.E.2d 272; Regan v. Kroger Grocery & Baking Co. (1944), 386 Ill. 284, 293, 54 N.E.2d 210; Ninth Liberty Loan Corp. v. Hardy (1977), 53 Ill.App.3d 601, 605-06, 11 Ill.Dec. 363, 368 N.E.2d 971; Alberty v. Daniel (1974), 25 Ill.App.3d 291, 295, 323 N.E.2d The Illinois courts have not prev......
  • Household Finance Corp. v. Buck
    • United States
    • United States Appellate Court of Illinois
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    ...Gray v. ITT Thorp Corp. (1981), 101 Ill.App.3d 167, 56 Ill.Dec. 738, 427 N.E.2d 1284; contra: Ninth Liberty Loan Corp. v. Hardy (1977), 53 Ill.App.3d 601, 11 Ill.Dec. 363, 368 N.E.2d 971.) On the other hand, Raymond and Mary Buck are not each entitled to recover. There should only be one re......
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    ...Peritz v. Liberty Loan Corp., 4 CCH Consumer Credit Guide (N.D.Ill. March 5, 1973); 9th Liberty Loan Corp. v. Hardy, 53 Ill. App.3d 601, 11 Ill.Dec. 363, 366, 368 N.E.2d 971, 974 (1977). Although plaintiffs are frustratingly curt about their TILA argument, we consider this imperative of cla......
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    ...Lake Shore National Bank v. McCann (1979), 78 Ill.App.3d 580, 33 Ill.Dec. 577, 396 N.E.2d 1301; Ninth Liberty Loan Corp. v. Hardy (1977), 53 Ill.App.3d 601, 11 Ill.Dec. 363, 368 N.E.2d 971, we believe that a threshold consideration is whether borrowers' counterclaim is barred by § 1640(e) o......
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