Pedro v. Pacific Plan of California, C-73-1844 SW (SJ).

Citation393 F. Supp. 315
Decision Date12 March 1975
Docket NumberNo. C-73-1844 SW (SJ).,C-73-1844 SW (SJ).
CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
PartiesLidwina B. Silva PEDRO, Plaintiff, v. PACIFIC PLAN OF CALIFORNIA, a corporation, et al., Defendants.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Richard A. Elbrecht, Santa Cruz, Cal., for plaintiff.

William J. McLean, Thoits, Lehman & Hanna, Palo Alto, Cal., for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

SPENCER WILLIAMS, District Judge.

I. Findings of Fact

1. At the times material to this action the defendant, Pacific Plan of California, (hereinafter called "Pacific Plan") was a corporation and a real estate mortgage loan broker. In the ordinary course of its business as a mortgage loan broker, Pacific Plan regularly arranged and offered to arrange consumer credit.

2. On October 17, 1972, plaintiff and Pacific Plan entered into a written "Agency and Servicing Agreement" whereby plaintiff appointed Pacific Plan as her agent to arrange a loan to plaintiff from a third party, Charles A. Coutts and Gail G. Coutts (hereinafter referred to as "Coutts").

3. Thereafter, Pacific Plan arranged a loan to plaintiff made by Coutts who advanced funds to Pacific Plan to enable Pacific Plan to consummate the loan. Coutts advanced $2,000.00 to Pacific Plan, of which Pacific Plan disbursed $1,503.70 to plaintiff. In exchange therefor, plaintiff made a note, secured by a deed of trust on her residence at 4352 Davis Street, Santa Clara, California in which the defendant, Security Guaranteed Agency, Inc., was trustee and Coutts was beneficiary, and by which plaintiff became obligated to repay Coutts a total of payments of $2,332.48. The remaining $496.30 of the $2,000.00 loan proceeds was disbursed in the manner set forth in the transaction's "Settlement Sheet."

4. The disclosures made by Pacific Plan to plaintiff on October 17, 1972 included those disclosures furnished in a written document entitled "Disclosure Statement of Loan Made in Compliance with Federal Law", dated October 17, 1972.

5. In all, at least eight separate documents were shown or furnished by Pacific Plan to plaintiff on October 17, 1972: (a) an Agency and Servicing Agreement dated October 17, 1972; (b) a Broker's Loan Statement dated October 17, 1973; (c) a Disclosure Statement of Loan dated October 17, 1972; (d) a Notice of Right of Rescission dated October 17, 1973; (e) a Monthly Payment notice dated October 17, 1972; (f) a Deed of Trust and Assignment of Rents dated October 17, 1972; (g) a Promissory Note dated October 17, 1972; and (h) Borrower's Escrow Instructions dated October 17, 1972.

6. On March 2, 1973, plaintiff and Pacific Plan entered into another written "Agency and Servicing Agreement" whereby plaintiff appointed Pacific Plan as her agent to arrange a refinancing of the October 17, 1972 loan from Coutts to plaintiff.

7. Thereafter, Pacific Plan arranged a loan to plaintiff made by the defendant, Scurry-Burns and Company (hereinafter referred to as "Scurry-Burns") who advanced funds to Pacific Plan to enable Pacific Plan to consummate the loan. Scurry-Burns advanced $4,000.00 to Pacific Plan, of which Pacific Plan disbursed $1,261.22 to plaintiff. In exchange therefor, plaintiff made a note, secured by a deed of trust on her residence at 4352 Davis Street, Santa Clara, California, in which the defendant, Security Guaranteed Agency, Inc. was trustee, and the defendant, Scurry-Burns, was beneficiary, and in which plaintiff became obligated to repay Scurry-Burns a total of payments of $5,447.83. Of the $4,000.00 loan proceeds, $1,834.48 were applied in full repayment of the loan from Coutts to plaintiff. The remaining $904.30 of the $4,000.00 loan proceeds were disbursed as set forth in the transaction's "Settlement Sheet".

8. The disclosures made by Pacific Plan to plaintiff on March 2, 1973, included those disclosures furnished in a written document entitled "Disclosure Statement of Loan Made in Compliance with Federal Law", dated March 2, 1973.

9. In all, at least nine separate documents were shown or furnished by Pacific Plan to plaintiff on March 2, 1973: (a) an Agency and Servicing Agreement dated March 2, 1973; (b) a Broker's Loan Statement dated March 2, 1973; (c) a Disclosure Statement of Loan dated March 2, 1973; (d) a Notice of Right of Rescission dated March 2, 1973; (e) a Monthly Payment Notice dated March 2, 1973; (f) a Special Notice of Balance Due dated March 2, 1973; (g) a Deed of Trust and Assignment of Rents dated March 2, 1973; (h) a Promissory Note dated March 2, 1973; and (i) Borrower's Escrow Instructions dated March 2, 1973.

10. In both transactions, the defendant, Pacific Plan, had knowledge of the relevant credit terms, all of which were in the purview of its relationship with plaintiff within the meaning of 12 C.F.R. § 226.6(d).

11. In both loan transactions, the lender advanced funds to Pacific Plan to enable Pacific Plan to make such loans and Pacific Plan received a commission for such services which was paid by plaintiff.

II. Conclusions of Law

1. This Court has jurisdiction of this cause under 15 U.S.C. § 1640(e) and 28 U.S.C. § 1337.

2. Both the transaction of October 17, 1972 and of March 2, 1973 involved extensions of credit within the meaning of 12 C.F.R. § 226.2(l).

3. Both loans were for plaintiff's personal purposes and therefore constituted extensions of "consumer credit" within the meaning of 12 C.F.R. § 226.2(k).

4. Pacific Plan "arranged" both loans within the meaning of 12 C.F.R. § 226.2(f) and was, in each transaction, a "creditor" within the meaning of 12 C.F.R. § 226.2(m).

5. Neither party contends that the credit thus extended was "open end credit" within the meaning of 12 C.F.R. § 226.2(r), nor does the Court so find. The Court therefore concludes that the disclosures applicable to the extension of "credit other than open end" were required, both in the transaction of October 17, 1972 (under 12 C.F.R. § 226.8(a)), and in the refinancing of March 2, 1973 (under 12 C.F.R. §§ 226.8(a) and 226.8(j)). The Court concludes that in both transactions, defendant, Pacific Plan, was required to make those disclosures required under 12 C.F.R. §§ 226.8(b) and (d) in the manner required by 12 C.F.R. §§ 226.6 and 226.8(b).

6. Neither of the "Disclosure Statements of Loan Made in Compliance with Federal Law" identified the lender Coutts or Scurry-Burns as required by 12 C.F.R. § 226.6(d). Said section specifically provides that in a transaction in which there is more than one creditor, "each creditor shall be clearly identified and shall be responsible for making only those disclosures required by this part which are within his knowledge and the purview of his relationship with the customer. If two or more creditors make a joint disclosure, each creditor shall be clearly identified."

7. The disclosure of the identity of each creditor is required to be made "together" with all the disclosures required by Regulation Z, on the same side of a single page or statement. 12 C.F.R. § 226.8(a); Philbeck v. Timmers Chevrolet, Inc., 361 F.Supp. 1255, 1259-60 (N.D.Ga.1973), reversed on other grounds, 499 F.2d 971 (5th Cir. 1974); Thomas v. Myers-Dickson Furn. Co., 479 F.2d 740, 745 (5th Cir. 1973); Garza v. Chicago Health Clubs, 347 F.Supp. 955, 961 (N.D.Ill.1972).

8. The names of the lenders, Coutts, appear in the promissory note dated October 17, 1972 and in the deed of trust dated October 17, 1972; and the name of the lender, Scurry-Burns, appears in the note dated March 2, 1973 and in the deed of trust dated March 2, 1973. However, 12 C.F.R. § 226.8(a) clearly provides that disclosures may not be made on separate pieces of paper, apart from the document on which the other required disclosures are made. Philbeck, supra. This Court is not persuaded by defendants' contention that they may properly disclose required and important information on documents accompanying the principal disclosure statement, for it is clear that the intent of the Truth-In-Lending Act is that all disclosures be made on the same side of a single page. Hall v. Sheraton Galleries, Civil No. 19159, 4 CCH Cons. Credit Guide ¶ 98,737, at 88,336 (N.D.Ga. Mar. 21, 1974). The Court therefore concludes that disclosure of the identity of the lenders in the separate promissory notes and deeds of trust involved here fails to satisfy 12 C.F.R. §§ 226.6 (d), 226.8(a).

9. Defendant, Pacific Plan, also contends that the identity of the lenders was not actually known at the time the notes and deeds of trust were signed, and that such information was therefore not "within its knowledge" within the meaning of 12 C.F.R. § 226.6(d). The Court notes that the notes and deeds of trust bear the same date as the truth in lending disclosure statements. If the notes and deeds of trust were properly dated, the identity of the lenders was necessarily known. If the identity was not known, then either the notes and deeds of trust were improperly dated, or they were signed by plaintiff in blank. The Court finds that the notes and deeds of trust did not contain the names of the lenders at the time they were signed by plaintiff, and that they therefore did not and could not communicate that information to plaintiff as required under 12 C.F.R. § 226.6(d).

10. Defendant, Pacific Plan, also contends that it was excused from complying with 12 C.F.R. § 226.6(d) on the ground that the information was not known to said defendant at the inception of its relationship with plaintiff. The Court notes, however, that the information was later acquired by said defendant, and could have been disclosed in a new disclosure statement at the time the information was acquired. The Court takes cognizance of the fact that it is the principal function of a mortgage loan broker to bring a prospective lender and a prospective borrower together. The Court concludes that the requirement of 12 C.F.R. § 226.6(d), namely, that the broker disclose the identity of...

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