Peer v. First Federal Sav. and Loan Ass'n of Cumberland, 102

• Decision Date: 04 February 1975
• Docket Number: No. 102,102
• Parties: Evelyn M. PEER v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CUMBERLAND.
• Court: Maryland Court of Appeals

Page 610

273 Md. 610

331 A.2d 299

Evelyn M. PEER v. FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CUMBERLAND.

No. 102.

Court of Appeals of Maryland.

Feb. 4, 1975.

Ronald C. Brubaker, Cumberland, for appellant.

Harry I. Stegmaier and Daniel F. McMullen, Jr., Cumberland (Stegmaier, McMullen & Kazary, Cumberland, on the brief), for appellee.

Argued before MURPHY, C. J., and SINGLEY, SMITH, LEVINE, ELDRIDGE and O'DONNELL, JJ.

MURPHY, Chief Judge.

In this appeal from a judgment of the Circuit Court for Allegany County granting a motion for a directed verdict against Mrs. Edward Peer in favor of First Federal Savings and Loan Association of Cumberland (First Federal), we need decide only one question: whether a contract to provide credit life insurance existed between the parties.

On August 5, 1969, Mr. and Mrs. Edward Peer borrowed $15,000 from first Federal, the loan to be secured by a real estate mortgage. Prior to closing the loan, the Peers received and signed a document entitled:

'Notice to Customers

Required by Federal Law

Federal Reserve Regulation Z.'

First Federal used the document (Regulation Z Notice) to comply with the disclosure provisions of the Federal Truth-in-Lending Act, 15 U.S.C.A. § 1601 et seq. (1970). The Regulation Z Notice contained a statement disclosing, among other items, the amount of the loan and other charges, including the finance charge expressed as an annual percentage rate, the number of monthly payments required and the monthly amount of principal and interest payments. Under the caption 'Insurance,' the notice stated:

CREDIT LIFE AND DISABILITY INSURANCE is not required to obtain this loan. No charge in made for credit insurance, and no credit insurance is provided unless the borrower signs the appropriate statement below:

(a) The cost for Credit Life Insurance alone will be $_ _ for the term of the credit.

(b) The cost for Credit Life Insurance and Disability Insurance will be $_ _ for the term of the credit.

I desire Credit Life and Disability Insurance.

I desire Credit Life Insurance Only.

I DO NOT want Credit Life or Disability Insurance.

_ _

Date

_ _

Signature

5 Aug. 1969

Date

(s) Edward B. Peer

Signature

_ _

Date

_ _

Signature

Among the other documents signed by the Peers at closing were (1) a loan settlement sheet setting forth various charges; (2) a promissory note fixing the amount of the loan, the interest rate and a monthly payment of $120.84; (3) a contractual rate agreement, required by Maryland Code (1972 Repl. Vol.) Art. 49, § 10, specifying such items as the amount of monthly payment, recording costs and attorney's fees, but leaving blank a space provided for costs of 'Life and/or health insurance premiums'; and (4) a mortgage which stated in part:

'It is agreed that the Mortgagee may at its option advance sums of money at anytime for the payment of premiums on any Life Insurance Policy assigned to the Mortgagee or wherein the Mortgagee is the Beneficiary and which is held by the Mortgagee as additional collateral for this indebtedness, and any sums of money so advanced shall be added to the unpaid balance of this indebtedness.'

Subsequently, the Peers received a payment coupon book; it stated that the loan payment and total monthly payment was $120.84. The Peers also received an annual statement of their loan account listing payments made on principal, interest, escrow and late charges. No charge was shown for life insurance.

At the time the Peers obtained their loan commitment, a letter was sent to them by First Federal, which stated:

'Ever mindful of the welfare of our members and endeavoring to be of utmost service to them, we have arranged with one of the prominent life insurance companies of our country to offer a plan of mortgage insurance to cover those of our members who may wish to avail themselves of this protection.

'Unfortunately, we have witnessed cases where misfortune has visited the families of some of our members, and through such loss, the wife and children have been confronted with a real problem in meeting the monthly payments of this mortgage.

'The plan to which we refer, provides for payment of the mortgage debt in full should misfortune befall any of our members covered under the plan. The premium for this coverage will be included in the monthly payment which you will make, if you adopt the plan.

'While this institution is not in the life insurance business, we think the advantages of the plan available to you are of such importance that we have arranged for a representative of the life insurance company underwriting it to call upon you to submit full particulars.'

Unfortunately, the letter proved too prophetic in some respects and not enough in others. No life insurance representative ever called upon the Peers and no policy was ever taken on Mr. Peer's life. He died on May 10, 1973. Subsequently, when Mrs. Peer demanded that First Federal pay off the mortgage with the insurance proceeds, she was told that no insurance had ever been provided.

On August 16, 1973, Mrs. Peer, in her individual capacity, sued First Federal, relying solely on the alleged existence of a contract to procure insurance and seeking $10,000 in damages. In granting First Federal's motion for a directed verdict, the lower court (Getty, J.) held that the language relating to life insurance in the Regulation Z Notice form and the mortgage did not create an enforceable contract to provide insurance.

We agree that no contract to provide credit life insurance was created between the parties. An essential feature of every contract is the parties' mutual assent, Post v. Gillespie, 219 Md. 378, 149 A.2d 391 (1959), which is crystallized in a certain and definite offer, Peoples Drug Stores v. Fenton Realty Corp., 191 Md. 489, 62 A.2d 273 (1948), and a knowing and sufficient acceptance, Buffalo Steel Co. v. Kirwan, 138 Md. 60, 113 A. 628 (1921). Moreover, it must appear that the terms of the contract are in all respects definitely understood and agreed upon and that nothing is left for future settlement. Peoples Drug Stores v. Fenton, supra. Finally, the agreement must be supported by sufficient consideration. Broaddus v. First National Bank, 161 Md. 116, 155 A. 309 (1931).

The provision relating to life insurance in the mortgage placed no obligation upon First Federal to procure life insurance, or to advance sums for premiums. Nor does the Regulation Z Notice, standing alone or together with the mortgage, create a binding obligation. The purpose of the Truth-in-Lending Act and the regulations promulgated under it by the Federal Reserve Board is 'to assume 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 avoid the uninformed use of credit.' 15 U.S.C.A. § 1601. See Mourning v. Family Publications Service, 411 U.S. 356, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973). The form used by First Federal was not issued by the Federal Reserve Board although the information appearing therein is derived from the Board's 'Regulation Z,' 12 C.F.R. § 226.4 and § 226.8 (1973). ¹

The federal regulations do not appear...