Pollock v. General Finance Corp., No. 75-2017

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: McCREE
• Citation: 535 F.2d 295
• Parties: 19 UCC Rep.Serv. 1219 John C. POLLOCK and Barbara Pollock, Plaintiffs-Appellees, v. GENERAL FINANCE CORPORATION, Defendant-Appellant.
• Docket Number: No. 75-2017
• Decision Date: 16 July 1976

Page 295

535 F.2d 295 19 UCC Rep.Serv. 1219 John C. POLLOCK and Barbara Pollock, Plaintiffs-Appellees,
v.
GENERAL FINANCE CORPORATION, Defendant-Appellant. No. 75-2017. United States Court of Appeals,
Fifth Circuit. July 16, 1976.

Page 296

Lewis N. Jones, J. Norwood Jones, Jr., Atlanta, Ga., for defendant-appellant.

G. W. Florence, Jr., Atlanta, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before GODBOLD, McCREE ^* and TJOFLAT, Circuit Judges.

McCREE, Circuit Judge.

This is an appeal by the defendant from an adverse judgment in a truth-in-lending action. 15 U.S.C. § 1639. The district court determined that the defendant had violated the requirements of Regulation Z, 12 C.F.R. § 226.8, by failing to inform the borrowers in the disclosure statement about (1) the actual proceeds of the loan, (2) the fact that after-acquired property was subject to a security interest and (3) the consequence that any future indebtedness was secured by property used to secure the present loan. We affirm.

This case was heard by Bankruptcy Judge William L. Norton, Jr., sitting as a Special Master for the U. S. District Court for the Northern District of Georgia. On February 28, 1975, Judge Norton filed his Recommendations and on March 26, 1975, the district court adopted the Special Master's Recommendations and entered judgment in favor of the plaintiffs.

It appears from the record that on September 12, 1973, appellees obtained a loan ("consumer credit" under 15 U.S.C. §§ 1602(e), (h)) in the amount of $155.28. The disclosure statement, however, failed to state expressly that the loan proceeds were $155.28. Instead, the statement indicated that the "amount financed" was $171.36. The statement separately itemized the charges for credit life insurance and disability credit insurance of $3.84 and $12.24, respectively. The "amount financed" was defined in another part of the disclosure statement as including insurance charges and the principal amount of the loan. ¹

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The district court adopted the bankruptcy judge's recommended finding that a violation of 12 C.F.R. § 226.8(d)(1) had occurred. That section provides that the "amount of credit . . . which will be paid to the customer . . ., including all charges, individually itemized, which are included in the amount of credit extended but which are not part of the finance charge" must be disclosed. The bankruptcy judge determined

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that the principal amount of the loan ($155.28) represented a part of the amount of credit extended and that individual itemization was required.

The district court further determined that the disclosure statement phraseology about future indebtedness and about security interests in after-acquired property conflicts with the corresponding language of the security agreement. With respect to after-acquired property, the disclosure statement recites that the security agreement "may cover after-acquired property." The pertinent language of the security agreement indicates, however, that a security interest would be retained in "all of the household and consumer goods . . . now or hereafter located in . . . the Debtor's residence . . . ." With respect to future indebtedness, the next sentence in the disclosure statement provides that "(a)ny chattel or real property which secured this loan may secure future or other indebtedness." The security agreement, however, indicates that future indebtedness incurred by the debtor "at any time before the entire indebtedness secured thereby

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shall be paid in full" would be secured by the property described in the security agreement.

With respect to these two disclosures, the court determined that General Finance had failed to "clearly set forth" the fact that after-acquired property will be subject to the security interest or that future indebtedness will be secured by property listed in the security agreement. It concluded that General Finance thereby violated 12 C.F.R. § 226.8(b)(5). ²

The first issue we consider is whether the district court erred in determining that the failure of General Finance to separately itemize the amount of the loan proceeds was a violation of § 226.8(d)(1). The regulation requires disclosure of the "amount of credit . . . which will be paid to the customer . . . including all charges, individually itemized, which are included in the amount of credit...