Rendler v. Corus Bank, N.A.

• Decision Date: 03 December 2001
• Docket Number: DEFENDANT-APPELLEE,PLAINTIFF-APPELLANT,No. 01-1934,01-1934
• Citation: 272 F.3d 992
• Parties: (7th Cir. 2001) GERALDINE L. RENDLER,, v. CORUS BANK, N.A., FORMERLY KNOWN AS AETNA BANK, N.A., FORMERLY KNOWN AS BELMONT NATIONAL BANK OF CHICAGO,
• Court: U.S. Court of Appeals — Seventh Circuit

Page 992

272 F.3d 992 (7th Cir. 2001)

GERALDINE L. RENDLER, PLAINTIFF-APPELLANT, v. CORUS BANK, N.A., FORMERLY KNOWN AS AETNA BANK, N.A., FORMERLY KNOWN AS BELMONT NATIONAL BANK OF CHICAGO, DEFENDANT-APPELLEE.

No. 01-1934

United States Court of Appeals Seventh Circuit

Argued September 26, 2001

Decided December 03, 2001

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 96 C 7351--Nan R. Nolan, Magistrate Judge.

Before Flaum, Chief Judge, and Coffey and Manion, Circuit Judges.

Manion, Circuit Judge

In 1995, Geraldine Rendler applied to Corus Bank to finance the purchase of a condominium and received both an adjustable rate note secured by a first mortgage and a home equity line of credit secured by a second mortgage under Corus Bank's 80/20 loan program. Rendler subsequently sued Corus Bank under the Truth in Lending Act ("TILA"), alleging that the bank violated the Act by issuing two loans and two TILA disclosure statements in connection with a single credit transaction. The district court certified a class of individuals to whom Corus Bank issued two loans and two TILA disclosure statements in connection with the financing of a single purchase or the refinancing of a single piece of residential real estate. Following discovery, the district court granted Corus Bank summary judgment holding that it had not violated the TILA. Rendler appeals this decision and we affirm.

I. Background

On October 5, 1995, Geraldine Rendler entered into a contract with Corus Bank to finance a purchase of a condominium unit.¹ Under the financing agreement, Corus lent Rendler a total of $53,200 through two separate loans pursuant to its 80/20 loan program. Under the 80/20 program, customers, like Rendler, who sought to finance more than eighty percent of the purchase of residential real estate were offered two loans. The first loan was a closed-end transaction in the form of a fully amortizing note for eighty percent of the property's value, and the second loan was a home equity line of credit. The home equity line of credit was a seven-year open-end loan for the remainder of the purchase price, meaning that the consumer could pay off the balance of the loan or borrow additional sums. Each loan was secured by a separate mortgage against the property, and both loans were offered as either stand-alone products or together.² Under the program, investors could finance the purchase of property without a down payment and avoid paying private mortgage insurance typically required for borrowers financing more than eighty percent of a home purchase.³ Corus regularly offered loans to residential property consumers under the 80/20 program. At the time Rendler applied for financing to purchase her condominium, Corus did not offer a fully amortizing first mortgage loan for an amount in excess of eighty percent of the value of the property to be purchased.

Rendler's primary loan transaction with Corus Bank was an adjustable rate note secured by a first mortgage on the property with a principal amount of $44,200 at an annual percentage rate of 8.61%. In addition, Rendler entered into a home equity line of credit secured by a second mortgage on the property, with a term of seven years, a maximum credit amount of $8,400 and an adjustable annual percentage rate of 4.5% above prime rate. At the closing on November 20, 1995, Rendler borrowed the full amount on her home equity line of credit and applied it towards the purchase of her condominium. Corus provided Rendler with separate TILA disclosure statements for each loan, both of which were signed by Rendler on November 20, 1995. The disclosure statement for the closed-end loan was a one-page document that clearly denoted the percentage rate, finance charge, amount financed and total of payments as required by the TILA. The home equity line of credit agreement disclosure statement was more detailed and included the percentage rate, balance and fee information required by the TILA. Rendler admits that both disclosures, if considered individually, are adequate under the TILA.

Almost one year later, on November 8, 1996, Rendler sued Corus claiming that Corus violated the TILA by not providing her with one disclosure statement for the combined loan. Rendler alleged that by offering two simultaneous loans and two sets of TILA disclosure statements, Corus violated the TILA's requirements that disclosures be grouped together to allow easy comparison amongst different lenders.

In her complaint, Rendler sought to certify a class of consumers who had received financing from Corus under simi lar circumstances. After four years of litigation the district court certified a class of individuals who obtained a loan from Corus on or after November 5, 1998, where: (1) Corus files show that the credit was applied for the purchase or refinancing of residential property, and (2) Corus issued two loans and two TILA disclosure statements in connection with the financing of a single piece of residential real estate. Geraldine Rendler was named as the class representative.⁴ Once the class was certified, both Corus Bank and Rendler moved for summary judgment on Rendler's claim that Corus violated the TILA by providing two loans and two Truth in Lending disclosures in connection with the financing or refinancing of a single piece of real estate.⁵ The district court granted Corus Bank's motion and denied Rendler's cross-motion for summary judgment, holding that nothing in the Truth in Lending Act would prohibit a lender from simultaneously entering into two loans and issuing two separate TILA disclosures for each transaction. The court also found that Rendler's class of plaintiffs could not maintain a cause of action involving loan splitting because in this case the class was not defined to be limited to individuals who expected to enter into more than one transaction. Rendler appeals.

II. Discussion

On appeal, Rendler argues that the district court erred in granting Corus Bank summary judgment and denying her motion for summary judgment because the undisputed facts demonstrate that Corus violated the TILA. Specifically Rendler contends that Corus' disclosures in the 80/20 program violate the TILA because Corus does not provide a single piece of paper summarizing the combined annual percentage rate that consumers will have to pay on the combined loans. In addition, Rendler claims that Corus violated the TILA by mischaracterizing a single credit transaction, namely the financing of a single piece of real estate, as two separate transactions. We review a district court's summary judgment decision de novo. Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56(c); Grun v. Pnumo Abex Corp., 163 F.3d 411, 419 (7th Cir. 1999); Curran v. Ho Sung Kwon, 153 F.3d 481, 485 (7th Cir. 1998).

A. The Disclosure Statement Claim

Corus makes no attempt to shade the purpose of its 80/20 program, which allows customers to finance more than eighty percent of the purchase price (or value) of their home through two loans. It adopted the program "in response to customer complaints about the cost of private mortgage insurance which was required for mortgage loans of more than eighty percent of the property's value." The alternative of a home equity line of credit for the balance of up to the remaining twenty percent of the property's value apparently offered a less expensive substitute for the private mortgage insurance.

Rendler first argues that by failing to provide a single disclosure statement summarizing the combined annual percentage rate on both loans, Corus Bank violated the TILA's disclosure requirements. The TILA is a disclosure statute. It does not substantively regulate consumer credit but rather "requires disclosure of certain terms and conditions of credit before consummation of a consumer credit transaction." Valencia v. Anderson Bros. Ford, 617 F.2d 1278, 1282 (7th Cir. 1980), rev'd on other grounds, 452 U.S. 205 (1981). The disclosures vary depending on the type of loan transaction.

The TILA recognizes two general types of consumer credit transactions: open-end credit and closed-end credit. See Benion v. Bank One, Dayton N.A., 144 F.3d 1056, 1057 (7th Cir. 1998). The disclosure requirements for each type of transaction are described in different sections of the TILA's implementing regulation, Regulation Z. See 12 C.F.R. § 226.17-18 (closed-end credit disclosures); 12 C.F.R. § 226.5b (open-end credit disclosure). For closed-end credit disclosures, the TILA requires that a creditor make the required disclosures "clearly and conspicuously in writing. . . ." 12 C.F.R. § 226.17(a)(1). In addition, "[t]he disclosures shall be grouped together, shall be segregated from everything else, and shall not contain any information not directly related to the disclosures required under § 226.18." Id. For open-end credit disclosures, the TILA requires that the disclosures required shall be "made clearly and conspicuously and shall be grouped together and shall be segregated from all unrelated information." 12 C.F.R. § 226.5b(a)(1). Rendler admits that each disclosure statement provided by Corus Bank satisfied the respectiverequirements, but contends that the disclosures were deceptive in that they hid the true cost of the loans she received and prevented her from comparing her loan to loans offered by other institutions.

The TILA's goal is to help consumers accurately compare credit rates. As the statute recites, "[i]t is the purpose of [the TILA] to assure 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, and to protect the consumer against unfair credit billing and credit card practices." 15 U.S.C. § 1601(a); Williams v. Chartwell Fin....