Stillman v. First Nat. Bank of North Idaho

• Decision Date: 05 January 1990
• Docket Number: No. 17383,17383
• Citation: 117 Idaho 642,791 P.2d 23
• Parties: Evelyn K. STILLMAN, Plaintiff-Appellant and Counterdefendant-Appellant, v. The FIRST NATIONAL BANK OF NORTH IDAHO, Defendant-Respondent and Counterclaimant-Respondent.
• Court: Idaho Court of Appeals

Page 23

791 P.2d 23

117 Idaho 642

Evelyn K. STILLMAN, Plaintiff-Appellant and Counterdefendant-Appellant, v. The FIRST NATIONAL BANK OF NORTH IDAHO, Defendant-Respondent and Counterclaimant-Respondent.

No. 17383.

Court of Appeals of Idaho.

Jan. 5, 1990.

Addendum March 27, 1990.

Petition for Review Denied May 24, 1990.

[117 Idaho 643] Evelyn K. Stillman, Post Falls, pro se.

Edward J. Anson, Coeur d'Alene, for defendant-respondent and counterclaimant-respondent.

BURNETT, Judge.

Evelyn Stillman asks us to review a summary judgment dismissing an action she brought against the First National Bank of North Idaho. She contends that she is entitled to rescind a bank loan under the federal Truth in Lending Act. The district court held otherwise, allowing the bank to foreclose a deed of trust securing the loan. We affirm.

The relevant facts are as follows. Robert and Evelyn Stillman borrowed $32,000 from the First National Bank of North Idaho. The loan was secured by a deed of trust on their home. At that time, Robert was operating a clock repair business. After the Stillmans were divorced, Mrs. Stillman remained in the home. When she discovered that the loan was in default, she brought this action against the Bank, seeking to have the loan rescinded and the deed of trust declared unenforceable. She alleged that the Bank had failed to comply with certain disclosure requirements of the federal Truth in Lending Act in effect when the loan was made. Although other parties and claims eventually were added to the litigation, we are not concerned with them in this appeal.

Upon the Bank's motion for summary judgment, the district court dismissed Mrs. Stillman's complaint. The judge held that the loan had been made primarily for a commercial purpose and was therefore exempt from the Act's disclosure requirements. The judge then ordered foreclosure on the home. Mrs. Stillman brought this appeal.

Preliminarily, we note our standard of review. We exercise free review over a district court's determination, on a motion for summary judgment, that the moving party is entitled to judgment as a matter of law. See Erickson v. Marshall, 115 Idaho 847, 848, 771 P.2d 68, 69 (Ct.App.1989). Controverted facts are viewed in favor of the party resisting a motion for summary judgment. Where, as here, there is no request for a jury trial, and the district judge will act as the trier of fact, the judge is not necessarily constrained to draw inferences in favor of the nonmoving party. Rather, the judge may draw those inferences which he or she deems most probable on uncontroverted facts. Argyle v. Slemaker, 107 Idaho 668, 670, 691 P.2d 1283, 1285 (Ct.App.1984); Riverside Development Co. v. Ritchie, 103 Idaho 515, 650 P.2d 657 (1982).

Mrs. Stillman first argues that there is at least a genuine issue of material fact as to whether the loan was made for a commercial purpose. This issue is framed by provisions of the federal Truth in Lending A single loan may have both exempt and non-exempt purposes. In deciding how such a loan should be characterized, the courts have adopted a quantitative approach. Where more than half the money loaned is for an exempt purpose, such as to fund a business, the disclosure requirements are deemed not to apply. See Federal Land Bank of Jackson v. Kennedy, 662 F.Supp. 787, 790 (N.D.Miss.1987) (loan is "primarily" for an exempt purpose, and therefore totally exempt from the requirements of the Truth in Lending Act, where more than half the proceeds were devoted to the exempt purpose). Accord, Bokros v. Associates Finance, Inc., 607 F.Supp. 869, 871-72 (D.C.Ill.1984); In re Klutzaritz, 46 B.R. 368, 370 (Bankr.E.D.Pa.1985).

[117 Idaho 644] Act requiring certain disclosures in consumer credit transactions where the lender receives a security interest in the borrower's residence. See 15 U.S.C. §§ 1631, 1635. If such disclosures are not made, the borrower has the right to rescind the transaction, rendering the security interest void. See 15 U.S.C. § 1635. However, not all types of consumer credit transactions fall within the disclosure requirement. The Act governs only those consumer credit transactions which are "primarily for personal, family or household purposes." 15 U.S.C. § 1602(h). Consumer credit transactions which are "primarily for business, commercial or agricultural purposes ..." are exempt from the Act's disclosure requirements. 15 U.S.C. § 1603(1).

Here, the Bank loaned the Stillmans $32,000, of which $13,441 was for the purpose of repaying the United States Small Business Administration for a prior business loan. Another portion of the loan was to be used in the clock repair business. There is conflicting evidence as to whether this portion was $3,000 or $7,000. Mrs. Stillman contends that this conflict represents a genuine issue of material fact, which should have precluded a summary judgment. However, when the Small Business Administration repayment is added to the amount borrowed to finance the clock repair business--whether it was $3,000 or $7,000--the total exceeds $16,000, constituting more than half of the amount borrowed. Consequently, there is no dispute of material fact as to whether the loan was made primarily for a commercial purpose.

Mrs. Stillman next contends that even if the loan was made in contemplation that more than half of the money would be put to a commercial purpose, most of the money in fact found its way into personal uses. Mrs. Stillman argues that these actual expenditures should determine the dominant purpose of the loan. Essentially, Mrs. Stillman's position is that the Truth in Lending Act imposes upon lenders an affirmative duty to ascertain what happens to money after it is disbursed, rather than relying on the representations of the borrowers when applying for the loans.

The Act does indeed require a determination "in each case if the transaction is primarily for an exempt purpose." See 12 C.F.R. § 226.3(a); 15 U.S.C. § 1603(1). But the courts have almost uniformly given effect to the stated "purpose" of the extension of credit. Sherrill v. Verde Capital Corp., 719 F.2d 364, 367 (11th Cir.1983) (emphasis original). See also Poe v. First Nat'l Bank of DeKalb County, 597 F.2d 895 (5th Cir.1979); Sapenter v. Dreyco, Inc., 326 F.Supp. 871 (E.D.La.); aff'd, 450 F.2d 941 (5th Cir.1971), cert. denied, 406 U.S. 920...