Thorns v. Sundance Properties

• Decision Date: 28 February 1984
• Docket Number: No. 83-2067,83-2067
• Citation: 726 F.2d 1417
• Parties: Curtis THORNS and Josie Thorns, Plaintiffs-Appellants, v. SUNDANCE PROPERTIES, a Nevada partnership, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1417

726 F.2d 1417

Curtis THORNS and Josie Thorns, Plaintiffs-Appellants, v. SUNDANCE PROPERTIES, a Nevada partnership, et al Defendants-Appellees.

No. 83-2067.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 16, 1983.

Decided Feb. 28, 1984.

Douglas M. Edwards, Beckley, Singleton, DeLanoy & Jemison & Chartered, Reno, Nev., for plaintiffs-appellants.

Patrick James Martin, Reno, Nev., for defendants-appellees.

Appeal from the United States District Court for the District of Nevada.

Before MERRILL, Senior Circuit Judge, BOOCHEVER, Circuit Judge, and WYZANSKI, ^* Senior District Judge.

BOOCHEVER, Circuit Judge:

The Thorns appeal from summary judgment granted in favor of defendant Sundance Properties in an action brought under the provisions of the Truth In Lending Act (TILA), 15 U.S.C. Sec. 1601, et seq. The district court, 562 F.Supp. 882, held that the transaction at issue was exempt from Truth in Lending disclosure. We reverse and remand because there exist triable issues of fact in the case.

FACTS

The Thorns obtained a loan secured by deed of trust on their personal residence from Sundance Properties. The purpose of the loan was to invest in a limited partnership, formed to purchase an apartment building. Sundance did not make disclosure to the Thorns of the right to rescind the loan, which was required pursuant to 15 U.S.C. Sec. 1635(a) if the transaction fell within the coverage of the TILA. The Thorns brought suit seeking rescission of the loan transaction, an injunction and other relief. The district court granted summary judgment for Sundance.

STANDARD OF REVIEW

In reviewing a grant of summary judgment, our task is identical to that of the trial court. State ex rel. Edwards v. Heimann, 633 F.2d 886, 888 n. 1 (9th Cir.1980). Viewing the evidence in the light most favorable to the party against whom summary judgment was granted, we must determine whether the trial court correctly found that there was no genuine issue of material fact and that the moving party was entitled to judgment as a matter of law. Heiniger v. City of Phoenix, 625 F.2d 842, 843 (9th Cir.1980).

DISCUSSION

The TILA is primarily concerned with consumer credit transactions, defined by the statute as "primarily for personal, family or household purposes." See 15 U.S.C. Sec. 1602(h). Exempted from coverage are:

Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.

15 U.S.C. Sec. 1603(1). The district court, in granting summary judgment, held that investment in a limited partnership formed to purchase an apartment building necessarily constitutes a business or commercial purpose within the meaning of the exemption. The district court further held that credit transactions executed for investment purposes are not personal in nature and fall outside coverage of the TILA.

Purchase of a limited partnership interest for investment purposes, however can be for a personal as opposed to a business or commercial purpose under the TILA. We find support for this conclusion in section 1603(2), which exempts from TILA coverage "[t]ransactions in securities or commodities accounts by a broker-dealer registered with the Securities and Exchange Commission." This language implies that, when no SEC registered broker-dealer is involved, a securities transaction can fall within the Act. In some instances, purchase of a limited partnership interest may be similar to purchase of a security. Cf. 17 C.F.R. Sec. 240.3a 11-1 (1983) (definition of "equity security" for purposes of the 1934 Securities Exchange Act extended by SEC to cover limited partnership interests).

The Federal Reserve Board (FRB) has taken the position that some investment transactions are covered by the TILA and by the primary administrative regulation covering Truth in Lending disclosure, Regulation Z. Regulation Z contains an exemption for business or commercial transactions closely analogous to the statutory exemption. See 12 C.F.R. Sec. 226.3(a)(1) (1983). The present FRB official staff interpretation of Regulation Z's exemption states:

In determining whether credit to finance an acquisition--such as securities, antiques, or art--is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

The relationship of the borrower's primary occupation to the acquisition. The more...