Varner v. Century Finance Co., Inc.
| Decision Date | 09 August 1984 |
| Docket Number | Nos. 82-8277,82-8393 and 82-8425,s. 82-8277 |
| Citation | 738 F.2d 1143 |
| Parties | 39 UCC Rep.Serv. 1047 Garrett VARNER, Plaintiff-Appellee, Cross-Appellant, v. CENTURY FINANCE COMPANY, INC., Defendant-Appellant, Cross-Appellee. Pearl M. BRADLEY, Plaintiff-Appellant, v. TERMPLAN, INC., Defendant-Appellee. Josephine SIMPSON, Plaintiff-Appellee, Cross-Appellant, v. TERMPLAN, INC. OF GEORGIA, Defendant-Appellant, Cross-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Lewis N. Jones, Atlanta, Ga., for Century Finance Co., Termplan, Inc. and Termplan, Inc. of Georgia.
Ralph Goldberg, Atlanta, Ga., for Varner and Simpson.
Joseph H. King, Atlanta, Ga., for Bradley.
Richard V. Karlberg, Jr., Atlanta, Ga., for Termplan, Inc. and Termplan, Inc. of Georgia.
Donald A. Loft, W. Rhett Tanner, Atlanta, Ga., for amicus curiae Termplan and Georgia Consumer Finance Ass'n, Inc.
Charles M. Baird, Atlanta, Ga., for Georgia Legal Services Program.
Appeals from the United States District Court for the Northern District of Georgia.
Before TJOFLAT and VANCE, Circuit Judges, and TUTTLE, Senior Circuit Judge.
This consolidated appeal brings to fruition three separate consumer suits seeking statutory damages and attorney fees for violation of the Truth-in-Lending Act (TIL or the Act), 15 U.S.C. Secs. 1601 et seq. Pearl Bradley and Josephine Simpson individually sued Termplan, alleging that their finance agreements with that company contained inadequate loan disclosures in violation of Regulation Z. Garrett Varner instituted a similar action against Century Finance. Both lenders denied the alleged violations and filed compulsory counterclaims to collect on the underlying debts. The borrowers, defendants to the counterclaims, raised affirmative defenses under the Georgia Industrial Loan Act, Off.Code Ga.Ann. Secs. 7-3-1 et seq. Following summary disposition by the district court, 1 the parties petitioned this court for review.
The district court ruled in Simpson's favor on her Truth-in-Lending claims. Bradley's claims met with defeat. On appeal, the losing parties renew their claims. 2 In addition, Simpson and Varner challenge the method used to calculate the attorney fees awarded pursuant to their TIL claims.
On May 25, 1979, Simpson obtained a consumer loan from Termplan. The disclosure statement accompanying the promissory note read in pertinent part:
This Loan is secured by a Security Interest pursuant to the Uniform Commercial Code covering: (1) the following described property, (2) the proceeds thereof, (3) all property of the same type or character in which Borrower acquires rights, provided that as to consumer goods, other than accessions, such rights are acquired within 10 days after Lender advances funds to or for Borrower upon this loan, (4) all equipment, accessories and parts added or attached thereto.
Under Georgia law, a secured party can claim a security interest in after-acquired property (other than accessions) 3 only if the debtor acquires such property within ten days of the date the secured party gives value. Off.Code Ga.Ann. Sec. 11-9-204(2). Simpson argues that paragraph (4) of the disclosure statement violated Regulation Z, 12 C.F.R. Sec. 226.8(b)(5) (1979) (), for failing to disclose the ten-day limit imposed under Georgia law. In Brown v. Termplan, 693 F.2d 1047 (11th Cir.1982), we concluded that the same provision drafted by the same lender, Termplan, contained a Truth-in-Lending violation. Id. at 1049-50. Since Brown squarely controls, we affirm the order of the district court granting summary judgment for Simpson.
In December, 1979, Termplan and Simpson agreed to refinance the May 25 loan. The disclosure statement included in the refinancing agreement contained the following provision:
This Loan is secured by a security interest pursuant to a security agreement covering: (1) the following described property; (2) the proceeds thereof; (3) all equipment, accessories and parts which become part of the described property by accession.
The security agreement provided:
You agree that all equipment, accessories and parts added or attached to the property shall become part of it by accession.
On appeal, Termplan asks this court to review the district court's determination that the disclosure provision violated the Truth-in-Lending Act. The district court accepted the magistrate's recommendation faulting the disclosure statement for failing to reveal that the security agreement expands the meaning of the term "accession" beyond its statutory definition. We concur in the judgment of the district court and affirm.
Under rules in force when the agreement was concluded, Termplan was required to identify the type of security interest it was claiming and the property to which that interest attached. 12 C.F.R. Sec. 226.8(b)(5) (1979). 4 Paragraph (3) of the December 1979 disclosure statement gave Termplan a security interest in "all equipment, accessories and parts which became part of the described property by accession." (Emphasis added). In turn, the companion security agreement defined accessions as equipment, accessories and parts "added or attached" to already secured property.
This contractual definition of accessions expands upon the statutory meaning of the term. The Georgia Uniform Commercial Code, Off.Code Ga.Ann. Sec. 11-9-314(1), defines "accessions" as objects "installed or affixed" to other objects. The provisions of the U.C.C. may be varied by agreement. Id. Sec. 11-1-102(3). The effect of the disputed passage in the security agreement is to expand upon the meaning of the term "accession" under Georgia law. In this connection, one court has remarked:
For instance, a lamp may be "added" or "attached" to a table by means of a wire or clamp without being "installed" or "affixed." Components and extra speakers may be "added" or "attached" to a phonograph without being "installed" or "affixed." Georgia law does not automatically make goods which are added or attached to other goods accessions of the goods to which they are attached. See, Mixon v. Georgia Bank & Trust Company, 154 Ga.App. 32, 267 S.E.2d 483 (1980).
Carr v. Termplan Inc. of East Atlanta, No. C-80-1591-A, slip op. at 4 (N.D.Ga. March 30, 1982). Since the security agreement endowed Termplan with a security interest broader than that created under Ga.Code Ann. Sec. 11-9-314(1), the company was obligated under 12 C.F.R. Sec. 226.8(b)(5) to disclose the extent to which its interest exceeded the scope of accessions contemplated by statute. Finding no merit in Termplan's claim, we affirm.
The Truth-in-Lending Act restricts recovery to one penalty per transaction regardless of the number of violations the transaction contains. 15 U.S.C. Sec. 1640(g). We therefore do not reach the other grounds Simpson urges for affirmance. Zamarippa v. Cy's Car Sales, Inc., 674 F.2d 877, 879 (11th Cir.1982).
In 1978, Termplan refinanced Bradley's existing obligation with the company. The disclosure statement which accompanied the 1978 promissory note contained the following federal Truth-in-Lending statement: 5
In the court below, Bradley argued that this disclosure violated the Act because the two identical subheadings labelled "LOAN FEE" obscured whether the prepaid finance charge was $62.07, $48.00, or the sum of the two. The district court differed and rendered judgment for Termplan.
Under applicable Georgia law, the maximum permissible finance charge on Bradley's loan was 8% on the first $600 of the face amount and 4% on any excess. Off.Code Ga.Ann. Sec. 7-3-14(2). Presumably Termplan's disclosure was an attempt to itemize these two components, calculated according to state law, for purposes of federal disclosure.
We conclude that Gresham v. Termplan Inc. West End, 648 F.2d 312 (5th Cir. Unit B 1981), requires reversal. Gresham involved the following, nearly identical disclosure by the same lender, Termplan:
PREPAID FINANCE CHARGE
LOAN FEE LOAN FEE
We concluded that the disclosure ran afoul of Regulation Z because there was no indication that the prepaid finance charge was the total of the two "LOAN FEE" items. As such, the disclosure violated 12 C.F.R Sec. 226.6(c) (1978), deleted, 46 Fed.Reg. 20,892 (1981), which prohibited the mingling of state and federal disclosure requirements "so as to mislead or confuse the customer ..." 648 F.2d at 313-14.
We discern no material distinction between the disclosure in this case and that in Gresham. As the Gresham court noted:
The same inconsistency would exist if the loan were $1,000 and the two items appeared as "loan fee $48" (8% on $600) and "loan fee $16" (4% on the $400 excess). Is there then one finance charge, and if so is it $48 or $16 or the total of $64, or are there two finance charges?
Id. at 314. The deficiency lies in the use of the two identical subheadings "LOAN FEE." Termplan could have skirted the problem by stating a single total sum. Alternatively it could have disclosed the two loan fees under the subheadings "4% fee(A)" and "8% fee(B)," as was done in Blalock v. Aetna Finance Co., 511 F.Supp. 33 (N.D.Ga.1980), aff'd without opinion, 641 F.2d 878 (5th Cir.1981). Having taken neither course, Termplan only invited confusion through use of its free-standing identical subheadings. We therefore reverse the district court's judgment for Termplan. Bradley is entitled to statutory attorney fees under 15 U.S.C. Sec. 1640(a)(3), including fees incident to her TIL appeal.
The Truth-in-Lending Act authorizes "reasonable attorney fees" for plaintiffs who prevail in actions to enforce its requirements. 15 U.S.C. Sec. 1640(a)(3). The amount of the award is left to the sound discretion of the trial court and is...
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