Watts v. Key Dodge Sales, Inc.

• Decision Date: 20 June 1983
• Docket Number: No. 82-3374,82-3374
• Citation: 707 F.2d 847
• Parties: Rosie WATTS and Robert L. Watts, Plaintiffs-Appellants, v. KEY DODGE SALES, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 847

707 F.2d 847

Rosie WATTS and Robert L. Watts, Plaintiffs-Appellants, v. KEY DODGE SALES, INC., et al., Defendants-Appellees.

No. 82-3374.

United States Court of Appeals, Fifth Circuit.

June 20, 1983.

Matthews & Breeden, Patrick D. Breeden, New Orleans, La., for plaintiffs-appellants.

Milling, Benson, Woodward, Hillyer, Pierson & Miller, David M. Culpepper, James K. Irvin, New Orleans, La., for Chrysler Credit Corp.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before CLARK, Chief Judge, THORNBERRY and RANDALL, Circuit Judges.

THORNBERRY, Circuit Judge:

I. Introduction:

This is an appeal by Rosie and Robert Watts (the Watts) from a judgment by the district court that defendants Key Dodge Sales, Inc. and Chrysler Credit Corp. (the creditor) did not violate the Truth in Lending Act (TILA), 15 U.S.C. Sec. 1601 et seq., and Regulation Z of the Federal Reserve Board (the Board), 12 C.F.R. Sec. 226.1 et seq. We affirm in part, and reverse in part.

II. Facts and Disposition Below:

On December 8, 1979, the Watts purchased a new 1980 Dodge Van from Key Dodge Sales for family and household use. As part of the sales transaction, the Watts and Key Dodge executed a "Sale and Chattel Mortgage" instrument which contained both a promissory note and a disclosure statement. This instrument was subsequently assigned to Chrysler Credit. At trial, the Watts alleged three violations of the TILA and Regulation Z by the creditor: failure to include the notarial fee in the finance charge; ambiguity of the disclosure providing for the delinquency charge; and invalidity of the waiver of all exemption clauses in the promissory note and disclosure statement. The district court, relying on two unpublished opinions, ¹ granted the creditor's motion for summary judgment.

III. Analysis

We begin by outlining the standard of review governing this appeal. In affirming a grant of summary judgment, an appellate court must satisfy itself that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Federal Rule of Civil Procedure 56(c).

The Supreme Court has used the following language to emphasize the way in which the reviewing court should evaluate the record on an appeal from a summary judgment: "on summary judgment the inferences to be drawn from the underlying facts contained in such materials [affidavits, depositions, and exhibits] must be viewed in the light most favorable to the party opposing the motion" and "we look at the record on summary judgment in the light most favorable to * * * the party opposing the motion * * * "

10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure: Civil 2d Sec. 2716, at 643 (1983) (citing U.S. v. Diebold, Inc., 369 U.S. 654, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962) and Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962)). See Wilson v. Taylor, 658 F.2d 1021, 1028 (5th Cir.1981).

A. The Notarial Fee:

Under the TILA and Regulation Z, the creditor must disclose all finance charges imposed by him and payable directly or indirectly by the consumer. 15 U.S.C. Sec. 1638(a); 12 C.F.R. Sec. 226.4(a). One exception from this broad rule is "[f]ees and charges prescribed by law which actually are or will be paid to public officials for determining the existence of or for perfecting or releasing or satisfying any security related to the credit transaction." 12 C.F.R. Sec. 226.4(b)(1) (emphasis added). ²

Under Louisiana law, a chattel mortgage must be authenticated by a notary public. La.Rev.Stat.Ann. Sec. 9:5353 (West Supp.1982). However, Louisiana law does not prescribe the amount of the fee a notary may legally charge. The disclosure statement furnished to the Watts listed a $3.50 charge for notarial fees under "other charges." Since the fee a notary may charge is not prescribed by law, the Watts contend that it falls without the exemption for fees and charges prescribed by law set out in 12 C.F.R. Sec. 226.4(b)(1), supra. They argue that the $3.50 notarial fee they paid should have been included in the finance charge, and that the creditor's failure to do so constitutes a violation of the TILA and Regulation Z. The creditor contends that because Louisiana law requires notaries to authenticate documents like those at issue here, the notarial fee is "prescribed by law" and therefore falls within the section 226.4(b)(1) exemption.

The Watts do not dispute the holding of George v. General Finance Corp., supra, 414 F.Supp. at 35, that the amount of the notarial fee need not be included in the finance charge as long as it is set forth elsewhere in the disclosure statement. The district court in George rejected an argument identical to that advanced by the Watts, i.e. that in order for a fee to be "prescribed by law" within the meaning of section 226.4(b)(1), the amount of the fee must be prescribed by statute, basing its holding on the premise that a creditor has no control over charges such as the notarial fee. Id. See also Williams v. Bill Watson Ford, Inc., 423 F.Supp. at 347. Rather, the Watts contend that the rule set forth in George was administratively overruled by an unofficial interpretation of section 226.4(b)(1), written by one of the Board's staff attorneys, which adopted the views held by the Watts, and expressly rejected the views underlying George, supra. In order to resolve this issue, we must therefore determine the proper weight to be accorded unofficial staff interpretations by federal courts.

In Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980), the Supreme Court held that "unless demonstrably irrational, Federal Reserve Staff opinions construing the [TILA] or Regulation [Z] should be dispositive...." Id. at 797. In that case, the Court relied on official staff opinions by the Board published in the Federal Register, and held that they were dispositive of the issue before it. In so doing, the Court clearly distinguished unofficial interpretations, stating that: "12 C.F.R. Sec. 226.1(d) (1979) authorizes the issuance of official staff interpretations that trigger the application of [15 U.S.C.] Sec. 1640(f).... Official interpretations are published in the Federal Register, and opportunity for public comment may be requested. 12 C.F.R. Sec. 226.1(d). Unofficial interpretations have no special status under Sec. 1260(f)." 100 S.Ct. at 798 n. 10 (emphasis added).

In Anderson Brothers v. Valencia, 452 U.S. 205, 101 S.Ct. 2266, 68 L.Ed.2d 783 (1981), the Supreme Court again looked to staff interpretation in seeking to resolve the issue before it. Although a relevant Official Staff Interpretation had been published for comment in the Federal Register, the Board itself had not passed on that Interpretation, deciding to defer to the Supreme Court disposition of the case. While noting that "we cannot agree that the staff's views expressed in the proposed ruling are wholly without significance," 101 S.Ct. at 2270, the Court nonetheless did not rest its holding on the Staff Interpretation, 101 S.Ct. at 2272, but instead resolved the case on the basis of the recent amendments to the TILA.

Relying on Milhollin, this court, in Smathers v. Fulton Federal Savings & Loan Association, 653 F.2d 977 (5th Cir.1981), used an official letter issued by the assistant director of the Board as a basis for overruling a contrary prior circuit court decision. 653 F.2d at 980-81. Concluding that the letter's interpretation of a section of the TILA was not demonstrably irrational, we held the letter to be dispositive of the issue before us. Id. In Lyles v. Commercial Credit Plan Consumer Discount Co., 660 F.2d 129 (5th Cir.1981), we rejected the argument that unofficial staff interpretations are not entitled to any weight, noting that: "[A]dministrative views, official or unofficial, offer helpful guidance." 660 F.2d at 132 (emphasis added). We relied on both official and unofficial staff interpretations in our disposition of that case. We think it significant that in the quoted passage above, we did not state that unofficial, as well as official, staff interpretations are entitled to the "demonstrably irrational" standard of Milhollin.

In Bury v. Marietta Dodge, 692 F.2d 1335 (11th Cir.1982), the Eleventh Circuit has set forth what we believe to be the proper view of the weight to be accorded different classes of administrative interpretations in light of the Supreme Court and our precedents:

Bury argues that in light of Smathers, this court should now give precedential value to all staff interpretations by members of the Federal Reserve Board. We do not agree. Smathers is easily distinguishable from the case at hand. In Smathers, the court relied upon a published, numbered letter by the assistant director of the Federal Reserve Board. Kluckman issued the letter in his official capacity as the assistant director of the Board. It is reasonable to assume that the letter therefore has the status of an official staff interpretation, especially as it is published and numbered by the Federal Reserve Board. In this case, we are dealing with an unnumbered, unpublished letter by a staff attorney. There is nothing to indicate that the Federal Reserve Board as a body approves of the interpretation of the regulation as expressed in the letter, or even knows of the interpretation as expressed in the letter. Although the two letters were approved by section chiefs, we cannot assume that approval by a section chief is to be given the same weight as that of the assistant director of the entire Federal Reserve Board.

Bury is correct in stating that if we give the two letters of the staff attorneys the same weight as official staff interpretations of the Federal Reserve Board, these Board letters would have the effect of overruling Whitfield v. Termplan [651 F.2d 383 (5th Cir.1981) ]. We cannot allow this result, because it would then follow that...