The opinion of the court was delivered by: MCCUNE
Plaintiff's cause of action is based upon the defendant's alleged failure to adequately comply with the disclosure provisions of the Truth-in-Lending Act (the Act), 15 U.S.C. § 1601 et seq., and Regulation Z, 12 C.F.R. § 226.1 et seq. Jurisdiction is based on Section 130(e) of the Act, 15 U.S.C.A. § 1640(e).
The facts are not in dispute. On June 17, 1974, plaintiff, Richard Gennuso, entered into a consumer credit transaction
with the defendant, Commercial Bank and Trust Company (Commercial), in order to obtain an automobile loan for the purchase of a new 1974 Chevrolet. During the course of the transaction, plaintiff received two documents from Commercial: a "Disclosure Statement -- Direct Installment Loans" and a "Note and Security Agreement." Both documents were signed by plaintiff and his wife, and an officer of the defendant bank.
On April 22, 1975, plaintiff filed this suit alleging four particular violations of the Act and Regulation Z.
Both parties have moved for Summary Judgment. After a consideration of the respective arguments presented and for the reasons that follow, we are convinced that Commercial did not violate the applicable sections of the Act and Regulation Z, and accordingly, will grant defendant's motion.
The Truth-in-Lending Act was passed by Congress in 1968 as the result of growing congressional concern over consumers' ignorance of the nature and cost of their credit obligations. See: Mourning v. Family Publications Service, Inc., 411 U.S. 356, 363-69, 93 S. Ct. 1652, 36 L. Ed. 2d 318 (1973).
The Act and Federal Reserve Board Regulation Z require that certain disclosures
be made in connection with consumer credit transactions. As stated by the Supreme Court in Mourning, supra, both the Act and Regulation Z serve a clear and definite purpose in requiring disclosures:
"[By] requiring all creditors to disclose credit information in a uniform manner, and by requiring all additional mandatory charges imposed by the creditor as an incident to credit be included in the computation of the applicable percentage rate, the American consumer will be given the information he needs to compare the cost of credit and to make the best informed decision on the use of credit." 411 U.S. at 365, 93 S. Ct. at 1658.
This purpose was subsequently codified in the Act itself, 15 U.S.C. § 1601. See also: Philbeck v. Timmers Chevrolet, Inc., 499 F.2d 971, 976 (5th Cir. 1974).
In line with this congressional purpose and intent, we must analyze plaintiff's arguments and consider the manner in which Commercial set forth the necessary disclosures in the two documents which plaintiff received at the time the credit transaction was entered into. Thus, we turn to a discussion of plaintiff's allegations.
A. Commercial's Disclosure of a Security Interest in the Proceeds and Unearned Premiums of a Property Insurance Policy.
An analysis of plaintiff's first contention
requires a review of the documents he received during the course of the credit transaction in light of the requirements set forth in §§ 226.6(a)
of Regulation Z. In addition, plaintiff, in his brief,
contends that § 226.8(a)
A review of the first document, the Disclosure Statement, reveals that in the center of that page, under the words, "Disclosure Statement," Commercial advised plaintiff that certain disclosures which followed were "(Furnished pursuant to the Federal Truth In Lending Act and F.R.B. Reg. Z)." Proceeding down that page, Commercial clearly set forth the following information: The amount financed, the Finance Charge, the Annual Percentage Rate, the number and amount of payments including the due date of each payment and the total payments involved, and the method of computing the amount of any delinquency charges. Then, at paragraph 8, the Disclosure Statement included the identification of the security interest involved. Paragraph 8 appears in lower third of the Disclosure Statement in the following form:
"8. Identification of security interest New 1974 Chev. Monte Carlo 2 door Hardtop Ser #1H57H4B575585 (refer to the instrument evidencing the obligation for full description of property to which the security interest relates and after acquired property to which the security interest may attach)."
Approximately one inch below paragraph 8 appears the date, "June 17, 1974," and the signature of a representative of Commercial. Directly below that appear the signatures of plaintiff and his wife, along with the same date.
Plaintiff contends, and this court agrees, that the requirements contained in paragraph 6 of the Note and Security Agreement create a "Security Interest,"
in the proceeds and unearned premiums of the required property insurance policy.
With a review of paragraph 8 of the Disclosure Statement and paragraph 6 of the Note and Security Agreement completed, we turn to an analysis of the substance of plaintiff's arguments in support of his first contention.
Essentially, plaintiff advances two arguments in that regard. First, plaintiff asserts since ". . . [a] description or identification of the . . . security interest held . . . by [Commercial] . . . [could not] properly be made on the disclosure statement due to the length of [the] identification . . .," the "reference" contained in paragraph 8 of the Disclosure Statement to the "security interest" present in paragraph 6 of the Note and Security Agreement failed to conform to the requirements of § 226.8(b)(5) of Regulation Z. Related thereto, plaintiff further asserts that § 226.8(a) of Regulation Z was violated in that the disclosures contained in paragraphs 8 and 6, respectively, were not made ". . . together on . . . the same side of the page and above or adjacent to the place for the (plaintiff's) signature . . .," i.e., on one document. Secondly, plaintiff objects to the manner in which the security interest contained in paragraph 6 of the Note and Security Agreement was disclosed to him. On this point, plaintiff asserts that the disclosures contained in paragraph 6 did not conform to the requirements of § 226.6(a) of Regulation Z in that they were not made ". . . clearly, conspicuously, [and] in [a] meaningful sequence. . . ."
In response to plaintiff's arguments, defendant contends that plaintiff was fully apprised of any security interest in the proceeds and unearned premiums of a required property insurance policy as contained in paragraph 6 of the Note and Security Agreement since an adequate "reference" was made in paragraph 8 of the Disclosure Statement.
Further, defendant contends that there is no requirement under the Act or Regulation Z that both the Note and Security Agreement and the Disclosure Statement be contained on the same sheet of paper.
Addressing plaintiff's first argument, we find that the "reference" made by Commercial in paragraph 8 of its Disclosure Statement to the security interest in certain proceeds and unearned premiums of a required property insurance policy in paragraph 6 of its Note and Security Agreement was not a violation of the disclosure requirements of § 226.8(b)(5) of Regulation Z. Likewise, we find that the purported "One Document" rule of § 226.8(a) was not violated by Commercial, nor was it intended by Congress to be so narrowly applied in situations such as the one factually presented in this instance. Thus, we find plaintiff's reliance on Douglas v. Beneficial Finance Co. of Anchorage, 334 F. Supp. 1166, 1174-75 (D.Alaska 1971) and Lattanzio v. Mellon Bank, N.A., Civil Action No. 74-1010 (W.D.Pa., filed September 24, 1975) misplaced, as those cases are distinguishable from the case at hand. Both of those cases dealt with the use of a two-sided document with various disclosures present on the face of the loan contract and more fully explained interests appearing on the reverse side of the document. In such cases, § 226.801
of Regulation Z makes it clear that adequate notice must be employed by the lender to apprise the consumer that additional, important information exists on the reverse side of the page. However, our situation does not warrant such a conclusion since two separate documents were used. Thus, § 226.8(b)(5) only controls, and as stated by the court in Douglas v. Beneficial Finance Co. of Anchorage, supra, at page 1175, footnote 8:
". . . 12 C.F.R. § 226.8(b)(5) allows the lender to incorporate a separate pledge agreement where a full description of the property to which a security interest relates would be too cumbersome to include in the disclosure statement." (Emphasis supplied).
Such a case is presented here.
Plaintiff's challenge to the "reference" language present in paragraph 8 of Commercial's Disclosure Statement presents the only claim to a possible § 226.8(b)(5) violation. However, we must agree with the defendant that the language present in paragraph 8 was indeed adequate enough to fully refer plaintiff ...