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DETILLO v. J. R. MOORE FARM SUPPLY

May 2, 1978

Albert E. DETILLO and Elizabeth R. Detillo
v.
J. R. MOORE FARM SUPPLY, INC.



The opinion of the court was delivered by: ROSENBERG

 In this action, the plaintiffs, Albert E. Detillo and Elizabeth R. Detillo, filed under Federal Rule of Civil Procedure 56 for summary judgment on the ground that there is no genuine issue as to any material fact, and as such, the plaintiffs are entitled to judgment as a matter of law.

 The plaintiffs filed the complaint against the defendant, J. R. Moore Farm Supply, Inc., for violation of the Federal Truth-In-Lending Act, 15 U.S.C. § 1601 et seq. and the Federal Reserve Regulation Z, 12 C.F.R. 226.1 et seq. Jurisdiction is based upon 15 U.S.C. § 1640(c). At the argument in this case, after notice to both parties, only the plaintiffs' counsel appeared.

 The plaintiffs aver that the defendant, doing business in the City of Mercer in the Western District of Pennsylvania, regularly extended, offered to extend or arranged to extend credit to its customers and imposed a finance charge on such credit; that on or about May 20, 1977, the plaintiffs and the defendant entered into a contract for the purchase of machinery on a credit basis; that during the course of the overall transaction, the defendant failed to comply with the Act and Regulation by (a) failing to disclose the deferred payment prices in violation of Regulation Z, 226.8(c)(8)(ii); (b) failed to include the finance charge, premiums for credit, life, accident and health insurance charges in violation of Regulation Z, 226.4(a)(5); and (c) failed to clearly and accurately disclose the amount or method of computing the amount of any default, delinquency or similar charges payable in the event of late payment, in violation of Regulation Z, 226.8(b)(4); and as a result of such violations the plaintiffs claim damages in the sum of $1,000, plus costs and Attorney's fees.

 The defendant in its answer alleged that the deferred payment price (No. 9) is equal to the addition of the figures set forth in Nos. 1, 4, 5, and 7; that the finance charge is set forth in No. 7 but that the insurance charge is not a part of the finance charge because it is set forth on the financing statement and is not mandatory, but that it will be included in the amount to be financed; that the amount or method of computing late charges is three-fourths the way down the page under No. 5; and that the defendant has committed no violations under the Act and Regulation Z.

 In answer to the interrogatories the defendant indicated that the disclosure statements "would be reviewed by an officer of the Loan Department of the Northwest Pennsylvania Bank and Trust Company at their Mercer office prior to accepting the security Agreement".

 For the purpose of this motion, the plaintiffs contend only that the defendant failed to accurately disclose the "deferred payment price" in violation of the Truth-In-Lending Act and Regulation Z, and that the defendant's violation is obvious on its face and is such an inaccuracy sufficient to trigger the civil liability provision of the Act. *fn1" The defendant, on the other hand, contends that the incorrect disclosure is merely an unintentional clerical error, and as such, exempts the defendant from any civil liability under 15 U.S.C. § 1640(c).

 The disclosure terminology requirements set out by the Federal Reserve Board in Regulation Z are mandatory and their imposition is within the broad authority granted the Board under the Truth-In-Lending Act. Richardson v. Time Premium Co. (D.C.Fla.1971) CCH Consumer Credit Guide, §§ 99.272, 99.273. The terminology required is specified in the various sections of Regulation Z applicable to each type of credit extension. Under the Act, a violation is deemed to have occurred upon any non-compliance with the Act's precise, technical requirements (e.g. mandatory disclosures, proper identification of terms), and such a violation takes place even if the creditor acts in good faith, without any purpose to mislead, and even without detrimental reliance on the part of the consumer. *fn2"

 The defendant readily admits that as to this issue of violation, there is no dispute on the retail sales agreement prepared by the defendant since the required disclosures were numbered in sequence and disclosure No. 9, the deferred payment price, is incorrect.

 However, the Act makes available to a creditor a defense to a charge of violation of the disclosure requirements of the Act. That defense is found in 1640(c) as follows:

 
" No liability for unintentional error under certain circumstances. A creditor may not be held liable in any action brought under this section for a violation of this title if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to avoid any such error."

 This section provides a two-pronged test. The creditor must first prove that the error was unintentional and bona fide, and second, that procedures reasonably adopted to avoid any such error were consistently maintained. Turner v. Firestone Tire & Rubber Co., 537 F.2d 1296, C.A.5 1976.

 With this in mind, we examine the document itself. It details in clear and precise form and in meaningful sequence, the required financial information which a buyer would need to be informed of his financial obligations. The "deferred payment price" is a simple arithmetical calculation, representing the original purchase price plus the cost of financing (the finance charge and the cost of insurance). It is obvious that each of the separate items comprising the "deferred payment price" was correct as stated, and that these figures were computed incorrectly. Yet anyone reading the statement was provided with the applicable formula and the proper components to arrive at the indicated sum.

 In construing 15 U.S.C. § 1640(c) the Seventh Circuit said in Haynes v. Logan Furniture Mart, Inc., 503 F.2d ...


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