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MAYFIELD v. VANGUARD S&L ASS'N

March 31, 1989

ANNA MAYFIELD
v.
VANGUARD SAVINGS & LOAN ASSOCIATION



The opinion of the court was delivered by: REED, JR.

 LOWELL A. REED, JR., UNITED STATES DISTRICT JUDGE.

 Plaintiff Anna Mayfield filed this action against defendant Vanguard Savings & Loan Ass'n alleging that defendant violated the disclosure requirements of the Truth-in-Lending Act (TILA), 15 U.S.C. § 1601, et seq. and Regulation Z, 12 C.F.R. § 226. Plaintiff's complaint seeks the following relief: damages under 15 U.S.C. § 1640; a declaration that defendant's security interest in plaintiff's property is void; an order requiring defendant to comply with its duty to rescind the loan transactions in accordance with the TILA; and an award of costs and reasonable attorney's fees under 15 U.S.C. § 1640. Presently before me is the motion of plaintiff for summary judgment. Upon review of the motion and affidavit, request for admissions and exhibits attached thereto, and the response of defendant, I find that there is no genuine issue of material fact and that plaintiff is entitled to a judgment in her favor as a matter of law for the reasons that follow.

 FACTS

 The Mayfields made the first two scheduled payments of $ 245.88 each in October and November, 1986. They then contacted defendant to explain that they were having difficulty paying the loan payment and their first mortgage payment of $ 171 on their income of $ 634 per month from social security and veteran's pension benefits. Defendant offered to refinance the prior loan and their first mortgage with a new loan which was written on January 19, 1987. The only new advances from this loan were $ 6,265.43 to pay off the first mortgage on the Mayfields' home and $ 160 to pay a water and sewer bill. To that were added the prior balance to defendant, a new origination fee of $ 1930 and about $ 1,500 in other closing costs. That total was written as a loan of $ 24,686.04 at an interest rate of 20% with a resulting future liability of $ 85,872.60, payable in monthly installments of $ 477.07. Defendant took another mortgage on the Mayfields' home to secure the loan. The only disclosure statement and notice of right to cancel given to the Mayfields concerning the new loan was received by them on December 2, 1986. According to Mrs. Mayfield's uncontested affidavit she made two payments of $ 911.00 each on this second loan transaction.

 On October 28, 1987 counsel for the Mayfields wrote a letter to defendant and its attorney rescinding the loan under TILA, 15 U.S.C. § 1635(a), which letter was received on October 30, 1987. Defendant took no action within twenty days after the rescission letter to remove the mortgage from the Mayfields' home or to return the money already received from the Mayfields. Mrs. Mayfield filed this action on January 19, 1988 to enforce the rescission and to obtain actual and statutory damages under TILA. *fn1"

 PLAINTIFF'S RIGHT TO RESCIND

 It appears from the response of defendant to plaintiff's motion that it does not contest that plaintiff has a right to rescind the loans it made to her and her husband. Nor would defendant have a basis to do so. Whenever a consumer credit transaction results in a creditor acquiring a security interest in an obligor's home, as is the case here, § 1635(a) gives the obligor "the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the disclosures required under this section and all other material disclosures required under this part, whichever is later. . . ." 15 U.S.C. § 1635(a). Section 1635(a) requires the creditor to disclose this right to rescind in accordance with regulations promulgated by the Federal Reserve Board. Id. Failure to properly complete the right to rescission form or to provide the consumer with the material disclosures required to be made under TILA extends the rescission period until three days after the disclosures are properly made. Id.; Williamson v. W.E. Lafferty, 698 F.2d 767, 768 (5th Cir. 1983). If the disclosures are never properly made, the rescission period runs for three years from the consummation of the transaction. 15 U.S.C. § 1635(f); Williamson v. W.E. Lafferty, 698 F.2d at 768.

 The failure of defendant to correctly make all material disclosures required to be made under 15 U.S.C. § 1638 also entitled plaintiff to rescind the loan. Section 1638 requires a creditor to disclose, inter alia, the extent of the collateral being taken for the loan. 15 U.S.C. § 1638(a)(9). The disclosure statements for the August, 1986 and January, 1987 loans indicated that the loans were secured by "the property being purchased" which was clearly an incorrect disclosure as these were not purchase money loans. Plaintiff and her husband purchased their home years before the present security interests in it were taken. The failure to accurately disclose a security interest taken is a material nondisclosure which also entitles a consumer to rescind a loan within the three year rescission period. Williamson v. W.E. Lafferty, 698 F.2d at 769; Bookhart v. Mid-Penn Consumer Discount Co., 559 F. Supp. 208, 211 (E.D.Pa. 1983).

 The disclosure statements also failed to accurately state several other material credit terms required to be disclosed by the TILA which would have entitled plaintiff to rescind the loans. However, because the violations of the TILA already discussed were clearly sufficient to have entitled plaintiff to rescind both the August 1986 and January 1987 loans on October 28, 1987, I do not address them.

 PLAINTIFF'S RIGHT TO DAMAGES

 Section 1640(a) of TILA provides for statutory penalties equal to twice the finance charge of the credit transaction up to a maximum of $ 1,000 for failing to comply with the disclosure requirements of the Act. Multiple disclosure violations made in connection with a single loan transaction entitles a person to only a single recovery. 15 U.S.C. § 1640(f). However, if a consumer rightfully exercises the right to rescind and the creditor fails to comply with its obligations under § 1635 the consumer is entitled to an additional award of damages under § 1640(a), Aquino v. Public Finance Consumer Discount Co., 606 F. Supp. at 510; In re Jones, 79 Bankr. 233 (Bankr. E.D. Pa. 1987), for each transaction rescinded. Abele v. Mid-Penn Consumer Discount Co., 77 ...


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