We have noted that some $ 14,817.35 of the $ 250,000 Carteret loan went toward various fees and closing costs. Since these costs would have been incurred whatever the purpose of the loan, we find that they do not carry any weight in the determination of the primary purpose of this transaction.
We have also noted that a large portion of the loan proceeds, some $ 114,622.80 was disbursed to satisfy plaintiffs' existing residential mortgage with Keystone Savings Association. In addition, $ 10,261.30 was disbursed for the payment of various outstanding taxes.
Although the refinancing of a residential mortgage would in many cases be a loan for personal purposes, that is not the situation in this case. The Gombosis were not refinancing to obtain a more favorable interest rate or to obtain lower monthly payments, but were instead refinancing at an interest rate that was a full percentage point higher than that of the existing Keystone Savings Association mortgage.
Furthermore, the satisfaction of the Keystone Savings Association mortgage was an express loan condition so as to create a first mortgage lien position on the Gombosis' residence in favor of Carteret Savings Bank, F.A. Similarly, the payment of outstanding taxes was a necessary prerequisite to protect the first mortgage rights of Carteret. All these facts indicate that the refinancing of an existing residential mortgage and the making of tax payments were not the primary purpose of the Carteret loan. Rather, the primary purpose of the Carteret loan was to acquire the remaining proceeds after the satisfaction of all the conditions of obtaining the loan. Thus, we find that the disposition of those remaining proceeds must weigh heavily in determining the primary purpose of the Carteret loan.
After the amounts that went toward fees, taxes, and satisfaction of the Keystone Savings Association mortgage are deducted, the remaining proceeds of the loan total approximately $ 110,000. Of this amount, some $ 65,015.50 went to pay off an existing loan from Meridian Bank. Although it is unclear precisely which loan from Meridian Bank was repaid, the fact that the $ 60,000 Eagle Trace Housing Development loan was coming due on October 30, 1990 strongly suggests that it was this loan which was in fact repaid. Resolution of this factual issue is not necessary to our decision, however, for it is undisputed that the repaid loan was a business loan.
The Gombosis received the remaining net funds of $ 45,283.05 of the loan proceeds at the time of closing. Mr. Gombosi testified that some of this money went toward his daughter's college education, while the rest was used for business purposes, namely to purchase inventory for Car Village and to pay off other business debts. Mr. Gombosi was unable to recall exactly how much of the $ 45,283.05 he spent on his daughter's college education, however, he did testify that it was less than $ 4000 to $ 5000.
Although we agree with plaintiffs that payment of a child's college expenses is properly classified as a "personal" or "family" expense, in this case only a very small portion of the loan proceeds were used for this purpose. Even if we assume that a full $ 5000 of the funds went toward college expenses, more than $ 105,000 of the $ 110,298.55 that remained after the payment of fees, taxes, and satisfaction of the Keystone Savings Association mortgage still went toward business purposes.
Thus, even viewing the facts in the light most favorable to the plaintiffs, as we must, we conclude that the Carteret loan was taken out for a business purpose. Plaintiffs have the burden of proving that the primary purpose of the Carteret loan primarily was personal, and they have simply presented no facts from which a reasonable jury could reach this conclusion. Indeed, the only evidence of personal use they have identified for the loan is that a small portion of its proceeds went toward payment of their daughter's college expenses. Defendants, on the other hand, have shown that at all of the $ 65,015.50 amount paid to Meridian and more than $ 40,000 of the $ 45,283.05 amount of net funds went toward business purposes. In addition, defendants have established that refinancing the existing Keystone Savings Association mortgage was obviously not a primary purpose of this loan, as the refinancing actually resulted in a higher interest rate than the Gombosis were previously paying.
Plaintiffs point out that, by attempting to make the required disclosures, defendants themselves treated the transaction as if it were subject to TILA. They contend that this fact weighs in favor of a finding that the purpose of the transaction was primarily personal. We find this argument to be unavailing. The Official Staff Interpretations of Regulation Z Truth in Lending, 12 C.F.R. Pt. 226, Supp. I, § 336.3(a)(1) specifically states that "if some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt." Here, it appears likely that defendants were not aware of the primary purpose of the loan at the time they attempted to make the TILA disclosures. In fact, the only record evidence that appears to have been available at that time was plaintiffs' written statement to Suburban that the purpose of the loan was "debt consolidation." Under these circumstances, the fact that defendants attempted to make the required disclosures, standing alone, cannot possibly outweigh the considerable evidence tending to show that plaintiffs undertook the transaction primarily for business purposes.
As for plaintiffs' contention that the primary purpose of the transaction is an issue for the trier of fact to decide, we disagree. Where the relevant facts are not in dispute, the court may decide the TILA exemption question as a matter of law. See Bokros v. Associates Finance, Inc., 607 F. Supp. at 872; Quinn v. A.I. Credit Corp., supra (granting summary judgment on ground that Act was inapplicable because transaction was primarily commercial). Although plaintiffs claim that outstanding issues of material fact exist, they have pointed to no such issues. The Gombosis' "mere denials" of defendants' evidence of the purpose of the loan cannot suffice to withstand a motion for summary judgment. See First Nat'l Bank v. Lincoln Nat'l Life Ins. Co., 824 F.2d at 282.
For all of the foregoing reasons, we find that the Carteret loan was undertaken primarily for business or commercial purposes. Accordingly, TILA does not apply to this transaction and defendants are entitled to summary judgment on Count I of the Complaint.
An appropriate order follows.
AND NOW, this 19th day of July, after full consideration of defendants' Motion for Partial Summary Judgment, filed on May 9, 1995, plaintiffs' response thereto, filed on May 22, 1995, and defendants' Supplemental Memorandum of Law, filed on June 1, 1995, it is hereby ORDERED that defendants' motion is GRANTED. Judgment is entered in favor of defendants Carteret Mortgage Corporation and Resolution Trust Corporation and against plaintiffs Robert and Carole Gombosi as to Count I of plaintiffs' Complaint.
Defendants' Motion for Partial Summary Judgment on damages, filed on April 28, 1995, is hereby DISMISSED as MOOT.
This case is CLOSED.
BY THE COURT
Franklin S. Van Antwerpen
United States District Judge