Source: https://law.justia.com/cases/federal/appellate-courts/F3/179/286/546675/
Timestamp: 2019-11-14 08:24:47
Document Index: 241386829

Matched Legal Cases: ['§ 1638', '§ 1638', 'art 226', '§ 1638', '§ 226', '§ 1638', '§ 1640', '§ 1638', '§ 226', '§ 1638', '§ 1640', '§ 1641', 'art 226', '§ 226', 'art 226', '§ 226', 'art, 150', '§ 1641']

Wilmore Green, Iii; Marsha W. Green, on Behalf of Themselvesand All Others Similarly Situated, Plaintiffs-appellants, v. Levis Motors, Inc., et al., Defendants,levis Motors, Inc., Doing Business As Levis Mitsubishi; Johndoes, 1-10; Hancock Bank of Louisiana; Abcinsurance; Xyz Insurance Co.,defendants-appellees, 179 F.3d 286 (5th Cir. 1999) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fifth Circuit › 1999 › Wilmore Green, Iii; Marsha W. Green, on Behalf of Themselvesand All Others Similarly Situated, Plain...
Wilmore Green, Iii; Marsha W. Green, on Behalf of Themselvesand All Others Similarly Situated, Plaintiffs-appellants, v. Levis Motors, Inc., et al., Defendants,levis Motors, Inc., Doing Business As Levis Mitsubishi; Johndoes, 1-10; Hancock Bank of Louisiana; Abcinsurance; Xyz Insurance Co.,defendants-appellees, 179 F.3d 286 (5th Cir. 1999)
US Court of Appeals for the Fifth Circuit - 179 F.3d 286 (5th Cir. 1999) June 22, 1999
* The core facts in this case are not in dispute. On or about August 31, 1995, (and this date is important), Wilmore and Marsha Green purchased a used car from Levis Motors. To finance this purchase, the Greens entered a retail installment contract ("RIC") with Levis Motors. As required by the Truth in Lending Act ("TILA"), the contract disclosed the "amount financed" and, in conjunction with the disclosure of this amount, purported to itemize an amount paid to the state of Louisiana for licensing fees. See 15 U.S.C. § 1638(a) (2) (B) (iii) (West 1998). The relevant portion of the contract reads as follows:
Itemization of Amount Financed (1) Cash Price $ 11,332.34 (2) (a) Cash Downpayment $ 700.00 (b) Net Trade"In Allowance $ n/a (3) Unpaid Balance $ 10,632.34 * * * (5) Amount Paid to Public Officials For: * * * (c) License Fee $ 40.00
* The statutory text upon which the Greens base their claim is found in 15 U.S.C. § 1638(a) (2) (B) (iii):
(2) (B) In conjunction with the disclosure of the amount financed, a creditor shall provide a statement of the consumer's right to obtain, upon a written request, a written itemization of the amount financed.... Upon receiving an affirmative indication, the creditor shall provide, at the time other disclosures are required to be furnished, a written itemization of the amount financed. For the purposes of this subparagraph, "itemization of the amount financed" means a disclosure of the following items, to the extent applicable:
At the time the Greens and Levis Motors executed the RIC, the only relevant regulatory provisions offering any guidance were 12 C.F.R. 226.18(c) (iii) (a section within "Regulation Z," 12 C.F.R. 226), and 12 C.F.R. Part 226, App. H-3 ("model form"). These two regulatory enactments have not changed since the time of the RIC's execution (August 31, 1995). Neither the regulation nor the model form provide any further guidance--with any relevance to this case--than that already present on the face of § 1638(a) (2) (B) (iii). The regulation states:
12 C.F.R. § 226.18(c) (iii) (1999). Model form H-3 appears as follows:
Itemization of the Amount Financed of $ ______ $ ________ Amount given to you directly $ ________ Amount paid on your account Amount paid to others on your behalf $ ________ to [public officials] [credit bureau] [appraiser] [insurance company] $ ________ to [name of another creditor] $ ________ to [other] $ ________ Prepaid finance charge
In December 1995, the FRB staff proposed an official staff interpretation of § 1638(a) (2) (B) (iii). See Truth in Lending, 60 Fed.Reg. 62764, 62765, 62769 (1995) (proposed Dec. 7, 1995). This proposed interpretation provides the following:
61 Fed.Reg. 14952, 14954 (1996). After the April 1996, adoption of the official interpretation,3 a handful of district courts (most within the state of Illinois) disagreed as to whether the FRB interpretation would allow creditors to lump the upcharge in with the fees paid to third parties--without informing the buyers that the creditor included an upcharge.4 Subsequently, the Seventh Circuit settled the intra-circuit controversy by reading the FRB's interpretation as requiring creditors either to itemize the upcharge separately or to include some language indicating that it may have listed the upcharge and the actual amount paid to third parties as one numerical value. Gibson v. Bob Watson Chevrolet-Geo, Inc., 112 F.3d 283, 285-86 (7th Cir. 1997) (Posner, C.J.).
This court reviews a trial court's grant of summary judgment de novo. Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998). Summary judgment should be granted when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c).
The Greens first argue that the district court erred because the FRB did not propose the interpretation that prompted the disagreement among the courts until after the Greens and Levis Motors executed the RIC. Citing Fifth Circuit law, the Greens maintain that the safe harbor provided by § 1640(f) can only shield creditors who act in conformity with regulations or interpretations in existence at the time of the challenged disclosure. See Jones v. Community Loan & Investment Corp. of Fulton County, 544 F.2d 1228, 1232 (5th Cir. 1976); McGowan v. Credit Ctr. of North Jackson, Inc., 546 F.2d 73, 77 (5th Cir. 1977). The Greens further note that Levis Motors does not claim to have relied on any conflicting authority existing before the Greens entered their RIC.
Neither the model form nor these FRB comments could be read as offsetting the plain language of § 1638(a) (2) (B) (iii) or 12 C.F.R. § 226.18(c) (iii). That plain language requires the itemization of amounts paid to third parties. By lumping the creditors' own charges in with the amounts actually paid to third parties, and failing to denote the conflation, the creditor fails to itemize or disclose (under any ordinary understanding of those terms) the "amount that is or will be paid to third persons." 15 U.S.C.A. § 1638(a) (2) (B) (iii).11
As noted above, after the district court found the § 1640(f) defense applicable, it did not go on to decide whether the RIC actually violated the TILA. Notwithstanding this fact, we have discretionary authority to decide the issue on this appeal. See Singleton v. Wulff, 428 U.S. 106, 120-21, 96 S. Ct. 2868, 49 L. Ed. 2d 826 (1976) ("The matter of what questions may be taken up and resolved for the first time on appeal is one left primarily to the discretion of the courts of appeals, to be exercised on the facts of individual cases."); Creel v. Johnson, 162 F.3d 385, 390 n. 3 (5th Cir. 1998) (resolving an issue not argued to the district court "because uncertainty exists with respect to a pure question of law").
The issue here is one of pure law: Does a lender violate the TILA by retaining an upcharge and failing to denote this fact in its itemization of the amount paid to third parties. Additionally, and as the next section of our opinion indicates, "the proper resolution of this question [in the Greens' favor] is beyond any doubt." Murray v. Anthony J. Bertucci Construction Co., 958 F.2d 127, 129 (5th Cir. 1992).
61 Fed.Reg. at 14956 (emphasis added). By focusing on the permissive words "may" and "could," some district courts (ruling before the Seventh Circuit's opinion in Gibson) read this interpretation to mean that a creditor could choose to disclose neither the actual amount of any upcharge nor the possible existence of an upcharge.
In support of its argument, the Greens contrast their own case with Taylor v. Quality Hyundai, Inc., 150 F.3d 689 (7th Cir. 1998). In Taylor, the automobile dealer's RIC listed an amount paid to a third party for extended warranty coverage. This creditor also included an upcharge, which the Seventh Circuit concluded was not apparent on the face of the RIC. Id. at 694-95. The Greens argue that their case is different because the actual amount paid to the third party (Louisiana) is readily available through public documents. In contrast, the actual amount paid to third parties in Taylor (the party offering the extended warranty) may not have been as readily available to the assignee.
Taylor, 150 F.3d at 694. The Eleventh Circuit has since agreed with Taylor and stated that "the plain language of the statute forbids us to [resort to evidence or documents extraneous to the disclosure statement]." Ellis v. General Motors Acceptance Corp., 160 F.3d 703, 709 (11th Cir. 1998). The fact that Taylor and Ellis involved payments to third parties for extended warranty services--as opposed to state licensing fees--is a distinction that has no effect.
The Taylor court noted that overriding the FTC clause in this context does not nullify it entirely. Taylor, 150 F.3d at 693. The clause still serves a very useful purpose for the plaintiffs. For example, " [i]f the cars they purchase turn out to be lemons and they assert a right to withhold payment against the sellers, they may also assert the same right against the assignees." Id. Thus, § 1641(a) limits assignee liability on only one set of claims (i.e., the specified TILA claims). The Taylor court further reasoned that the FTC clause, "even though contained within the contract, was not the subject of bargaining between the parties, and indeed could not have been. It is part of the contract by force of law, and it must be read in light of other laws that modify its reach." Id.14
12 C.F.R. Part 226, Supp. I, § 226.18(c) (1) specifically allows creditors to provide an itemization as a matter of course, without notifying the consumer of the right to receive it
Now codified at 12 C.F.R. Part 226, Supp. I, § 226.18(c) (1) (iii)-2 (1999)
See, e.g., Gibson v. Bob Watson Chevrolet-Geo, Inc., No. 95-C-6661, 1996 WL 316975 (N.D. Ill. June 10, 1996) (holding that defendant does not violate TILA when it failed to disclose existence of an upcharge), rev'd, 112 F.3d 283 (7th Cir. 1997); Taylor v. Quality Hyundai, Inc., 932 F. Supp. 218 (N.D. Ill. 1996) (same), aff'd in part and rev'd in part, 150 F.3d 689 (7th Cir. 1998); Abercrombie v. William Chevrolet/Geo Inc., No. 95-C-3119, 1996 WL 251435 (N.D. Ill. May 8, 1996) (same); El-Mohammed v. Old Orchard Chevrolet-Geo, Inc., No. 96-C-3774, 1997 WL 106243 (N.D. Ill. Feb.10, 1997) (same); Bambilla v. Evanston Nissan, Inc., No. 94-C-6818, 1996 WL 284954 (N.D. Ill. May 21, 1996) (holding that defendant violated TILA by failing to note the existence of an upcharge); Alexander v. Continental Motor Werks, Inc., 933 F. Supp. 715 (N.D. Ill. July 16, 1996) (same)
The relevant Fifth Circuit cases (Jones and McGowan) deal with FRB regulations. However, Levis Motors has offered no good reason for treating official FRB interpretations differently from FRB regulations in this particular context
See, e.g., Alexander v. Continental Motor Werks, Inc., No. 97 C 5828, 1996 WL 79403, at * 6 (N.D. Ill. Feb.16, 1996) ("In general, courts addressing the issue of TILA assignee liability have found that § 1641(a) limits liability when there is no indication from the disclosure documents that liability may arise.")