Source: https://law.justia.com/cases/federal/appellate-courts/F2/746/931/31210/
Timestamp: 2020-06-02 09:42:41
Document Index: 697641282

Matched Legal Cases: ['§ 1601', '§ 1635', '§ 1635', '§ 1604', 'art 226', 'arts 200', '§ 1635', '§ 1635', '§ 1635', 'arts 200']

Daniel R. Murphy and Susan Murphy, Plaintiffs-appellants, v. Empire of America, Fsa, Defendant-appellee, 746 F.2d 931 (2d Cir. 1984) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Second Circuit › 1984 › Daniel R. Murphy and Susan Murphy, Plaintiffs-appellants, v. Empire of America, Fsa, Defendant-appel...
Daniel R. Murphy and Susan Murphy, Plaintiffs-appellants, v. Empire of America, Fsa, Defendant-appellee, 746 F.2d 931 (2d Cir. 1984)
U.S. Court of Appeals for the Second Circuit - 746 F.2d 931 (2d Cir. 1984) Argued Sept. 12, 1984. Decided Oct. 12, 1984
Daniel R. Murphy and Susan Murphy appeal from an order of the Western District of New York entered by Judge Michael A. Telesca, 583 F. Supp. 1563, granting the motion of defendant Empire of America, FSA ("Empire") for summary judgment dismissing their action under the Truth-In-Lending Act ("TILA"), 15 U.S.C. § 1601, et seq. The Murphys sought enforcement of their purported rescission of their agreement with Empire for a loan of $27,000 to them, reimbursement of costs and fees paid in anticipation of the consummation of the transaction, a civil statutory penalty, and reasonable attorney's fees. See 15 U.S.C. §§ 1635(b), 1640. We affirm.
On January 31, 1984, the Murphys commenced the present action in the New York State Supreme Court, County of Monroe, from which it was removed by Empire to the Western District of New York. Their complaint alleges that under TILA, Sec. 125(a), 15 U.S.C. § 1635(a), they had the right to rescind the transaction because there had not been a "consummation" of it as that term is used in TILA and is defined in Regulation Z, 21 C.F.R. Sec. 226.23(d) (2), promulgated by the Board of Governors of the Federal Reserve System. Judge Telesca held that consummation of the transaction had occurred at the time when the commitment contract was executed and delivered to Empire by the Murphys (i.e., on November 18, 1982), rendering ineffective their January 31, 1983, purported rescission or cancellation, which was not executed until more than three business days after both the execution and delivery of the commitment and their receipt of the disclosure and cancellation materials the TILA requires.
Congress did not define the term "consummation of the transaction" as used in Sec. 125(a). However, it delegated to the Board of Governors of the Federal Reserve System the authority to promulgate regulations that would implement the legislation. See TILA Sec. 105(a), 15 U.S.C. § 1604(a). " [A]bsent some obvious repugnance to the statute, the Board's regulation implementing this legislation should be accepted by the courts, as should the Board's interpretation of its own regulation." Anderson Bros. Ford v. Valencia, 452 U.S. 205, 219, 101 S. Ct. 2266, 2273, 68 L. Ed. 2d 783 (1981). Indeed, " [u]nless demonstrably irrational, Federal Reserve Board staff opinions construing the Act or Regulation should be dispositive ...." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565, 100 S. Ct. 790, 796, 63 L. Ed. 2d 22 (1980).
"Consummation" is defined in Regulation Z (the provisions of Part 226 of Title 12 of the C.F.R. are commonly known as Regulation Z) as "the time that a consumer becomes contractually obligated on a credit transaction."1 The Official Staff Interpretation of this definition notes:"1. State law governs. When a contractual obligation on the consumer's part is created is a matter to be determined under applicable law; Regulation Z does not make this determination. A contractual commitment agreement, for example, that under applicable law binds the consumer to the credit terms would be consummation." Regulation Z, Supplement I, Commentary 2(a) (13) (at p. 684 of 12 C.F.R. Parts 200-299 (1984)).
Under New York law the consumer's acceptance of a lender's commitment offer constitutes a binding contract. For such a commitment contract to exist it is only necessary that the borrower and lender concur as to the essential terms of the future mortgage transaction. See Avalon Construction Corp. v. Kirch Holding Co., 256 N.Y. 137, 142, 175 N.E. 651, 652 (1931); Zelazny v. Pilgrim Funding Corp., 41 Misc.2d 176, 181, 244 N.Y.S.2d 810, 816 (Nassau County, 1963) ("A commitment letter to a prospective borrower constitutes a contract and one who has suffered damage as a result of a breach of such contract may recover damages for the breach thereof."); Dubin Weston, Inc. v. Louis Capano & Sons, Inc., 394 F. Supp. 146, 155 (D.C.Del.1975).
Indeed, one New York appellate court, faced with substantially the question before us, held in Gramatan Home Investors Corp. v. Mack, 70 A.D.2d 288, 421 N.Y.S.2d 124 (3d Dept.1979), that a consumer credit transaction was "consummated," as that term is used in 15 U.S.C. § 1635(a), upon execution of the contract for extension of credit rather than upon the later execution of the note and mortgage that were the subject of the transaction. In rejecting the borrower's claim that the transaction had not been consummated until the execution of the note and mortgage the court stated:
Appellants' contention that the legislative history of Sec. 125(a) of TILA, 15 U.S.C. § 1635(a), supports their interpretation of the statute as not intending the "consummation of the transaction" to occur until the closing of the loan and mortgage must be rejected. Although Congresswoman Sullivan, during a House debate on a TILA conference report, stated that Sec. 125(a) gave the "buyer ... three days grace ... after he was told that he was signing a mortgage," 114 Cong.Rec. 14398 (1968), her remark was immediately controverted by Congressman Cahill, an advocate of TILA, who stated that there was a need to "establish some legislative history" because, in his words, "I do not read the amendment as the gentlewoman from Missouri [Congresswoman Sullivan] reads it. I think there are serious questions as to interpretation." Id. In any event, such isolated remarks are entitled to little or no weight, particularly when they are unclear or conflict with one another, as distinguished from a legislative committee's formal report on its enactment, see Chrysler Corp. v. Brown, 441 U.S. 281, 311, 99 S. Ct. 1705, 1722, 60 L. Ed. 2d 208 (1979), or when there is no official legislative history on the enactment, see, e.g., Davis v. Federal Deposit Ins. Corp., 620 F.2d 489, 491 (5th Cir. 1980) ("the legislative history [of TILA] is virtually nonexistent"); Eby v. Reb Realty, Inc., 495 F.2d 646, 651 (9th Cir. 1974) (noting "the absence of congressional history"). No committee report exists with reference to TILA, probably for the reason that the conference version of the bill, which differed substantially from the provisions initially passed by the House, was adopted by the House without debate. 114 Cong.Rec. 14397 (1968). The absence of any legislative history was noted by several members of the House, including Congressman Poff, who stated:
" [O]ne of the essential components of the legislative process often is the writing of legislative history. Courts which undertake to interpret congressional intent in future years will find a want of true legislative history when they read the Congressional Record for today.
We find no merit in appellants' other arguments. Our holding is not inconsistent with language of Sec. 125(b) of TILA, 15 U.S.C. § 1635(b), to the effect that rescission voids "any security interest given by the obligor." Neither this language nor that of the implementing provisions of Sec. 226.23 of Regulation Z, 12 C.F.R. Sec. 226.23(d) (1) (1984), implies that a security interest must have been given before the transaction may be rescinded. It merely provides that when a security interest has been given (as would be the case when a note and mortgage are executed without any prior commitment) that interest becomes void upon rescission.
12 C.F.R. Sec. 226.2(a) (13). Prior to 1982 Regulation Z provided that "consummation" occurred when "a contractual relationship was created between a creditor and a customer ... irrespective of the time of performance of either party." 12 C.F.R. Sec. 226.2(kk) (1980). The 1982 change of this language to provide that "consummation" occurs when "a consumer becomes contractually obligated on a credit transaction," 12 C.F.R. Sec. 226.2(a) (13), did not, as appellants argue, postpone consummation to "the time the loan is made and the consumer agrees to repay the debt." (Appellants' Br. 18). As the Official Staff Interpretation makes clear, the change was designed to insure that consummation would occur only when contractual obligations bound the parties to the credit terms, not when there had merely been some investment in the transaction, such as the making of a non-refundable deposit. Regulation Z, Supplement I, Commentary 2(a) (13); 12 C.F.R. Parts 200-299, at 684 (1984)