Case Name: Geter ANDERSON and Loretta Anderson, Appellants, v. SOUTHERN DISCOUNT COMPANY, Appellee
Court: United States Court of Appeals for the Fourth Circuit
Jurisdiction: United States
Decision Date: 1978-09-21
Citations: 582 F.2d 883
Docket Number: No. 77-1587
Parties: Geter ANDERSON and Loretta Anderson, Appellants, v. SOUTHERN DISCOUNT COMPANY, Appellee.
Judges: Before HAYNSWORTH, Chief Judge, and WINTER and LAY, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 582
Pages: 883–887

Head Matter:
Geter ANDERSON and Loretta Anderson, Appellants, v. SOUTHERN DISCOUNT COMPANY, Appellee.
No. 77-1587.
United States Court of Appeals, Fourth Circuit.
Argued April 3, 1978.
Decided Sept. 21, 1978.
Herman L. Stephens, Winston-Salem, N. C. (Stephens, Peed & Walker, Winston-Salem, N. C., on brief), for appellants.
Walter W. Pitt, Jr., Winston-Salem, N. C. (Deal, Hutchins & Minor, Winston-Salem, N. C., on brief), for appellee.
Before HAYNSWORTH, Chief Judge, and WINTER and LAY, Circuit Judges.
Donald P. Lay, United States Circuit Judge for the Eighth Circuit, sitting by designation.

Opinion:
HAYNSWORTH, Chief Judge:
This is an action by Mr. and Mrs. Anderson against the Southern Discount Company in which they assert that the Truth-in-Lending Act was violated in three respects. Summary judgment was entered for the defendant and we affirm.
I.
In the note there was a provision that the Andersons would pay reasonable attorneys' fees in the event that, after default, a lawyer was engaged to institute legal proceedings for the collection of the note. The potential attorneys' fees, the Andersons say, are a "charge" which is part of the price of credit to them and that disclosure of the actual amount of the Andersons' attorneys' fees, or of a ceiling upon them, should be made. Their reliance is upon § 226.8(b)(4) of Regulation Z.
The Federal Reserve Board has had occasion to interpret that section of Regulation Z and has consistently read it to require disclosure of the attorneys' fees only if they are automatically imposed in the event of default.
Here, there was no imposition of attorneys' fees automatically upon default. Southern Discount Company was free to waive delinquencies, to work out extension of payment agreements, seek agreement for the repossession of the collateral or resort to lawful self help in its repossession. Only if Southern chose to resort to legal proceedings for collection of the note and actually engaged a lawyer for that purpose would the reasonable attorneys' fees be chargeable to the Andersons.
II.
The note was secured by a refrigerator, a kitchen range, a washing machine, a television set and a number of pieces of household furniture, each of which was listed and identified. The agreement also provided for a security interest in "all additions and accessions" to the listed chattels. This is said to constitute a violation of § 1631(a) and 1639(a) of the Truth-in-Lending Act and § 225.6(a) and 226.8(b)(5) of Regulation Z.
The Uniform Commercial Code limits a security interest in after-acquired consumer goods to those acquired within ten days after the lender gave value. U.C.C. 9-204(4)(b). The Andersons contend that the phrase "all additions and accessions" covers generally all after-acquired household goods and that the Truth-in-Lending Act was violated by nondisclosure of the ten-day limit.
Use of the words "additions and" tends toward the creation of ambiguity, as the district judge clearly recognized, but read in the context of the instrument and of a secured interest in specified items of household furniture, we cannot read it as broadly including all after-acquired furniture and household furnishings. The "additions and accessions" must be to specified listed items. An ice-making machine incorporated in the refrigerator would be an accession and included in the security agreement but a new record player would hardly be an "addition" to the kitchen range or the dining room table. Even if a second refrigerator were acquired, we cannot read the phrase "additions and accessions" to the existing refrigerator as including the second. We think the obvious meaning and the only proper interpretation of the phrase is that it covers only accessions, articles later acquired and physically attached to one of the listed articles.
III.
Finally, the Andersons complain that in the note there is a provision that interest accrues at the rate of three per cent per month on the unpaid principal balance of up to three hundred dollars and one and one-half per cent per month on any unpaid principal balance exceeding three hundred dollars.
In Mason v. General Finance Corporation, 542 F.2d 1226 (4th Cir. 1976), we did find a violation of the statute when information about a so-called "contract rate" and the "annual percentage rate" disclosure required by federal law was included in the disclosure statement without the separation of the disclosures required by the federal statute. We thought such co-mingled disclosure confusing, but we do not have such a case here. Here, the disclosure statement, the agreement about the collateral and the promissory note are all on the same long piece of paper, but the disclosure statement is clearly and distinctly separated from the promissory note. The disclosure statement contains all of the information required to be disclosed by the Truth-in-Lending Act, providing the borrowers with all of the information they need for "comparison shopping." It contains no other information derived from different methods of computation or which might make the information in the disclosure statement confusing. The complaint is that the terms of the note are not the same as the terms of the disclosure statement. However, we find that they differ out of necessity.
The finance charge and the annual percentage rate disclosed in the federal disclosure statement are computed upon the assumption that all payments of principal and interest will be made on the due dates, neither sooner nor later. That, of course, is not the real world. Borrowers are sometimes tardy and sometimes anticipatory. Accordingly, the note here provides for the computation of interest to the actual date of each payment. Additionally, the borrowers were given the right of prepayment of principal without penalty.
Necessarily, the note was east in terms of rates of interest. Had it contained no provision for interest, it would have been incomplete. Had it incorporated the hypothetical computation upon which the information in the disclosure statement is derived, it probably would have been in violation of state law and, at least, unfair to the borrower who prepays his obligations.
Of course, the note and its terms are clearly and distinctly separated from the disclosure statement and the information it contains. See Regulation Z, 226.6(b)(c); 12 C.F.R. 226.6(b) and (c).
IV.
We conclude that the district court properly found no violation of the Truth-in-Lending Act.
AFFIRMED.
. FRB Letters of June 23, 1970, March 19, 1970 (No. 290), CCH Consumer Credit Guide, Par. 30,404, 30,528.
. If the note had called for the automatic imposition of attorneys' fees, so that they would amount to a delinquency charge within the meaning of Regulation Z, we do not suggest that the amount of such fees should be fixed in advance in a dollar sum. The point is not before us, but it probably would be detrimental to the interest of borrowers if potential legal fees were required to be fixed in an amount in advance when the extent of the necessary legal service is unknown.
. Enacted in North Carolina as N.C.G.S. § 25-9-204(4)(b).
. See, e. g. Pollock v. General Finance Corporation, 535 F.2d 295 (5th Cir. 1971); Tinsman v. Moline Beneficial Finance Company, 531 F.2d 815 (7th Cir. 1971).
. Mourning v. Family Publications Service, 411 U.S. 356, 364, 93 S.Ct. 1652, 36 L.Ed.2d 318 (1973).