Court Opinion

ID: 194497
Source: CourtListenerOpinion
Date Created: 2011-02-07 02:18:32+00
Date Added: 2024-06-11T17:26:37.369134
License: Public Domain

January 19, 1993
                  UNITED STATES COURT OF APPEALS
                      FOR THE FIRST CIRCUIT
                                           

No. 91-2343

              PAULINE CHRONIAK and THOMAS PUGLIESE,

                      Plaintiffs, Appellees,

                                v.

           GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,

                     Defendants, Appellants.

                                           

No. 92-1121

                         THOMAS PUGLIESE,

                       Plaintiff, Appellee,

                                v.

           GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,

                     Defendants, Appellants.

                                           

No. 92-1317

                         THOMAS PUGLIESE,

                      Plaintiff, Appellant,

                                v.

           GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,

                      Defendants, Appellees.

                                           

No. 92-1318

                         THOMAS PUGLIESE,

                      Plaintiff, Appellant,

                                v.

           GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,

                      Defendants, Appellees.

                                           

          APPEALS FROM THE UNITED STATES DISTRICT COURT

                FOR THE DISTRICT OF NEW HAMPSHIRE

          [Hon. Martin F. Loughlin, U.S. District Judge]
                                                       

                                           

                              Before

                       Selya, Cyr and Stahl,

                         Circuit Judges.
                                       

                                           

  Richard  F.  Johnston  with  whom  Kenna,  Johnston,  Craighead  &
                                                                    
Sharkey, P.A. were on brief for appellants.
           
  Peter S. Wright, Jr.  with whom Wright & Cherry were on brief  for
                                                 
appellees.

                                           

                                           

          Cyr,  Circuit  Judge.   Appellants  Armand  Roberts and
          Cyr,  Circuit  Judge.
                              

Golden  Investment Corporation  challenge  the  district  court's

interpretation of three New Hampshire statutes regulating lending

and debt  collection practices.  Appellee  Thomas Pugliese cross-

appeals from the  district court  order disallowing  an award  of

attorney  fees.  We affirm the district court judgment and remand

for reconsideration of the application for attorney fees.

                                I

                            BACKGROUND
                                      

          In  June  1986, Armand  Roberts  and Golden  Investment

Corporation  loaned Pugliese  $75,000 with  which to  arrange his

release  on  bail.   Pugliese  and  his  aunt,  Pauline Chroniak,

cosigned  a promissory note which stated the dollar amount of the

interest charge  ($1,384.61 biweekly), but not  the interest rate
                                                                 

by percentage  (45% annually).  The  loan was secured  by a first
             

mortgage on the Chroniak residence.   The loan was repaid in full

by June 1988.

          In July  1987, appellants loaned Pugliese an additional

$20,000 to buy equipment for his trucking business.  Pugliese and

Chroniak  executed a promissory  note in  the amount  of $27,000,

which  required a  payment of  $7,000 within  ninety days  of its

execution.  

                                3

The loan was  secured by a second mortgage  on the Chroniak home.

In  July  1988,  Pugliese  defaulted on  the  loan  after  making

principal  payments totalling  $18,000.   Chroniak made  what she

believed was a "final" $2,000 payment on the second mortgage loan

shortly thereafter.  Claiming  that $27,000 (rather than $20,000)

had been advanced to  Pugliese under the second loan,  appellants

demanded   an  additional   $32,000  to   discharge   the  second

mortgage.1   Pugliese's  counsel  notified  appellants that  both

loans violated New Hampshire  law, as the notes did  not disclose

the percentage rate of  interest.  Appellants promptly instituted

foreclosure proceedings on the Chroniak residence.

          In  November 1988,  Pugliese  and Chroniak2  brought  a

six-count complaint against Roberts  and Golden Investment in New

Hampshire  federal district  court, alleging,  inter  alia,3 that
                                                          

the interest  and repayment  provisions in both  promissory notes

violated three New Hampshire statutes.

          Relying on the Second Mortgage Home Loan Act, N.H. Rev.

                    

     1Because Pugliese  made his  initial loan payment  after the
specified due  date, the note provided that interest would there-
after accumulate at  the rate of  $2,000 per month.   By  October
1988, as a result of this rapid acceleration in interest accrual,
appellants  made claim  to  an outstanding  principal balance  of
$16,000, accrued interest of $15,000, and legal fees of $1,000.

     2In December  1988, the foreclosure  proceedings against the
Chroniak  residence  were  suspended pending  resolution  of  the
present litigation.  In October 1991, Chroniak settled her  claim
against appellants.

     3The original complaint alleged violations of  the Racketeer
Influenced  and Corrupt  Organizations  statute.   See 18  U.S.C.
                                                      
  1962(c).   The RICO claims  were dismissed and  form no part of
the present appeal.

                                4

Stat. Ann.   398-A [hereinafter:  "SMHLA"], the complaint alleged

that  (1)  appellants  had  forfeited  their  "right  to  collect

interest"  on  the  notes  by  failing  to  state  the  "rate  of

interest,"  thereby entitling  plaintiffs  to a  "refund" of  all

interest payments  on the $75,000 note  (i.e., $74,768.94) (SMHLA
                                             

  3),4  (2)  appellants' violations  of  SMHLA,  section 3,  con-

stituted  criminal offenses  because they  were  "willful" (SMHLA
                  

  7a),  and (3) appellants overstated by $7,000 the amount of the

loan  proceeds  received  by  Pugliese on  the  second  note,  or

included  a $7,000 prepayment penalty in the second note (SMHLA  

2 (III, IV)).

          Relying on the Consumer Protection Act, N.H. Rev. Stat.

Ann.   358-A [hereinafter:  "CPA"], plaintiffs claimed (1) actual

damages because appellants' violations  of the SMHLA  constituted

"unfair or  deceptive act[s]  or [trade] practice[s]"  (CPA   2),

and (2) double or treble damages because appellants' violation of

section 2 of the CPA was "willful or knowing" (CPA   10). 

          Finally,  relying on  the  Unfair Collection  Practices

Act, N.H. Rev. Stat. Ann.   358-C [hereinafter:  "UCPA"],  plain-

tiffs claimed that (1) appellants qualified both as "debt collec-

tors" 

                    

     4The complaint did not  demand reimbursement of the interest
paid on the $27,000 note  but merely a declaration that the  note
had been  satisfied by plaintiffs' payments  totalling $20,000 in
principal, an issue  which the jury resolved adversely  to appel-
lants.

                                5

(UCPA   1)  and "creditors" engaged in  "consumer credit transac-

tions"  in  the "ordinary  course  of  business," (2)  appellants

attempted  to  collect  interest  on  the  $75,000  note5 "in  an

unfair,  deceptive,  or  unreasonable  manner,"  as the  interest

charges were  not "expressly  authorized" by the  loan agreement,

hence were  not "legally chargeable" to the plaintiffs (UCPA    2

& 3), and  (3) appellants' violation  of the UCPA  simultaneously

violated CPA,  section 2,  which authorizes awards  of double  or

treble damages (UCPA   4(IV)).

          Appellants initially were  granted summary judgment  on

the ground that the  SMHLA, whose violation formed the  bases for

liability under  the CPA and  the UCPA, exempted  appellants from

all  liability because  (1) Roberts  was not  licensed  under the

SMHLA  to conduct  "the business  of [providing]  second mortgage

loans,"  and (2)  both loans  were "incidental" to  Roberts' real

estate  investment business.    On appeal,  these questions  were

certified to  the New  Hampshire Supreme Court,  which determined

that  the  SMHLA applies  both to  licensed  lenders and  to "any
                                                        

person making a loan secured by  a mortgage."  Chroniak v. Golden
                                                                 

Inv.  Corp., 133 N.H. 346, 349-50, 577 A.2d 1209, 1212-13 (1990).
           

Acknowledging that loans "incidental" to a real estate investment

business would be exempt under 

                    

     5Unlike  the  first  note  ($75,000),  which   arguably  was
advanced  for  "personal" purposes  (i.e.,  bail),  see UCPA    1
                                                       
(defining "consumer"), the $27,000 note evidenced a business loan
not actionable under the UCPA as a "consumer credit transaction."

                                6

the   SMHLA,  the   New   Hampshire  Supreme   Court  noted   the

"improbability that a loan advanced  for purposes of posting bail

or purchasing a boat trailer could ever be  considered incidental

to  the [real estate investment] business."  Id. at 352, 577 A.2d
                                                

at  1214.  Thereafter, the summary judgment was vacated on appeal

and the case was remanded for trial.

          In its final  charge to  the jury,  the district  court

read  verbatim excerpts  from the  three New  Hampshire statutes.
                       

The  jury ultimately  responded in  the following  manner to  the

special verdict form and a special interrogatory:

          1.   The loans extended by  Golden Investment
               Corporation  to   Thomas  Pugliese  were
               incidental to the  conduct or the opera-
                         
               tion   of   the   business   of   Golden
               Investment Corporation.  (Question 1)

          2.   Roberts  knew  that   the  $75,000   and
               $27,000  notes  failed  to disclose  the
               "rate of interest."  (Questions 2, 3)

          3.   The    $75,000    and    $27,000    loan
               transactions were not "strictly private"
               in nature  and  were undertaken  in  the
               "ordinary   course   of   a   trade   or
               business."  (Questions 4,5)

          4.   Pugliese  incurred  $20,000 in  damages.
               (Question 6)

          5.   Pugliese  received  only $20,000  in the
               course of the loan transaction evidenced
               by  the  $27,000 promissory  note signed
               July 27, 1987.  (Special Interrogatory)

On  October 24, 1991,  the  district court  entered judgment  for

Pugliese in  the amount of $20,000,  rejecting Pugliese's request

for an award of attorney fees.

                                7

                                II

                            DISCUSSION
                                      

A.   The Roberts and Golden Investment Appeal6
                                             

     1.  "Technical" Violation
                              
          of SMHLA, Section 3 
          of SMHLA, Section 3
                             

          The jury  was instructed on five  substantive statutory

provisions (SMHLA,    2 & 3,  see infra pp. 9, 11; CPA,    2, see
                                                                 

infra p.  13; and UCPA     2 & 3).   Appellants concede  that the
     

verdicts may have been based  on their failure to state the  rate

of  interest  in  the   promissory  notes,  which  constituted  a

predicate violation of  both the CPA and the UCPA.   On the other

hand, appellants argue  that the  jury simply  may have  bypassed

consideration  of the CPA and the UCPA altogether, instead basing

its award  solely on appellants' direct  "technical" violation of
                 

the disclosure requirements in SMHLA, section 3:

                    

     6Although it is undisputed that the jury found that Pugliese
sustained  monetary  damages  as  a  consequence  of  appellants'
"knowing" failure to disclose the rate of interest in the promis-
sory  notes,  three  factors  hamper our  review  of  appellants'
various challenges to the jury instructions.  First, the district
court  read  verbatim  excerpts  from  the  three  New  Hampshire
                               
statutes, but  during its  deliberations the jury  apparently was
provided with unexcerpted photocopies  of the statutes, including
                         
extraneous, uninstructed  portions.   Second,  the jury  received
little guidance as to  whether (or how) the three  statutes might
be  interrelated.   Finally,  the special  verdict  form did  not
require the jury to indicate the statutory provision on which its
award was based.   Consequently, we must scrutinize the statutes,
the jury charge, and the special verdict form to  ensure that the
jury  verdicts were  not predicated  on any  impermissible basis,
including an  incorrect application of the statutory  law.  Brown
                                                                 
v. Trustees of Boston  Univ., 891 F.2d 337,  353 (1st Cir.  1989)
                            
("'Our  principal  focus in  reviewing  jury  instructions is  to
determine whether they tended  to confuse or mislead the  jury on
the controlling  issues.'") (quoting  Service Merchandise  Co. v.
                                                              
Boyd Corp., 722 F.2d 945, 950 (1st Cir. 1983)), cert. denied, 496
                                                            
U.S. 937 (1990).

                                8

          If any note secured  by a second mortgage and
          any such mortgage, in the case of loans other
          than  open-end  loans,  does  not,  among its
          provisions,  specify  as  separate items  the
                                                  
          principal  sums, the  rate  of interest,  the
                                                 
          period  of the  loan  and  the  periodic  due
          dates,  if any,  of  principal  and  interest
          . . . then the lender  shall have no right to
                                                       
          collect interest.
                          

(Emphasis  added.)    Appellants  further argue  that  the  plain

language of section 3 merely affords  the borrower an affirmative

defense in any action initiated by the lender to collect interest
       

on the note, and unlike other sections of the SMHLA (e.g.,    2 &
                                                         

7), affords the borrower no affirmative right to recover interest

paid to the lender.7  

          The  procedural  peregrinations  of the  present  claim

almost daunt description.   Appellants raised the claim initially

in their motion for summary judgment, see supra  pp. 6-7, but the
                                               

district court  granted summary judgment on  an alternate ground.

On appeal, the summary  judgment was vacated.   Following remand,

appellants renewed  their motion for summary  judgment.  Pugliese

opposed  summary   judgment  on   the  ground  that   a  criminal
                                                                 

("willful") violation of SMHLA,  section 3, would give rise  to a

common-law cause of  action for restitution of  the interest paid

on  the illegal  loan.    Prior  to  trial,  the  district  court

purportedly  granted appellants'  motion to  dismiss the  "common

                    

     7We reject appellants' contention that the complaint did not
allege that  SMHLA,   3, created  an independent cause  of action
for rescission of the  loan agreement and refund of  the interest
payments.   Count one alleged that the $75,000 note was "illegal"
and  "[p]laintiffs are  entitled  to have  all interest  payments
refunded. . . ."

                                9

law" claims based on SMHLA, section 3.  Thus, the  jury was given

no instruction on any "common law" claims based on SMHLA, section

3.

          Normally, this  would end  our inquiry.   As previously

suggested, however,  two factors  aligned to configure  a correct

jury  instruction  on  the applicable  law.    In  the course  of

defining  the predicate conduct that could serve as an "unfair or

deceptive"  trade practice under the CPA and the UCPA, sections 2

and 3  of the SMHLA  were read, verbatim, to  the jury.   But the
                                        

court  did not  instruct the  jury  that it  could  not return  a
                                                                 

verdict based exclusively on the  provisions of SMHLA, section 3.
                                                                

Moreover, the court later  denied Pugliese's request for attorney

fees because it could  not discern whether the jury  had premised

its verdict exclusively on SMHLA, section 3, the  only one of the
                       

three statutes presented to the jury which does not authorize fee

shifting.  See infra pt. II.B.
                    

          We  agree   with  the  district  court   that  no  mere

"technical" violation of SMHLA,  section 3, could give rise  to a

common-law cause  of action  for restitution.8   Nevertheless, we
          

conclude  that  the  SMHLA,  holistically  construed,  creates  a

                    

     8Pugliese  based this  implied  private cause  of action  on
                                   
Karamanou v. H.V.  Greene Co., 80 N.H. 420, 423,  124 A. 373, 375
                             
(1922), which held  that a  person who sustains  damages under  a
prohibited contractual provision  may, "after the  transaction is
finished and completed [,] . .  bring [an] action and defeat  the
contract."   (Citation omitted).   In Karamanou and  its progeny,
                                               
however, the defendants committed criminal violations of statutes
                                          
designed to  protect the plaintiffs.   Pugliese  pursued no  such
allegation,  nor did he make  it the subject  of a special inter-
rogatory.  See infra note 17.
                    

                                10

statutory cause of action for so-called "technical" violations of
         

section 3.   First,  a jury  determination that  Roberts violated

SMHLA,  section  3,   necessarily  would  entail  a   concomitant

violation  of SMHLA,  section 2  (also read  to the  jury), which

states in pertinent part:

          The  allowable rate  of interest  computed on
                                                    
          the  unpaid  balance  that  any   person  may
          directly  or  indirectly   charge,  take   or
                                                       
          receive for a second mortgage loan secured by
                 
          property which  is occupied in whole  or part
          at  the time said loan  is made as  a home by
          any obligor  on the  mortgage debt or  by any
          person  granting  or  releasing any  interest
          under said mortgage shall be  the rate agreed
                                                       
          upon  in the  note between  the  borrower and
                            
          lender, and following the sixth month  of any
          period in which a loan has been in continuous
          default not more than 1-1/2 percent per month
          [18% annual] on any unpaid balances.

(Emphasis added.)  The synergism between  sections 2 and 3 of the

SMHLA  derives from  their  shared  use  of  the  term  "rate  of

interest."  Under section 2, a lender may not compute (hence, may

not receive) interest at a "rate" not  "agreed upon in the note."
           

Thus, a covered lender's  receipt of interest charges based  on a

note which discloses no rate of interest violates both sections 2
                                                      

and 3.   Furthermore,  SMHLA, section  7,  provides in  pertinent

part:

          Any loan made in violation of  [section] 398-
                                                       
          A:2 by  any person  shall be  discharged upon
             
          payment or tender by the debtor or any person
          succeeding  to  his  interest  in  such  real
          estate   of   the   principal  sum   actually
          borrowed.    The  superior court  shall  have
          jurisdiction  of all suits  arising under RSA
                                                       
          398-A:2 and  if a  finding is made  that such
                 
          loan  secured by  any such  mortgage violates
          said section such borrower shall  be entitled
                                    
          as part of  his costs to a reasonable fee for
                                                       

                                11

          the services of his attorney in such suit.
                                      

(Emphasis added.)  Accordingly,  as the New Hampshire Legislature

inarguably afforded  borrowers a right of  action for restitution

of  the interest paid in  excess of the  interest "agreed upon in

the note,"9 SMHLA,   2, even  a jury verdict based exclusively on

a so-called  "technical" failure to disclose the rate of interest

would comport with the applicable New Hampshire law as instructed

by the district court.10

     2.  "Unfair or Deceptive Act or 
          Practice" Under CPA, Section 2
                                        

          Appellants contend  that  it was  reversible  error  to

instruct the jury that the mere omission of the rate of  interest

                    

     9We  ascribe  no  controlling  significance  to  the  jury's
failure to award Pugliese  the entire amount of interest  paid on
the $75,000 note.   A lender who commits a  "technical" violation
of a  credit disclosure statute  may be entitled  to set off  the
reasonable  value of  the goods  or money  advanced while  in the
possession of the buyer  or borrower.  See, e.g.,  General Motors
                                                                 
Acceptance Corp. v. Kyle, 351 P.2d 768, 774 (Cal. 1960).
                        

     10Appellants argue that a "technical" violation of a lending
disclosure statute  should not invariably result  in the voidance
of a  loan contract  or in  the borrower's  right to recover  the
interest  paid  on  the   note.    Cf.  DeCato  Bros.,   Inc.  v.
                                                             
Westinghouse Credit  Corp., 129  N.H. 504,  529  A.2d 952  (1987)
                          
(analogous case under   399-B);  First Fed. Sav. & Loan  Ass'n v.
                                                              
Le  Clair, 109 N.H. 339, 253 A.2d 46 (1969) (same); American Home
                                                                 
Improvement, Inc. v. MacIver,  105 N.H. 435, 201 A.2d  886 (1964)
                            
(same).   Unlike the SMHLA, however,    339-B explicitly provides
only  one statutory remedy    criminal penalties.  In DeCato, for
                                                            
example,  the court  addressed  the limited  question "whether  a
consequence  [i.e.,  restitution  of  an  undisclosed  prepayment
                  
remedy] beyond the one prescribed by the statute [i.e.,  criminal
                                                      
penalties  for the  lender]  should attach  [to the  violation]."
DeCato,  129 N.H. at 509,  529 A.2d at 955.   These cases form no
      
basis for the  proposition that  a "technical"  violation of  the
SMHLA could  not support a  jury verdict depriving  appellants of
the  benefit of their bargain (i.e., the undisclosed interest), a
                                   
remedy explicitly authorized in SMHLA,   7.

                                12

from  the notes would constitute  an "unfair or  deceptive act or

practice  in the  conduct of  any trade  or business"  within the

meaning of CPA, section 2, which provides, in pertinent part:

          It shall  be unlawful  for any person  to use
          any  unfair  method  of  competition  or  any
          unfair or  deceptive act or  practice in  the
                                               
          conduct of any trade  or commerce within this
                                           
          state.   Such unfair method of competition or
          unfair or  deceptive  act or  practice  shall
          include, but is not limited to, the following
          [list of thirteen acts] . . . .

(Emphasis  added.)  Appellants argue that:  (1) the New Hampshire

Legislature   has  amended  several   other  consumer  protection

statutes so as to  make their violation a simultaneous  violation

of  the CPA, section 2,  while prior SMHLA  amendments contain no

similar cross-referencing provision, and (2) the evidence adduced

at trial was insufficient to entitle Pugliese to such an instruc-

tion, since the jury  reasonably could not have inferred  that he

was  treated  unfairly  or  otherwise  deceived  by   appellants'

omissions.  

          The current version of  section 2 lists thirteen unfair

or deceptive acts or practices, but the listing is expressly made

non-exhaustive.    Although  the   statute  provides  no  further

explication  and  New Hampshire  caselaw is  sparse, consultation

with both federal and Massachusetts precedent is encouraged.11

                    

     11The CPA itself provides that  courts should "be guided  by
the interpretation and construction  given Section 5(a)(1) of the
Federal Trade Commission Act (15 U.S.C. 45(a)(1)), by the Federal
Trade Commission and the  federal courts."  N.H. Rev.  Stat. Ann.
  358-A:13.   The New Hampshire courts  have invited interpretive
comparisons  with the  "well  developed"  caselaw construing  the
analogous Massachusetts  "unfair  and deceptive  practices"  act,
Mass. Gen. Laws ch. 93A.  See Chase v. Dorais, 122 N.H. 600, 602,
                                             

                                13

          "[W]hether a party has committed an unfair or deceptive

act,  within the meaning of  [the consumer protection  act], is a

question  of fact."   Brennan v. Carvel Corp.,  929 F.2d 801, 813
                                             

(1st Cir. 1991) (citing USM Corp. v. Arthur D. Little Sys., Inc.,
                                                                

28 Mass. App. Ct. 108, 124, 546 N.E.2d 888, 897 (1989)) (emphasis

added);  see also  Pan  American World  Airways,  Inc. v.  United
                                                                 

States, 371 U.S.  296, 306-07  (1963) (meaning  of Federal  Trade
      

Commission  Act  term  "unfair"  must  be  left  to  case-by-case

determination).   A practice is "unfair" if  (1) it is "within at

least  the  penumbra  of  some common-law,  statutory,  or  other
                                                                 

established   concept  of  unfairness,"   (2)  "it   is  immoral,
                                     

unethical,  oppressive,  or  unscrupulous,"  or  (3)  "it  causes

substantial injury to consumers."   Rizzuto v. Joy Mfg.  Co., 834
                                                            

F.2d  7, 8  (1st  Cir. 1987)  (quoting  Purity Supreme,  Inc.  v.
                                                             

Attorney  General, 380  Mass.  762,  777,  407  N.E.2d  297,  301
                 

(1980)); see  also In re  Pfizer, Inc.,  81 F.T.C. 23,  61 (1972)
                                      

(same  standard under Federal Trade Commission Act).  "A practice

may be 'deceptive' . . . if it 'could reasonably be found to have

caused  a person  to act  differently from  the way  he otherwise

would have acted.'"   Kazmaier v.  Wooten, 761 F.2d  46, 51  (1st
                                         

Cir.  1985) (quoting Purity Supreme, 380 Mass. at 777, 407 N.E.2d
                                   

at  301).    The CPA  is  a  "comprehensive  statute designed  to

regulate  business practices  for consumer  protection," and  its

terms should  be "broadly applied."  Gilmore v. Bradgate Assocs.,
                                                                 

                    

448  A.2d  390,  391-92  (1982)  (applying  Massachusetts courts'
definition of statutory term "trade and commerce").

                                14

Inc.,  135  N.H. 234,  235, 604  A.2d  555, 557  (1992) (citation
    

omitted); see also Nei  v. Burley, 388 Mass. 307, 313, 446 N.E.2d
                                 

674,  678 (1983)  ("Legislature  intended the  terms 'unfair  and

deceptive' to grow and change with the times.").

          Given these expansive  premises, appellants'  arguments

fail.  First, even if a technical violation of  SMHLA, section 3,

would not afford  Pugliese an  independent right  of recovery,  a

proposition we reject, the factfinder nonetheless would have been

free to find that appellants'  conduct came within the "penumbra"

of  a statute  (i.e., SMHLA) designed  to protect  consumers from
                    

"unfair"  lending  practices,  and  that  appellants' failure  to

disclose  the  rate of  interest in  the  two notes  went against

established concepts  of fairness  upon which SMHLA  is premised.

See,  e.g., Schubach v. Household Fin. Corp., 375 Mass. 133, 137,
                                            

376  N.E.2d  140,  142  (1978)  (though  the  illegality  of  the

challenged conduct is a relevant inquiry,  even a lawful practice

may  be unfair or  deceptive in some  circumstances); PMP Assocs.
                                                                 

Inc. v.  Globe Newspaper Co., 366 Mass. 593, 595, 321 N.E.2d 915,
                            

917 (1975) (common law  violation need not be shown  under FTCA);

Commonwealth v. De Cotis, 366 Mass. 234, 241, 316 N.E.2d 748, 754
                        

(1974)  ("unfair"  acts  under  FTCA  not  limited  to  practices

forbidden  at common law or  by criminal statute).12   If conduct

                    

     12Massachusetts  caselaw is  replete with  decisions holding
that  a failure  to disclose  a material  fact may  constitute an
unfair or deceptive practice.   See, e.g., Heller v. Silverbranch
                                                                 
Constr.  Corp., 376 Mass. 621, 382 N.E.2d 1065 (1978) (failure to
              
disclose  drainage problem to home buyer);  York v. Sullivan, 369
                                                            
Mass.  157, 338 N.E.2d  341 (1975) (failure  to disclose imminent
rental increase).

                                15

that is not proscribed by any statute may be found "unfair" under

CPA, section 2, conduct squarely within the proscriptive penumbra

of   a   consumer  protection   statute   surely   satisfies  the

"unfairness" requirement.

          Second,  the  jury had  ample  evidence  from which  to

determine  that  appellants'  failure  to disclose  the  rate  of

interest was a  "deceptive" practice  under CPA, section  2.   In

1981, when  New Hampshire  largely deregulated the  mortgage loan

industry  and  eliminated  the  usury laws  applicable  to  these

transactions,  see, e.g.,  N.H. Rev.  Stat.   218.1,  these "full
                        

disclosure"  statutes took on  increased significance as consumer

protection provisions.  Although  disclosure of the dollar amount

of interest charged would  no doubt put many borrowers  on notice

of  the rate of  interest, the statute  presumes that  it will be

difficult for  the average  borrower to calculate  the percentage

rate from the dollar figures; accordingly, the statute places the

burden on the lender to express the rate of interest.  Cf. DeCato
                                                                 

Bros., 129 N.H.  at 508-09, 529 A.2d at 954  (fact that "the rate
     

of  interest  . . .  could   be  readily  ascertained  by  simple

comparison of the principal amount  financed with the face amount

of  the notes  . . .  does not  vitiate noncompliance"  with non-

disclosure statute);  American Improvement  v. MacIver,  105 N.H.
                                                      

435, 438, 201 A.2d 886, 887 (1964) (noting that analogous lending

disclosure  statute,    399-B,  was  enacted to  inform  "average

individuals who have neither  the capability nor the  strength to

calculate  the cost  of  the credit  that  has been  extended  to

                                16

them").   Indeed,  SMHLA, section  3, was  amended in  1967, even

before   deregulation,  specifically  to   eliminate  the  option

previously  allowed the  lender  to express  the interest  charge

either by percentage, "or by its equivalent in money."  N.H. Rev.

Stat.   258:5.13

          We  conclude that  the appellants' failure  to disclose

the percentage interest rate as required  under SMHLA, section 3,

was  sufficient to form a predicate "unfair or deceptive practice

or act" under CPA, section 2, and that the plaintiff was entitled

to such an instruction.14

     3.  "Willfulness" Instruction
                                  

          Appellants argue that the district  court misinstructed

                    

     13Interestingly,  several  witnesses  made widely  divergent
calculations  of the percentage  rate appellants charged Pugliese
    ranging from  36% to  52%.  Additionally,  Pugliese testified
that he would  have "thought about [the loan] a little more," and
was "not sure"  he would have  agreed to its  terms, had he  been
informed  that the annual interest  rate on the  $75,000 loan was
45%.  See, e.g., Southwest Sunsites, Inc. v. FTC,  785 F.2d 1431,
                                                
1435  (9th Cir.) (plaintiff need  not prove actual deception, but
only that representation had  capacity to mislead), cert. denied,
                                                                
479 U.S.  828 (1986); Montgomery Ward & Co. v. FTC, 379 F.2d 666,
                                                  
670 (7th  Cir. 1967) (same);  Goodman v.  FTC, 244 F.2d  584, 602
                                             
(9th Cir. 1957) (same).

     14Appellants cite Welch v. Fitzgerald-Hicks Dodge, Inc., 121
                                                            
N.H.  358,  430  A.2d 144  (1981),  for  the  proposition that  a
violation  of CPA,   2, cannot be established absent a showing of
bad  faith on  the part of  the defendant.   In  Welch, the court
                                                      
found  no  evidence that  the  defendants  "acted in  bad  faith,
dishonestly, or in any way attempted to take unfair advantage . .
."  Id.  at 362, 430 A.2d  at 147 ("We fail  to see how the  good
       
faith attempts of the  defendants to comply with  the terms of  a
standard warranty  can be  classified as  an unfair  or deceptive
practice.")  In Welch, however, the  defendants complied with the
                     
literal  requirements of  their  warranty; in  this  case, it  is
undisputed  that appellants did not comply with the interest rate
disclosure requirements of SMHLA,    2 & 3.

                                17

the jury  that appellants' conduct could  be determined "willful"

if appellants knew that  the rate of interest  was not stated  in

the notes.   Since the  complaint alleged a  violation of  SMHLA,

section  3, and a "willful"  violation of section  3 would expose

appellants to criminal penalties, see N.H. Rev. Stat. Ann.   398-
                                     

A:7a, see infra  p. 19,  appellants argue that  the court  should
               

have  given the jury some sort of mens rea instruction, requiring
                                          

that appellants  have had  specific knowledge that  their conduct

violated a statute.

          The  substantive  provisions   of  the  New   Hampshire

statutes which were read to the jury (SMHLA    2 & 3, CPA    2  &

10 [first clause] and UCPA    2 & 3) do not state a "willfulness"

requirement.  Thus,  the court's extraneous  instruction defining

"willfulness"15  ultimately  imposed  a more  stringent  mens rea
                                                                 

requirement than  required by the  statutory language.   Davet v.
                                                              

Maccarone,  973  F.2d 22,  26 (1st  Cir. 1992)  ("harmless error"
         

standard of review applicable to jury instruction challenge); see
                                                                 

                    

     15The court gave the following instruction to the jury:

     If  you  find  that  either Armand  Roberts  or  Golden
     Investment,  or  [their]  Attorney  . . .   had  actual
     knowledge or  notice of  the violations of  [the SMHLA]
     and of the bar against collecting interest contained in
                                                            
     that  law  and they  went  ahead  with the  foreclosure
              
     anyway in an attempt to collect more interest, then you
     should find that they violated [the CPA].

(Emphasis added.)  Thus, in the event the jury considered whether
appellants' conduct constituted a criminal violation of the SMHLA
(as opposed  to a non-willful "technical"  violation), the quoted
instruction insulated the jury charge from  appellants' challenge
   that a finding of specific intent was required.  Veranda Beach
                                                                 
Club  Ltd. Partnership v. Western  Sur. Co., 936  F.2d 1364, 1384
                                           
(1st Cir. 1991) (jury charge to be viewed "as a whole").

                                18

also,  e.g., Smith v.  Brady, 390 F.2d  176, 177 (4th  Cir. 1968)
                            

(jury  instruction on damages which had no effect on verdict held

"harmless").

          The gratuitous instruction  on willfulness  conceivably

could  have had  relevance  to two  statutory provisions,  SMHLA,

section 7a, and CPA, section 10, neither of which was read to the

jury.   The  SMHLA provides  but two  remedies for  violations of

SMHLA, section  3.   If a  lender knowingly16  omits the  rate of

interest  from a promissory note    willfully or otherwise    the

borrower may  maintain a  private  cause of  action under  SMHLA,

sections 2, 3  and 7,  to recover  any interest  received by  the

lender in excess of the interest rate "agreed upon in the  note."

See supra pt. II.A.1.   If the section 3 violation was "willful,"
         

however,  the lender is  subject to  criminal penalties  as well.

SMHLA, section 7a, provides:

          Any   person   who   wilfully  violates   any
                                                 
          provision  of this  chapter [SMHLA]  shall be
          guilty of a misdemeanor if  a natural person,
          or guilty  of a  felony if any  other person,
          for each such violation.

(Emphasis added.)  

          The special  verdict form reflects a  jury finding that

appellants "knowingly"  failed to disclose the  rate of interest.

Since the  "willfulness" element (i.e., appellants'  knowledge or
                                      

disregard of the statutory requirement that the  rate of interest

                    

     16As the notes were prepared  by Roberts' attorney, the jury
was  asked  to  determine whether  Roberts  had  notice that  the
percentage  rates of  interest  were omitted,  and whether  these
omissions had the capacity to deceive, within the meaning of CPA,
  2.

                                19

be stated in  the note) would be relevant  only to the imposition

of a criminal penalty  under section 7a (section 7a  never having

been read to the jury),  the failure to give a "specific  intent"

instruction was  "harmless" error  at most;17  at best, the  jury

instruction  amounted to beneficial  error, as  it placed  on the

plaintiff a more difficult burden of proof.  

          The  only other  statute  to which  a determination  of

"willfulness"  would have been relevant is CPA, section 10, which

provides  that "[i]f the [factfinder]  finds that the  use of the

method of competition  or the act or  practice was a  willful and
                                                                 

knowing violation of  this chapter, it shall  award as much as  3
       

times,  but not  less  than 2  times,  such amount."    (Emphasis

added.)  Like SMHLA, section 7a, this portion of CPA, section 10,

was never read to the  jury.18  The special verdict form  did not

request a finding as  to whether plaintiff's "damages" should  be

doubled or trebled, and the district court did not in fact double

or  treble the award.  Any error in the "willfulness" instruction

was therefore harmless.

     4.  "Incidental" Exemption Instruction
                                           

          SMHLA,   section  10(II),  exempts  from  its  coverage

"individuals  or corporations who  make mortgage loans incidental
                                                                 

                    

     17In closing argument, plaintiff's counsel never referred to
a "criminal" violation of the SMHLA.  Moreover, the jury instruc-
tion  simply referred  to  a "violation"  of  SMHLA,   3,  not  a
"criminal violation."

     18Prior to  the jury charge,  plaintiff's counsel disclaimed
double or treble damages.

                                20

to the conduct or the operation of another business, such as real
                                                                 

estate  or  construction."    (Emphasis added.)    The  jury  was
                        

instructed to determine:  (1) whether "the principal  activity of

Golden Investment Corporation" was real estate investment and (2)

if so, whether these  loans were "incidental" to its  real estate

investment  business.    The  district  court  defined  the  term

"incidental" to encompass a matter which "inseparably depends on,

pertains  to, and is subordinate to the main or principal project

[of the business]."

          Appellants argue that  the court improperly required  a

threshold determination  that  the principal  activity of  Golden

Investment was  real estate investment,  thereby disenfranchising

its  defense if the jury found that general investment was Golden
                                           

Investment's principal business activity.  We disagree.  

          Section 10 itself restricts  the exemption to a limited

category  of businesses;  namely, those  already engaged  in real
                                                                 

estate-related activities "such  as" real estate construction  or
      

investment.   In real  estate-related activities, there  exists a

greater business  need to afford mortgage loan  financing to cus-

tomers  as an  ancillary commercial  service.   Cf. Moore  v. New
                                                                 

Hampshire Ins. Co., 122 N.H. 328,  333, 444 A.2d 543, 546  (1982)
                  

(defining plain meaning of  term "incidental"; "'a hardware store

dealing in paint and wallpaper would commonly  rent equipment for
                                                   

removal of wallpaper and  a reasonable person . . . would  assume

such  rental  is incidental  to  the operation  of  the store.'")

(emphasis added) (citation omitted).  The necessary nexus was not

                                21

lost  on the district court; its instruction required the jury to

consider  whether the  loans "inseparably  depend[ed]" on  appel-

lants' main business activity.19

          Appellants  claim that  the jury  should have  been in-

structed that  "incidental" means "occurring merely  by chance or

without intention or calculation,  or being likely to inure  as a

minor  consequence."     To  the  extent   appellants  suggest  a

definition  based on mere  fortuity, it clearly  does not comport

with the statutory context, or the legislative intent, underlying

the section  10 exemption.20    Moreover, we  see no  significant

difference between the language  utilized in the jury instruction

("subordinate  to the main or principal  project") and the second

element in  the definition proposed by  appellants ("minor conse-

quence"), as  both  require the  jury  to determine  whether  the

second  mortgage lending  activity on  which Pugliese's  cause of

action  is predicated  constituted a  relatively minor  aspect of
                                                

appellants' overall  business activity.  We  find further support

for our  interpretation of the  term "incidental" in  the opinion

previously rendered by  the New Hampshire  Supreme Court in  this

case:

                    

     19We note further that appellants did not produce sufficient
evidence to  support their contention that  Golden Investment was
formed to engage in  general investment.  The two  mortgage loans
to  Pugliese  were the  only  significant  business conducted  by
                            
appellants during the entire time period at issue in the case.

     20The  first  element  in  the  proposed   definition  seems
especially  discordant  in  the  present context,  as  few  loans
totalling  $95,000 could ever be found to have been made "without
intention or calculation."

                                22

          [L]oans  made  by  a  corporation  formed  to
          engage in  real estate investment  are exempt
                                           
          from  the requirements of  RSA chapter 398-A,
          assuming they are "incidental" to the conduct
          of that business.  . . . [W]e  do not  ignore
          the  improbability that  a loan  advanced for
          purposes of posting bail or purchasing a boat
          trailer could ever  be considered  incidental
          to the  business of a  corporation formed  to
          engage in real estate investment.
                                          

Chroniak v. Golden Inv. Corp., 133 N.H. 346, 352, 577 A.2d  1209,
                             

1214  (1990) (emphasis added).  The evidence not only showed that

these  loans were not a  subordinate or minor  activity of Golden

Investment,  the evidence disclosed that Golden Investment's only
                                                                 

significant income-generating activity during the entire relevant

period derived from these two loans to Pugliese.

          We conclude that the jury instruction on SMHLA, section

10, did not constitute reversible error.21

                    

     21Appellants raise four other unsuccessful claims on appeal,
based   generally  on   their   characterization  of   the   jury
instructions  as  "confusing."     First,  appellants  failed  to
preserve their claim that the jury may  have been misled when the
district court read CPA,   10, out of sequence (i.e., between its
                                                    
reading of SMHLA,   3, and SMHLA,   10).  When asked by the court
whether the  provision of  photocopies of  these statutes  to the
jury in  the correct  sequential order would  satisfy appellants'
objections, defense counsel responded in the affirmative.
          Second,  appellants  maintain  that the  statutes  were
inherently confusing, and  should not have been  read verbatim to
the  jury.  We do  not conclude that  the statutes are inherently
confusing;  moreover, even  such a  conclusion would  not benefit
appellants since the jury was guided by the special verdict form,
which described  the essential findings required  under the three
statutes.  See supra p. 7.  
                    
          Third,  appellants argue  that  the  court should  have
defined  the  statutory term  "ordinary  course  of business,"  a
relevant  term under  both the  CPA and  the UCPA.   In  Chase v.
                                                              
Dorais, 122  N.H. 600, 448 A.2d  390 (1982), the court  held that
      
the  CPA  does  not apply  "'where  the  transaction is  strictly
private in nature,  and is in  no way undertaken in  the ordinary
course of a trade or business.'"   Id. at 602, 448 A.2d at 391-92
                                      
(quoting  Lantner v. Carson, 374  Mass. 606, 610,  373 N.E.2d 973
                           

                                23

B.  The Pugliese Cross-appeal
                             

          Pugliese claims  he was  entitled  to recover  attorney

fees  because the jury  must have based  its award on  one of the

three  fee shifting statutes (SMHLA,     2 & 7;  CPA,   10; UCPA,

  4).22    The  district  court  denied  an  attorney  fee  award

because  it  could not  exclude  the  possibility that  the  jury

verdict was based on  a violation of SMHLA, section 3, which does

not authorize attorney fees.  As we have determined that a viola-

tion of SMHLA, section 3, would necessarily entail a violation of

SMHLA, section 2,  see supra pt. II.A.1, we are  able to conclude
                            

that the jury verdict was based on a fee shifting statute, either

SMHLA,    2 & 7, CPA,    2 & 10, or UCPA,    2 & 4.  Accordingly,

we  remand  for reconsideration  of the  motion  for an  award of

attorney fees.

                    

(1978)).  UCPA,   1, likewise provides in pertinent part:

     IV.   "Creditor"  means a  person who  in  the ordinary
                                                            
     course   of  business   engages   in  consumer   credit
                          
     transactions with consumers.

(Emphasis added.)  We do not believe the term "ordinary course of
business" was  used in any  technical sense, or  required further
explanation by the  court.  The  special verdict form  adequately
formulated  the  essential   distinction  raised  by  appellants'
defense      whether  appellants  were engaged  in  a  "business"
activity when they loaned these funds to Pugliese, or whether the
loans were between "private" individuals.
     Finally, appellants  incorrectly  assert that  the  district
court  did  not  read  the  statutory  definition  of  "creditor"
appearing in UCPA,   1(IV).  See Tr. at 771-72.
                                

     22Pugliese theorized that the jury must  have found that the
$27,000 note  contained a  $7,000 prepayment penalty,  which con-
stituted an independent violation of SMHLA,   2.  See supra p. 3.
                                                           
We need not address this issue.

                                24

          The district  court judgment is affirmed  on the merits
                                                                 

and the case is remanded for reconsideration of the motion for an
                                                                 

award of attorney fees.
                      

                                25