Pia DENNIS, Plaintiff,
v.
R. W. HANDLEY, d/b/a General Loan Co., General Loan & Sales Co., and Best Loan & Sales, and Howard J. Lindsey, d/b/a General Loan Co., General Loan & Sales Co., and Best Loan & Sales, Defendants.
Civ. A. No. 77-G-1403-S.
United States District Court, N. D. Alabama, S. D.
June 30, 1978.*834 Edward F. Still and Judith S. Crittenden, Birmingham, Ala., for plaintiff.
Charlie D. Waldrep, Birmingham, Ala., for defendants.
MEMORANDUM OPINION
GUIN, District Judge.
This cause under the Truth in Lending Act is before the court on defendants' amended motion for summary judgment and plaintiff's motion for summary judgment as to all issues save those dealing with the award of attorneys' fees.
The undisputed facts are as follows: On January 5, 1976, plaintiff pawned a diamond ring with defendant Lindsey for $200.00. Plaintiff received a pawn ticket in the following form:
----------------------------------------------------------------------------- | | | No. 3009 $ __________ | | | | GENERAL LOAN CO. | | 1307 3rd Avenue North | | | | Birmingham, Ala. __________ 19 ____ | | | | This Certificate entitles nolder to ____________________ | | ________________________________________________________________ | | ___________________________________________ on surrender of | | this Ticket and payment of $ _____________ on or before ________ 19 ____ | | __________________________________________________________ | | Disclosures: Lender holds property as a pledge. Default charges continue | | same as FINANCE CHARGE. | | | | Loan $ ___________________ FINANCE CHARGE $ ____________________ | | | | Total of Payments $ _________________________ | | ANNUAL PERCENTAGE RATE __________ % | | | | The holder of this Ticket waives all right and title to the above | | described property if not redeemed on above date, also all rights given | | him under sections 5290 to 5295 Civil Code of Alabama, and section 7517 | | Criminal Code of Alabama, or any other law statute or constitution whereby | | ______________ he could claim said property or damages. | | Name ____________________________ GENERAL LOAN CO. | | Address _________________________ By: _____________________________ | | ____________________________________________________________________________| | This Ticket Can be Renewed Not Responsible for Fire or Theft | -----------------------------------------------------------------------------
Under the contract plaintiff could renew the loan each month upon payment of the $20.00 accrued interest.
Plaintiff renewed the loan from time to time, until May 1977, when she defaulted. On October 17, 1977, plaintiff redeemed the ring upon payment of $600.00, $200.00 principal and $400.00 in finance charges. Upon each renewal and upon redemption, plaintiff received only a receipt in the following form:
*835
----------------------------------------------------------------------
| General Loan & Sales Co. ________________________ |
| 224 No. 18th Street Next Due Date |
| Phone 251-1458 |
| Birmingham, Ala. 35203 |
| Date ________________________________ 197 _____ |
| |
| RECEIVED |
| FROM _______________________________________________________________ |
| |
| _____________________________________________ Dollars $ ____________ |
| |
| For ________________________________________________________________ |
| |
| Amt. of Acct. $ _______________ |
| GENERAL LOAN & SALES CO. |
| Amount Paid $ _______________ |
| |
| Balance Due $ _______________ By ____________________________ |
|______________________________________________________________________|
Regulation Z, 12 C.F.R. § 226.8(j) reads: "If any existing extension of credit is refinanced, . . . such transaction shall be considered a new transaction subject to the disclosure requirements of [Regulation Z]." Each renewal, therefore, constituted a new transaction, and defendant may be held liable for a separate statutory penalty upon failure to make the required disclosures with each renewal. Thomas v. Myers-Dickson Furniture Co., 479 F.2d 740 (5th Cir. 1973). Turner v. Firestone Tire & Rubber Co., 537 F.2d 1296 (5th Cir. 1976), which held that each monthly statement of account does not constitute a separate transaction, is distinguishable from the present situation in that Turner involved a single account payable in installments, while the present case involves a separate loan made upon each renewal.
By 15 U.S.C. § 1640(e), actions to enforce civil penalties under the Truth in Lending Act may be brought within one year from the date of violation. Five renewals and the final redemption were made within the year preceding the filing of the complaint in this action and are thus properly in issue.
Regulation Z, 12 C.F.R. § 226.8(d)(1) requires that the amount of credit made available to a customer be disclosed by using the terms "amount financed." These terms do not appear on the five receipts in issue. Defendant thus failed to make the required disclosures.[*]
Viewing each renewal as a separate transaction, five loans were made within the one-year limitations period. The first four involved finance charges of under $50.00, so defendant incurred liability for the statutory minimum of $100.00 on each of these loans. The last loan involved a finance charge of $400.00, so defendant is liable for a statutory penalty of $800.00 on that loan. The total penalty to be awarded is, therefore, $1,200.00. 15 U.S.C. § 1640(a).
Defendant argues that plaintiff is not a "customer" within the meaning of Regulation Z and that the transaction is, therefore, outside the scope of the Truth in Lending Act. Regulation Z, 12 C.F.R. § 226.2(u) defines "customer" as "(1) a card-holder or (2) a natural person to whom consumer credit is offered or to whom it is or will be extended, and includes a comaker, endorser, guarantor, or surety for such natural *836 person who is or may be obligated to repay the extension of consumer credit." The issue thus presented is whether plaintiff had an obligation to repay.
Defendant first contends that there is no obligation to repay because neither the pawn ticket nor the receipt recite a promise to repay. The court notes first that the parol evidence rule presents no bar to showing a promise to repay because the instruments are inherently ambiguous. Parker v. McGaha, 294 Ala. 702, 321 So.2d 182 (1975); Drake v. Goree, 22 Ala. 409 (1853). The court notes, second, that a valid promise to repay a loan may be oral; it need not be written.
Defendant next points to defendant's affidavit in which he stated that there is no obligation to repay. The statement constitutes a legal conclusion and is thus illegal evidence, improper for the court's consideration. Rule 56(e), Federal Rules of Civil Procedure.
Though apparently there are no Alabama cases directly in point, there is strong authority indicating that plaintiff had an obligation to repay and that pawn transactions are covered by the Truth in Lending Act.
Two Federal Reserve Board letters (July 17, 1969 and September 18, 1969), an F.T.C. informal staff opinion (August 18, 1969), and an unpublished decision (Gilensons v. Twaddle, 74-223 (D.N.M.1974)) have held pawnbrokers subject to the Act. Section 8-1-80, Code of Alabama 1975, regulating pawnbrokers, recites that on violation of the section, the pawnbroker "forfeits the debt and all right to the security, . .." [Emphasis added.] Logically, if there were no obligation to repay, then there would be no debt to forfeit. The original pawn ticket used the terms "lender," "pledge," "default," "finance charge," and "loan." Black's Law Dictionary defines "pawnbroker" as "[a] person whose business is to lend money, usually in small sums, on security of personal property deposited with him or left in pawn." (Page 1284.)
Alabama, by Section 1-3-1, Code of Alabama 1975, has adopted the English common law insofar as it is not superseded by other Alabama law. The English common law defined a pawn transaction as one in which goods are delivered to another as security for money borrowed. Coggs v. Bernard, 2 Ld.Raym. 909, 913, 92 Eng.Rep. 107 (1790). The authority is thus persuasive, if not controlling, that plaintiff incurred a debt which she was obligated to repay and that the transaction is within the Truth in Lending Act.
That transactions such as those in issue should, on principle, be covered by the Truth in Lending Act, is apparent from the peculiar facts of this case. The plaintiff paid $880.00 for a $200.00 loan over a period of less than two years. To hold pawnbrokers immune from the Truth in Lending Act would be to withhold protection from an area where it is most sorely needed. For the foregoing reasons, the court is of the opinion that defendants' motion for summary judgment is due to be denied and that plaintiff's motion for summary judgment is due to be granted.
NOTES
[*] Though this action is against both R. W. Handley and Howard J. Lindsey, it appears that Handley is merely an employee of Lindsey and that any recovery due plaintiff is properly to be awarded against Lindsey.