United States Court of Appeals, Eleventh Circuit.
No. 94-4463.
Carl S. VEALE, Mary A. Veale, Plaintiffs-Appellants,
v.
CITIBANK, F.S.B., a Federal Savings and Loan fka Citicorp Savings
of Florida, Inc., Defendant-Appellee.
June 19, 1996.
Appeal from the United States District Court for the Southern
District of Florida. (No. 92-8444-CIV-JAG), Jose A. Gonzalez, Jr.,
Judge.
Before EDMONDSON, Circuit Judge, and FAY and GIBSON*, Senior
Circuit Judges.
FAY, Senior Circuit Judge:
This appeal arises from the District Court's judgment as a
matter of law in favor of the defendants. The plaintiffs, Carl and
Mary Veale, brought suit under the Truth in Lending Act (TILA),
alleging that Citibank did not provide the required material
disclosures in connection with a home mortgage loan. Because
Citibank did not violate TILA as a matter of law, we affirm.
I. BACKGROUND
In July of 1989, the Veales borrowed $361,800 from Citibank.
The loan was secured by a first security interest in the Veale's
primary residence. The Veale's used the money to pay off
$24,825.98 previously owed to Citibank and to pay off two other
mortgages retained by two other lenders. The rest of the loan was
used to pay $269.05 to Epic Mortgage, a $723.60 intangible tax, a
$53.40 recording fee, a $6.60 release fee, $582.70 in documentary
*
Honorable Floyd R. Gibson, Senior U.S. Circuit Judge for
the Eighth Circuit, sitting by designation.
stamps, $2,571.00 in title insurance, a $21.00 Airborne fee, and
$835.00 in prepaid finance charges. The Veales did not retain any
of the loan proceeds.
According to the note, the loan was "payable in 84
installments, the first one of $3,582.87, 83 of $3,582.87, and 1 of
$350,565.12." Thus the note obviously contained a typographical
error, as it could not require both 84 and 85 payments. The Truth
in Lending disclosure statement listed 84 payments: 83 plus the
final balloon payment.
The Truth in Lending recision notice provided by Citibank gave
the Veales until midnight of July 29, 1989 to rescind the
transaction. On July 31, 1989, the Veales executed a Verification
of Election not to Cancel.
In September of 1991, the Veales defaulted. Citibank sued for
foreclosure in state court. In June of 1992, the Veales attempted
to rescind the transaction under TILA, but Citibank rejected the
demand for recision. Citibank purchased the property at the state
court foreclosure sale.
The Veales brought suit in United States District Court,
alleging that Citibank violated the TILA disclosure requirements
and demanding recision. The Veales moved for summary judgment but
the District Court denied the motion. At the close of the Veale's
case during a non-jury trial, Citibank moved for judgment as a
matter of law under Rule 52(c) of the Federal Rules of Civil
Procedure.1 The District Court granted the motion and entered
1
Citibank argues that the Veales waived certain issues
raised in their summary judgment motion by not raising those
issues at trial. This is simply not a fair characterization of
judgment for Citibank.
II. STANDARD OF REVIEW
We review conclusions of law de novo but do not disturb
findings of fact unless they are clearly erroneous. See U.S. v.
Thomas, 62 F.3d 1332, 1336 (11th Cir.1995), cert. denied, --- U.S.
----, 116 S.Ct. 1058, 134 L.Ed.2d 202 (1996).
III. ANALYSIS
A. The $21 Federal Express Charge
The Truth in Lending Act requires a lender to disclose the
amount financed and the finance charge in a loan transaction. 15
U.S.C. § 1638. In the TILA Disclosure Statement, Citibank included
a $21 Federal Express charge in the Amount Financed but did not
include that amount under the Finance Charge. The Veales contend
that this was a material misstatement.
In Rodash v. AIB Mortgage Company, 16 F.3d 1142 (11th
Cir.1994) this Court held that the Federal Express fee at issue was
a transaction charge, imposed by the lender as an incident to the
extension of credit. As such, it had to be included in the Finance
Charge.
In this case, however, we are not convinced that the Federal
Express fee was required by Citibank. If the borrower can choose
what occurred. The issues were squarely before the court at
trial through the pre-trial stipulation, through certain exhibits
presented by the Veales, and through the argument of both
counsel. Counsel for the Veales stated, "Your Honor, in light of
your ruling on the summary judgment motion, we will rest."
Citibank's counsel moved for a directed verdict and stated,
"Judge, there were two issues before Your Honor this morning that
you had not disposed of before ..." Moreover, the District Court
addressed all the issues in his final order. Thus the pre-trial
rulings were incorporated into the trial judgment.
to avoid the Federal Express fee by having the documents sent via
regular mail, then the fee is not imposed as an incident to the
extension of credit. See Berryhill v. Rich Plan of Pensacola, 578
F.2d 1092, 1099 (5th Cir.1978). The Veales did not produce any
evidence that Citibank required the fee before it would extend
credit to the Veales. To the contrary, although not covered as a
specific finding of fact, it appears in this case that the delivery
charge was the result of expediting the pay outs to the other
financial institutions in an effort to save the Veales additional
interest expense. Since the Veales could have chosen not to pay
the Federal Express fee and the bank did not require it, then the
fee was not imposed as an incident to the extension of credit and
need not be included in the Finance Charge. Unlike Rodash, the
charge here was not incidental to the extension of credit.
B. The Florida Intangible Tax
On the TILA Disclosure Statement, Citibank did not include
the Florida intangible tax in the Finance Charge. This Court has
held that the Florida intangible tax is a finance charge payable by
the consumer as an incident to the extension of credit. Rodash, 16
F.3d at 1148. Of course, we are bound by Rodash; however this
Court in Rodash was attempting to apply Florida law as Florida
courts would. In matters of state law, federal courts are bound by
the rulings of the state's highest court. Huddleston v. Dwyer, 322
U.S. 232, 236, 64 S.Ct. 1015, 1017-18, 88 L.Ed. 1246 (1944). If
the state's highest court has not ruled on the issue, a federal
court must look to the intermediate state appellate courts.
Fidelity Union Trust Co. v. Field, 311 U.S. 169, 177-78, 61 S.Ct.
176, 177-79, 85 L.Ed. 109 (1940).
When this Court decided Rodash, no intermediate appellate
court in Florida had ruled on the issue. Since then, a Florida
court has ruled on the issue, and decided it differently than this
Court anticipated. In such a situation, we must look to the
Florida court's ruling. See Roboserve, Ltd. v. Tom's Foods, Inc.,
940 F.2d 1441, 1451 (11th Cir.1991).
Under TILA, a tax is not a finance charge if it is prescribed
by law and paid to a public official for perfecting a security
interest. 12 C.F.R. § 226.4(e)(1). Thus the issue in this case is
whether Florida law requires the intangible tax for perfecting a
security interest. In Pignato v. Great Western Bank, 664 So.2d
1011 (Fla. 4th DCA 1995), the court held that the Florida
intangible tax is prescribed by law and paid to a public official
for perfecting a security interest. For that reason, we must
conclude that the Florida intangible tax is not a finance charge.
C. The Required Number of Payments on the Disclosure Statement
According to the note signed by Citibank and the Veales, the
loan was "payable in 84 installments, the first one of $3,582.87,
83 of $3,582.87, and 1 of $350,565.12." Thus the note obviously
contained a typographical error, as it could not require both 84
and 85 payments. Such an error must be construed against Citibank,
Landale Enterprises Inc. v. Berry, 676 F.2d 506, 508 (11th
Cir.1982), and so the note must be read to require only 84 total
payments. The Truth in Lending disclosure statement listed 84
payments (83 plus the final balloon payment) and accurately
reflected the Veales' obligations. This typographical error in the
note does not rise to the level of a TILA violation particularly
when the disclosure statement is correct.
D. The Recision Notice Form
The Truth in Lending recision notice provided by Citibank
gave the Veales until midnight of July 29, 1989 to rescind the
transaction. This notice was based on the form in Appendix H-8 of
Regulation Z of the Federal Reserve Board Rules and Regulations
Relating to Truth in Lending. 12 C.F.R. § 226.1 et seq.
The H-8 form does not apply perfectly to the Veales'
situation, because they already owed Citibank money and Citibank
already had a mortgage on their home. Thus Citibank would still
hold a mortgage on the home even if the Veales elected to rescind
the current transaction; the Veales did not have the right to
rescind the entire security interest. Ideally, because no model
form applied perfectly to this transaction, Citibank should have
provided a nonstandard notice form. See In re Porter, 961 F.2d
1066, 1076 (3rd Cir.1992). However, TILA does not require perfect
notice; rather it requires a clear and conspicuous notice of
recision rights. See Rodash, 16 F.3d at 1146.
The H-8 form stated: "You have a legal right under federal
law to cancel this transaction.... If you cancel the transaction,
the (mortgage/lien/security interest) is also canceled." 12 C.F.R.
Pt. 226, Appendix H (emphasis added). We hold that under these
particular facts the H-8 form provides sufficient notice that the
current transaction may be canceled but that previous transactions,
including previous mortgages, may not be rescinded.
In the Porter case, the Third Circuit held that the H-8 form
did not provide sufficient notice of recision rights in a
refinancing and consolidation transaction such as this one. See
Porter, 961 F.2d at 1077. The court acknowledged that the H-8 form
could be read as saying that the recision right only applied to the
current transaction, and thus did not apply to previous security
interests in the property. Id. However, the court in Porter also
believed the form could be read to say that the recision right
applied to the old loan money as well as the new loan money and to
the old mortgages as well as the new mortgage. Id. Thus the court
concluded that the H-8 form did not clearly and accurately notify
the borrower of her right to recision.
We respectfully disagree. As we noted earlier, although the
H-8 form does not apply perfectly to the Veales' situation, TILA
does not require perfect notice; rather it requires a clear and
conspicuous notice of recision rights. See Rodash, 16 F.3d at
1146. We find the H-8 form to be reasonably clear when applied to
the particular facts involved in this case; it provides sufficient
notice that the current transaction may be canceled but that
previous transactions, including previous mortgages, may not be
rescinded. Such meets the requirements of the law.
E. Monthly Mortgage Payment
The Veales presented evidence at trial that Citibank
miscalculated the mortgage monthly payments. The Veales' expert
testified that his analysis, utilizing a special software program,
resulted in a different monthly payment. However, the expert also
testified that when he used other calculation tools widely used in
the financial industry, the resulting monthly payment was the same
as Citibank's calculated payment. Using those other calculation
tools also resulted in the same finance charge, amount financed,
and total of payments reported by Citibank. Certainly the trial
court's findings are not clearly erroneous; the record supports
the conclusion that the computations are correct.
IV. CONCLUSION
Because Citibank did not violate the Truth in Lending Act, the
judgment of the District Court is hereby AFFIRMED.