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Peritz v. Liberty Loan Corp.

decided: September 3, 1975.

ELI PERITZ ET AL., PLAINTIFFS-APPELLEES,
v.
LIBERTY LOAN CORPORATION ET AL., DEFENDANTS-APPELLANTS



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 72 C 1827. THOMAS R. McMILLEN, Judge.

Swygert and Bauer, Circuit Judges, and Frederick van Pelt Bryan, Senior District Judge.*fn*

Author: Swygert

SWYGERT, Circuit Judge.

Plaintiffs are debtor parties to consumer loan contracts entered into with several offices of defendant Liberty Loan Corporation. The loans involved are consumer loans within the meaning of the Consumer Credit Protection Act, 15 U.S.C. §§ 1601, et seq., also known as the Truth in Lending Act. In their amended complaint plaintiffs alleged, inter alia, that the loan contract form which was used by Liberty in making the loans in question failed to comply with certain disclosure requirements contained in the Act and in certain regulations promulgated thereunder, commonly and collectively referred to as "Regulation Z".*fn1 A pendent claim was brought under the Consumer Finance Act of Illinois, Ill. Rev. Stat. ch. 74, §§ 19, et seq., the relevant provisions of which are identical to those contained in Regulation Z. These two claims were both brought as class actions on behalf of all persons with similar grievances against defendant Liberty.

Specifically, plaintiffs claimed that a form used by Liberty entitled "Combined Statement, Note, Security Agreement, Disbursement Schedule and Election as to Insurance Pertaining to a Loan" did not disclose with sufficient clarity the fact that the purchase of credit life and/or disability insurance was not required for obtaining a loan from Liberty. Plaintiffs rely on section 226.4(a) (5) of Regulation Z which provides in part:

§ 226.4. Determination of finance charge

(a) General rule. Except as otherwise provided in this section, the amount of the finance charge in connection with any transaction shall be determined as the sum of all charges, payable directly or indirectly by the customer, and imposed directly or indirectly by the creditor as an incident to or as a condition of the extension of credit, whether paid or payable by the customer, the seller, or any other person on behalf of the customer to the creditor or to a third party, including any of the following types of charges:

(5) Charges or premiums for credit life, accident, health, or loss of income insurance, written in connection with any credit transaction unless

(i) The insurance coverage is not required by the creditor and this fact is clearly and conspicuously disclosed in writing to the customer; and

(ii) Any customer desiring such insurance coverage gives specific dated and separately signed affirmative written indication of such desire after receiving written disclosure to him of the cost of such insurance.

It is not disputed that the finance charge in each transaction as disclosed on the respective loan forms did not include the cost of insurance written in connection with the loan, nor is the adequacy of the signed and dated election provision in issue. The central question on the merits, then, is whether the challenged form "clearly and conspicuously disclosed in writing [that] the insurance coverage [was] not required."

Plaintiffs' first amended complaint was filed on October 13, 1972. Six days later, and prior to any request for determination of the class action status of the case, plaintiffs moved for summary judgment on the issue of adequate disclosure. In their motion plaintiffs pointed out that the violations complained of " appear on the face of, and are clearly apparent from a simple examination of, defendants standard printed form." (original emphasis). Liberty responded shortly thereafter by filing a cross-motion for summary judgment on the notice issue, and they too indicated their belief that the only relevant evidence on this issue was the loan form itself.

While the parties were briefing the cross-motions for summary judgment, defendant Liberty moved to disallow class action status for all counts of the complaint. This was the first time this issue had been raised by either of the parties. Briefing commenced on this motion. On March 5, 1973, prior to the completion of briefing on the class action question, the district judge entered a decision and order denying both motions for summary judgment. In his order the district judge indicated his belief that the "clear and conspicuous" issue was "not entirely a question of law as the parties seem to assume" and he noted that subject to further consideration he would submit this issue to a jury. Thereafter, defendants submitted a brief on the question of the use of a jury to determine whether defendants' form met the statutory requirement that the insurance disclosure be clear and conspicuous. Defendants' brief argued that an application of the plain words of the statute to the printed form in issue presented a question of law only and that no factual issues remained for a jury to consider. Plaintiffs responded with a brief contending, in contradiction to their original position, that the notice issue was a proper jury question.

On May 7, 1973 the district judge reaffirmed his decision to submit the clear and conspicuous disclosure question to a jury. At the same time he severed this issue from the class action determination issue and specifically noted his intent to defer any consideration of the class action issue until after a jury trial on the disclosure question. A status report was set for May 11, 1973 at which time a trial date was to be determined. The status date was continued, however, and defendants moved for certification pursuant to 28 U.S.C. § 1292(b) for immediate appeal of the questions of the use of a jury on the statutory disclosure question and the delay of class determination until after trial. Defendants submitted a brief in support of this motion on May 24, 1973. On May 29, 1973 a status report hearing was held and trial was set for July 5, 1973. On June 27, 1973 defendants moved to reset the trial date in light of the fact that no decision had been rendered regarding the section 1292(b) motion for certification and in light of the difficulty defendants were having in determining the scope of the issues to be tried and evidence to be allowed at a trial on the notice question. This motion was denied. On July 5, 1973 the cause was ...


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