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Ninth Liberty Loan Corp. v. Hardy

OPINION FILED SEPTEMBER 27, 1977.

NINTH LIBERTY LOAN CORPORATION, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,

v.

DAYTON HARDY, DEFENDANT AND COUNTERCOMPLAINANT-APPELLANT.



APPEAL from the Circuit Court of St. Clair County; the Hon. THOMAS P. O'DONNELL, Judge, presiding.

MR. JUSTICE JONES DELIVERED THE OPINION OF THE COURT:

Defendant, a lendee of plaintiff, a licensee under the Illinois Consumer Finance Act (Ill. Rev. Stat. 1969, ch. 74, par. 19 et seq.) appeals from a judgment of the trial court in favor of plaintiff in the amount of $526.01 and from denial of defendant's first and second counterclaims. Although plaintiff did not file a brief we have nevertheless elected to consider the appeal on its merits.

Plaintiff, Ninth Liberty Loan Corp., brought suit against defendant, Dayton Hardy, to recover the balance allegedly due on a promissory note given as payment for a personal loan. The defendant filed an answer alleging partial payment and that the note was void because it violated section 14 of the Illinois Consumer Finance Act. (Ill. Rev. Stat. 1969, ch. 74, par. 32.) Defendant also filed two counterclaims. The first alleged that the note was void for violations of the Illinois Consumer Finance Act and prayed for judgment in the amount of all money he had paid on the note, pursuant to section 19 of the Act. The second alleged that Liberty Loan had failed to make certain disclosures required by the Federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and prayed for judgment in the amount of the statutory penalty provided for in section 1640(a) of the Act.

Defendant signed a promissory note to Ninth Liberty Loan on March 29, 1971. The note was for the total amount of $725 which included precomputed interest of $169 at an "annual percentage rate" of 26%. Credit life insurance charges were $16.31 and credit accident and health was $22.43. The loan was to be repaid in 25 consecutive monthly installments of $29. At the time the loan was made Mr. Hardy was approximately 60 years of age. He became delinquent in his payments almost immediately because he was laid off from his job but he made reduced payments for many months. By the time the instant suit was commenced the remaining balance was $248.93, which included numerous default and late charges.

Section 14 of the Illinois Consumer Finance Act reads in pertinent part:

"Every licensee must disclose to the borrower before the loan is consummated a statement * * * in the English language disclosing the following items to the borrower:

(k) A description or identification of the type of any security interest held or to be retained or acquired by the licensee in connection with the loan and a clear identification of the property to which the security interest relates. If after-acquired property will be subject to the security interest, or if other or future indebtedness is or may be secured by any such property, this fact shall be clearly set forth in conjunction with the description or identification of the type of security interest held, retained or acquired." Ill. Rev. Stat. 1969, ch. 74, par. 32.

Defendant contends that the disclosure statement given to him at the time the loan was consummated violated the statute in several respects. First, it failed to provide "a clear identification of the property to which the security interest relate[d]," in that the language used to describe the property was, in the first instance, vague and misleading and in the second, unintelligible. Second, the clause relating to after acquired property was too broad to comply with the statute.

The disclosure statement read:

"SECURITY: The loan together with all other and future indebtedness will be secured by (1) a security interest in the property referred to immediately after each cross or checkmark, or in a description, entered by pen or typewriter below, and (2) a security interest in all after-acquired property of the same character."

A check mark was placed in the box by the line reading:

"All household furnishings and appliances on the Borrowers' premises at their address above stated."

The box headed "The following described property" was filled in by typewriter with the initials: "FN 1WA HHG INS." No further description was furnished or indicated.

• 1, 2 We must agree with defendant that the disclosure statement does not comply with the requirement of section (k) of the Act. The subsection requires a "description or identification" of the type of any security interest held (not, as defendant alleges, a "clear identification and description.") We deem it a sufficient identification of the type of security held by indicating by check mark that it was "[a]ll household furnishings and appliances of the Borrowers'." However, the required "clear identification" of the property to which the security relates is not furnished by typing in a box styled "The following Described Property" the letters, "FN 1WA HHG INS." Such identification is not only unclear, it escapes us entirely. Perhaps these letters have a specific and well understood meaning within the small loan business community. But the benefit of the statute is not directed to the small loan business community, it is directed to the small loan patron. It is he who must understand and know just which of his goods he is furnishing as security for his loan. We note, too, that section 14 of the Act requires licensees to furnish ...


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