The opinion of the court was delivered by: Aspen, District Judge:
MEMORANDUM OPINION AND ORDER
Plaintiff Vincente R. Tirado ("Tirado") brought this action
against defendants, "Z" Frank, Inc. ("Z Frank") and General
Motors Acceptance Corporation ("GMAC"), alleging a failure to
disclose certain information in connection with the sale of a
used car, in violation of sections 121 and 128 of the Truth in
Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"), Federal Reserve
Regulation Z, 12 C.F.R. § 226 ("Regulation Z"), and the
Illinois Motor Vehicle Retail Installment Sales Act,
Ill.Rev.Stat. ch. 121½, § 561 et seq. ("MVRISA"). Jurisdiction
in this case is based on 15 U.S.C. § 1611, 1638.
On June 11, 1981, GMAC filed a motion to dismiss Counts I and
II of the complaint for failure to state a claim pursuant to
Fed.R.Civ.P. 12(b)(6). At the same time Z Frank moved to dismiss
Count IV of the complaint for failure to state a claim under TILA
and to dismiss Count V for failure to state a claim under MVRISA
and for lack of federal jurisdiction.*fn1 By order of this Court
dated June 18, 1981, Counts I and II of Tirado's complaint were
dismissed as to Z Frank and the complaint was dismissed in its
entirety as to GMAC. This case is now before the Court on Z
Frank's motion to dismiss Counts IV and V of the complaint.
Z Frank contends that Count IV of Tirado's complaint should be
dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure because it does not state a claim under the TILA. In
Mathers Fund, Inc. v. Colwell Co., 564 F.2d 780, 783 (7th Cir.
1977), the United States Court of Appeals for the Seventh Circuit
applied the following standard to a motion to dismiss pursuant to
[O]n a motion to dismiss, a complaint must be
construed in the light most favorable to the
plaintiff, the allegations thereof being taken as
true; and, if it appears reasonably conceivable that
at trial the plaintiff can establish a set of facts
entitling him to some relief, the complaint should
not be dismissed.
See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02,
2 L.Ed.2d 80 (1957).
In Count IV, Tirado alleges that on November 23, 1979, he and Z
Frank signed a purchase order for an automobile. In pertinent
part, the purchase order stated,
I [Tirado] have requested SELLER to attempt to
arrange financing of this purchase for me. I
understand that until such financing satisfactory to
both of us is arranged, either SELLER or I can cancel
this order at any time.
Tirado alleges that he attempted to cancel the purchase order
before financing was arranged, but Z Frank refused to permit him
to cancel. Because of the refusal to permit cancellation, Tirado
claims that Z Frank was required to make credit disclosures prior
to execution of the purchase order, since the transaction was
consummated at that time; and that by failing to make such
disclosure, Z Frank is in violation of §§ 121 and 128 of the TILA
and Regulation Z.
The Truth in Lending Act provides that in connection with each
consumer credit sale the creditor shall disclose relevant credit
information to enable the consumer to compare various credit
arrangements offered by other lenders or sellers.
15 U.S.C. § 1638(a); Gonzalez v. Schmerler Ford, 397 F. Supp. 323 (N.D.Ill.
1975). Section 1638(b) further requires that such disclosures ".
. . shall be made before the credit is extended, and may be made
by disclosing the information in the contract or other evidence
of indebtedness to be signed by the purchaser." In elaboration of
this provision, Regulation Z states that "such disclosures shall
be made before the transaction is consummated,"
12 C.F.R. § 226.8(a) and that "a transaction shall be considered consummated
at the time a contract relationship is created between a creditor
and customer irrespective of the time of performance of either
party." 12 C.F.R. § 226.2(kk).
The issue before the Court is whether the transaction for the
purchase of the automobile was consummated as Tirado contends on
November 23, 1980, when the purchase order was signed, or as Z
Frank contends on December 4, 1980, when the retail installment
contract was signed. If the transaction was consummated on
November 23, Z Frank was required to make credit disclosures at
that time, and Tirado's complaint does state a claim under the
TILA. If, however, the transaction was consummated on December 4,
Z Frank's retail installment contract form sets forth the credit
terms as required, and Tirado's complaint merely states a claim
for breach of contract for
refusal to allow cancellation, rather than a federal cause of
action under the TILA.
Tirado contends that disclosure of credit terms by Z Frank was
required on November 23, 1980, even though the installment sales
contract was not signed until December 4, 1980. In support of
this position, Tirado cites Gonzalez v. Schmerler Ford,
397 F. Supp. 323 (N.D.Ill. 1975). In Gonzalez, the parties completed
an agreement for the purchase of a car on October 1, 1973,
indicating a downpayment of $10.00 had been made and that the
balance was due on October 3, 1973. The October 1 document also
contained plaintiff's credit references and the credit terms
sought by plaintiff. On October 3, 1973, the parties completed an
installment sales contract that fully disclosed the credit
information required by law. Plaintiff brought an action against
defendant for a failure to disclose credit information in
connection with the execution of the October 1 document in
violation of the TILA and Regulation Z.
The defendant in Gonzalez maintained that disclosure of
credit terms was not required on October 1, since the October 1
document indicated the balance was to be paid on October 3 in a
single installment, a transaction not covered by the TILA.*fn2
Defendant further maintained that since they had no way of
knowing whether the finance company would approve plaintiff's
credit, the credit arrangement sought by plaintiff was not so
integral a part of the October 1 agreement to create a
contractual relationship regarding financing on October 1, and
consequently, TILA disclosures were not required on that date.
In essence, defendant's position was that on October 1, it had
a binding contract for a cash sale, not subject to the TILA, or a
binding contract for an installment credit sale in which
disclosures were required to be made on October 3. The court
disagreed, concluding that under defendant's operating
procedures, the only way a consumer was free to negotiate his
credit terms and reject the defendant's offer was to subject
himself to a lawsuit. The court held that although the October 1
contract was not binding, the financing arrangements were such an
integral part of the sale that a contractual ...