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CLAY v. JOHNSON

December 3, 1999

REE CLAY AND RUBY CHIVERS, PLAINTIFFS,
v.
IVER R. JOHNSON AND MARVIN BILFELD, DOING BUSINESS AS DAVENPORT CONSTRUCTION COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Denlow, United States Magistrate Judge.

MEMORANDUM OPINION AND ORDER

The Court conducted a two-day bench trial on October 12 and 13, 1999, to decide the issue of damages following this Court's earlier ruling that Defendants violated the Truth In Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. (1998) by failing to properly disclose the payment schedule and that Plaintiffs had adequately rescinded their contracts. Clay v. Johnson, 22 F. Supp.2d 832 (N.D.Ill. 1998), motion for reconsideration denied, 50 F. Supp.2d 816 (N.D.Ill. 1999).

The Court has carefully considered the testimony of the three witnesses who testified at trial, the exhibits introduced into evidence, the written submissions by the parties, and the closing arguments of counsel. The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings may be deemed conclusions of law, they shall also be considered conclusions. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they should also be considered findings. See Miller v. Fenton, 474 U.S. 104, 113-114, 106 S.Ct. 445, 451-52, 88 L.Ed.2d 405 (1985).

I. FINDINGS OF FACT

A. THE PARTIES.

1. Plaintiffs Ree Clay ("Clay") and Ruby Chivers ("Chivers") (collectively "Plaintiffs") are sisters. In 1995, they resided in a house owned by Clay at 4633 West 177th Street, Country Club Hills, Illinois.

2. Defendant Marvin Bilfeld ("Bilfeld") is an individual who resides in Highland Park, Illinois. He is a general contractor who does business as Davenport Construction Company ("Davenport") located in Blue Island, Illinois. Davenport has no employees other than Bilfeld. Davenport subcontracts all of its construction and remodeling contracts to independent contractors who perform the construction work.

3. Defendant Iver Johnson ("Johnson") is an individual who resides in Chicago, Illinois. Johnson finances construction projects for Davenport's customers.

4. Bilfeld, Davenport and Johnson are hereinafter collectively referred to as "Defendants".

B. THE THREE CONSTRUCTION CONTRACTS.

5. On February 11, 1995, Plaintiffs executed a retail installment contract and mortgage to finance the purchase of $9,500 in home improvements from Davenport. (Px 1-3). The contract was later assigned to Bilfeld. The contract included work on Plaintiffs' roof and a new kitchen floor. (Px 3). On March 11, 1995, Clay executed a completion certificate for the work performed. (Px 1).

6. On July 10, 1995, Plaintiffs executed a second retail installment contract and mortgage to finance the purchase of $6,500 in home improvements from Davenport. (Px 4-6). The contract was later assigned to Bilfeld. The contract included work on Plaintiffs' basement. (Px 6). On August 1, 1995, Plaintiffs executed a completion certificate for the work performed. (Px 2).

7. On July 15, 1995, Clay executed a third retail installment contract and mortgage to finance the purchase of $24,000 in home improvements from Davenport. (Px 7-9). The contract was later assigned to Bilfeld. The contract included a kitchen remodeling. On August 10, 1995, Plaintiffs executed a completion certificate for the work performed. (Px 3).

8. Between March and August, 1995, Plaintiffs began to observe problems with the work performed. Plaintiffs voiced their complaints to Bilfeld who contacted the subcontractor to correct the problems. The subcontractor corrected many of the problems.

9. On August 21, 1997, over two years after the work was completed and problems substantially corrected, Plaintiffs mailed notice to the Defendants requesting rescission of all three contracts.

C. PLAINTIFFS FILE THIS ACTION.

10. On August 25, 1997, Plaintiffs filed this action against Defendants. Plaintiffs filed an amended complaint on January 29, 1998.

D. CLAY FILES CH. 13 BANKRUPTCY.

11. On August 26, 1997, Clay filed for Chapter 13 bankruptcy in the United States District Court for the Northern District of Illinois, Eastern Division, Case Number 97 B 26080.

12. When Clay filed for bankruptcy, Defendants were listed as secured creditors as a result of the mortgages that were executed with the February 11, 1995, July 10, 1995 and July 15, 1995 contracts.

13. To date, Defendants are still listed as secured creditors under Clay's bankruptcy plan. Defendants have not released their mortgages or caused their claims to be listed as unsecured.

14. Under Clay's Chapter 13 bankruptcy plan, all secured creditors will be paid 100% of the amount Clay owes.

15. From the time Clay filed for bankruptcy to the current date, Defendants have been paid on a monthly basis.

16. This Court previously held that certain federally required disclosures in Plaintiffs' three retail installment contracts failed to comply with TILA and implementing Regulation Z, 12 C.F.R. part 226. The Court recognized that the Plaintiffs had the right to, and effectively did, rescind their February 15, 1995, July 10, 1995 and July 15, 1995 transactions with Defendants.

E. THE REASONABLE VALUE OF THE HOME IMPROVEMENTS.

17. The total contract price for the three contracts is $40,000.

18. The work completed included installation of a new fiberglass shingle roof; a new kitchen and basement tile floor; partial remodeling of two bathrooms; installation of a bathroom vanity and toilet; repair and installation of new bathroom walls and floor; shower repair; remodeling of kitchen including: new cabinets, countertops, garbage disposal, and ceramic tile backsplash; two ceiling fans; one awning; new garage door with electric opener; painting of the house interior; and installation of new carpeting throughout the house.

19. The Court finds the testimony of Bilfeld credible regarding the reasonable value of the work under the three contracts to be $40,000. Bilfeld is an experienced general contractor who has contracted approximately 6,000 jobs over the past 20 years. The Court finds the testimony of Plaintiffs' expert, John Tomassi, unpersuasive given the extensive home renovation work performed under the three contracts. Tomassi claimed the reasonable value of the work to be $12,340 (Px 10), less than 31% of the contracted value. The Court finds that work in the amount of $38,000 was actually performed and $2,000 in repairs were required. (Px 19-50). These figures represent the Court's findings that the work was 95% completed and minor repairs were necessary to bring the work up to workmanlike standard. Due to scheduling problems between the parties, Davenport's subcontractor was not able to return to complete all punch list items and repairs.

20. The reasonable value of the home improvement work provided by Davenport to ...


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