knowledge by the lender that there was no reasonable probability of payment in full, and knowingly taking advantage of a borrower's inability to protect his interest -- were the only two enumerated in the Act that fit the facts proven at trial.
Williams now argues that the verdict on his statutory claim requires me to find, under the common law doctrine established in the Walker-Thomas Furniture case, that the entire loan agreement was unconscionable. The argument is rejected for two reasons. First, the questions put to the jury were not the same questions upon which the common law unconscionability issue turns. Second, because the jury was permitted to return a verdict for plaintiff if they found either of the two enumerated factors proven by a preponderance of the evidence, nobody can say what the jury found the facts to be. The jury's-verdict thus does not "govern the entire case" as a matter of Seventh Amendment law. See Kolstad v. American Dental Ass'n, 323 U.S. App. D.C. 402, 108 F.3d 1431, 1440 (D.C. Cir. 1997) (internal citations omitted).
Williams can prevail on his common law unconscionability claim if 1) he did not have a meaningful choice about whether or not to enter into the loan agreement and 2) the terms of the agreement unreasonably favored First Government. Riggs Nat'l Bank of Washington, D.C. v. District of Columbia, 581 A.2d 1229, 1251 (D.C. 1990). I find that the terms of the mortgage loan to Williams were indeed unreasonably favorable to First Government, but I cannot find that Williams lacked a meaningful choice.
Williams' argument on the lack of meaningful choice proceeds from his assertion that he was under time pressure either to pay his D.C. property taxes or suffer the tax sale of his home. The notice of an impending tax sale undoubtedly motivated Williams' decision, but it did not deprive him of meaningful choice. Williams had known for weeks that a tax sale on his home was scheduled. The sale was not proven to be imminent.
Moreover, Williams had substantial experience in finding mortgage loans and had been actively shopping for a loan in the weeks before his entry into the agreement with First Government. Williams' testimony that he was upset by the terms of the loan, which plaintiff now argues demonstrates his lack of meaningful choice, actually tends to prove the contrary proposition: that he knew what he was doing and did it voluntarily.
Williams had the burden of proving that he had no meaningful choice about whether or not to enter into the contract. Not only did he fail to sustain that burden, but the evidence all points the other way.
II. TRUTH IN LENDING ACT
Williams also seeks rescission, as well as other statutory remedies, under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1635, 1640. His principal submission is that the $ 1,273 premium for a life insurance policy was not included as a finance charge in the calculation and disclosure of the annual percentage rate (APR) on his loan. TILA and regulations issued thereunder, 12 C.F.R. § 226.4 (Regulation Z), require premiums for credit life insurance to be included in the finance charge unless there is strict compliance with three enumerated requirements.
The agency comments to Regulation Z (assumed for purposes of this motion to have the force and effect of law) further provides that fees for any insurance (other than property insurance) must be included in the disclosed finance charge, if the insurance is "required." Official Staff Interpretation to 12 C.F.R. § 226.4(b)(7) & (8), comment 4.
I dismissed plaintiff's TILA claim at trial after finding that the $ 1,273 disbursement to Coxworth & Associates at settlement was not for credit life insurance because the lender was not designated as the beneficiary. Tr. 386-87. Later in the trial, while reconsidering plaintiff's second TILA argument, I found that there was no evidence to refute or offset Williams' clear admissions that insurance was not required and that he purchased the policy voluntarily. Tr. 639-41. The issue was preserved for post-trial briefing. Tr. 823. A third point, argued only in Williams' post-trial brief but considered on its merits nonetheless (see note 6, infra), is that First Government failed to deliver in a timely manner the requisite two copies of a notice of his right to rescind the loan.
a. Beneficiary of the policy
The insurance certificate mailed to plaintiff in March 1995 (the loan closing was on January 13, 1995) does not contain the name of a beneficiary. Instead, it states that the beneficiary is "as specified on application or subsequent endorsement." Pl. Tr. Ex. 4. No beneficiary is named on the application, and no subsequent document exists that resembles an endorsement. Williams insists, however, that a disclosure statement he received at settlement operates as a "subsequent endorsement" because it was signed by Williams after the effective date of the policy (even if Williams had not received the policy) and because it contains the statement that the insurance company "will pay all insurance benefits to the Bank which will apply it to the unpaid balance of your loan. The excess, if any, will be paid to your designated Beneficiary." Pl. Tr. Ex. 9.
The printed language indicating that loan proceeds would be paid to "the Bank" does not establish that First Government was a beneficiary: First Government was not a "Bank." Williams' counsel might have, but did not, elicit direct testimony from Williams as to whether he thought he was naming First Government as his beneficiary when he affixed his signature to the disclosure form. In any case, the purpose of the disclosure form was clearly not to name a beneficiary, but to make a record of the voluntary nature of Williams' purchase. Merely arguing that such a disclosure form is an endorsement does not make it one. Had Williams died during the two-year term of the policy, his estate -- not First Government or its assignees -- would have been entitled to the proceeds of the life insurance policy.
Plaintiff has not established by a preponderance of the evidence that Williams' creditor was the beneficiary of the life insurance policy.
b. Voluntariness of the purchase
Williams' signature is on an insurance application form and an "optional life insurance disclosure statement," which states in bold letters that the "insurance is not required to obtain credit . . . ." Pl. Tr. Ex. 8 & 9. Williams also gave clear testimony that he purchased the insurance voluntarily, that he understood the term of the policy was two years when he received it, and that he knew he had 20 days to return the policy after receiving it if he was not satisfied. Tr. 57, 114-16. Williams' purchase of this policy may have been unwise, but no reasonable juror could have concluded that it was involuntary.
c. Notice of right to rescind6
TILA establishes a right of rescission for any loan transaction in which the borrower's principal dwelling is used as security. 15 U.S.C. § 1635(a). The rescission period extends until "midnight of the third business day following consummation [of the loan], delivery of the notice [of right to rescind], or delivery of all material disclosures, whichever occurs last." 12 C.F.R. § 226.23(a)(3). Under TILA regulations, a creditor is required to "deliver 2 copies of the notice of the right to rescind to each consumer entitled to rescind." 12 C.F.R. § 226.23(b)(1). Failure to deliver the notices in a timely manner or in the proper form extends the rescission period from three days to three years. 12 C.F.R. § 226.23(a)(3).
Williams testified that he was not given copies of the closing documents at the settlement on January 13, 1995, but instead that they were mailed to him. Tr. 142. From that assertion of fact, Williams now asks for an inference that mailed copies did not reach him by January 15, 1995 -- the date by which Williams would have had to receive the documents in order for the rescission expiration date identified on the notice (January 18, 1995) to be accurate. From that inference he advances the legal conclusion that First Government failed to comply with TILA regulations and that he is accordingly entitled to rescind the First Government loan. 12 C.F.R. § 226.23(a)(3).
Williams admits that he signed two copies of the notice of right to cancel at the settlement on January 13, 1995. Def. Tr. Ex. 52, 53. The notices state just above the signature line that plaintiff "acknowledge[s] receipt of two copies of NOTICE OF RIGHT TO CANCEL." Williams' signature on those notices gives rise to a rebuttable presumption that the notices were in fact delivered to him. 15 U.S.C. § 1635(c); Stone v. Mehlberg, 728 F. Supp. 1341, 1354 (W.D. Mich. 1990). The question now under consideration is whether Williams adduced evidence of non-delivery sufficient to rebut that presumption. If he did, the question should have been put to the jury, and Williams would be entitled to a new trial.
Plaintiff's direct testimony on this point was given almost in passing (Tr. 61):
"After I got through signing the papers, me and Ms. Angel, [the settlement agent] said, that's all for now, we'll get in touch with you."
"I asked [the settlement agent] was there any papers. He said, no, not at this moment. Ms. Angel -- then we left."