The opinion of the court was delivered by: ROBERTSON
On May 15, 1997, a jury returned a verdict of $ 8,400 in favor of plaintiff Brad Williams against defendant First Government Mortgage and Investors Corporation ("First Government"). The award was trebled to $ 25,200 in accordance with the District of Columbia's Consumer Protection Procedures Act, D.C. Code § 28-3905(k)(1). The jury had been instructed, in accordance with the Act, that it could award economic damages to Williams if it found either that First Government knowingly took advantage of Williams' inability to protect his interests in connection with a real estate loan made to him, or that First Government made the loan knowing that there was no reasonable probability that Williams could keep up with his payments.
Now before the Court is Williams' motion for judgment on his equitable claim that the entire loan transaction was unconscionable. The relief prayed for is rescission of the mortgage loan. Williams also renews, post-trial, his motion for judgment as a matter of law on his claim that First Government violated the Truth in Lending Act, and First Government moves for judgment notwithstanding the verdict. For the reasons set forth below, all three motions will be denied.
This case went to the jury on a statutory claim. The statute makes it a violation of District of Columbia law to "make or enforce unconscionable terms or provisions of sales or leases. . . ." D.C. Code § 28-3904(r). Because the term "unconscionable" is probably not in the lexicon of the ordinary lay juror, the elements of an unconscionable contract found in Williams v. Walker-Thomas Furniture Co., 121 U.S. App. D.C. 315, 350 F.2d 445, 449 (D.C. Cir. 1965) -- absence of meaningful choice and terms unreasonably favorable to one party -- were set forth in the jury instruction by way of a definition. The jury, however, carefully was not asked to decide if the contract was unconscionable. See Dawson v. Contractors Transport Corp., 151 U.S. App. D.C. 401, 467 F.2d 727, 730 (D.C. Cir. 1972). Instead, the jury was asked to decide whether terms or provisions of the mortgage loan were unconscionable, and they were instructed to make their decision on the basis of the two factors set forth in D.C. Code §§ 28-3904(r)(1) and (5). Those factors -- 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.
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.
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 ...