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Action on account. Fulton Civil Court. Before Judge Camp.
1. Certain business records which were introduced into evidence were not inadmissible as being in violation of Code Ann. 38-711 (Ga. L. 952, p. 177) which requires a showing that it was in the "regular course of such business to make such memorandum or record at the time of such act, transaction, occurrence or event or within a reasonable time thereafter."
2. (a) Since the contracts sued upon were retail instalment contracts, finance charges in excess of that prescribed by the Retail Instalment and Home Solicitation Sales Act bars recovery of such charge.
(b) Violations of the "Truth in Lending" disclosures required by Federal Reserve Regulation Z exposes a creditor to the civil penalties provided therefor where no showing was made that such violations were unintentional.
(c) However, under the Georgia Retail Instalment and Home Solicitation
Act, violations must be shown to be wilful.
Glenn's Furniture Company, Inc. filed suit against Lois C. Martin in the Civil Court of Fulton County. The complaint as amended alleged: "Defendant owes plaintiff $559.75, according to the two contracts hereto annexed as Exhibit A." The two contracts attached as Exhibit A are identical insofar as the printed portions thereon are concerned. The pertinent provisions of these contracts are as follows: After the name and address of the plaintiff the contract provides: "I/We have purchased the merchandise listed below, title to which remains in seller, Glenn's Furniture Co., Inc., until purchase price is fully paid." Under additional terms the contract recites: " Title to said property shall remain in the company until the whole amount of said price shall have been paid." The contract sets out the following information with regard to price: "Total Sale, Less Trade-In, Sub-Total, Sales Tax, Cash Sale Balance, Less Cash Paid, Sub-Total, Time Price Differential, Total."
The contract contains a "Notice To Buyer" which reads: "1. Do not sign this before you read it or if it contains any blank spaces. 2. You are entitled to an exact copy of the paper you sign. 3. You have the right to pay in advance the full amount due or any part thereof and under certain conditions to obtain a partial refund of finance charges." With regard to the finance charge the contract reads: "I/We agree to pay the balance now due shown above plus a finance charge of 1 1/2% per month (plus tax, if any) which is an annual percentage rate of 18% computed on the unpaid balance at the beginning of each monthly payment period. If account is paid in full within 90 days from this date the full finance charge will be waived."
The defendant in her answer denied the material allegations of the complaint and set out a counterclaim predicated on the failure of the plaintiff to make disclosures required by the Federal Truth in Lending Law, 15 USCA 1601 et seq. (Pub. L. 90-321, Title I, 102, May 29, 1968, 82 Stat. 146), and Federal Reserve Regulation Z which is 12 CFR 226 (34 FR 2002, Feb. 11, 1969; 34 FR 5327, Mar. 18, 1969). The defendant sought the recovery of $100 for each contract pursuant to 15 USCA 1640. The defendant by amendment to her counterclaim also set out that the contracts in question violated the provisions of the Georgia Retail Instalment and Home Solicitation Sales Act (Code Ann. Ch. 96-9; Ga. L. 1967, p. 659), and sought the recovery of $100 for each of the two contracts pursuant to Code Ann. 96-910 (c) (Ga. L. 1967, pp. 659, 672).
The case came on for trial without a jury. Both sides admitted, as stated in the defendant's brief, "There is no dispute over the fact that the defendant signed both of the contracts sued upon, and the fact that she obtained all the merchandise called for under the two contracts. Neither is there any dispute over the fact that defendant has made some payments on these contracts, but not enough to pay them in full." Plaintiff introduced into evidence, over objection by counsel for the defendant, the ledger showing the transactions that took place with the defendant. This ledger indicated that the sum of $559.75 was owed by the defendant to the plaintiff. The plaintiff's president testified that all the amounts listed as charges (after the initial entry of $329.40), except the sum of $329.57 (the amount due on the second contract) were finance or carrying charges.
At the close of the evidence the defendant made a motion for judgment and "directed verdict," which motion was overruled by the trial judge. The judge then entered the final judgment in favor of the plaintiff for the full amount sought. Appeal was taken from this order.
1. Objection was made to the admission of a business record of the plaintiff showing amounts owed and paid by the defendant. The ledger in question contained as its first entry and dated July 30, 1970, a balance of $329.40, less a credit of $42, leaving a balance of $287.40. This was the amount owed under the first contract sued on which was executed on July 2, 1970. The defendant contends that as a matter of law the distance of time between July 2, 1970, and July 30, 1970, is insufficient to comply with Code Ann. 38-711 (Ga. L. 1952, p. 177). This Code section requires a showing that it was in "the regular course of business to make a memorandum or record at the time of such act, transaction, occurrence, or event, or within a reasonable time thereafter." It is urged that 28 days was not a reasonable time.
2. (a) It is urged that the trial judge erred in not finding for the defendant on her counterclaims and in entering judgment for the plaintiff in the amount sought. Since these issues are interrelated, we consider them together.
The Georgia Retail Instalment and Home Solicitation Sales Act provides: " 'Retail Instalment contract' or 'contract' means an instrument or instruments creating a purchase money security interest. It does not include a revolving account or an instrument reflecting a sale pursuant thereto." Code Ann. 96-902 (7) (Ga. L. 1967, pp. 659, 660; 1968, p. 1088). A revolving account is defined as an instrument or instruments prescribing the terms of retail instalment transactions which may be made thereafter from time to time pursuant thereto. Code Ann. 96-902 18). In short, a revolving account is based on a series of transactions which may occur in the future. The Federal Truth in Lending Act also contemplates two different types of accounts. The key term under the Federal Act is "Open End Account" which means: "Consumer credit extended on an account pursuant to a plan under which (1) the creditor may permit the customer to make purchases or obtain loans, from time to time, directly from the creditor or indirectly by use of a credit card, check, or other device, as the plan may provide; (2) the customer has the privilege of paying the balance in full or in instalments; and (3) a finance charge may be computed by the creditor from time to time on an outstanding unpaid balance. The term does not include negotiated advances under an open end real estate mortgage or a letter of credit." Regulation Z, 12 CFR 226.2 (r). Other credit arrangements are covered under "Credit Other Than Open End."
A sound explanation of the distinction between "open end" and other credit is contained in the interpretation of 15 USCA 1602 found in 12 CFR 226.203 (b, c) (34 FR 8698, June 3, 1969). "In certain cases, a form of contract or note relating to a single transaction provides that the finance charge will be computed from time to time by application of a rate to the unpaid balance and stipulates required minimum periodic payments. However, the obligor has the privilege of making larger and more frequent payments than stipulated or paying the obligation in full at any time without penalty. The question arises as to whether the creditor should make disclosures in such circumstances under 226.7 for open end credit accounts or under 226.8 for credit other than open end. Although the terms of such a contract or note meet the second and third requirements for such a plan, they do not meet the first of such requirements nor the basic qualification that consumer credit be extended on an account pursuant to a plan. [See Regulation Z, 226.2 (r) quoted above.] Therefore, disclosures in this case are required to be made under 226.8."
In this case, plaintiff's suit was brought on two contracts, not on an account. The contracts in question created a security interest, leaving title in the seller until the purchase money is paid. The contracts used the terminology inherent in an instalment contract and used the notice required under Code Ann. 96-903 (Ga. L. 1967, pp. 659, 663; 1970, p. 98) for retail instalment contracts. Furthermore, the contracts in question make no mention of any arrangement for future transactions. Therefore, it is clear that under the Federal law these contracts are "contracts other than open end," and under the State law they are retail instalment contracts.
However, these contracts provide for a finance charge which is appropriate to a revolving account; that is, they allow an annual percentage rate of 18% computed on the unpaid balance. See Code Ann. 96-904 (Ga. L. 1967, pp. 659, 667; 1970, pp. 98, 100). This is a clear violation of the Georgia law which states that a retail instalment contract may charge a time price differential which shall not exceed: "On the unpaid balance, 12 cents per $1 per year on so much of the unpaid balance as does not exceed $400; and 10 cents per $1 per year on so much of the unpaid balance as exceeds $400." Code Ann. 96-903 (d). Under Code Ann. 96-910 (Ga. L. 1967, pp. 659, 672), a violation of Code Ann. 96-903 (d) shall bar recovery of any finance charge, delinquency or collection charge on the contract. See Reese v. Termplan, Inc., Bolton, 125 Ga. App. 473 (188 SE2d 177). Under testimony given by plaintiff, there were $79.78 in finance charges imposed under the contract. Because of the violation of Code Ann. 96-903 (d), recovery of these charges was barred and the trial judge erred in allowing recovery of this amount in the final judgment.
(b) We also find merit in the defendant's counterclaim based on violations of the Federal Truth in Lending Act and Regulation Z. A contract other than open end requires certain disclosures and certain terminology to be utilized in making such disclosures. The contract in question violated several of the provisions of 12 CFR 226.8 (b) and (c) by failing to use the terminology required. For example, we point out a few of these discrepancies: The contract fails to use the term "Total of Payments" as required by 12 CFR 226.8 (b) (3); the contract also fails to use the terms "Cash Price" required by (c) (1); "Unpaid Balance of Cash Price" required by (c) (3); and "Amount Financed" required by (c) (7). 15 USCA 1640 imposes civil liability on a creditor who fails to disclose any information required under this Chapter and allows an amount equal to the sum of twice the amount of the finance charge but not less than $100 or more than $1,000. An action to recover under this section may be brought in a U. S. District Court or any other court of competent jurisdiction within one year of date of the violation. 15 USCA 1640 (e). A creditor may escape liability if within 15 days of discovering an error and prior to the institution of the action under this section he notifies the person of the error and makes necessary adjustments. 15 USCA 1640 (b). This was not done in this case. 15 USCA 1640 (c) provides: "A creditor may not be held liable in any action brought under this section for a violation of this chapter if the creditor shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error." This section places the burden on the creditor and in effect means that when a violation is shown the debtor has a prima facie right to recover. Here violations were shown and the creditor made no effort to show that the violations were not intentional. Hence, the plaintiff was entitled to recover the $100 sought under each contract.
(c) With regard to the counterclaims seeking recovery under the Georgia law, we find them to be without merit. Code Ann. 96-910 (c) states: "In case of a wilful violation of any provision of this Chapter, with respect to any transaction, the retail buyer in such transaction may recover from the person committing such violation (or may set off or counterclaim in any action by such person) a minimum of $100 . . ." As can be seen the Georgia law is not worded like the Federal law and requires that there be a wilful violation. " 'The general rule is that mere violation of instructions, orders, rules, ordinances, and statutes, and the doing of hazardous acts where the danger is obvious, do not, without more, as a matter of law, constitute wilful misconduct; and where the misconduct consists of a failure or refusal to perform a duty required by statute, a bare failure, or refusal, without more, does not constitute a wilful failure or refusal to perform such duty. Such violations or failures or refusals generally constitute mere negligence, and such negligence, however great, does not constitute wilful misconduct or wilful failure or refusal to perform a duty required by statute . . ." Gooseby v. Pinson Tire Co., 65 Ga. App. 837 (2) (16 SE2d 767). See Carroll v. Aetna Life Ins. Co., 39 Ga. App. 78, 80 (146 SE 788); King v. State, 103 Ga. 263, 265 (30 SE 30); Hateley v. State, 118 Ga. 79, 81 (44 SE 852). By using the terminology contained in the Act the legislature obviously intended that there be some showing that the violation be "wilful" other than the mere fact of the violation itself. The evidence in this case was insufficient to demand a finding of wilfulness, therefore the trial judge was authorized to deny recovery as to that portion of the defendant's counterclaim.
The judgment is affirmed on the condition that the amount of $79.78 included as finance charges and the amount of $200 which should have been imposed as a civil penalty for the plaintiff's violation of the Truth in Lending Act be written off within 15 days after the remittitur is made the judgment of the trial court; otherwise reversed.
Judgment affirmed on condition. Hall, P. J., and Pannell, concur.
Claude E. Hambrick, for appellee.
Kenneth G. Levin, for appellant.
Friday May 22 14:54 EDT

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