Bernice Gunn v. Title Max of AL, Inc.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 08-12197 ELEVENTH CIRCUIT
SEPT 16, 2008
Non-Argument Calendar
THOMAS K. KAHN
________________________
CLERK
D. C. Docket No. 07-00233-CV-W-E
BKCY No. 06-80646
In Re: BERNICE GUNN,
Debtor.
__________________________________________________________________
BERNICE GUNN,
Plaintiff-Appellant,
versus
TITLE MAX OF ALABAMA, INC.,
d.b.a Title Max of Alexander City #1,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Middle District of Alabama
_________________________
(September 16, 2008)
Before BIRCH, DUBINA and CARNES, Circuit Judges.
PER CURIAM:
Bernice Gunn appeals the district court’s judgment affirming the bankruptcy
court’s Fed. R. Civ. P. 12(b)(6) dismissal of both counts of her adversary
complaint against TitleMax of Alabama, Inc. We affirm.
I.
In October 2005 Gunn received a loan of $500.00 from TitleMax and
pledged the title to her car as a security. Gunn received a four-page Pawn Ticket
that contained required federal and state disclosures. It also stated that the pledger
could, by paying a “pawnshop charge” instead of any loan principal, create
deferral periods in which TitleMax would continue to hold the security and delay
the loan’s due date for thirty more days. Repayment of the loan, in the amount of
$579.95, was due on November 21, 2005.
Between November 2005 and July 2006 there were a number of transactions
during which Gunn paid interest in the form of monthly pawnshop charges and,
apparently, some of the principal but not all of it. On July 21, 2006 Gunn paid
TitleMax interest in the amount of $63.93, and received a Customer Receipt
showing that on August 21, 2006 she would owe $399.82 plus another interest
payment in the amount of $63.93. The Customer Receipt contained no federal
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Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., disclosures, but stated:
“You are only required to pay the Interest Due amount in order to extend or renew
the Pawn Ticket.”
Gunn filed a Chapter 13 bankruptcy petition in August 2006. TitleMax then
made a claim in her bankruptcy case, asking for $463.75 and listing Gunn’s car as
collateral. Gunn responded by filing a two-count adversary complaint against
TitleMax. Count 1 alleged that each of the monthly transactions between Gunn
and TitleMax was a “Subsequent Loan Agreement” requiring new TILA
disclosures. Count 2 asked the court to recognize that TitleMax’s claim for
$463.75 was independent of the original $500.00 pawn and thus unsecured. Gunn
attached her original Pawn Ticket and her July 2006 Customer Receipt as Exhibits
B and C to the complaint.1
TitleMax filed a motion to dismiss under Fed. R. Civ. P. 12(b)(6),
contending that the monthly transactions between November 2005 and July 2006
were merely extensions of the original pawn agreement and thus did not require
TILA disclosures. The bankruptcy court granted TitleMax’s motion, dismissing
1
These documents are properly before us because Gunn incorporated them into her
complaint. See Bickley v. Caremark RX, Inc., 461 F.3d 1325, 1329 n.7 (11th Cir. 2006) (“where
the plaintiff refers to certain documents in the complaint and those documents are central to the
plaintiff’s claim, then the Court may consider the documents part of the pleading for purposes of
Rule 12(b)(6) dismissal.”) (quotation marks omitted).
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Gunn’s complaint with prejudice. The district court affirmed. Gunn timely filed a
notice of appeal to this Court.
II.
We review de novo the legal conclusions of the bankruptcy court. Asbestos
Settlement Trust v. City of New York (In re Celotex Corp.), 487 F.3d 1320, 1328
(11th Cir. 2007). In deciding a motion to dismiss for failure to state a claim, this
Court accepts the factual allegations in the plaintiff’s complaint and construes
them in the light most favorable to her. Young Apartments, Inc. v. Town of
Jupiter, 529 F.3d 1027, 1037 (11th Cir. 2008). However, the plaintiff’s “factual
allegations must be enough to raise a right to relief above the speculative level.”
Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965 (2007).
This Court is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Id. (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932,
2944 (1986)).
III.
Gunn contends that TitleMax violated TILA’s disclosure requirements in
connection with their July 21, 2006 transaction. TILA requires meaningful
disclosures to customers in consumer credit transactions, and in closed-end
transactions like the ones between Gunn and TitleMax, the disclosures must be
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given before credit is extended. 15 U.S.C. § 1601(a); 15 U.S.C. § 1638(b)(1); 12
C.F.R. § 226.18. The Federal Reserve Board has promulgated Regulation Z, 12
C.F.R. § 226.1(a), to implement TILA. It has also issued Official Staff
Interpretations of Regulation Z, and the Supreme Court has instructed that these
interpretations be dispositive unless they are “demonstrably irrational.” Ford
Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980). Neither party disputes
the applicability or rationality of Regulation Z and its Official Staff
Interpretations.
It is undisputed that “a refinancing is a new transaction requiring new
disclosures to the consumer,” Regulation Z, 12 C.F.R. § 226.20(a), but that a mere
extension of an earlier deal, even if the terms change, does not trigger new
disclosure requirements. 12 C.F.R. Pt. 226, Supp. I at § 226.20 (“Redisclosure is
no longer required for deferrals or extensions.”). Gunn labels the July 2006
transaction a “refinancing” of her November 2005 pawn. TitleMax labels the
transaction a mere extension of the original pawn agreement.
Gunn’s argument fails because it relies on two cases that were decided
under an earlier, much friendlier set of regulations than those that existed in 2006
and on a contorted interpretation of the Alabama Pawnshop Act, Ala. Code §
5–19A–1 et seq.
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Gunn relies primarily on Dennis v. Handley, 453 F. Supp. 833 (N.D. Ala.
1978), and on Chapes, Ltd. v. Anderson (In re Scaife), 825 F.2d 357 (11th Cir.
1987). Both cases involved diamond rings that were pawned. In both cases,
further transactions repeatedly extended the pawns. Both courts, applying a pre-
1982 version of Regulation Z, found that extensions of existing pawn agreements
were refinancings and thus did require TILA disclosures. Dennis, 453 F. Supp. at
835; In re Scaife, 825 F.2d at 361. However, more than twenty years before the
transactions between Gunn and TitleMax occurred in 2005 and 2006, the Federal
Reserve Board created a new version of Regulation Z, which became mandatory in
October 1982. Compare 12 C.F.R. § 226.8(j) (1981) with 12 C.F.R. § 226.20
(2006).
The Official Staff Interpretation of the current Regulation Z states: “1981
changes: While the previous regulation treated virtually any change in terms as a
refinancing requiring new disclosures, this regulation limits refinancings to
transactions in which the entire original obligation is extinguished and replaced by
a new one. Redisclosure is no longer required for deferrals or extensions.” 12
C.F.R. Pt. 226, Supp. I at § 226.20. Thus, the law has changed in a pivotal way
since Dennis and Scaife, and the amended Regulation Z significantly narrows the
field of transactions that qualify as “refinancing.”
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The current regulations define “refinancing” as “when an existing
obligation. . . is satisfied and replaced by a new obligation.” 12 C.F.R. §
226.20(a). The Official Staff Interpretations of the regulation note that:
[W]hether a refinancing has occurred is determined by reference to whether
the original obligation has been satisfied or extinguished and replaced by a
new obligation.... Changes in the terms of an existing obligation, such as the
deferral of individual installments, will not constitute a refinancing unless
accomplished by the cancellation of that obligation and the substitution of a
new obligation.
12 C.F.R. Pt. 226, Supp. I at § 226.20. Gunn contends that her original pawn was
“cancelled” or “extinguished” within the meaning of 12 C.F.R. § 226.20 and its
Official Staff Interpretation by the Alabama Pawnshop Act. Gunn argues that the
Alabama Pawnshop Act cancelled her original November 2005 pawn because, in
her view, the law “does not make any provision whatsoever for the renewal or
extension of the maturity date of the pawn transaction.” However, Gunn’s focus is
misplaced. The provisions that she cites limit the amount of permissible
pawnshop charges to 25 percent of the principal per month and grant the pledger
thirty days’ grace period beyond the original maturity date in which to redeem her
pawn. See Ala. Code §§ 5–19A–6; 5–19A–10(b); 5– 19A–7(a). None of these
sections of the Alabama Pawnshop Act prohibit pledgers and pawnbrokers from
agreeing to extensions of the original maturity date. In fact, both the original
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Pawn Ticket given to Gunn in October 2005 and the Customer Receipt she
received in July 2006 clearly provide for extensions of the original loan.
The $579.95 that Gunn owed TitleMax was neither “satisfied and replaced”
nor cancelled. Gunn’s Customer Receipt, received in July 2006, gives no
indication that TitleMax ever loaned Gunn any money beyond the $500.00 it had
given her in October 2005, and Gunn does not claim otherwise. Neither party
alleges that Gunn ever entirely paid the $579.95 that she owed TitleMax in
November 2005, either on her own or with refinancing assistance from TitleMax.
Further, the receipt is divided into two categories, “Today’s Payment
Details” and “Next Payment Information.” It designates $399.82 as the “Principal
Due” in August and refers to the possibility of extending or renewing the original
Pawn Ticket. The only logical reading of the July 2006 Customer Receipt is that
the “Principal Due” of $399.82 reflects the remaining principal due from the
original loan. The Customer Receipt is not an inadequate new pawn ticket, but
instead a receipt showing that Gunn made a monthly interest payment of $63.93
and that she owed another interest payment the next month. All of this relates to
the original loan.
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There was no satisfaction and replacement nor cancellation, and thus no
“refinancing” under TILA. No further disclosures were required. See Regulation
Z, 12 C.F.R. § 220(a). Accordingly, the facts that Gunn has pleaded do not state a
claim under TILA, and the district court properly granted TitleMax’s Rule
12(b)(6) motion to dismiss.
IV.
Gunn contends that because the Alabama Pawnshop Act allegedly cancelled
the October 2005 pawn of her car, TitleMax’s lien on her vehicle was extinguished
and their July 2006 transaction was unsecured.
However, the Alabama Pawnshop Act does not prohibit extensions or
renewals of an initial maturity date, and the Pawn Ticket and Customer Receipt
both allow for such extensions. Because we have concluded that the initial
$500.00 pawn was merely extended, not satisfied and replaced nor cancelled,
TitleMax’s initial lien on Gunn’s vehicle remains valid. Ala. Code § 5–19A–10(a)
(“A pawnbroker shall have a lien on the pledged goods for the money advanced
and the pawnshop charge owed.”).
AFFIRMED.
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