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UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
____________________
No. 97-31226
____________________
STEFANIE RIVIERE, ET AL.,
Plaintiffs,
STEFANIE RIVIERE; THOMAS STURDEVANT,
Plaintiffs-Appellants;
versus
BANNER CHEVROLET, INC., ET AL.,
Defendants,
BANNER CHEVROLET, INC.,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________________________
August 6, 1999
Before JONES, DUHÉ, and BARKSDALE, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
For this appeal concerning the Truth in Lending Act, the
defendant/appellee automobile dealer from whom Appellants purchased
a vehicle having prevailed in a bench trial on the basis that the
dealer is not a "creditor" within the meaning of the Act, that
issue and whether the transaction was a "consumer transaction" for
purposes of the Act are the primary matters at hand. We VACATE and
REMAND for further proceedings.

I.

In December 1994, Thomas Sturdevant and his wife, Stefanie
Riviere, (Appellants) purchased a white pickup truck from Banner
Chevrolet. After that truck was damaged in September 1995,
Appellants returned it to Banner for repairs. By check, their
insurer paid approximately $2,100 to them and $242 to Banner for
the damage/repairs.
Appellants testified that, when they returned to Banner to
retrieve the truck in October 1995, it was not completely repaired.
Sturdevant then discussed with Frank Tessitore, a Banner salesman,
trading in the truck toward the purchase of a new one. Appellants
did so on 13 October 1995, purchasing a new gold pickup.
The purchase was a credit transaction. Banner completed the
form "Retail Instalment Contract", identifying Banner as the
"Vendor/Creditor" and containing a section captioned "Federal
Truth-In-Lending Disclosures", in which, among other things, Banner
stated the "finance charge" and "amount financed". The contract
provided that Banner assigned its interest to General Motors
Acceptance Corporation (GMAC).
In conjunction with the purchase, Tessitore had the white
truck appraised and offered Sturdevant $10,000 on the trade-in.
Sturdevant refused. Following a second appraisal, Tessitore
offered to value it at $12,000. Sturdevant accepted; but, he
testified that he understood the appraisal to represent the value
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of the truck in its still-damaged condition. Tessitore testified
that the white truck was fully repaired; that the appraisal
represented its value in that condition.
During the sales transaction, Sturdevant was in possession of
the $2100 insurance check. Tessitore testified that he told
Sturdevant to give the check to the body shop manager as payment
for the work on the white truck; and that Sturdevant assured him
that he would. However, Appellants kept the check.
Accordingly, the day after Appellants took possession of the
gold truck, Tessitore asked Sturdevant for the insurance check.
Sturdevant refused. (Banner subsequently obtained a state court
judgment against Appellants for the amount due for the repairs.)
Approximately two weeks later, Appellants refinanced the
purchase. As discussed infra, they maintain that, prior to
refinancing, the new truck was used solely for consumer, not
business, purposes.
In November 1995, Appellants filed this action, claiming that
Banner had violated the Truth in Lending Act (TILA), 15 U.S.C. §
1601 et seq.1 Following a bench trial, the district court ruled in
1 Appellants also presented claims against Banner's attorneys
under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692,
based on a demand letter to Appellants from Banner's attorneys.
These claims were dismissed following Appellants' presentation of
evidence at trial. No appeal was taken from that dismissal.
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favor of Banner, on the basis that it was not a "creditor" within
the meaning of TILA.2
II.
Factual findings are reviewed for clear error; questions of
law, de novo. E.g., Bridges v. City of Bossier, 92 F.3d 329, 332
(5th Cir. 1996), cert. denied, 519 U.S. 1093 (1997). Appellants
maintain that Banner is a TILA "creditor"; that the sale of the
gold truck was a consumer transaction; and that Banner violated
TILA. (For purposes of this opinion, we need not describe the two
claimed violations.)
A.
Enacted to ensure the "informed use of credit results
[through] an awareness of the cost thereof by consumers", TILA
attempts to achieve this goal by mandating "a meaningful disclosure
of credit terms". 15 U.S.C. § 1601(a). See also Fairley v. Turan-
Foley Imports, Inc., 65 F.3d 475, 479 (5th Cir. 1995) ("purpose of
2A prior panel affirmed. Appellants then sought rehearing en
banc. Amicus briefs urging the court to reconsider its decision
with regard to the creditor issue were filed by the Commercial Law
League of America, the National Association of Consumer Advocates,
the National Consumer Law Center, the American Bankers Association,
the Consumer Bankers Association, the American Financial Services
Association, and the Louisiana Bankers Association. The prior
panel granted rehearing and vacated its opinion. See Riviere v.
Banner Chevrolet, Inc., 158 F.3d 335 (5th Cir. 1998), vacated, 166
F.3d 727 (5th Cir. 1998).
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TILA is to protect the consumer from inaccurate and unfair credit
practices").
In the light of TILA's purpose and the fact that, among other
functions related to being a traditional creditor, Banner completed
the form retail installment contract, including the TILA
disclosures and identifying itself as the "Vendor/Creditor", it
should follow that Banner is the TILA "creditor". But, of course,
we must look to TILA to make that determination. Along this line,
Appellants contend that the district court, in holding that Banner
was not a TILA "creditor", erred in its interpretation of TILA and
the applicable regulation and by rejecting the official Federal
Reserve Board (FRB) commentary. We agree.
Prior to the enactment of the Truth in Lending Simplification
and Reform Act, Pub. L. No. 96-221, 94 Stat. 132, 168 (1980)
(TILSRA), the TILA definition of "creditor" distinguished between
"creditors" and "credit arrangers", defining a "creditor" as one
"who regularly extend[s], or arrange[s] for the extension of,
credit". 15 U.S.C. § 1602(f)(1980) (subsequently amended by
TILSRA); see also 12 C.F.R. § 226.2(s)(1980) (pre-TILSRA regulatory
definition of "creditor"). Applying this former definition, the
Supreme Court held that an automobile dealer was a TILA "credit
arranger" because it merely arranged for credit with a finance
company which, in turn, became the immediate assignee of the
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underlying contract. See Ford Motor Credit Co. v. Cenance, 452
U.S. 155, 157-58 (1981)(per curiam). The Court acknowledged that
both the dealer and the finance company fit within the pre-TILSRA
definition of "creditor", with the finance company's role in the
transaction similar to that of a traditional creditor. Id.
In response to Cenance, Congress enacted TILSRA (effective in
1982) and amended the definition of "creditor". As a result, TILA
presently defines a "creditor" as
a person who both (1) regularly extends,
whether in connection with loans, sales of
property or services or otherwise, consumer
credit which is payable by agreement in more
than four installments or for which the
payment of a finance charge is or may be
required, and (2) is the person to whom the
debt arising from the consumer credit
transaction is initially payable on the face
of the evidence of indebtedness or, if there
is no such evidence of indebtedness, by
agreement.
15 U.S.C. § 1602(f). The legislative history of TILSRA reflects
that Congress sought to simplify the definition of "creditor". See
S. Rep. No. 96-73, 1979 WL 10376 at *15 (1979) (TILSRA simplified
definition of "creditor" to "eliminate confusion under the current
act as to the responsibilities of assignees and `arrangers of
credit'").
When it enacted TILA, Congress "delegated expansive authority
to the Federal Reserve Board to elaborate and expand the legal
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framework governing commerce in credit". Fairley, 65 F.3d at 479
(quoting Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559-60
(1980)). To implement TILA, the FRB promulgated "Regulation Z",
located at 12 C.F.R. § 226. See id. Regulation Z defines a
"creditor" as "[a] person (A) who regularly extends consumer credit
..., and (B) to whom the obligation is initially payable, either on
the face of the note or contract, or by agreement when there is no
note or contract". 12 C.F.R. § 226.2(a)(17)(i). Regulation Z also
contains an official FRB staff interpretation regarding the
distinction between "creditors" and "assignees":
If an obligation is initially payable to one
person, that person is the creditor even if
the obligation by its terms is simultaneously
assigned to another person. For example:
*An auto dealer and a bank have a business
relationship in which the bank supplies the
dealer with credit sale contracts that are
initially made payable to the dealer and
provide for immediate assignment of the
obligation to the bank. The dealer and
purchaser execute the contract only after the
bank approves the creditworthiness of the
purchaser. Because the obligation is
initially payable on its face to the dealer,
the dealer is the only creditor in the
transaction.
12 C.F.R. pt. 226, supp. I, subpt. A, cmt. 2(a)(17)(i)(2) (emphasis
added).
The district court concluded that Banner was not a TILA
"creditor" for two reasons: it was not an extender of credit
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because, although its credit department investigates credit
histories and prepares forms, it is ultimately GMAC or other
entities to which Banner subsequently assigns a loan that actually
make the loan and thereby extend the credit; and, according to the
district court, the obligation was not initially payable to Banner.
Accordingly, the court also found that Regulation Z was not
applicable to Banner. See 12 C.F.R. § 226.2(a)(17)(i) (defining
creditor as one "to whom the obligation is initially payable"). In
so deciding, the district court rejected the FRB staff
interpretation of "creditor".
In Green v. Levis Motors, Inc., 1999 WL 414224, *1 (5th Cir.
1999), an automobile dealer executed a retail installment contract,
which included TILA disclosures, and assigned the contract to
Hancock Bank. (It is not clear whether the assignment was
simultaneous.) The purchasers sued the dealer and Hancock.
Without addressing the applicability of TILA to the dealer, our
court treated it as a TILA "creditor" and held that it had
committed TILA violations. Id. at *7-8. Hancock was treated as an
assignee. Id. at *8.
In Green, our court did not explicitly address the issue
before us. But, its disposition could only be reached by treating
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the automobile dealer as a TILA "creditor".3 See also Ellis v.
General Motors Acceptance Corp., 160 F.3d 703, 705-08 (11th Cir.
1998) (treating GMAC as assignee, even though contract was
simultaneously assigned to it by automobile dealer); Taylor v.
Quality Hyundai, Inc., 150 F.3d 689 (7th Cir. 1998), cert. denied,
119 S. Ct. 1032 (1999) (treating automobile dealer as "creditor"
and financing companies as assignees).
In this regard, the district court erred by rejecting the FRB
staff commentary. In Milhollin, 444 U.S. at 565-66, the Supreme
Court stated that, "[u]nless demonstrably irrational, Federal
Reserve Board staff opinions construing [TILA or Regulation Z]
should be dispositive". The staff interpretation is not
demonstrably irrational. See Kinzel v. Southview Chevrolet Co.,
892 F. Supp. 1211, 1216 (D. Minn. 1995) (staff interpretation of
"creditor" is rational, "as it simply restates the congressional
intent to eliminate an ambiguity in the statute prior to October,
1982").
3Regarding a similarly structured transaction, several other
district courts have found that an automobile dealer, such as
Banner, was a "creditor" under TILA. See Baldwin v. Laurel Ford
Lincoln-Mercury, Inc., 32 F. Supp. 2d 894, 904 (S.D. Miss. 1998);
Kinzel v. Southview Chevrolet Co., 892 F. Supp. 1211, 1216 (D.
Minn. 1995); Frazee v. Seaview Toyota Pontiac, Inc., 695 F. Supp.
1406, 1408 (D. Conn. 1988). But see Augustine v. Ray Brandt
Nissan, Inc., 1993 WL 557680, *1 (1993) (automobile dealer not a
"creditor" because it was not the entity that actually provided the
funds).
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As noted supra and by the district court, Banner identified
itself in the form retail installment contract as the
"Vendor/Creditor". In the light of this, viewing the contract as
a whole, and applying the FRB staff interpretation, the obligation
was initially payable to Banner, even though it was assigned to
GMAC. See 12 C.F.R. § 226, supp. I, subpt. A, cmt. 2(a)(17)(i)(2)
(even where obligation is simultaneously assigned to another,
automobile dealer is "creditor" if obligation is "initially payable
on its face" to automobile dealer). The staff interpretation also
makes it clear that, although Banner simultaneously assigned the
loan to GMAC, it still "extended credit" as a "creditor" under
TILA. Id.
B.
As a second basis for TILA not being applicable, Banner
maintains, as it did in district court, that the sale of the gold
truck was a business, not a consumer, transaction. TILA exempts
"transactions involving extensions of credit primarily for
business, commercial, or agricultural purposes". 15 U.S.C. §
1603(1); see also Poe v. First National Bank of DeKalb County, 597
F.2d 895, 896 (5th Cir. 1979). Further, TILA states that it covers
"consumer" credit transactions, defined as those "in which the
party to whom credit is offered or extended is a natural person,
and the money, property, or services which are the subject of the
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transaction are primarily for personal, family, or household
purposes". 15 U.S.C. § 1602(h).
Therefore, "[w]e must examine the transaction as a whole and
the purpose for which the credit was extended in order to determine
whether this transaction was primarily consumer or commercial in
nature". Tower v. Moss, 625 F.2d 1161, 1165 (5th Cir. 1980). At
trial, Banner maintained that Sturdevant intended to use the gold
truck for his construction business. In support, it introduced
Sturdevant's 1995 business tax return, which claimed a deduction
for 100% of the use of the white truck and for 70% of the use of
the gold truck. Further, Tessitore testified that Sturdevant
removed his tool box (as noted, he worked in construction) and mat
(used to protect the truck bed) from the white truck and placed
them in the gold truck; and that, in his experience, the mat is
used to protect vehicles used for work.
Banner asserts that, in the light of this, it follows that
Sturdevant purchased the gold truck for his business. But,
Sturdevant testified that he never used it for his business in
1995.
And, when questioned regarding the 1995 tax return, he claimed
that his tax preparer took the deduction without his knowledge. He
also testified that he did not use the gold truck for business
during the two week interval between its purchase and its
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refinancing. Riviere testified that, during those two weeks, she
used the truck for transportation to her place of work. Further,
all documents executed in connection with the sale of the gold
truck indicate that it was a consumer transaction. Finally, the
title and loan documents were drafted in Riviere's name.
(Sturdevant testified that her name was used because of his poor
credit.)
Obviously, the evidence is conflicting. That the documents
relevant to this transaction label it as "consumer" is not
dispositive. The few cases that address this issue look to the
substance of the transaction and the borrower's purpose in
obtaining the loan, rather than the form alone. See Tower, 625
F.2d at 1166-67 (although loan money used to repair house
subsequently leased to third party, loan primarily personal in
nature because evidence established that borrower intended to
reside in house during retirement and lessee functioned primarily
as caretaker); Henson v. Columbus Bank and Trust Co., 651 F.2d 320,
326-27 (5th Cir. 1981) (loan not personal investment loan where
borrower invested in company of which he was holder of one-fifth
stock, director, guarantor of debts, corporate secretary, and legal
counsel); Poe, 597 F.2d at 896 (loan primarily for business even
though stockholder and wife were required to co-sign and pledge
their family home as security); Bloom v. I.C. System, Inc., 972
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F.2d 1067, 1069 (9th Cir. 1992) (loan not primarily personal in
nature where borrower used money to invest in company of which he
was president).
In short, resolution of this issue involves a factual
determination of Appellants' purpose in purchasing the gold truck,
which hinges on Sturdevant's credibility. Although the district
court discussed the evidence regarding this issue, it did not make
factual findings regarding the purpose for the purchase. Of
course, we may, in our discretion, resolve this issue for the first
time on appeal. See Green, 1999 WL 414224 at *6 (citing Singleton
v. Wulff, 428 U.S. 106, 120-21 (1976)).
But, cutting against our doing so is, inter alia, the district
court's noting that, had it proceeded to the merits of the TILA
claims, it would have credited Tessitore's testimony that the
repairs to the white truck constituted a separate transaction from
the sale of the gold truck. In so doing, the court rejected
Sturdevant's version. Because the court apparently found at least
one portion of Sturdevant's testimony to lack credibility, we are
reluctant to decide the consumer transaction issue, which, as
noted, turns primarily on his credibility.
The better course is to remand to the district court for
findings of fact. Obviously, should it find a consumer
transaction, it should then rule on the claimed TILA violations.
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III.
For the foregoing reasons, the judgment is VACATED and this
case is REMANDED for further proceedings consistent with this
opinion.
VACATED and REMANDED
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