Brenda Wilson, Plaintiff-appellee, v. Credithrift of America, Inc., No. 3, a Corporation,defendant-appellant.patricia Straight, Plaintiff-appellant, v. Associates Financial Services of Oregon, Inc., Acorporation, Defendant-appellee, 659 F.2d 122 (9th Cir. 1981)

These are two actions¹  by borrowers against lenders for damages under § 130(a) of the Truth in Lending Act, 15 U.S.C. § 1640(a). We must decide whether the respective lenders violated the Act by failing sufficiently to identify the type of security interest they retained as required by Regulation Z, 12 C.F.R. § 226.8(b) (5).²  The parties in each case stipulate that their loan agreement is a consumer credit transaction subject to the Act and Regulation Z. The district court held that the description in the Wilson case was insufficient; the sufficiency of the description in the Straight case was upheld. We hold that the description was sufficient in both cases.

In the Wilson case, the disclosure statement contained a box which was checked to designate the following language: "(y)our debt, if incurred, will be secured by a chattel mortgage (security agreement, which also secures other or future indebtedness)." Another box, describing security by a real estate deed of trust, was not checked. The parties agree that an elaborate description of the interest was unnecessary, see Hutchings v. Beneficial Finance Co. of Oregon, 646 F.2d 389, 391 (9th Cir. 1981); Bone v. Hibernia Bank, 493 F.2d 135 (9th Cir. 1974). They also agree that if the interest had been described as a security interest in personal property, the description would have been sufficient. See Fed.Res.Bd. Official Staff Interpretation FC-0023, 5 Cons.Cred.Guide (CCH) P 31,491 (November 22, 1976), in which the staff advised that disclosure of a "security interest under the Uniform Commercial Code" was sufficient to comply with § 226.8(b) (5).

The magistrate, whose decision was approved by the district court, invalidated the description in Wilson because he concluded that the term "chattel mortgage" was unduly confusing; if the term had been omitted, he would have deemed the description satisfactory.

The term "chattel mortgage" was expressly absorbed into the statutory definition of "security interest" when the state adopted the Uniform Commercial Code in 1961. See O.R.S. §§ 79.1020(2), 79.1050(h). While we agree with the magistrate that the term is therefore surplusage, we cannot agree that it is so confusing or misleading that a reasonable borrower would fail to understand that the lender was creating a security interest in personal property. There was no evidence that the borrower was in fact confused. The judgment awarding damages to the borrower must be reversed.

In Straight, the Loan Disclosure Statement provided that the debt was secured by a "security agreement of even date herewith." Attached to the disclosure statement was a one page document entitled "loan agreement" which contained clearly marked provisions describing the security for the loan. The borrower argues that because the attached document was entitled "loan agreement" rather than "security agreement," there was no sufficient identification of the security interest in personal property. The "loan agreement" was the only document labeled "agreement"; it was of "even date" and it clearly stated that the loan was secured by the borrower's household goods. We agree with the district court that the type of security interest retained by the lender was adequately identified.

There is no merit to appellant Straight's additional argument that the lender failed to identify the specific items in which it retained a security interest. The loan documents included a list of the specific items of personal property which constituted the furnishings in appellant's house; consequently, there could have been no reasonable doubt as to what property was covered by the agreement.

The judgment of the district court in Straight v. Associated Financial Services is affirmed; the judgment in Wilson v. Credithrift is reversed.