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Stavrides v. Mellon National Bank & Trust Co.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


decided: November 26, 1973.

ALEXANDER STAVRIDES AND MARCIA M. STAVRIDES, HIS WIFE; LEONARD S. KISSLINGER AND MARGARET KISSLINGER, HIS WIFE; MARTIN W. SAPPER AND EVELYN G. SAPPER, HIS WIFE; ALAN REZNIK AND MARION REZNIK, HIS WIFE; WALTER ELLMAN AND IRENE ELLMAN, HIS WIFE; DAVID M. BURSTIN AND LAUREL F. BURSTIN, HIS WIFE; JOSEPH P. MYERS AND SUSAN V. MYERS, HIS WIFE; RICHARD RAPHAEL AND MARCIA RAPHAEL, HIS WIFE; ROGER E. BUCHANAN AND DOROTHY E. BUCHANAN, HIS WIFE; MAX R. STONE AND MARJORIE B. STONE, HIS WIFE; ROBERT B. GAYLOR, JR.; LEONARD S. CAHEN; E. JOSEPH CHARNEY AND MARGARET K. CHARNEY, HIS WIFE; IRIS S. NAHEMOW; MEYER GISSER AND HELEN GISSER, HIS WIFE; STANLEY J. ADELSHEIMER AND ELLEN F. ADELSHEIMER, HIS WIFE; PETER Z. COHEN AND JANE K. COHEN, HIS WIFE; RAYMOND SCHREIBER AND VIRGINIA A. SCHREIBER, HIS WIFE; INDIVIDUALLY, AND ON BEHALF OF ALL OTHER PERSONS SIMILARLY SITUATED, APPELLANTS,
v.
MELLON NATIONAL BANK & TRUST COMPANY; DOLLARSAVINGS BANK; FRANKLIN FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH; CENTURY FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH; COMMUNITY SAVINGS ASSOCIATION; WEST PENN FEDERAL SAVINGS AND LOAN ASSOCIATION; PITTSBURGH HOME SAVINGS AND LOAN ASSOCIATION; FRIENDSHIP FEDERAL SAVINGS AND LOAN ASSOCIATION; PARKVALE SAVINGS & LOAN ASSOCIATION; CHARTIERS VALLEY SAVINGS AND LOAN ASSOCIATION; CONCORD-LIBERTY SAVINGS AND LOAN ASSOCIATION; CRAFTON-INGRAM SAVINGS AND LOAN ASSOCIATION; EUREKA FEDERAL SAVINGS AND LOAN ASSOCIATION; FIDELITY SAVINGS AND LOAN ASSOCIATION; FEDERAL NATIONAL MORTGAGE ASSOCIATION; FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF HOMESTEAD; FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PITTSBURGH; FIRST STATE SAVINGS AND LOAN; FORT PITT FEDERAL SAVINGS AND LOAN ASSOCIATION; GUARANTY SAVINGS AND LOAN ASSOCIATION; MT. LEBANON FEDERAL SAVINGS AND LOAN ASSOCIATION; REGENT SAVINGS ASSOCIATION; SECOND FEDERAL SAVINGS AND LOAN ASSOCIATION OF PITTSBURGH; SOUTH PITTSBURGH SAVINGS AND LOAN ASSOCIATION; STATON FEDERAL SAVINGS AND LOAN ASSOCIATION; SUBURBAN SAVINGS ASSOCIATION; UNION NATIONAL BANK; WESTERN PENNSYLVANIA NATIONAL BANK; PITTSBURGH NATIONAL BANK; INDIVIDUALLY, AND ON BEHALF OF ALL OTHER LEADING INSTITUTIONS SIMILARLY SITUATED

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA. D.C. Civil No. 72-242.

Van Dusen, Hunter and Garth, Circuit Judges.

Author: Per Curiam

Opinion OF THE COURT

The issue presented by this appeal from a January 4, 1973, district court order, 353 F. Supp. 1072, entering judgment dismissing Counts Fourth through Ninth of the First Amended Substituted Complaint, is the validity of that portion of such order holding that the Fifth Count failed to state a claim upon which relief can be granted.*fn1

Paragraph 37 of such complaint states the claim of the Fifth Count under the Truth-In-Lending Act, 15 U.S.C. § 1639, as follows:

"In the one year preceding the commencement of this action, the representative and class defendants have extended new credit to the representative and class plaintiffs, or have transmitted to the representative and class plaintiffs periodic statements, and in connection with the extension of credit to the representative and class plaintiffs reflected in their secured loans: (a) misstated the true effective annual percentage rate of interest by reason of the failure to include in the computation thereof the amounts required by the representative and class defendants to be paid on account of insurance premiums and taxes, which increase the effective annual percentage interest rates; and (b) intentionally and knowingly failed to disclose that payments on account of insurance premiums and taxes made by the representative and class plaintiffs and accumulated by the representative and class defendants bear no interest and are not credited to the borrowers' principal debt balances."

After careful consideration of oral argument, the briefs of counsel and the record, we have concluded that the above mentioned district court judgment must be affirmed for the reasons stated in the district court opinion. See Stavrides v. Mellon National Bank & Trust Co., 353 F. Supp. 1072, 1079-80 (W.D. Pa. 1973).*fn2 Similar reasons were advanced by the District Court for the District of Columbia in rejecting a similar claim under the Truth-In-Lending Act. See Graybeal v. American Savings & Loan Ass'n, 59 F.R.D. 7, 18-20 (D.D.C. 1973).

Supplementing the reasons given in the district court opinion, we note the following:

(1) The term "escrow" has been used in the mortgage business to describe monthly tax and insurance prepayments even though such payments are not segregated and without regard to whether interest is paid to the mortgagor. See First Federal Savings & Loan Ass'n v. Board of Equalization, 182 Neb. 25, 26, 152 N.W.2d 8, 9 (1967);*fn3

(2) The term "escrow" (15 U.S.C. § 1605(e)(3)) has been used by courts where one of the parties to the escrow agreement held the escrow funds and no independent escrow holder of the fund was contemplated by the agreement. See, e.g., Gulf Petroleum, S.A. v. Collazo, 316 F.2d 257, 261 (1st Cir. 1963);

(3) Since the mortgagor has no right to withdraw his monthly tax and insurance payments, the arrangement challenged by plaintiffs-appellants complies with the following language of the Restatement (Second) of Trusts, § 12, Comment 1 (1959):

"Where the deposit is in escrow, that is where the money is to be paid to a third person on the happening of a designated event and in the meantime the depositor has no right to withdraw the money, it depends upon the manifestation of the intention of the parties whether the bank may use as its own the money deposited or whether the money shall be held in trust. Such a deposit ordinarily indicates an intention that the bank may use the money as its own . . . ."*fn4

For the foregoing reasons, the district court order will be affirmed.


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