Williams v. First Government Mortgage & Investors Corp. , 225 F.3d 738 ( 2000 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 11, 1998 Decided August 1, 2000
No. 97-7195
Brad Williams,
Appellee/Cross-Appellant
v.
First Government Mortgage and Investors Corporation,
Appellant/Cross-Appellee
Industry Mortgage Company,
Appellant/Cross-Appellee
Consolidated with
No. 97-7243
Appeals from the United States District Court
for the District of Columbia
(No. 96cv00708)
(No. 96cv01993)
---------
Nathan I. Finkelstein and Laurie B. Horvitz argued the
cause and filed the briefs for appellants/cross-appellees.
Rachel Mariner argued the cause for Brad Williams as
appellee. Nina F. Simon argued the cause for Brad
Williams as cross-appellant. With them on the briefs was
Jean Constantine-Davis.
Before: Wald,* Tatel and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Tatel.
Tatel, Circuit Judge: Brad Williams refinanced his Wash-
ington, D.C. home with First Government Mortgage and
Investors Corporation. Unable to make his monthly pay-
ments and threatened with foreclosure, Williams sued First
Government, raising common law and both state and federal
statutory causes of action. A jury found First Government
liable under the D.C. Consumer Protection Procedures Act
and awarded damages. The district court trebled the dam-
ages, denied Williams's common law unconscionability and
federal Truth in Lending Act claims, and awarded him sub-
stantial attorneys' fees. Both sides appealed. Because the
District of Columbia Court of Appeals has squarely held that
the D.C. Consumer Protection Procedures Act applies to
home mortgage transactions, and because we find sufficient
evidence in the record to support the jury's verdict, we affirm
the award of damages. We also affirm the district court's
judgment that the attorneys' fee award, though disproportion-
ate to the amount of damages recovered, was reasonable in
relation to Williams's success in the litigation. Finally, we
affirm the district court's dismissal of Williams's Truth in
Lending Act claims, but remand his common law unconsciona-
bility claim for the district court to clarify whether he lacked
"meaningful choice" when he agreed to the terms of the loan.
I
The facts of this case are set forth in detail in Williams v.
First Gov't Mortgage & Investors Corp., 176 F.3d 497 (D.C.
__________
* Former Circuit Judge Wald was a member of the panel at the
time of oral argument, but did not participate in the decision.
Cir. 1999). In summary, appellee and cross-appellant Brad
Williams, a 61 year old retired painter and handyman, has
owned his home in Northeast Washington, D.C. for 29 years.
In 1994, Williams had a $42,000 mortgage from Central
Money Mortgage Company. He paid $587 per month. Be-
cause he owed $1,400 in unpaid property taxes, the D.C.
government advertised his house for auction in a tax sale.
Short on cash, Williams went to several lenders, including
seven banks, seeking a $1,400 loan to pay his taxes. Most
would not give him credit because his income was too low.
First Government Mortgage and Investors Corporation,
appellant and cross-appellee, offered to help Williams, though
not by loaning him the $1,400 he needed to make the pay-
ment. Instead, First Government offered to refinance his
entire mortgage through a 30-year loan for $58,300 with a
13.9 percent interest rate and $686 monthly payments. Al-
though the monthly payment was $100 more than he had
been paying, and although the term of the loan was longer
than he wanted, Williams reluctantly took the loan, believing
that he had no other alternative to foreclosure. Most of the
loan, $42,913, paid off his existing mortgage; $7,596 covered
various fees; $1,609 covered his taxes; $1,273 went to pay for
a two-year life insurance policy; the remaining $4,909 eventu-
ally went toward his monthly payments.
At the time of the loan settlement, Williams was receiving
$1,072 a month in disability benefits, $100 of which went to
health insurance, plus up to $3,000 a year from part-time
work. At most he had roughly $1,200 a month in disposable
income, over half of which went to First Government to cover
his $686 monthly payments. This left little more than $500
each month to buy necessities for himself and his dependents.
With 11 children and 23 grandchildren, Williams testified that
his household had at least seven people in it at any given
time.
He kept up with his loan payments for 12 months, but his
financial circumstances steadily worsened. He began to run
out of food by the latter part of each month. His electricity,
gas, and water were cut off. He eventually fell behind on his
loan payments. In August 1996, Industry Mortgage Compa-
ny (to whom First Government had assigned the loan) served
him with a foreclosure notice demanding $63,831.
Williams filed suit in the United States District Court for
the District of Columbia, seeking to enjoin the foreclosure, to
rescind the loan, and to obtain damages pursuant to statutory
and common law causes of action. Among other things, he
claimed: (1) that First Government violated section 28-
3904(r) of the D.C. Consumer Protection Procedures Act
("CPPA") by knowingly taking advantage of his inability to
protect his interests in the loan transaction or by knowingly
making him a loan he could not repay with any reasonable
probability; (2) that First Government violated the common
law doctrine of unconscionability articulated in Williams v.
Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir. 1965);
and (3) that First Government violated the federal Truth in
Lending Act ("TILA") by failing to disclose the life insurance
premium as a finance charge and by failing to give him timely
notice of his right to cancel the loan. First Government
moved for summary judgment, arguing that the CPPA did
not apply to home mortgage loans. The district court denied
the motion. See Williams v. Central Money Co., 974 F.
Supp. 22, 27 (D.D.C. 1997) ("Williams I").
After a five-day trial, the jury returned a verdict in favor of
Williams on his CPPA claim in the amount of $8,400. Find-
ing the evidence sufficient to sustain the verdict, the district
court denied First Government's motion for judgment not-
withstanding the verdict. See Williams v. First Gov't Mort-
gage & Investors Corp., 974 F. Supp. 17, 22 (D.D.C. 1997)
("Williams II"). After trebling the jury's award to $25,200,
as authorized by section 28-3905(k)(1) of the CPPA, the
district court denied Williams's common law unconscionability
and TILA claims. See id. at 18-22. Williams then filed a
motion seeking $199,340 in attorneys' fees. The district court
awarded him the entire amount. See Williams v. Central
Money Co., No. 96-1993 (D.D.C. Jan. 28, 1998) ("Fees Order
II"); Williams v. Central Money Co., No. 96-1993 (D.D.C.
Oct. 1, 1997) ("Fees Order I"). Both sides appealed.
Oral argument in this case was heard on the same day as
DeBerry v. First Gov't Mortgage & Investors Corp., 170 F.3d
1105 (D.C. Cir. 1999) amended, No. 97-7211, ___ F.3d ____
(D.C. Cir. 2000), a case also involving a claim by First
Government that the CPPA does not apply to home mortgage
transactions. Because local D.C. courts had "not ruled di-
rectly on this issue and because the answer will have signifi-
cant effects on District of Columbia mortgage finance prac-
tice," we certified the following question to the D.C. Court of
Appeals: "Does D.C. Code s 28-3904(r) apply to real estate
mortgage finance transactions?" Id. at 1110. In the mean-
time, we disposed of First Government's claims that Mary-
land law, not the CPPA, governs the loan it made to Williams
and that TILA preempts the CPPA. See Williams, 176 F.3d
at 499-500.
On December 30, 1999, the D.C. Court of Appeals answered
the certified question, holding that section 28-3904(r) of the
CPPA does apply to real estate mortgage finance transac-
tions. DeBerry v. First Gov't Mortgage & Investors Corp.,
743 A.2d 699, 703 (D.C. 1999), reh'g en banc denied (May 16,
2000). We address First Government's remaining claims in
section II of this opinion. In section III, we address
Williams's cross appeal.
II
First Government argues that the evidence is insufficient to
support the jury's finding of liability and award of damages
under the CPPA. It also challenges the award of attorneys'
fees to Williams. We discuss each argument in turn.
Sufficiency of evidence
The district court instructed the jury that it could find
CPPA liability on one of two grounds: either that First
Government made Williams a loan that it knew he could not
repay, see D.C. Code Ann. s 28-3904(r)(1), or that First
Government took advantage of Williams's inability to protect
his interests in the transaction, see id. s 28-3904(r)(5). Our
role in reviewing the jury's verdict in Williams's favor and the
district court's denial of First Government's motion for judg-
ment notwithstanding the verdict is "very limited." Ferebee
v. Chevron Chem. Co., 736 F.2d 1529, 1534 (D.C. Cir. 1984).
The jury's verdict must stand unless the evidence, to-
gether with all inferences that can reasonably be drawn
therefrom is so one-sided that reasonable [persons] could
not disagree on the verdict. The appellate court does
not assess witness credibility nor weigh the evidence, but
rather seeks to verify only that fair-minded jurors could
reach the verdict rendered.
Id. (citations and internal quotation marks omitted).
Applying this highly deferential standard, we think "fair-
minded jurors" could find First Government liable under
either subsection (r)(1) or subsection (r)(5). Williams testified
that he informed First Government that he received approxi-
mately $900 in monthly disability benefits and no more than
$3,000 a year from part-time work. See Trial Tr. 5/12/97
("Tr.") at 96-97. Although Williams's loan application indi-
cated that he earned $500 a month in addition to his monthly
check, Williams testified not only that he never gave that
figure to First Government, but also that First Government
"lied" when it wrote that figure on his application. Id. at 100.
From this testimony, a reasonable jury could easily find that
First Government knew that Williams's income was no more
than $1,200 a month. From other evidence in the record, a
reasonable jury could also find that First Government knew
that Williams was disabled, that he was getting older, and
that he would be unable to supplement his fixed income with
earnings from part-time work throughout the 30-year term of
the loan. We find that a reasonable jury could conclude that
First Government made the loan to Williams knowing "there
was no reasonable probability of payment in full of the
obligation." D.C. Code Ann. s 28-3904(r)(1).
We likewise find that a reasonable jury applying subsection
(r)(5) could conclude that Williams was unable fully to under-
stand the transaction and that First Government "knowingly
[took] advantage of [his] inability ... reasonably to protect
his interests." Id. s 28-3904(r)(5). Williams testified that he
had only a sixth-grade education from the segregated schools
of Savannah, Georgia, see Tr. at 40-41, that he could read no
more than 40 percent of a newspaper, see id. at 90, that he
only recently learned through tutoring "what S means at the
end of the word" and "what a capital letter means," id. at 43-
44, that he thought an interest rate of 13.90 percent exceeded
13.9 percent, see id. at 173-74, and that when he bought his
house in 1970, he "depended on [his wife] basically to do most
of [his] reading [at the closing] 'cause she had an 11th grade
education," id. at 43. Williams also testified that during his
20-minute meeting with First Government to settle the loan,
the loan officers neither explained the papers he signed nor
gave him time to review the papers or any papers to take
home. See id. at 60-61, 142-44, 183. First Government
points to testimony suggesting that Williams had considerable
experience and familiarity with mortgage transactions. Our
role, however, does not include weighing the evidence. See
Ferebee, 736 F.2d at 1534. Instead, we need only satisfy
ourselves that "fair-minded jurors could reach the verdict
rendered." Id. In this case, the evidence is sufficient for a
reasonable jury to find liability under subsection (r)(5).
First Government next claims that the evidence does not
support the jury's award of damages, pointing out that the
terms of the loan were calibrated to the risk Williams posed
as a borrower and that Williams was unable to secure better
terms from other lenders. But the amount of damages turns
not on whether Williams had better options or whether the
terms of the loan met industry standards, but rather, as the
district court instructed the jury, on whether "Mr. Williams
lost money as a result of unlawful acts of First Government."
Tr. at 816 (emphasis added). Upon finding that First Gov-
ernment unlawfully made Williams a loan that he either could
not repay or did not understand, the jury had ample basis for
awarding $8,400 in damages. After all, First Government
collected over $7,500 in fees and expenses, and charged
Williams $100 per month more than he had been paying
under his previous mortgage.
Nor do we find merit in First Government's complaint that
the district court articulated no factual basis for trebling the
damages and improperly awarded Williams both treble dam-
ages and attorneys' fees. Once it is established that a
"consumer [has] suffer[ed] any damage," the CPPA autho-
rizes courts to treble damages without further findings. D.C.
Code Ann. s 28-3905(k)(1)(A) (1996). Moreover, at the time
First Government made the loan, the CPPA provided that
plaintiffs may "recover or obtain any of the following: (A)
treble damages; (B) reasonable attorneys' fees; (C) punitive
damages; (D) any other relief which the court deems proper."
Id. s 28-3905(k)(1) (amended 1998). The word "any," togeth-
er with the absence of the word "or" between options (A)
through (D), indicates that courts may award any one or any
combination of the listed remedies. See District of Columbia
Committee on Public Services and Consumer Affairs, Report
on Bill 1-253, the District of Columbia Consumer Protection
Procedures Act 23 (1976) ("Treble damages and reasonable
attorneys' fees are recoverable in order to encourage the
private bar to take such cases.").
Attorneys' fees
Williams's original suit in district court named four defen-
dants (First Government, Industry Mortgage, Central Money,
and Charles Hardesty) and alleged five causes of action
(common law fraud, common law unconscionability, CPPA,
TILA, and D.C. usury law). After settling with two defen-
dants (Central Money and Charles Hardesty), Williams went
to trial against First Government and Industry Mortgage, the
assignee of the loan. Following the jury verdict in his favor
and the district court's subsequent orders, Williams submit-
ted a fee request calculated as follows: Starting with the total
amount of fees generated by the suit, Williams's attorneys cut
in half all fees incurred prior to settlement with Central
Money and Charles Hardesty, thus excluding fees attribut-
able to work performed against the two settling defendants.
His attorneys then excluded fees associated with the TILA
and usury claims, as well as post-trial fees associated with the
unconscionability claim. Thus, according to Williams, the
$199,340 fee request, which the district court granted in full,
reflects half of all fees associated with the fraud, CPPA, and
unconscionability claims prior to settlement, plus the entire
amount of such fees after settlement up to the end of trial.
"[A]n attorney's fee award by the District Court will be upset
on appeal only if it represents an abuse of discretion." Cope-
land v. Marshall, 641 F.2d 880, 901 (D.C. Cir. 1980) (en banc).
Under settled law, Williams may recover fees only for work
related to the claim on which he prevailed, and the fees
awarded on that claim must be reasonable in relation to the
success achieved. See Hensley v. Eckerhart, 461 U.S. 424,
434 (1983). Pointing out that Williams's fee request actually
included time for work on the TILA claims, First Government
argues that the TILA and fraud claims were unrelated to the
CPPA and unconscionability claims. The latter, it says,
involved Williams's ability to understand the transaction and
to pay off the loan, while the former involved the accuracy
and completeness of First Government's disclosures and rep-
resentations to Williams. Disagreeing with First Govern-
ment, the district court explained that "all the claims against
all defendants involved a 'common core of facts' and 'related
legal theories.' " Fees Order I at 3 (quoting Hensley, 461
U.S. at 435). "For example," the district court said, "the sale
of insurance to plaintiff ... was a common denominator of
plaintiff's [TILA] theory, its fraud theory, and its D.C. statu-
tory claims. The overlap was certainly enough to justify the
basic approach of plaintiff's counsel [in calculating the fee
request]." Fees Order II at 1-2.
In Morgan v. District of Columbia, we said that "[f]ees for
time spent on claims that ultimately were unsuccessful should
be excluded only when the claims are 'distinctly different' in
all respects, both legal and factual, from plaintiff's successful
claims." 824 F.2d 1049, 1066 (D.C. Cir. 1987) (quoting Hens-
ley, 461 U.S. at 434). Recognizing that "there is no certain
method of determining when claims are 'related' or 'unrelat-
ed,' " Hensley, 461 U.S. at 437 n.12, we find no basis for
believing that the district court abused its discretion in con-
cluding that the TILA and fraud claims were not " 'distinctly
different in all respects' " from the CPPA and unconscionabil-
ity claims. Fees Order II at 1 (quoting Morgan, 824 F.2d at
1066). Indeed, considering the overlap among Williams's
various common law and statutory causes of action, we agree
with the district court that "[m]uch of the work done by
plaintiff's counsel would have been required to litigate any
one of his claims against any single defendant." Fees Order I
at 3.
First Government next argues that the district court
abused its discretion by awarding fees disproportionate to the
damages Williams recovered. Relying on pre-trial estimates
of the dollar value of the suit provided by Williams's attor-
neys, First Government argues that because the $25,200
award amounted to only 10 to 15 percent of Williams's
litigation objectives, the district court should have awarded no
more than 10 to 15 percent of the attorneys' fees requested.
Again, the district court disagreed, stating "while the relief
plaintiff obtained was not what he originally sought in dollar
terms, the fee requested is not unreasonable in relation to
that recovery." Id.In Hensley, the Supreme Court rejected a " 'mathematical
approach' " similar to that proposed by First Government,
461 U.S. at 435 n.11 (citation omitted), noting that "[t]here is
no precise rule or formula" for determining the reasonable-
ness of the relation between the fee requested and the relief
obtained, id. at 436. Here, the district court found the fees
reasonable, considering not only the damages Williams recov-
ered, which will prevent his immediate expulsion from his
home and will likely help save his home in the long run, but
also "[t]he vindication of rights, whether constitutional or
statutory." Fees Order II at 2. Like the plaintiffs in City of
Riverside v. Rivera, who received a $245,000 fee award that
was more than seven times the $33,000 in damages they
recovered under a federal civil rights statute, Williams "seeks
to vindicate important civil ... rights that cannot be valued
solely in monetary terms." 477 U.S. 561, 574 (1986) (plurality
opinion). Affirming the fee award in Rivera, the Supreme
Court held that fees awarded under 42 U.S.C. s 1988 need
not be proportionate to the amount of damages recovered in
order to satisfy Hensley's reasonableness standard. See id.
at 580 (plurality opinion); id. at 585 (Powell, J., concurring in
the judgment). Given the public policy interests served by
the CPPA, see DeBerry, 743 A.2d at 703, we decline to read a
"rule of proportionality" into that statute. Such a rule "would
make it difficult, if not impossible, for individuals with merito-
rious ... claims but relatively small potential damages to
obtain redress from the courts." Rivera, 477 U.S. at 578(plurality opinion). Thus, although Williams's fee award is
disproportionate to the damages he recovered, the district
court did not abuse its discretion in concluding that the fees
requested were "reasonable in relation to the success
achieved." Hensley, 461 U.S. at 436.
First Government challenges the calculation of the fee in
several other respects, claiming among other things that
Williams's attorneys failed to exercise billing judgment, over-
staffed the case, and incurred unnecessary costs due to their
alleged lack of trial experience. Having carefully considered
each claim, we think none requires discussion. As we have
said before, "[w]e customarily defer to the District Court's
judgment because an appellate court is not well situated to
assess the course of litigation and the quality of counsel."
Morgan, 824 F.2d at 1065. By contrast, the district court
"closely monitors the litigation on a day-to-day basis," id. at
1065-66, "presid[ing] at numerous motions, discovery dis-
putes, and chambers conferences, as well as at the pretrial
conference and trial," id. at 1066 (internal quotation marks
and citation omitted). See also Hensley, 461 U.S. at 437(district court has "superior understanding of the litigation").
"[I]ll-positioned to second guess [its] determination," Morgan,
824 F.2d at 1066, we need only verify that the district court
"provide[d] a concise but clear explanation of its reasons for
the fee award," Hensley, 461 U.S. at 437. Because the
district court in this case did just that, we see no basis for
disturbing Williams's fee award.
* * *
Having thoroughly considered First Government's other
claims, including its challenges to various evidentiary rulings
by the district court, and finding none persuasive, we affirm
the district court's judgments against First Government in all
respects.
III
As cross-appellant, Williams argues that the district court
violated his constitutional right to a jury trial by rejecting his
unconscionability claim after the jury had determined that the
loan was unconscionable under the CPPA; that the district
court misapplied the common law doctrine of unconscionabili-
ty; and that it erred as a matter of law in dismissing his
TILA claims. Because these claims present issues of law, our
review is de novo. See Pierce v. Underwood, 487 U.S. 552,
558 (1988).
Common law unconscionability
After the jury found First Government liable under sec-
tion 28-3904(r) of the CPPA, which prohibits sales or leases
with "unconscionable terms or provisions," the district court
rejected Williams's equitable claim of common law unconscio-
nability. Relying on the proposition that the Seventh
Amendment right to trial by jury guarantees that a jury's
determination of factual issues common to legal and equita-
ble claims "governs the entire case," Bouchet v. National
Urban League, 730 F.2d 799, 803 (D.C. Cir. 1984), Williams
argues that the jury's finding of statutory unconscionability
compelled the district court to find common law unconsciona-
bility as well. We disagree.
Liability for common law unconscionability requires two
findings: "an absence of meaningful choice on the part of one
of the parties together with contract terms which are unrea-
sonably favorable to the other party." Walker-Thomas, 350
F.2d at 449. Liability for statutory unconscionability in this
case required one of two findings: either that First Govern-
ment knew Williams would be unable to repay the loan, see
D.C. Code Ann. s 28-3904(r)(1), or that it took advantage of
his inability to protect his interests in the loan transaction,
see id. s 28-3904(r)(5). Of course, a finding of liability under
either subsection (r)(1) or subsection (r)(5) would be highly
probative of common law unconscionability. But because the
jury was not asked to specify which provision it applied in
reaching its verdict (Williams never requested such an in-
struction), "nobody can say what the jury found the facts to
be." Williams II, 974 F. Supp. at 19. The jury's verdict can
thus have no binding effect on the district court's subsequent
factfinding.
Independent of his Seventh Amendment claim, Williams
argues that the district court misapplied the "absence of
meaningful choice" standard articulated in Walker-Thomas.
That case identified a range of factors that courts should
consider in determining whether a party to a transaction
lacks "meaningful choice":
Whether a meaningful choice is present in a particular
case can only be determined by consideration of all the
circumstances surrounding the transaction. In many
cases the meaningfulness of the choice is negated by a
gross inequality of bargaining power. The manner in
which the contract was entered is also relevant to this
consideration. Did each party to the contract, consider-
ing his obvious education or lack of it, have a reasonable
opportunity to understand the terms of the contract, or
were the important terms hidden in a maze of fine print
and minimized by deceptive sales practices? Ordinarily,
one who signs an agreement without full knowledge of its
terms might be held to assume the risk that he has
entered a one-sided bargain. But when a party of little
bargaining power, and hence little real choice, signs a
commercially unreasonable contract with little or no
knowledge of its terms, it is hardly likely that his con-
sent, or even an objective manifestation of his consent,
was ever given to all the terms.
350 F.2d at 449 (footnotes omitted); see also Diamond Hous-
ing Corp. v. Robinson, 257 A.2d 492, 493 (D.C. 1969) (allowing
factfinder to find " 'absence of meaningful choice' because of
appellee's unequal bargaining power and her ignorance of the
meaning of the lease provisions").
After finding the terms of the loan unreasonably favorable
to First Government, the district court offered the following
analysis of whether Williams lacked "meaningful choice":
Williams' argument on the lack of meaningful choice
proceeds from his assertion that he was under time
pressure either to pay his D.C. property taxes or suffer
the tax sale of his home. The notice of an impending tax
sale undoubtedly motivated Williams' decision, but it did
not deprive him of meaningful choice. Williams had
known for weeks that a tax sale on his home was
scheduled. The sale was not proven to be imminent.
Williams II, 974 F. Supp. at 19. The district court went on
to say:
Moreover, Williams had substantial experience in finding
mortgage loans and had been actively shopping for a loan
in the weeks before his entry into the agreement with
First Government. Williams' testimony that he was
upset by the terms of the loan, which plaintiff now
argues demonstrates his lack of meaningful choice, actu-
ally tends to prove the contrary proposition: that he
knew what he was doing and did it voluntarily.
Id. According to Williams, the district court failed to consid-
er "all the circumstances surrounding the transaction,"
Walker-Thomas, 350 F.2d at 449--in particular, his lack of
education and limited literacy.
We agree with Williams that Walker-Thomas required the
district court not only to have examined, as it did in the first
part of its analysis, whether he could have pursued other
options, but also to have inquired whether he gave meaningful
"consent" to the loan. Id. From the second part of its
analysis, especially its statement that "he knew what he was
doing and did it voluntarily," Williams II, 974 F. Supp. at 19,
we cannot be sure whether the district court considered, as
Walker-Thomas requires, Williams's lack of education, his
ability to understand the transaction, his overall bargaining
power, and the fairness of First Government's sales practices.
Nor can we be sure whether the district court's observation
that "Williams had substantial experience in finding mortgage
loans," id., was shorthand for a finding, again as required by
Walker-Thomas, that Williams understood the terms of his
loan with First Government, notwithstanding the appreciable
evidence of his limited literacy, see supra at 6-7.
We thus remand the "meaningful choice" issue to the
district court. If the district court did in fact consider
Williams's lack of education and limited literacy in concluding
that Williams "knew what he was doing and did it voluntari-
ly," Williams II, 974 F. Supp. at 19, that will be the end of
the matter. Otherwise, the district court should take such
action as it believes necessary consistent with this opinion.
Truth in Lending Act
Challenging the district court's denial of his TILA claims,
Williams first argues that the district court wrongly rejected
his claim that First Government unlawfully failed to disclose
the $1,273 life insurance premium as a finance charge associ-
ated with the loan. See 15 U.S.C. s 1605 (1994) (requiring all
costs of credit to be disclosed to borrowers as finance
charges); 12 C.F.R. s 226.4 (1998) (same). The life insurance
policy he bought had the following provision, known as an
"actively at work requirement":
Your insurance will take effect on the date shown above.
You must be regularly performing the duties of your
occupation on your last scheduled workday before this
date. If you are not, your insurance will take effect on
the date you resume such duties.
According to Williams, First Government knew that the
policy would never take effect because it was aware that he
had not "regularly perform[ed] the duties of [his] occupation"
since retiring in 1987 and that he could never "resume such
duties" due to his disability. Thus, Williams argues, the
insurance premium amounted to a hidden cost of credit that
First Government should have disclosed as a finance charge.
Although the language of the "actively at work require-
ment" could be read to prevent Williams's policy from taking
effect, we think ordinary principles of waiver and estoppel
would have barred any attempt by the insurance company to
deny coverage on this ground. Where an insurer accepts
premium payments from the insured with knowledge of facts
that would invalidate the policy, the insurer may not avoid
liability on the basis of those facts. See Britamco Underwrit-
ers, Inc. v. Nishi, Papagjika & Assocs., Inc., 20 F. Supp. 2d
73, 77 (D.D.C. 1998) (noting common law norm that waiver
and estoppel "bar[ ] an insurer who has knowledge of facts
that would exclude coverage, from seeking to avoid liability
on non-coverage grounds after acting as though the policy
were in force"); Diamond Serv. Co. v. Utica Mutual Ins. Co.,
476 A.2d 648, 654 (D.C. 1984) ("Waiver is an act or course of
conduct by the insurer which reasonably leads the insured to
believe that the breach will not be enforced. Estoppel ...
generally results when an insurance company assumes the
defense of an action or claim, with knowledge of a defense of
non-liability under the policy...."); see also 16C John A.
Appleman & Jean Appleman, Insurance Law & Practice
s 9273 (1981). Here, Williams wrote on his insurance appli-
cation that he was a "Painter--Retired" and that he was not
"actively engaged full time in the duties of [his] profession."
Knowing this, the insurance company (through First Govern-
ment) accepted Williams's $1,273 premium. Since these facts
would have barred the insurance company from invoking the
"actively at work requirement" to deny Williams coverage, we
agree with the district court that the insurance policy was not
worthless and that the premium was therefore not a finance
charge. See Williams II, 974 F. Supp. at 20 n.3.
Claiming that the life insurance policy he bought was
"credit life" (a policy that insures payment of the outstanding
balance on a loan if the borrower dies during the policy's
term), Williams next argues that First Government excluded
the premium from the finance charge without making disclo-
sures required by TILA. See 12 C.F.R. s 226.4(d)(1)(ii).
The district court rejected this argument on the ground that
the insurance policy was not credit life. See Williams II, 974
F. Supp. at 20. Again, we agree.
The essential feature of a credit life insurance policy is that
the beneficiary must be the creditor or the credit account of
the insured. See 12 C.F.R. s 226(d), Supp. I, cmt. 6 (official
staff interpretations). Williams never designated a beneficia-
ry on his insurance application, nor did he make a subsequent
endorsement. He did sign a disclosure form that said: "The
[insurance] [c]ompany will pay all insurance benefits to the
Bank which will apply it to the unpaid balance of your Loan.
The excess, if any, will be paid to your designated Beneficia-
ry." But the quoted language appears on the form under the
title "Multiple Life Coverage" and applies only to policies
covering two or more co-borrowers. The form contains no
such language under the title "Single Life Coverage." We
thus agree with the district court that "[h]ad Williams died
during the two-year term of the policy, his estate--not First
Government or its assignees--would have been entitled to the
proceeds of the life insurance policy." Id.
In the alternative, Williams argues that even if the policy
was not credit life, the evidence compelled the district court
to find that Williams did not buy the policy voluntarily and
that First Government therefore should have disclosed the
premium as a finance charge. See 12 C.F.R. s 226.4(d),
Supp. I, cmt. 6 (exempting insurance premiums from disclo-
sures applicable to finance charges "[i]f such insurance is not
required by the creditor as an incident to or a condition of
credit"). When Williams bought the policy, however, he
signed a form titled "OPTIONAL LIFE INSURANCE DIS-
CLOSURE STATEMENT," whose first sentence reads:
"Credit related life insurance is not required to obtain credit
and will not be provided unless you sign and agree to pay the
additional cost." We thus agree with the district court:
"[N]o reasonable juror could have concluded that [Williams's
purchase] was involuntary." Williams II, 974 F. Supp. at 20.
Finally, Williams argues that the district court wrongly
denied his claim that First Government failed to provide him
timely notice of his right to cancel the loan. Under TILA, a
borrower who uses his home as security for a loan is entitled
to a three-day "cooling off" period after settlement during
which he has an absolute right to cancel the transaction. See
15 U.S.C. s 1635; 12 C.F.R. s 226.23(a)(3). If a lender fails
to notify the borrower of the right to cancel three business
days before the "cooling off" period expires, then the borrow-
er retains the right to cancel for three years after settlement.
See id.
First Government issued Williams a notice stating that he
had until January 18, 1995 to cancel the loan. Counting
backward three days from January 18, the district court
assumed that if the notice reached Williams by January 15,
then First Government had satisfied its disclosure and deliv-
ery obligations. See Williams II, 974 F. Supp. at 21. But
"for purposes of rescission," TILA regulations define "busi-
ness days" as "calendar days except Sundays and the legal
public holidays ... such as ... the Birthday of Martin
Luther King, Jr." 12 C.F.R. s 226.2(a)(6). January 16 was
the King holiday. January 15 was a Sunday. The January
18 expiration date thus meant that First Government had to
deliver notice of Williams's right to cancel no later than
January 13, the date of the loan settlement.
Notwithstanding this miscalculation of the notice delivery
date, we think the district court properly dismissed Williams's
claim. At the loan settlement on January 13, Williams signed
a document stating, "I acknowledge receipt of two copies of
NOTICE OF RIGHT TO CANCEL...." His signature
created a rebuttable presumption of delivery. See 15 U.S.C.
s 1635(c). To rebut this presumption, Williams relied on his
trial testimony stating that he received no papers to take
home at settlement and that he only received loan documents
in the mail some days later. See Tr. at 142-44. Rejecting
this argument, the district court concluded that "it is reason-
able ... to require strict proof of a claim of non-delivery" and
that "Williams' testimony, on its own, is not sufficient."
Williams II, 974 F. Supp. at 22.
Although we disagree with the district court on the proper
legal standard for evaluating the sufficiency of Williams's
testimony--the presumption of delivery imposed on Williams
"the burden of going forward with evidence to rebut or meet
the presumption, but [did] not shift to [him] the burden of
proof," Fed. R. Evid. 301; see Legille v. Dann, 544 F.2d 1, 6
(D.C. Cir. 1976)--we agree with the court's ultimate conclu-
sion. Even under Rule 301's more permissive standard,
Williams failed to satisfy his evidentiary burden. After
Williams testified that he received no papers during the loan
settlement, First Government's lawyer confronted him with
his deposition in which he had stated that he "look[ed] at
those papers when [he] got home" on "the day of the settle-
ment." Tr. at 143. Pointing to Williams's prior inconsistent
statement, the district court found his trial testimony not
credible, see Williams II, 974 F. Supp. at 21-22, observing
that "Williams failed to call the only other witness to the
actual closing, a friend who accompanied him and who might
have provided corroboration that the documents were not
handed to him," id. at 22 n.10. Because "the district court's
credibility determinations are entitled to the greatest defer-
ence from this court on appeal," Carter v. Bennett, 840 F.2d
63, 67 (D.C. Cir. 1988), and because Williams offered no
evidence of non-delivery beyond his trial testimony, we affirm
the district court's determination that Williams failed to rebut
the presumption of delivery.
Having affirmed the district court's dismissal of Williams's
TILA claims, we have no need to reach Industry Mortgage's
arguments denying assignee liability under 15 U.S.C. s 1641.
IV
We remand Williams's common law unconscionability claim
for further proceedings consistent with this opinion. On all
other claims, we affirm.
So ordered.