Cullers v. Home Credit Co. , 130 Ga. App. 441 ( 1973 )

Eberhardt, Presiding Judge.

Appellant brings this appeal from the denial of his motion to set aside a default judgment entered in a suit on a contract made pursuant to the Industrial Loan Act (Ga. L. 1955, p. 431, as amended; Code Ann. § 25-301 et seq.). Held:

1. The original grounds of the motion to set aside, and enumeration of error 1, present the question of whether a lender may sell to the borrower any type of credit life insurance other than declining term. We dealt with this in Mason v. Service Loan &c. Co., 128 Ga. App. 828 (3) (198 SE2d 391), holding that either type of credit life insurance in connection with industrial loans is lawful, which we here follow. See Comptroller-General’s Industrial Loan Regulations, § 120-l-ll-.02(2) (a, b).

2. The amendment to the motion to set aside, and enumeration of error 2, complain that appellee violated Ga. L. 1955, pp. 431, 444 (Code Ann. § 25-319) by failing to disclose on the loan statement or on the loan contract that appellant was receiving level term, as opposed to decreasing term, credit life insurance. The statute in question provides that "At the time the loan is made, each licensee hereunder shall deliver to the borrower ... a copy of the loan contract or a written itemized statement in the English language showing in clear terms . . . the amount of each class of insurance carried and the premiums paid thereon . . .” The Statement of Loan provides, in part: "The Amount Financed will be disbursed to or for Borrower as follows: Credit Life Insurance Premium-$24; Credit Accident and Health Ins. Premium -$36; Personal Property Insurance Premium-$24; Auto Physical Damage Insurance Premium etc.-$-0-.”

Elsewhere in the contract appears "Amount of Life Insurance-$600 .... Accident and Health Insurance Monthly Benefit-$25 . . . Insurance-The purchase of Credit Life or Credit Accident and Health Insurance is not required by Lender in order to obtain a loan. Borrower, however, having first examined the cost of such insurance, as indicated opposite, does hereby voluntarily elect to purchase the following coverages: [7] Credit Life Insurance GO Credit Accident and Health Insurance [dated and signed by borrower]”

Credit life insurance, being a form of life insurance, is a part of that "class” of insurance as defined in Code Ann. § 56-305, whether it be level or reducing term.

3. "Credit Level Term Life Insurance or group credit level term life insurance may be written as security on all loans made under the provisions of the Industrial Loan Act. Insurance coverage shall not exceed the face amount of the contract.” Comptroller-General’s Industrial Loan Regulations, § 120-1-11-.02 (a). (Emphasis supplied.)

"Credit reducing term life insurance or group credit reducing term life insurance may be written on all loans made under the provisions of the Act. Insurance coverage shall not exceed the face amount of the contract.” Comptroller-General’s Industrial Loan Regulations, § 120-1-11-.02 (b).

There is no provision, either in the statute (Code Ann. §§ 25-315 and 56-3306) or in the Commissioner’s Regulations requiring that the borrower be given the option as to which type of credit life insurance is to be written. It is required that the statement of the transaction show the amount of the insurance and the premium to be paid therefor. That was done. The insurance policy or certificate must be delivered within 30 days after acceptance of the application and risk. The application must indicate the effective date. Code Ann. § 56-3306.

There is, of course, as between level term and declining or reducing term insurance, some difference in the premium to be paid and in the benefit which may result to the borrower. If it is desirable that the borrower be afforded the option as to which of these he will buy, it is a matter that is within the power delegated by the General Assembly to the commissioner (see Code Ann. § 25-315) and provision for the option should be made in his regulations,¹ — not by the court. It is a legislative function which either the General Assembly or the commissioner may perform, but we have no legislative power.

Since the commissioner has already provided that level term credit life insurance may be written as security for all loans made under the Act, which he was authorized to do under Code Ann. § 25-315, and the licensees of this state have acted under the regulation when writing level term insurance, the courts should not void the loans simply because, in our view, the regulations should go further and provide for the giving of an option to the borrower as to whether he will buy level or reducing term insurance.

There can be no fair way of effecting such a requirement except by the adoption of a rule or regulation in accordance with the provisions of the Administrative Procedure Act of 1964, §§ 3 and 4 (Code Ann. §§ 3A-103, 3A-104), which declares our public policy as requiring the giving of advance notice to all who may be interested and the holding of a public hearing before promulgating the rule or regulation, and, of course, it is to be given prospective effect from the effective date.² Code Ann. § 3A-106.

We are required to take judicial notice of any rule or regulation which the commissioner has adopted in conformity with the Administrative Procedure Act. Code Ann. § 3A-108. Consequently, at this time we must judicially know that it is provided under the commissioner’s regulations, § 120-1-11-.02 (a) that the lender may write level term credit life insurance as security for all loans made under the Industrial Loan Act, or he may, if he so chooses, write reducing term credit life insurance on them, and that since, at the time this loan was made, nothing in either the Industrial Loan Act or in the commissioner’s regulations required that an option be afforded to the borrower as to which he would buy, it was not a violation of the law for the lender to write or sell only one of these types of insurance. If it is not required by law, or by regulation having the effect of law, we can not say that it must be included in the statement of the transaction required to be delivered to the borrower under Code Ann. § 25-319.

We agree that "the law on this question is not simply what the judges of this court think the law should be but what the General Assembly has said it is.” Horton v. Brown, 117 Ga. App. 47, 49 (159 SE2d 489). It is to be found in the Industrial Loan Act, and in the commissioner’s regulations, issued pursuant to the authorization therein found, and our judgment is rested upon them.

4. The disclosure here fully complies with the requirements of the Truth in Lending Act, 15 USC § 1505 (5), providing that where imposed directly or indirectly by the creditor as an incident to the extension of credit, the "premium or other charge for guarantee or insurance protecting the creditor against the obligor’s default or other credit loss” is a part of the finance charge to be disclosed. However, by the terms of 15 USC § 1605 (b) the premium is not a part of the finance charge (1) if the coverage is not a factor in the extension of the credit, or (2) if the person to whom credit is to be extended gives specific written indication of his desire to obtain the insurance after written disclosure to him of the amount of the premium. The record shows this was done.

We can find nothing in either the statutes or the regulations requiring a disclosure or statement as to whether the insurance written is level term or declining term, but such a disclosure, either on an application or on the loan contract itself, if made, would appear to be a proper one.

The statement of the loan, appearing on the face of the contract, is sufficient to meet the requirements of the statutes and of the regulations, as they stood when this loan was made and as they now stand.

Argued April 9, 1973 Decided November 28, 1973 Rehearing denied December 18, 1973 Richard B. Ellenberg, for appellant. B. J. Roberts, for appellee.

The holding in Patman v. General Finance Corp., 128 Ga. App. 836 (198 SE2d 371) was based upon the failure of the statement of the transaction or the loan contract to show the amount of credit life insurance to be obtained on the life of the borrower. Any indication that a failure further to show whether the insurance was to be level term or declining term might have voided the obligation was obiter dicta. Under Code Ann. §§ 25-319, 25-9903 the obligation was already voided by the lender’s failure to meet the statutory requirement of showing the amount of the insurance, and it was unnecessary to deal with anything else. It is to be noted that on the statement of the transaction in that case there were places to be checked for indicating whether the insurance would be level or declining term, and neither was checked. In Mason v. Service Loan &c. Co., 128 Ga. App. 828, supra, it appears that the statement of the transaction "revealed a premium charge for a level term’ credit life insurance policy rather than for a 'declining term’ policy,” and we pointed out that "the borrower elected to take the level term.” The offering of the election to the borrower was neither required nor prohibited by the law or by regulations, in those cases or here, though it will be required beginning January 1,1974 under Regulation 120-1-14-.15.

5. This is a proceeding to set aside a default judgment, brought under § 60 (d) (Code Ann. § 81A-160 (d)) of the Civil Practice Act which requires that the motion "must be predicated upon some nonamendable defect which does appear upon the face of the record or pleadings” upon which the judgment was rendered, and that "it is not sufficient that the complaint or other pleading fails to state a claim upon which relief can be granted, but the pleadings must affirmatively show that no claim in fact existed.” Appellant has wholly failed to meet these requirements. The pleadings upon which this judgment was rendered do not show that no claim in fact existed.

Judgment affirmed.

Bell, C. J., Quillian and Clark, JJ., concur. Evans, J., concurs specially. Hall, P. J., Pannell, Deen and Stolz, JJ., dissent. Barry Phillips, Richard R. Cheatham, amicus curiae.

1 On November 1,1973 the commissioner promulgated additional regulations and amendments to regulations affecting the making of industrial loans, effective January 1, 1974. Included in these is regulation No. 120-1-14-.15 which provides, inter alia, "If the creditor requires credit life insurance, the creditor shall give the debtor written notice of the debtor’s right to choose either level term life insurance or reducing term life insurance coverage. The creditor may for reasonable cause before credit is extended decline the insurance provided by the debtor.”

2 The right of the lender to sell level term or declining term credit life insurance is confirmed by the additional regulations and amendments issued November 1, 1973, effective January 1, 1974, and provision is made for giving the borrower the election as to which he will buy.