IN RE RICHARDS

272 F. Supp. 480 (1967) | Cited 0 times | D. Maine | July 20, 1967

OPINION AND ORDER OF THE COURT

GIGNOUX, District Judge.

Aetna Finance Company of Maine petitions for review of an order of the referee in bankruptcy entered in these consolidated proceedings for a wage earner plan under the provisions of Chapter XIII of the Bankruptcy Act, 11 U.S.C. §§ 1001-1086 (1964). By his order the referee disallowed a secured claim filed by Aetna because the loan contained "excessive, unauthorized and illegal" charges for credit life and disability insurance, thereby rendering the loan usurious and void under the provisions of the Maine Small Loan Law, 9 M.R.S.A. §§ 3001-3162 (1964).

The material facts may be briefly stated. On December 7, 1963, the debtors, Robert R. Richards and Gail L. Richards of Lewiston, Maine, filed petitions for wage earner plans under Chapter XIII of the Bankruptcy Act, listing debts of $2,118.81 and assets of $619, and proposing to remit $15 each week for the purpose of paying their debts in full over a period of three years. In the schedules attached to their petitions, the debtors listed a debt to Aetna in the amount of $957.22, secured by a chattel mortgage on household goods, with the notation that the debt was disputed as being in violation of the Maine Small Loan Law.

Following consolidation of the proceedings, a first meeting of creditors was held on December 26, 1963. At this meeting, Aetna appeared by counsel and filed a proof of claim in the amount of $957.22, to which was attached a copy of the note upon which it was based, the chattel mortgage securing the same, the ledger cards relating to the transaction, and an affidavit of Aetna's local manager that to the best of his knowledge and belief "no usury has been charged said debtors on said account." The referee continued for a later determination the question of the validity of Aetna's claim, and at the conclusion of the meeting entered an order declaring the plan accepted, appointing a trustee and confirming the plan. 1"

On December 22, 1964, approximately a year after confirmation of the plan, the trustee for the first time filed formal objections to Aetna's claim. The debtors joined in these objections on January 11, 1965, and after extensive pre-trial proceedings, the hearing on Aetna's disputed claim was finally held before the referee on June 29 and July 9, 1965.

The evidence presented at the hearing disclosed that the debtors had borrowed from Aetna on two different occasions, once on March 7, 1961 and again on July 2, 1962. On the second occasion, the debtors signed a note in the face amount of $1,174.73, n2 which provided for payment of the maximum interest then permitted under Maine law. 3" The note was secured by a duly recorded chattel mortgage covering the debtors' household goods. The principal amount of the note included a credit life insurance premium of $35.24 and a credit health and accident insurance premium of $115.92. As a part of the loan transaction, the debtors received a certificate of insurance for credit life and disability benefits under a creditors group life and disability policy issued to Aetna by Old Republic Life Insurance Company, an insurer duly authorized to do an insurance business in the State of Maine. 4" The referee found, and his finding is amply supported by the evidence, that the amounts charged the debtors for credit insurance were in excess of any amounts authorized to be charged for such insurance under the then applicable provisions of the Maine Credit Insurance Law, 24 M.R.S.A. §§ 1201-1214 (1964). 5" However, significantly, no evidence was presented at the hearing, either by Aetna or by the trustee, to show whether the amount charged by Aetna to the debtors for credit insurance was the same as, or greater than, the premium charged by Old Republic to Aetna, and the referee made no finding in this respect. 6" n2 As shown by Aetna's voucher of the transaction, the note was made up of the following items: Payment of unpaid principal of prior loan $ 856.99Recording fee 1.00Insurance premiums 151.16Cash to borrowers 165.58 Total amount of loan $ 1174.73

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