2024 ME 17 Franklin

MAINE&SUPREME&JUDICIAL&COURT& Reporter&of&Decisions&

Decision:& & 2024&ME&17&

Docket:& BCD-23-56&

Argued:& September&12,&2023&

Decided:& & February&29,&2024&

Panel:& & STANFILL,&C.J.,&and&MEAD,&CONNORS,&LAWRENCE,&and&DOUGLAS,&JJ.

FRANKLIN!SAVINGS!BANK!

v.!

MICHAEL!T.!BORDICK!et!al.!

CONNORS,!J.!

[¶1]! ! This! appeal! involves! the! construction ! of! two ! provis ion s ! of! the!

Federal! Truth!in! Len ding!Act! (TILA):!(1)!15!U.S.C.A.!§!1603(1),!which!exempts!

from!T ILA !disclosure!requir em e n ts!“[c]redit!transactions!inv olving!extensions!

of! credit! primarily! for! business! [or]! commercial! .! .! .! purposes,”! and! (2)! 15!

U.S.C.A.!§!1603(3),!which!exempts!“[c]redit! transactions,!other!than! those!in!

which!a!security!interest!is!or! will!be! acquired! in!real!property,! or!in! personal!

property! used! or! expected! to! be! used! as! the! principal! dwelling! of! the!

consumer!.!.!.!in! which!the!total!am o un t !financed!exceeds!$50,0 0 0 .”!!15!U.S.C.A.!

§§!1601-1667f!(Westlaw!through!Pub.!L.!No.!118 - 22).!

&&Although&Justice&Jabar&participated&in&this&appeal,&he&retired&before&this&opinion&was&certified.&

[¶2]!!Michael!T.!Bordick!and!Monica!P.!Bordick!defaulted!on!a!loan!from!

Franklin! Savings! Bank! secured! with! a! hunting! cabin! that! they! owned! on!

property! they! leased.! ! The! Bank! filed! a! complaint! for! recovery! of! personal!

property!(the!cab in),!and! th e!Business!and!Consumer!Docket!(BCD)!(!"##$%&'()!

ruled! in! favor! of! th e! Bank.! ! The! Bordicks! now! appeal! from! that! judgment,!

pursuing! the! affirmative! defense! that! th e! Bank! did! not! make! disclosures!

required!by!TILA.

!!The!Bank!concedes!that!it!did!not!make!TILA!disclosures,!

but!counters!that!the!credit!transaction!is!not!subject!to!TILA.

[¶3]!!We!conclude!that!a!credit!transaction!secured!by !real!prop erty!in!

the!form !of!a!lease!is!not!exempt!from!TILA!under!15!U.S.C.A.!§!1603(3),!but!

that!the!BCD!applied!an!incorrect!test!to!determine!whether!the!loan!was!for!

commercial! purposes! and! therefore!exempt! under! §! 1603(1).!! We! therefore!

vacate!the!judgment!in!favor!of!the!Bank!and!remand!for!the!BCD!to!determine!

the!nature!of!the!loan,!looking!at!the!totality!of!the!circumstances.!

&&Violation&of&TILA&would&also&violate&the&Maine&Consumer&Credit&Code&-&Truth-in-Lending,&9-A&

M.R.S.&§&8-504(1)&(2023)&(requiring&creditors&to&comply&with&TILA).&

&&The&Bordicks&also&argue&that&even&if&the&Bank&were&entitled&to&judgment,&the&BCD&erred&as&a&

matter&of&law&in&compelling&the&Bordicks&to&allow&the&Bank&to&enter&the&Bordicks’&leased&property&

through&issuance&of&a& writ& of&possession.&&Given& our& ruling,& we&need&not&and&do&not& address& this&

question.&

I.!!BACKGROU N D!

[¶4]!!The!Bordicks!entered!into!a! loan!with!the! Bank!for!$378,698.55.!!

The!loan!w as!secured! by!both!personal! prop erty!(the! Bo rdicks’!hunting! ca bin)!

and!real!property!(a!lease!for!the!land!on!which!they!had!built!the!cabin).!!When!

the!Bordicks!failed!to!make!their!payments,!the!Ban k!decla red!a !default!a nd!

filed!a!complaint!for!recovery!of!personal!property!pursuant!to!14!M.R.S.!§!7071!

(2023)!in!Rumford!D istr ict !Cou r t,!s eek in g !p os ses sio n!o f!th e !ca bin.!

[¶5]!!The!matter!was!transferre d!to!the!BCD,!and!the!BCD!held!a!summary!

proceeding!per!section!7071!on!January!17,!2023.!

! [¶6]!!During!the!hearing,!the!Bordicks!asserted!the!affirmative!defense!

that!the!Bank !did!not!m ake!disclosures!required!by!TILA.!!)**&+,-./0-#&1,.23&

4,56&7&8-"9.&:0(&;(&+,-;*$,!420!A.2d!230,!236-37!(M e.!1980)!(holding!th at!claim!

of!a!right!to!statutory!penalties!for!a!violation!of!TILA! disclosure!requirements!

in! a n ! amount! sufficient ! to! offset! the! default! amount! may! be! raised! as! an!

affirmative!defense!in!the!predecessor!statute!to !sec tio n!7 0 7 1).!

[¶7]! ! The! Bank! conceded! that! it! did! not! make! TILA! disclosures! to! the!

Bordicks! but! argued! that! TILA! did! not! apply! because! the! loan! was! for!

commercial!purposes,!citing!language!in!t he !loan!documents !labeling!the!lo a n!

commercial.! ! In! response,! the! Bordicks! argued! that! the! label! in! loan!

documentation!is!n ot !definitive!when!determining!the!nature!of!a!loan!for!TILA!

disclosure!purposes!and!that,!in!any!event,!the!purpose!provided!in!th e!loan!

documents!stated!that!the!proceeds!would!be!used!to!“refinance”!real!estate!for!

“the!following!type!of!business:!N/A.”!!As!an!offer!of!proof!on!the!first!point,!

they!cited!material!outside!the!loan!documentation!to!support!their!position,!

including!that!the!loan!was!a!refinancing!of!a!residential!consumer!debt!and!

that!there!was!no!new!money!lent,!ju st!the!payment!restructure!of!an!earlier!

loan.!

[¶8]!!The!BCD!excluded !the!Bordicks’!ex trinsic!evidence,!agreeing!with!

the!Bank!that!the! d ecision!in!40-#*.96$&;(&'<=& >*,3.$&8-(,!2007!ME!42,!157! A.3d!

233,! precluded! rev iew ! of! any! evide nce ! outside! the ! loan! do cum e ntation ! to!

determine!the!purpose!of!the!loan.!!Based!on!the!loan!documentation!here,!the!

BCD!entered!judgment!in!favor!of!the!Bank!for!possession!of!the!camp,!holding!

that!the!loan!was!exempt!un der!section!1603(1).!!The!judgment!included!an!

order! directing! the! issuance! of! a! writ! of! possession! and! requiring! that! the!

Bordicks!turn!over!the!camp!to!the!Bank!by!delivering!all!keys!to!the!cabin!and!

to! the! gate! on! the! driveway! leading! to! the! cabin! and! by! allowing! the! Bank!

unimpeded!access!to!the!camp.!

[¶9]! ! The! Bordicks! timely! appealed.! ! M.R.! App.! P.! 2B(c)(2);! 14!M.R.S.!

§!7071(8).!!After! briefing

! and! oral! argument,! w e! requested! supplemental!

briefing! on! the! question! of! whether! the! loan! was! exempt! under! 15!U.S.C.A.!

§!1603(3)! (Westlaw! current! through! Pub.! L.! 118-39).

! ! The! parties! filed!

supplemental! briefs;! the! U.S.! Consumer! Financial! Protection! Bureau! (CFPB)!

and!the!State!declined!to!take!a!position!on!this!issue.!

II.!!DISCUSSION!

A.! Under! TILA,! disclosures! are! required! for! some! but! not! all! credit!

transactions.!

[¶10]!!“Th e!Truth!in!Lending!Act!has!the!broad!purpose!of!promo ting!the!

informed! use! of! cre d it! by! assurin g ! meaningful! disclosure! of! credit! terms! to!

consumers.”! ?0-#& @0.0-& :-*#A.& :0(& ;(& @A3B033A5,! 444! U .S .! 555,! 559! (1980)!

(quotation!marks!omitted).

[¶11]!! A!creditor’s!failure!to!comply!with!TILA!can!result!in!civil! liability!

if!the!consu m e r!brings!an!action!within!one!year!of!the!violation.!!)**&15!U.S.C.A.!

&&We&granted&the&motion&of&the&U.S.&Consumer&Financial&Protection&Bureau&(CFPB),&the&State&of&

Maine& Bureau& of& Financial& Institutions,& and& the& Attorney& General& of& the& State& of& Maine& to& file& an&

amicus&brief,&which&supported&the&Bordicks’&interpretation&of&15&U.S.C.A.&§&1603(1)&(Westlaw&through&

Pub.&L.&No.&118-39).&

&&Specifically,& we& asked,& “Does& 15& U.S.C.A.& §& 1603(3)& (Westlaw& current& through& P.L.& 118-13)!

exempt&the&loan&at&issue&here&from&the&operation&of&the&federal&Truth&in&Lending&Act,&given&that&the&

total& amount& financed& exceeded& $50,000,& the& loan& was& not& a& private& education& loan,& no& security&

interest&in&real&property&was&acquired,&and&the&personal&property&in&which&a&security&interest&was&

acquired&was&not&used&or&expected&to&be&used&as&the&principal&dwelling&of&the&borrowers?”&

§!1640(e)! (Westlaw! current! through! Pub.! L.! 118-39).! ! Despite! the! one-year!

statute!of!limitations !on!affirmative!claims!by!a!consumer,!a!c on s umer!in!default!

can!at!any!time!assert!a!violation!of!TILA!as!a!defense!to!any!action!to!collect!

amounts!owed!by!the!consumer!to!a!creditor!or!by!recoupment!or!setoff.!!C#(&

§!1640(h),!(k).!

[¶12]!!TILA!does!not!apply!to!all!credit!transactions.!!Among!others,!it!

does!not!apply!to!the!following!transactions:!

(1)!!Credit!transactions!involving!extensions!of!credit!primarily!for!

business,!commercial,!or!agricultural!purposes,!or!to!government!

or!governmental!agencies!or!instrumentalities,!or!to!organizations.!

.!.!.!.!

(3)! ! Credit! transactions,! other! than! those! in! which! a! security!

interest! is! or! w ill ! be! ac q u ired ! in! rea l ! property,! or! in! personal!

property!used!or!expected!to!be!used!as!the!principal!dwelling!of!

the!consumer!and!other!than!private!education!loans!(as!that!term!

is!defined!in!section!1650(a)!of!this!title),!in!w hich!the!total!amount!

financed!exceeds!$ 50,0 00 .!

15!U.S.C.A.!§!1603!(1),!(3).!

[¶13]!!As!the!Sup rem e!Court!has!no ted,!credit!transactions,!given !their!

complexity! and! variety,! “defy! exhaustive! regulation! by! a! single! statute.”!!

?0-#&@0.0-&:-*#A.&:0(,!444!U.S .!at!559!(1980).!!Con g r ess !therefore!“delegated!

broad!administrative!lawmaking!power! to!the!Federal! Reserve!Board!when!it!

framed!TILA.”!!C#(&at!566.!!In!2010,!Congress!created!th e!CFPB,!which!took!over!

responsibility!for!the!administration!of!TILA !from !th e!F ede ral!R ese rve!Board!

(FRB).!!)**!)*A3,&D(&DD:&;(&:059"E*-&?A5(&F-0.(&4"-*,",!591!U.S.!___,!140!S.!Ct.!

2183,!2193!(2020).!!By!statute,!the!CFPB!is!currently!charged!with!carrying!

out!the!purposes!of!TILA!and!is !authorized!to!impose!additional!requirements,!

classifications,! and! other! p rovisions! to! facilitate! compliance! with! TILA.!!

)**&15!U.S.C.A.!§!1604(a)!(Westlaw!through! P ub.!L.!No.!118-39).!!Regulatio n !Z!

implements!this!authority.!!)**&12!C.F.R.!§!226.1!(2024);!?0-#&@0.0-&:-*#A.&:0(,!

444!U.S.!at!560.!

[¶14]! ! The! Supreme! Court! has! ex plaine d! that! “considerable! respect! is!

due”!to!the!interpretation!of!a!statute!by!the!officers!or!agency!charged!with!its!

administration.!!?0-#&@0.0-&:-*#A.&:0(,!444!U.S.!at!566.!!The!Supreme!Court!has!

also! noted! that! this! deference! is! particularly! apt! under! TILA! because! of! the!

FRB’s! (no w ! CFPB’s)! “role! in! setting! the! statutory! machinery! in! motion.”! ! C#(&

(quotation! marks! and! alteration! omitted).! ! Thus,! the! administrative!

interpretations! by! the! CFPB! including! official! staff! memoranda! are! afforded!

significant! deference.! ! )**& A#(& &! n.9;! 9**& ,390& 15! U.S.C.A.! §! 1640(f)! (Westlaw!

through! Pub.! L.! No.! 118-39)! (allowing ! as! a! defense! to! a! TILA! v iolation! a!

creditor’s!good! faith! conformity! with! “any! rule,!regulation,! or! interpretation!

thereof!by!the![CFPB]”).!

[¶15]!! In!addition!to!Regulation!Z!itself,!the!CFPB!has!also!is su ed !O ffic ial !

Staff! Interpretations,! directing! a! creditor! to! “determine! in! each! case! if! the!

transaction!is!primarily!for!an!exem pt!purpose.”!!12!C.F.R.!Supp.!I!to!pt.!226—

Official!Staff!Interpretations!§!226.3(3)(a)(1)!(2023).!

B.! A!remand!is!required!because!whether!a!credit!transaction!is!!

primarily!for!a! business! or!commercial! purpose! rather!than! for!a!

consumer! pur pose ! is! not! determined! solely! by! how! the! loan! is!

characterized!in!the!loan!documentation.!

[¶16]!!We!review! the!BCD’s!exclusion!of!extrinsic!evidence!de!novo!as!a!

question!of!law.!! 4,56&0/&<E(%& 1(<(& ;(& :,EA-*,!2017!ME!20,!¶ !7,!155!A.3d! 4 1 6;!G/(&

4-0H5&!*;(& :0-I(&;(& +*E05#,! 200 8 ! ME ! 146 ,! ¶! 13,! 956 ! A.2d ! 104 ! (sta t ing ! tha t!

whether!a!contract!is!integrated!for!purposes!of!applying!the!parol!evidence!

rule!is!a!question!of!law).!

[¶17]! ! Neither! section! 1603(1)! nor! Regulation! Z! elucidates! how! to!

determine! whether! a! credit! transaction! is! primarily! for! a! business! or!

commercial! purpose! rather! than! for! a! consumer! pu rpose .! )**! 12! C.F.R.!

1026.3(a)! (2023).! ! The! Official! Staff! In t erp r et at ion s ,! howeve r,! provide ! the!

following:!

In!determining!whether!credit!to!finance!an!acquisition—such !as!

securities,! antiques,! or! art—is! primarily! for! business! or!

commercial! purposes! (as! opposed! to! a! con sumer! purpose),! the!

following!factors !sho u ld!b e !con s ider ed :!

! .!.!.!.!!

A.!!The!relationship!of!the!borrower’s!primary!occupation!to!

the!acq uisition.!!T he!more!closely!related,!the!m ore!likely!it!

is!to!be!business!p ur p ose .!

B.!!The!degree!to!which!the!borrower!will!personally!manage!

the!acquisition.!!The!more!personal!involvement!there!is,!the!

more!likely!it!is!to!be!business!purpose.!

C.! ! The! ratio! of! income! from! the! acquisition! to! the! total!

income!of!the!borrow e r.!!The!higher!the!ratio,!the!more!likely!

it!is!to!be!business!p u rp os e.!

D.!!The!size!of!the!transaction.!!The!larger!the!transaction,!the!

more!likely!it!is!to!be!business!purpose.!

E.!!The!borrower’s!statement!of!purpose!for!the!loan.!

12! C.F.R.! Supp.! I! to! pt.! 226 —Official!Staff! Interpretations! §!226.3(3)(a)(3)(i)!

(2023).!

[¶18]!! Of! the!federal!courts!that!have!considered!this!issue,!most!apply!a!

holistic! approach! in! determining! whether! the! true! purpose! of! a! loan! is!

consumer!or!commercial.!!As!the!Ninth!Circuit!explained,!

We!have!found!it!necessary!when!classifying!a!loan!to!examine!the!

transaction!as!a!whole,!paying!particular!attention!to!the!purpose!

for!which!th e!credit!was!extended!in!order!to!determine!whether!

the!transaction!was!prim arily!consumer!or!commercial!in!nature.!!

In! making! this! determination,! w e ! have! elevated! substance! over!

form,!holding!tha t!neither!the!lender’s!motives!nor!t he !fa sh ion !in !

which!the!loan!is! memorialized!are!dispositive!of! this!inquiry.!! We!

must! therefore! look! to! the! substance! of! the! transaction! and! the!

10"

borrower’s! purpose! in! obtaining! the! loan,! rather! than! the! form!

alone.!

)3*56&;(&8-,59H0-3#&)$9(%&C5G(,! 236!F.3d! 1072,!1075! (9th!Cir.!2001)! (citations,!

alterations,!and!quotation!marks!omitted);!9**&,390&8B0-59&;(&)"5#,5G*&F-0I9(,!

726!F.2d!1417,!1419!(9th!Cir.!1984)!(listing!the!five!factors!in!the!1983!Official!

Staff!Interpretations!and!remanding!the!matter!to!the!trial!court!so!that!it!could!

evaluate!whether!the!loan!at!issue!was!covered!by!TILA);!J*9.K,56&;(& @,"-*-,!

658!N.E.2d!1381,!1387-89!(Ill.!App.!Ct.!1995)!(applying!the!five!factors);&80H*-&

;(&@099,!6 25 !F.2 d !11 6 1 ,!11 6 6 !(5 th !Cir .!19 8 0 )!(“We!must!exam ine!the!transaction!

as! a! whole! and! the! purpose! for! which! the! credit! was! extended! in! order! to!

determine!w hether!this!transaction! was!primarily!consumer!or!commercial!in!

nature.”);!L,33*M09&;(&).06*9,!593!F.2d!372,!375!(10th!Cir.!1979)!(same);!<#A*3&;(&

:B,9*&?*#(&),;(&7&D0,5&<9925,!810!F.2d!1051,!1054!(11th!Cir.!1987)!(implying!

that!the!court!looks!at!the!transaction!as!a!whole!in!determining!the!purpose!of!

a! loan);!L0EK09A&;(&:,-.*-*.&@0-.M(& :0-I(,!894!F.!S u p p.!176,!180 !(E.D.!Pa.!1 9 9 5 )!

(same).!

[¶19]! ! As! noted! above,! the! BCD! relied ! on! our! decision! in! 40-#*.96$& in!

determining! that! it! could! not! consider! extrinsic! evidence! concerning! the!

purpose! of! the! Bordicks’! loan.! ! 40-#*.96$! involved! an! in t erp r eta t ion ! of! a!

provision!in!14!M.R.S.!§!6111!(2023)!that!requires!lenders!to!provide!a!notice!

11"

of!default!and!opp ortunity!to!cure!before!the!lender!may!foreclose!on!a!loan.!!

The!requirement!only!applies! to!loans!for!“personal,!family!or!household! use,”!

section! 6111(1),! and! the! note! in! 40-#*.96$& stated! that! the! lo an! was! “for!

business!and!commercial!purposes!and!not!for!personal,!household,!or!family!

purposes.”! ! 2017! ME! 42,! ¶¶! 2-3,! 157! A.3d! 233! (quotation! marks! om itted ).!!

Because!this!language! was! unambiguous,! we!held!that! no! extrinsic!evidence!

should!have!been!admitted,!and!the!lender!therefore!did!not!have!to!provide!

notice!and!an!opportunity!to!cure.!!C#(&¶¶!10,!13.&

[¶20]!!Here,!in!contrast!to!the!situation!in!40-#*.96$,!we!are!construing!a!

federal!statute.!!In!@00-*&;(&:,5,3&1,.23&4,56,!409!A.2d!679,!683!(Me.!1979),!we!

stated!that!great!deference!should!be!given!to!the!Official!Staff!Interpreta tions!

under!TILA.!!These!interp re ta tio ns !make!clear!that,!in!de te rm in in g !whether!a!

loan! is!for! consum e r! or! comm e rcial! purpo ses,! a! variety! of! factors! should! be!

considered,! not! just! the! language! within! the! four! corners! of! the! relevant!

documents.!!)**&A5/-,&¶!17,!8-9.!!Therefore,!it!was!error!for!the!BCD!not!to!go!

beyond!the!language!of!the!loan!documents!and!apply!the!factors!set!forth!in!

the!Official!Staff!Interpretations.

!!On!remand,!the!BCD!should !conduct!a !totality!

&&The&Bordicks&argue&that,&even&if&we&were&to&rule&that&Bordetsky&applies&to&their&TILA&defense,&

the&BCD&erred&when&it&found&that&their&loan&documents&were&unambiguous&in&stating&that&the&loan&

was&for&commercial&purposes.&&The&Bank&disagrees,&highlighting&that&the &note&“plainly&states&the&loan&

is&primarily&for&commercial&purposes.”&&Given&our&ruling,&we&need&not&address&this&question.&

12"

of!the!circumstances!review!by!considering!all!relevant!evidence!and!factors!in!

determining! whether! the! Bordicks’! loan! was! for! business! or! commercial!

purposes.!

C.! The! credit! transaction! is! not! e xem pt! from! TILA! under! §! 16 03(3 )!

because!it!was!secured!with!real!property.!

[¶21]!!We!requested!supplemental!briefing!on!the!question!of!whether!

section!1603(3)!exempts!the!Bordicks’!loan!from!TILA.!!The!Bordicks!argue!that!

section!1603(3)!does!not!exempt!this!credit!transaction!from!TILA!because!the!

loan!was!secured !by!a!leasehold,!which!constitutes!real!property,!in!addition!to!

the!hunting!cabin.!!The!Bank!counters!that!even!if!the!leasehold!does!constitute!

real! property,! this! credit! transaction! is! exempt! from ! TILA! under! section !

1603(3)! because! the! leasehold! is! for! property! that! is! not! used! and! is! not!

expected!to!be!used!as!the!Bordicks’!principal!dwelling.!

[¶22]!!Section!1603(3)!exempts!

Credit!transactions,!other!than!those!in!which!a!security!interest!is!

or!will!be!acquired!in!real!property,!or!in!personal!property!used!

or!expected!to!be!used!as!the!principal!dwelling!of!the!consumer!

and!other!than!private!education!loans!(as!that!term!is!defined!in!

section!1650(a)!of! this!title),!in!which!the!total!amount! financed!

exceeds!$50,000.[

&&Similarly,&TILA’s&implementing&regulation,&Regulation&Z,&does&not&apply&to&the&following:&

An&extension&of&credit&in&which&the&amount&of&credit&extended&exceeds&the&applicable&

threshold& amount& or& in& which& there& is& an& express& written& commitment& to& extend&

credit&in&excess&of&the&applicable&threshold&amount,&unless&the&extension&of&credit&is:&

13"

[¶23]! ! Here,! the! credit! transaction! is! for! $378,69 8.55,! w ell! over! the!

$50,000!threshold,!and!it!is!not!a!private!education!loan.!!It!is,!ho w eve r,!a!credit!

transaction! with! a! security!interest!in! real! property.! ! The! Bordicks! assigned!

their!2014!lease!for!the!land!on!which!their!cabin!was!located!to!the!Bank!as!

part!of!the!collateral!to!secure!the!loan.!!The!loan!agreement!specifies!that!the!

Bordicks!“assign[],!grant[]!to!Lender,!with!mortgage!covenants!as!additional!

security!all!the!right,!title!and!interest!in!the!following!(Property):!A.!Existing!

or!future!leases.”!!“A!leasehold!is!an!interest!in!real!property.”!!80H5&0/&DA9K05&

;(&8B,$*-&:0-I(,!675!A.2d!514,!51 6 !(Me.!1996)!(quoting!3!Thompson,!8B0EI905&

05&>*,3&F-0I*-.$,!§!1015!at!7!(198 0 ) ).!

[¶24]!!The!question!here!is!whether!the!langua g e!“used!or!expected!to!be!

used!as!the!principal!dwelling!of!the! consumer”!in!section ! 1603(3) ! modifies!

everything! that! came! before! it! or! only! “ personal! property.”!!The! security!

agreement!describes!the!collateral!as!a!“[c]abin!located!on!Leased!land!at!Burnt!

Mountain!Road,!Lower!Cupsuptic!Township,!Me!04970.”!!The!Bordicks!concede!

that!this!cabin!was!not!their!principal!dwelling.!

(A)&Secured&by&any&real&property,&or&by&personal&property&used&or&expected&

to&be&used&as&the&principal&dwelling&of&the&consumer;&or&

(B)&A&private&education&loan&as&defined&in&§&226.46(b)(5)&

12&C.F.R.&§&226.3(b)&(2023).!

14"

[¶25]!!The!comma!in!the!statuto ry !text!is!located!after!“ re al!property,”!

separating! that! clause! from! the! lang uag e! rega rding! personal! property.! ! As! a!

grammatical! principle,!therefore,! the! clause! applies! only! to! the! noun! phrase!

“personal!property.”!! )**& N2:0550-& ;(&N,6B"-9.&!,A-$,! 851! F.3d!6 9 ,! 72,! 74-75!

(1st!Cir.!2017)!(interpreting!a!statute!with!a!missing!serial!comma!by!“tak[ing]!

account!of!certain!linguistic!conventions—canon s,! as!they! are!often! called—

that! can! help! us! make! sense! of! a! word! in! the! context! in! which! it! appears,” !

including!“gra m m a r” ).!

[¶26]! ! T he! statute’s! legislative! history! confirms! that! the! principal!

dwelling!requirement!applies!only!to!personal!property.!!When! TILA!was!first!

enacted!in!1968,!it!exempted!“[c]redit!transac tion s ,!other!than !real !prope rty !

transactions,!in!which!the!total!amount!to!be!financed!exceeds!$ 25,000 .”!!Truth!

in!Lend in g !Act!of!1968,!Pub.!L.!90-321,!tit.!I,!§!104(3),!82!Stat.!147.!!The!Truth!

in! Lend ing ! Simplification! Act! p as se d ! in! 198 0 ! and! ch a n g ed ! this! pr ov isio n! to!

exempt!“[c]redit!transactions,!other!than!those!in!which!a!security!interest!is!

or!will!be!acquired!in!real!property,!or!in!personal!property!used!or!expected!

to!be!used!as!th e!principal!dwelling!of!the!consumer,!in!which!the!total!am o unt!

financed!exceeds!$25,000.”!!Truth!in! Lending!Simplification!and!Reform!Act!of!

1980,!Pub.!L.!96-221,!94!Stat.!132 .!!A!Senate!Report!accompanying!the!Truth!in!

15"

Lending! Simplification! Act! explained! the! rationale! for! this! change:! “the! b ill!

excludes!from!the! $25,000!cutoff!purchases! of!mobile!homes! expected!to! be!

used! as! a! principal! dwelling.! ! Thus,! where! mobile! homes! costing! more! than!

$25,000!are!purchased!to!be!used!as!a!principal!dwelling,!the!act’s!disclosure!

requirements!would!apply.!!This!change,!recommended!by!the!federal!reserve!

board,!extends!the!same!protection!to!buyers!of!mobile!homes!as!purchasers!of!

traditional!residential!structures! n ow ! en joy.”! !S.! Rep.!No.!96-368,!at!24!(1979),!

,9& -*I-A5.*#& A5! 1980! U.S.C.C.A.N.! 236,! 259.

!!Therefore,! the! added! language!

regarding!person al!property!is!meant!to!add!protection !for!peo ple!who!live!in!

mobile!homes!as!their!principal!dwelling.!!This!rationale!makes!clear!that!the!

principal! dwelling! requirement! was! intended! to! apply! only! to! personal!

property,!such!as!mobile!homes,!not!to!real!property.!

[¶27]! ! Further,! while! the! case! law! is! sparse,! at! least! one! court! has!

interpreted! the! principal ! dwe ll ing ! requ ire m en t ! to! apply! only! to! persona l!

property.! ! )**& J,339& ;(& 'F@0-M,5& :B,9*& 4,56%& 1(<(,! 2012! WL! 3096 6 6 0,! a t! *3 !

(W.D.!Ky.!July! 30,!2012)! (“[A]lthough!Chase!suggests!the!‘principal!dw elling’!

&&The& Official&Staff&Interpretation&of&Regulation&Z &contains& a& similar& explanation:& “[b]ecause& a&

mobile&home&can&be&a&dwelling&under&§&226.2(a)(19),&the&exemption&in&§&226.3(b)&does&not&apply&to&

a&credit& extension&secured&by&a&mobile&home&that&is&used&or&expected& to&be& used&as&the&principal&

dwelling&of&the&consumer.”&&12&C.F.R.&Supp.&I&to&pt.&226—Official&Staff&Interpretations&§&226.3(3)(b)(7)&

(2023).&

16"

condition!applies!to!both!personal!and!real!property,!this!interpretation!fails!as!

a!matter!of!a!plain!reading!of!the!statute”).

[¶28]! ! Because! the! Bordicks’! credit! tra nsaction ! with! the! Bank! was!

secured!with!real!property,!it!does!not!matter!that!the!property!was!not!th eir!

principal!dwelling,!and!the!credit!transaction!is!not!exem p t!from!TILA!under!

§!1603(3).!

III.!!CONCLUSIO N!

! [¶29]! ! For! the! foregoing! reasons,! the! credit! transaction! is! no t! exempt!

from!TILA!under!§!1603(3),! b ut!it!m ay!be!exempt!from!TILA!u nder!§!1603(1).!!

We! vacate! the! judgmen t! and! remand! the! matter! to! the! BCD! to! review! the!

totality!of!the!circumstances!to!determine!w heth er!the!loan!was!for!commercial!

purposes!under!§!1603(1).!

The!entry!is:!

Judgment!vacated.!!Reman ded!for!fu rth er !

proceedings!consistent!with!this!opinion.!

&&There&is& confusing&language&in&other& case&law&that&appears&to&the&contrary,&but&these&cases&relate&

to&sections&of&TILA&not&relevant&to&this&case.&&See+Antanuos+v.+First+Nat’l+Bank+of+Ariz.,&508&F.&Supp.&2d&

466,&470-71&(E.D.&Va.&2007)& (holding&that&“TILA&applies&only&to&credit&transactions&secured&by&real&or&

personal& property& used& or& expected& to& be& used& as& the& principal& dwelling& of& the& debtor”& for& the&

purposes&of&the&right&to&rescind&under&15&U.S.C.A.&§&1635(a)&(Westlaw&through&Pub.&L.&No.&118-39);&

Onyeoziri+v.+Spivok,&44&A.3d&279,&284-85&(D.C.&2012)&(applying&Antanuos+incorrectly&and&holding&that&

“TILA’s&plain&language&makes&clear&that&the&statute&applies&‘only&to&credit&transactions&secured&by&

real&or&personal&property&used&or&expected&to&be&used&as&the&principal&dwelling&of&the&debtor’”&in&the&

context&of&TILA&disclosures&(quoting&Antanuos,+508&F.&Supp.&2d&at&471));&see+ also+Laporte+ v.+Wells+

Fargo+Bank,+N.A.,+2009&WL&2146324,&at&*3&(E.D.&Tenn.&July&14,&2009)+(incorrectly&applying&§&1603(3)&

in&a&rescission&case&and&stating&that&“TILA&specifically&exempts&credit&transactions&other&than&those&

where&the&security&interest&relates&to&real&property&to&be&used&as&the&borrower’s&principal&dwelling”).&

17"

! ! ! !

Daniel! L.! Rosenthal,! Esq.! (orally),! and! Trey! R.! Milam,! Esq.,! Marcus! Clegg,!

Portland,!for!appellants!Michael!T.!Bordick!and!Monica!P.!Bordick!

David!R.!Dubord,!Esq.,!and!Alexander!J.!Mihalov,!Esq.!(orally),!Skelton!Taintor!

&!Abbott,!Lewiston,!for!appellee!Franklin!Savings!Bank!

Ryan!Cooper,!Esq.!(orally),!Consumer!Financial!Protection!Bureau,!Washington,!

DC;!and!Darcie!N.!McElwee,!United!States!Attorney,!and!Andrew!K.!Lizotte,!Asst.!

U.S.!Atty.,!United!States!Attorney’s!Office,!Bangor,!fo r!amicu s!curiae!Consu m er !

Financial!Protection!Bureau!

Aaron!M.!Frey,!Attorney!General,!James!M.!Bow ie ,!Asst.!Atty.! Gen.,!Christina !M.!

Moylan,!Asst.!Atty.!Gen.,!and!Michael!T.!Devine,!Asst.!Atty.!Gen.,!Office!of!the!

Attorney!General,!Augusta,!for!amici!curiae!Bureau!of!Financial!Institutions!and!

Bureau!of!Consumer!Credit!Protection!

Business&and&Consumer&Docket&docket&number&CIV-2022-13&

FOR+CLERK+REFERENCE+ONLY-