In Lankhorst v. Independent Sav. Plan Co., No. 14-11449, 2015 WL 3440288 (11th Cir., May 29, 2015), the Eleventh Circuit Court of Appeals held that the credit agreement the Plaintiff’s entered into did not convey the requisite security interest in the Plaintiffs’ primary residence in order to trigger the TILA protections on which the Plaintiffs relied. Therefore, the district court did not err in granting summary judgment in favor of the defendants.

The Plaintiffs agreed to purchasing a water treatment system and having it installed in their home. However, the purchase and installation was completed before the Plaintiffs executed a financing agreement that would cover the relevant costs. Prior to installation, the salesman assured Plaintiffs that they would qualify for a very low interest rate. Following the installation, the three-day period allowing for the Plaintiffs to cancel the purchase expired. Shortly thereafter, Independent Savings Plan Company (“ISPC”) delivered the credit agreement, which provided the financing terms of the purchase and installation of the new system. The credit agreement provided for an interest rate of 17.99% and since the new system was already installed, the Plaintiffs effectively had no choice other than to accept its terms.

Plaintiffs filed suit against ISPC alleging, inter alia, ISPC violated TILA by not disclosing “examples of minimum payments and the maximum repayment period for the ‘extension of credit which is secured by the consumer’s principal dwelling,'” 15 U.S.C. § 1637a(a)(9). Additionally, Plaintiffs alleged ISPC violated § 1635(a) by failing to properly delay performance and allow rescission of the contract, since regulations prohibit services from being performed and material from being delivered until after the rescission period.

In order for a TILA violation to have occurred, the financing that ISPC provided must have been secured by the Plaintiffs’ “principal dwelling.” The district court granted summary judgment in favor of ISPC, finding that the credit agreement did not convey a security interest in Plaintiffs’ residence and, therefore, there was no violation of either §§ 1635(a) or 1637a(a)(9) because both depend on their having been a security interest in the residence. Furthermore, the district court held that the treatment system was not a fixture to the Plaintiff’s primary residence, and even if it was, TILA specifically excludes fixtures from the definition of a “security interest.” On appeal, the Plaintiffs argued that the water treatment system was a fixture and that the credit agreement created an interest in the residence. ISPC countered that the system was not a fixture, and alternatively, even if it were a fixture, it was not a security interest in the residence and, thus, neither §§ 1635(a) nor 1637a(a)(9) apply.

The Eleventh Circuit held that it was unaware of any case law holding that a security interest in a fixture constitutes a security interest in real property on which the fixture is installed. Furthermore, the court cited Fla. Stat. § 679.604(3), which provides that a party holding a security interest in a fixture may, after default, remove the collateral from the real property. In light of the Florida statute, the court held that a security interest in a fixture does not give the party a security interest in the realty on which it is installed. Here, the water treatment system could be removed. Moreover, the credit agreement stated that the Plaintiffs granted ISPC a purchase money security interest in any purchases made to the account. Obviously, the “purchase” here was the water treatment system, not the residence.

Interestingly enough, the Eleventh Circuit explained that a different outcome could have been reached, however, if the Plaintiffs had argued estoppel. In a footnote, the court noted that it may have estopped ISPC from arguing that it took no interest in the Plaintiff’s primary residence (and, therefore, the TILA provisions did not apply) because of language contained in a note to the “security interest” section of the credit agreement, which stated:

Purchases that are ‘fixtures’ attach to and are legally treated as part of the house or other real property, and consequently, under the law, the security interest in ‘fixtures’ likewise are treated and enforced similarly as liens on the house or other real property.

Arguably, this language states that ISPC takes a security interest in the Plaintiffs residence and may have provided a basis for estopping ISPC from arguing that it took no interest in the Plaintiff’s residence. However, Plaintiffs failed to raise estoppel as an argument and, therefore, the argument was waived. Accordingly, the district court’s judgment was affirmed.