
USCA1 Opinion

	




          January 19, 1993                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                 ____________________                                 ____________________        No. 91-2343        No. 91-2343                        PAULINE CHRONIAK and THOMAS PUGLIESE,                        PAULINE CHRONIAK and THOMAS PUGLIESE,                                Plaintiffs, Appellees,                                Plaintiffs, Appellees,                                          v.                                          v.                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                               Defendants, Appellants.                               Defendants, Appellants.                                _____________________                                _____________________        No. 92-1121        No. 92-1121                                   THOMAS PUGLIESE,                                   THOMAS PUGLIESE,                                 Plaintiff, Appellee,                                 Plaintiff, Appellee,                                          v.                                          v.                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                               Defendants, Appellants.                               Defendants, Appellants.                                 ____________________                                 ____________________        No. 92-1317        No. 92-1317                                   THOMAS PUGLIESE,                                   THOMAS PUGLIESE,                                Plaintiff, Appellant,                                Plaintiff, Appellant,                                          v.                                          v.                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                                Defendants, Appellees.                                Defendants, Appellees.                                _____________________                                _____________________        No. 92-1318        No. 92-1318                                   THOMAS PUGLIESE,                                   THOMAS PUGLIESE,                                Plaintiff, Appellant,                                Plaintiff, Appellant,                                          v.                                          v.                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                     GOLDEN INVESTMENT CORP. and ARMAND ROBERTS,                                Defendants, Appellees.                                Defendants, Appellees.                                 ____________________                                 ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF NEW HAMPSHIRE                          FOR THE DISTRICT OF NEW HAMPSHIRE                    [Hon. Martin F. Loughlin, U.S. District Judge]                    [Hon. Martin F. Loughlin, U.S. District Judge]                                              ___________________                                 ____________________                                 ____________________                                        Before                                        Before                                 Selya, Cyr and Stahl,                                 Selya, Cyr and Stahl,                                   Circuit Judges.                                   Circuit Judges.                                   ______________                                 ____________________                                 ____________________            Richard  F.  Johnston  with  whom  Kenna,  Johnston,  Craighead  &            Richard  F.  Johnston  with  whom  Kenna,  Johnston,  Craighead  &            _____________________              _______________________________        Sharkey, P.A. were on brief for appellants.        Sharkey, P.A. were on brief for appellants.        _____________            Peter S. Wright, Jr.  with whom Wright & Cherry were on brief  for            Peter S. Wright, Jr.  with whom Wright & Cherry were on brief  for            ____________________            _______________        appellees.        appellees.                                 ____________________                                 ____________________                                 ____________________                                 ____________________                    Cyr,  Circuit  Judge.   Appellants  Armand  Roberts and                    Cyr,  Circuit  Judge.                          ______________          Golden  Investment Corporation  challenge  the  district  court's          interpretation of three New Hampshire statutes regulating lending          and debt  collection practices.  Appellee  Thomas Pugliese cross-          appeals from the  district court  order disallowing  an award  of          attorney  fees.  We affirm the district court judgment and remand          for reconsideration of the application for attorney fees.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    In  June  1986, Armand  Roberts  and Golden  Investment          Corporation  loaned Pugliese  $75,000 with  which to  arrange his          release  on  bail.   Pugliese  and  his  aunt,  Pauline Chroniak,          cosigned  a promissory note which stated the dollar amount of the          interest charge  ($1,384.61 biweekly), but not  the interest rate                                                     ___  ___ ________ ____          by percentage  (45% annually).  The  loan was secured  by a first          __ __________          mortgage on the Chroniak residence.   The loan was repaid in full          by June 1988.                    In July  1987, appellants loaned Pugliese an additional          $20,000 to buy equipment for his trucking business.  Pugliese and          Chroniak  executed a promissory  note in  the amount  of $27,000,          which  required a  payment of  $7,000 within  ninety days  of its          execution.                                            3          The loan was  secured by a second mortgage  on the Chroniak home.          In  July  1988,  Pugliese  defaulted on  the  loan  after  making          principal  payments totalling  $18,000.   Chroniak made  what she          believed was a "final" $2,000 payment on the second mortgage loan          shortly thereafter.  Claiming  that $27,000 (rather than $20,000)          had been advanced to  Pugliese under the second loan,  appellants          demanded   an  additional   $32,000  to   discharge   the  second          mortgage.1   Pugliese's  counsel  notified  appellants that  both          loans violated New Hampshire  law, as the notes did  not disclose          the percentage rate of  interest.  Appellants promptly instituted          foreclosure proceedings on the Chroniak residence.                    In  November 1988,  Pugliese  and Chroniak2  brought  a          six-count complaint against Roberts  and Golden Investment in New          Hampshire  federal district  court, alleging,  inter  alia,3 that                                                         _____  ____          the interest  and repayment  provisions in both  promissory notes          violated three New Hampshire statutes.                    Relying on the Second Mortgage Home Loan Act, N.H. Rev.                                        ____________________               1Because Pugliese  made his  initial loan payment  after the          specified due  date, the note provided that interest would there-          after accumulate at  the rate of  $2,000 per month.   By  October          1988, as a result of this rapid acceleration in interest accrual,          appellants  made claim  to  an outstanding  principal balance  of          $16,000, accrued interest of $15,000, and legal fees of $1,000.               2In December  1988, the foreclosure  proceedings against the          Chroniak  residence  were  suspended pending  resolution  of  the          present litigation.  In October 1991, Chroniak settled her  claim          against appellants.               3The original complaint alleged violations of  the Racketeer          Influenced  and Corrupt  Organizations  statute.   See 18  U.S.C.                                                             ___            1962(c).   The RICO claims  were dismissed and  form no part of          the present appeal.                                          4          Stat. Ann.   398-A [hereinafter:  "SMHLA"], the complaint alleged          that  (1)  appellants  had  forfeited  their  "right  to  collect          interest"  on  the  notes  by  failing  to  state  the  "rate  of          interest,"  thereby entitling  plaintiffs  to a  "refund" of  all          interest payments  on the $75,000 note  (i.e., $74,768.94) (SMHLA                                                   ____            3),4  (2)  appellants' violations  of  SMHLA,  section 3,  con-          stituted  criminal offenses  because they  were  "willful" (SMHLA                    ________            7a),  and (3) appellants overstated by $7,000 the amount of the          loan  proceeds  received  by  Pugliese on  the  second  note,  or          included  a $7,000 prepayment penalty in the second note (SMHLA            2 (III, IV)).                    Relying on the Consumer Protection Act, N.H. Rev. Stat.          Ann.   358-A [hereinafter:  "CPA"], plaintiffs claimed (1) actual          damages because appellants' violations  of the SMHLA  constituted          "unfair or  deceptive act[s]  or [trade] practice[s]"  (CPA   2),          and (2) double or treble damages because appellants' violation of          section 2 of the CPA was "willful or knowing" (CPA   10).                     Finally,  relying on  the  Unfair Collection  Practices          Act, N.H. Rev. Stat. Ann.   358-C [hereinafter:  "UCPA"],  plain-          tiffs claimed that (1) appellants qualified both as "debt collec-          tors"                                         ____________________               4The complaint did not  demand reimbursement of the interest          paid on the $27,000 note  but merely a declaration that the  note          had been  satisfied by plaintiffs' payments  totalling $20,000 in          principal, an issue  which the jury resolved adversely  to appel-          lants.                                          5          (UCPA   1)  and "creditors" engaged in  "consumer credit transac-          tions"  in  the "ordinary  course  of  business," (2)  appellants          attempted  to  collect  interest  on  the  $75,000  note5 "in  an          unfair,  deceptive,  or  unreasonable  manner,"  as the  interest          charges were  not "expressly  authorized" by the  loan agreement,          hence were  not "legally chargeable" to the plaintiffs (UCPA    2          & 3), and  (3) appellants' violation  of the UCPA  simultaneously          violated CPA,  section 2,  which authorizes awards  of double  or          treble damages (UCPA   4(IV)).                    Appellants initially were  granted summary judgment  on          the ground that the  SMHLA, whose violation formed the  bases for          liability under  the CPA and  the UCPA, exempted  appellants from          all  liability because  (1) Roberts  was not  licensed  under the          SMHLA  to conduct  "the business  of [providing]  second mortgage          loans,"  and (2)  both loans  were "incidental" to  Roberts' real          estate  investment business.    On appeal,  these questions  were          certified to  the New  Hampshire Supreme Court,  which determined          that  the  SMHLA applies  both to  licensed  lenders and  to "any                                                               ___          person making a loan secured by  a mortgage."  Chroniak v. Golden                                                         ________    ______          Inv.  Corp., 133 N.H. 346, 349-50, 577 A.2d 1209, 1212-13 (1990).          ___________          Acknowledging that loans "incidental" to a real estate investment          business would be exempt under                                         ____________________               5Unlike  the  first  note  ($75,000),  which   arguably  was          advanced  for  "personal" purposes  (i.e.,  bail),  see UCPA    1                                               ____           ___          (defining "consumer"), the $27,000 note evidenced a business loan          not actionable under the UCPA as a "consumer credit transaction."                                          6          the   SMHLA,  the   New   Hampshire  Supreme   Court  noted   the          "improbability that a loan advanced  for purposes of posting bail          or purchasing a boat trailer could ever be  considered incidental          to  the [real estate investment] business."  Id. at 352, 577 A.2d                                                       ___          at  1214.  Thereafter, the summary judgment was vacated on appeal          and the case was remanded for trial.                    In its final  charge to  the jury,  the district  court          read  verbatim excerpts  from the  three New  Hampshire statutes.                ________ ________          The  jury ultimately  responded in  the following  manner to  the          special verdict form and a special interrogatory:                    1.   The loans extended by  Golden Investment                         Corporation  to   Thomas  Pugliese  were                         incidental to the  conduct or the opera-                         __________                         tion   of   the   business   of   Golden                         Investment Corporation.  (Question 1)                    2.   Roberts  knew  that   the  $75,000   and                         $27,000  notes  failed  to disclose  the                         "rate of interest."  (Questions 2, 3)                    3.   The    $75,000    and    $27,000    loan                         transactions were not "strictly private"                         in nature  and  were undertaken  in  the                         "ordinary   course   of   a   trade   or                         business."  (Questions 4,5)                    4.   Pugliese  incurred  $20,000 in  damages.                         (Question 6)                    5.   Pugliese  received  only $20,000  in the                         course of the loan transaction evidenced                         by  the  $27,000 promissory  note signed                         July 27, 1987.  (Special Interrogatory)          On  October 24, 1991,  the  district court  entered judgment  for          Pugliese in  the amount of $20,000,  rejecting Pugliese's request          for an award of attorney fees.                                          7                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________          A.   The Roberts and Golden Investment Appeal6          A.   The Roberts and Golden Investment Appeal6               ________________________________________               1.  "Technical" Violation               1.  "Technical" Violation                    ____________________                    of SMHLA, Section 3                     of SMHLA, Section 3                    ___________________                    The jury  was instructed on five  substantive statutory          provisions (SMHLA,    2 & 3,  see infra pp. 9, 11; CPA,    2, see                                        ___ _____                       ___          infra p.  13; and UCPA     2 & 3).   Appellants concede  that the          _____          verdicts may have been based  on their failure to state the  rate          of  interest  in  the   promissory  notes,  which  constituted  a          predicate violation of  both the CPA and the UCPA.   On the other          hand, appellants argue  that the  jury simply  may have  bypassed          consideration  of the CPA and the UCPA altogether, instead basing          its award  solely on appellants' direct  "technical" violation of                     ______          the disclosure requirements in SMHLA, section 3:                                        ____________________               6Although it is undisputed that the jury found that Pugliese          sustained  monetary  damages  as  a  consequence  of  appellants'          "knowing" failure to disclose the rate of interest in the promis-          sory  notes,  three  factors  hamper our  review  of  appellants'          various challenges to the jury instructions.  First, the district          court  read  verbatim  excerpts  from  the  three  New  Hampshire                       ________  ________          statutes, but  during its  deliberations the jury  apparently was          provided with unexcerpted photocopies  of the statutes, including                        ___________          extraneous, uninstructed  portions.   Second,  the jury  received          little guidance as to  whether (or how) the three  statutes might          be  interrelated.   Finally,  the special  verdict  form did  not          require the jury to indicate the statutory provision on which its          award was based.   Consequently, we must scrutinize the statutes,          the jury charge, and the special verdict form to  ensure that the          jury  verdicts were  not predicated  on any  impermissible basis,          including an  incorrect application of the statutory  law.  Brown                                                                      _____          v. Trustees of Boston  Univ., 891 F.2d 337,  353 (1st Cir.  1989)             _________________________          ("'Our  principal  focus in  reviewing  jury  instructions is  to          determine whether they tended  to confuse or mislead the  jury on          the controlling  issues.'") (quoting  Service Merchandise  Co. v.                                                ________________________          Boyd Corp., 722 F.2d 945, 950 (1st Cir. 1983)), cert. denied, 496          __________                                      ____  ______          U.S. 937 (1990).                                          8                    If any note secured  by a second mortgage and                    any such mortgage, in the case of loans other                    than  open-end  loans,  does  not,  among its                    provisions,  specify  as  separate items  the                                 _______  __  ________ _____                    principal  sums, the  rate  of interest,  the                                     ___  ____  __ ________                    period  of the  loan  and  the  periodic  due                    dates,  if any,  of  principal  and  interest                    . . . then the lender  shall have no right to                          ____ ___ ______  _____ ____ __ _____ __                    collect interest.                    _______ ________          (Emphasis  added.)    Appellants  further argue  that  the  plain          language of section 3 merely affords  the borrower an affirmative          defense in any action initiated by the lender to collect interest          _______          on the note, and unlike other sections of the SMHLA (e.g.,    2 &                                                               ____          7), affords the borrower no affirmative right to recover interest          paid to the lender.7                      The  procedural  peregrinations  of the  present  claim          almost daunt description.   Appellants raised the claim initially          in their motion for summary judgment, see supra  pp. 6-7, but the                                                ___ _____          district court  granted summary judgment on  an alternate ground.          On appeal, the summary  judgment was vacated.   Following remand,          appellants renewed  their motion for summary  judgment.  Pugliese          opposed  summary   judgment  on   the  ground  that   a  criminal                                                                   ________          ("willful") violation of SMHLA,  section 3, would give rise  to a          common-law cause of  action for restitution of  the interest paid          on  the illegal  loan.    Prior  to  trial,  the  district  court          purportedly  granted appellants'  motion to  dismiss the  "common                                        ____________________               7We reject appellants' contention that the complaint did not          allege that  SMHLA,   3, created  an independent cause  of action          for rescission of the  loan agreement and refund of  the interest          payments.   Count one alleged that the $75,000 note was "illegal"          and  "[p]laintiffs are  entitled  to have  all interest  payments          refunded. . . ."                                          9          law" claims based on SMHLA, section 3.  Thus, the  jury was given          no instruction on any "common law" claims based on SMHLA, section          3.                    Normally, this  would end  our inquiry.   As previously          suggested, however,  two factors  aligned to configure  a correct          jury  instruction  on  the applicable  law.    In  the course  of          defining  the predicate conduct that could serve as an "unfair or          deceptive"  trade practice under the CPA and the UCPA, sections 2          and 3  of the SMHLA  were read, verbatim, to  the jury.   But the                                          ________          court  did not  instruct the  jury  that it  could  not return  a                 ___ ___  ________ ___  ____  ____ __  _____  ___ ______  _          verdict based exclusively on the  provisions of SMHLA, section 3.          _______ _____ ___________ __ ___  __________ __ _____  _______ _          Moreover, the court later  denied Pugliese's request for attorney          fees because it could  not discern whether the jury  had premised          its verdict exclusively on SMHLA, section 3, the  only one of the                      ___________          three statutes presented to the jury which does not authorize fee          shifting.  See infra pt. II.B.                     ___ _____                    We  agree   with  the  district  court   that  no  mere          "technical" violation of SMHLA,  section 3, could give rise  to a          common-law cause  of action  for restitution.8   Nevertheless, we          __________          conclude  that  the  SMHLA,  holistically  construed,  creates  a                                        ____________________               8Pugliese  based this  implied  private cause  of action  on                                      _______          Karamanou v. H.V.  Greene Co., 80 N.H. 420, 423,  124 A. 373, 375          _________    ________________          (1922), which held  that a  person who sustains  damages under  a          prohibited contractual provision  may, "after the  transaction is          finished and completed [,] . .  bring [an] action and defeat  the          contract."   (Citation omitted).   In Karamanou and  its progeny,                                                _________          however, the defendants committed criminal violations of statutes                                            ________          designed to  protect the plaintiffs.   Pugliese  pursued no  such          allegation,  nor did he make  it the subject  of a special inter-          rogatory.  See infra note 17.                     ___ _____                                          10          statutory cause of action for so-called "technical" violations of          _________          section 3.   First,  a jury  determination that  Roberts violated          SMHLA,  section  3,   necessarily  would  entail  a   concomitant          violation  of SMHLA,  section 2  (also read  to the  jury), which          states in pertinent part:                    The  allowable rate  of interest  computed on                                   ____  __ ________  ________                    the  unpaid  balance  that  any   person  may                    directly  or  indirectly   charge,  take   or                                                               __                    receive for a second mortgage loan secured by                    _______                    property which  is occupied in whole  or part                    at  the time said loan  is made as  a home by                    any obligor  on the  mortgage debt or  by any                    person  granting  or  releasing any  interest                    under said mortgage shall be  the rate agreed                                                      ____ ______                    upon  in the  note between  the  borrower and                    ____  __ ___  ____                    lender, and following the sixth month  of any                    period in which a loan has been in continuous                    default not more than 1-1/2 percent per month                    [18% annual] on any unpaid balances.          (Emphasis added.)  The synergism between  sections 2 and 3 of the          SMHLA  derives from  their  shared  use  of  the  term  "rate  of          interest."  Under section 2, a lender may not compute (hence, may          not receive) interest at a "rate" not  "agreed upon in the note."              _______          Thus, a covered lender's  receipt of interest charges based  on a          note which discloses no rate of interest violates both sections 2                                                            ____          and 3.   Furthermore,  SMHLA, section  7,  provides in  pertinent          part:                    Any loan made in violation of  [section] 398-                                  __ _________ __  _________ ____                    A:2 by  any person  shall be  discharged upon                    ___                    payment or tender by the debtor or any person                    succeeding  to  his  interest  in  such  real                    estate   of   the   principal  sum   actually                    borrowed.    The  superior court  shall  have                    jurisdiction  of all suits  arising under RSA                                         _____  _______ _____ ___                    398-A:2 and  if a  finding is made  that such                    _______                    loan  secured by  any such  mortgage violates                    said section such borrower shall  be entitled                                      ________                    as part of  his costs to a reasonable fee for                                               __________ ___ ___                                          11                    the services of his attorney in such suit.                    ___ ________ __ ___ ________          (Emphasis added.)  Accordingly,  as the New Hampshire Legislature          inarguably afforded  borrowers a right of  action for restitution          of  the interest paid in  excess of the  interest "agreed upon in          the note,"9 SMHLA,   2, even  a jury verdict based exclusively on          a so-called  "technical" failure to disclose the rate of interest          would comport with the applicable New Hampshire law as instructed          by the district court.10               2.  "Unfair or Deceptive Act or                2.  "Unfair or Deceptive Act or                     Practice" Under CPA, Section 2                    Practice" Under CPA, Section 2                    ______________________________                    Appellants contend  that  it was  reversible  error  to          instruct the jury that the mere omission of the rate of  interest                                        ____________________               9We  ascribe  no  controlling  significance  to  the  jury's          failure to award Pugliese  the entire amount of interest  paid on          the $75,000 note.   A lender who commits a  "technical" violation          of a  credit disclosure statute  may be entitled  to set off  the          reasonable  value of  the goods  or money  advanced while  in the          possession of the buyer  or borrower.  See, e.g.,  General Motors                                                 ___  ____   ______________          Acceptance Corp. v. Kyle, 351 P.2d 768, 774 (Cal. 1960).          ________________    ____               10Appellants argue that a "technical" violation of a lending          disclosure statute  should not invariably result  in the voidance          of a  loan contract  or in  the borrower's  right to recover  the          interest  paid  on  the   note.    Cf.  DeCato  Bros.,   Inc.  v.                                             ___  _____________________          Westinghouse Credit  Corp., 129  N.H. 504,  529  A.2d 952  (1987)          __________________________          (analogous case under   399-B);  First Fed. Sav. & Loan  Ass'n v.                                           _____________________________          Le  Clair, 109 N.H. 339, 253 A.2d 46 (1969) (same); American Home          _________                                           _____________          Improvement, Inc. v. MacIver,  105 N.H. 435, 201 A.2d  886 (1964)          _________________    _______          (same).   Unlike the SMHLA, however,    339-B explicitly provides          only  one statutory remedy    criminal penalties.  In DeCato, for                ___                                             ______          example,  the court  addressed  the limited  question "whether  a          consequence  [i.e.,  restitution  of  an  undisclosed  prepayment                        ____          remedy] beyond the one prescribed by the statute [i.e.,  criminal                  ______ ___ ___ __________ __ ___ _______  ____          penalties  for the  lender]  should attach  [to the  violation]."          DeCato,  129 N.H. at 509,  529 A.2d at 955.   These cases form no          ______          basis for the  proposition that  a "technical"  violation of  the          SMHLA could  not support a  jury verdict depriving  appellants of          the  benefit of their bargain (i.e., the undisclosed interest), a                                         ____          remedy explicitly authorized in SMHLA,   7.                                          12          from  the notes would constitute  an "unfair or  deceptive act or          practice  in the  conduct of  any trade  or business"  within the          meaning of CPA, section 2, which provides, in pertinent part:                    It shall  be unlawful  for any person  to use                    any  unfair  method  of  competition  or  any                    unfair or  deceptive act or  practice in  the                    ______ __  _________ ___ __  ________                    conduct of any trade  or commerce within this                                   _____  __ ________                    state.   Such unfair method of competition or                    unfair or  deceptive  act or  practice  shall                    include, but is not limited to, the following                    [list of thirteen acts] . . . .          (Emphasis  added.)  Appellants argue that:  (1) the New Hampshire          Legislature   has  amended  several   other  consumer  protection          statutes so as to  make their violation a simultaneous  violation          of  the CPA, section 2,  while prior SMHLA  amendments contain no          similar cross-referencing provision, and (2) the evidence adduced          at trial was insufficient to entitle Pugliese to such an instruc-          tion, since the jury  reasonably could not have inferred  that he          was  treated  unfairly  or  otherwise  deceived  by   appellants'          omissions.                      The current version of  section 2 lists thirteen unfair          or deceptive acts or practices, but the listing is expressly made          non-exhaustive.    Although  the   statute  provides  no  further          explication  and  New Hampshire  caselaw is  sparse, consultation          with both federal and Massachusetts precedent is encouraged.11                                        ____________________               11The CPA itself provides that  courts should "be guided  by          the interpretation and construction  given Section 5(a)(1) of the          Federal Trade Commission Act (15 U.S.C. 45(a)(1)), by the Federal          Trade Commission and the  federal courts."  N.H. Rev.  Stat. Ann.            358-A:13.   The New Hampshire courts  have invited interpretive          comparisons  with the  "well  developed"  caselaw construing  the          analogous Massachusetts  "unfair  and deceptive  practices"  act,          Mass. Gen. Laws ch. 93A.  See Chase v. Dorais, 122 N.H. 600, 602,                                    ___ _____    ______                                          13                    "[W]hether a party has committed an unfair or deceptive          act,  within the meaning of  [the consumer protection  act], is a          question  of fact."   Brennan v. Carvel Corp.,  929 F.2d 801, 813          ________  __ ____     _______    ____________          (1st Cir. 1991) (citing USM Corp. v. Arthur D. Little Sys., Inc.,                                  _________    ___________________________          28 Mass. App. Ct. 108, 124, 546 N.E.2d 888, 897 (1989)) (emphasis          added);  see also  Pan  American World  Airways,  Inc. v.  United                   ___ ____  ___________________________________     ______          States, 371 U.S.  296, 306-07  (1963) (meaning  of Federal  Trade          ______          Commission  Act  term  "unfair"  must  be  left  to  case-by-case          determination).   A practice is "unfair" if  (1) it is "within at          least  the  penumbra  of  some common-law,  statutory,  or  other                      ________                                    __  _____          established   concept  of  unfairness,"   (2)  "it   is  immoral,          ___________   _______  __  __________          unethical,  oppressive,  or  unscrupulous,"  or  (3)  "it  causes          substantial injury to consumers."   Rizzuto v. Joy Mfg.  Co., 834                                              _______    _____________          F.2d  7, 8  (1st  Cir. 1987)  (quoting  Purity Supreme,  Inc.  v.                                                  _____________________          Attorney  General, 380  Mass.  762,  777,  407  N.E.2d  297,  301          _________________          (1980)); see  also In re  Pfizer, Inc.,  81 F.T.C. 23,  61 (1972)                   ___  ____ ___________________          (same  standard under Federal Trade Commission Act).  "A practice          may be 'deceptive' . . . if it 'could reasonably be found to have          caused  a person  to act  differently from  the way  he otherwise          would have acted.'"   Kazmaier v.  Wooten, 761 F.2d  46, 51  (1st                                ________     ______          Cir.  1985) (quoting Purity Supreme, 380 Mass. at 777, 407 N.E.2d                               ______________          at  301).    The CPA  is  a  "comprehensive  statute designed  to          regulate  business practices  for consumer  protection," and  its          terms should  be "broadly applied."  Gilmore v. Bradgate Assocs.,                                               _______    _________________                                        ____________________          448  A.2d  390,  391-92  (1982)  (applying  Massachusetts courts'          definition of statutory term "trade and commerce").                                          14          Inc.,  135  N.H. 234,  235, 604  A.2d  555, 557  (1992) (citation          ____          omitted); see also Nei  v. Burley, 388 Mass. 307, 313, 446 N.E.2d                    ___ ____ ___     ______          674,  678 (1983)  ("Legislature  intended the  terms 'unfair  and          deceptive' to grow and change with the times.").                    Given these expansive  premises, appellants'  arguments          fail.  First, even if a technical violation of  SMHLA, section 3,          would not afford  Pugliese an  independent right  of recovery,  a          proposition we reject, the factfinder nonetheless would have been          free to find that appellants'  conduct came within the "penumbra"          of  a statute  (i.e., SMHLA) designed  to protect  consumers from                          ____          "unfair"  lending  practices,  and  that  appellants' failure  to          disclose  the  rate of  interest in  the  two notes  went against          established concepts  of fairness  upon which SMHLA  is premised.          See,  e.g., Schubach v. Household Fin. Corp., 375 Mass. 133, 137,          ___   ____  ________    ____________________          376  N.E.2d  140,  142  (1978)  (though  the  illegality  of  the          challenged conduct is a relevant inquiry,  even a lawful practice          may  be unfair or  deceptive in some  circumstances); PMP Assocs.                                                                ___________          Inc. v.  Globe Newspaper Co., 366 Mass. 593, 595, 321 N.E.2d 915,          ____     ___________________          917 (1975) (common law  violation need not be shown  under FTCA);          Commonwealth v. De Cotis, 366 Mass. 234, 241, 316 N.E.2d 748, 754          ____________    ________          (1974)  ("unfair"  acts  under  FTCA  not  limited  to  practices          forbidden  at common law or  by criminal statute).12   If conduct                                        ____________________               12Massachusetts  caselaw is  replete with  decisions holding          that  a failure  to disclose  a material  fact may  constitute an          unfair or deceptive practice.   See, e.g., Heller v. Silverbranch                                          ___  ____  ______    ____________          Constr.  Corp., 376 Mass. 621, 382 N.E.2d 1065 (1978) (failure to          ______________          disclose  drainage problem to home buyer);  York v. Sullivan, 369                                                      ____    ________          Mass.  157, 338 N.E.2d  341 (1975) (failure  to disclose imminent          rental increase).                                          15          that is not proscribed by any statute may be found "unfair" under          CPA, section 2, conduct squarely within the proscriptive penumbra          of   a   consumer  protection   statute   surely   satisfies  the          "unfairness" requirement.                    Second,  the  jury had  ample  evidence  from which  to          determine  that  appellants'  failure  to disclose  the  rate  of          interest was a  "deceptive" practice  under CPA, section  2.   In          1981, when  New Hampshire  largely deregulated the  mortgage loan          industry  and  eliminated  the  usury laws  applicable  to  these          transactions,  see, e.g.,  N.H. Rev.  Stat.   218.1,  these "full                         ___  ____          disclosure"  statutes took on  increased significance as consumer          protection provisions.  Although  disclosure of the dollar amount          of interest charged would  no doubt put many borrowers  on notice          of  the rate of  interest, the statute  presumes that  it will be          difficult for  the average  borrower to calculate  the percentage          rate from the dollar figures; accordingly, the statute places the          burden on the lender to express the rate of interest.  Cf. DeCato                                                                 ___ ______          Bros., 129 N.H.  at 508-09, 529 A.2d at 954  (fact that "the rate          _____          of  interest  . . .  could   be  readily  ascertained  by  simple          comparison of the principal amount  financed with the face amount          of  the notes  . . .  does not  vitiate noncompliance"  with non-          disclosure statute);  American Improvement  v. MacIver,  105 N.H.                                ____________________     _______          435, 438, 201 A.2d 886, 887 (1964) (noting that analogous lending          disclosure  statute,    399-B,  was  enacted to  inform  "average          individuals who have neither  the capability nor the  strength to          calculate  the cost  of  the credit  that  has been  extended  to                                          16          them").   Indeed,  SMHLA, section  3, was  amended in  1967, even          before   deregulation,  specifically  to   eliminate  the  option          previously  allowed the  lender  to express  the interest  charge          either by percentage, "or by its equivalent in money."  N.H. Rev.          Stat.   258:5.13                    We  conclude that  the appellants' failure  to disclose          the percentage interest rate as required  under SMHLA, section 3,          was  sufficient to form a predicate "unfair or deceptive practice          or act" under CPA, section 2, and that the plaintiff was entitled          to such an instruction.14               3.  "Willfulness" Instruction               3.  "Willfulness" Instruction                    ________________________                    Appellants argue that the district  court misinstructed                                        ____________________               13Interestingly,  several  witnesses  made widely  divergent          calculations  of the percentage  rate appellants charged Pugliese              ranging from  36% to  52%.  Additionally,  Pugliese testified          that he would  have "thought about [the loan] a little more," and          was "not sure"  he would have  agreed to its  terms, had he  been          informed  that the annual interest  rate on the  $75,000 loan was          45%.  See, e.g., Southwest Sunsites, Inc. v. FTC,  785 F.2d 1431,                ___  ____  ________________________    ___          1435  (9th Cir.) (plaintiff need  not prove actual deception, but          only that representation had  capacity to mislead), cert. denied,                                                              ____  ______          479 U.S.  828 (1986); Montgomery Ward & Co. v. FTC, 379 F.2d 666,                                _____________________    ___          670 (7th  Cir. 1967) (same);  Goodman v.  FTC, 244 F.2d  584, 602                                        _______     ___          (9th Cir. 1957) (same).               14Appellants cite Welch v. Fitzgerald-Hicks Dodge, Inc., 121                                 _____    ____________________________          N.H.  358,  430  A.2d 144  (1981),  for  the  proposition that  a          violation  of CPA,   2, cannot be established absent a showing of          bad  faith on  the part of  the defendant.   In  Welch, the court                                                           _____          found  no  evidence that  the  defendants  "acted in  bad  faith,          dishonestly, or in any way attempted to take unfair advantage . .          ."  Id.  at 362, 430 A.2d  at 147 ("We fail  to see how the  good              ___          faith attempts of the  defendants to comply with  the terms of  a          standard warranty  can be  classified as  an unfair  or deceptive          practice.")  In Welch, however, the  defendants complied with the                          _____          literal  requirements of  their  warranty; in  this  case, it  is          undisputed  that appellants did not comply with the interest rate          disclosure requirements of SMHLA,    2 & 3.                                          17          the jury  that appellants' conduct could  be determined "willful"          if appellants knew that  the rate of interest  was not stated  in          the notes.   Since the  complaint alleged a  violation of  SMHLA,          section  3, and a "willful"  violation of section  3 would expose          appellants to criminal penalties, see N.H. Rev. Stat. Ann.   398-                                            ___          A:7a, see infra  p. 19,  appellants argue that  the court  should                ___ _____          have  given the jury some sort of mens rea instruction, requiring                                            ____ ___          that appellants  have had  specific knowledge that  their conduct          violated a statute.                    The  substantive  provisions   of  the  New   Hampshire          statutes which were read to the jury (SMHLA    2 & 3, CPA    2  &          10 [first clause] and UCPA    2 & 3) do not state a "willfulness"          requirement.  Thus,  the court's extraneous  instruction defining          "willfulness"15  ultimately  imposed  a more  stringent  mens rea                                                                   ____ ___          requirement than  required by the  statutory language.   Davet v.                                                                   _____          Maccarone,  973  F.2d 22,  26 (1st  Cir. 1992)  ("harmless error"          _________          standard of review applicable to jury instruction challenge); see                                                                        ___                                        ____________________               15The court gave the following instruction to the jury:               If  you  find  that  either Armand  Roberts  or  Golden               Investment,  or  [their]  Attorney  . . .   had  actual               knowledge or  notice of  the violations of  [the SMHLA]               and of the bar against collecting interest contained in               ___ __ ___ ___ _______ __________ ________ _________ __               that  law  and they  went  ahead  with the  foreclosure               ____  ___               anyway in an attempt to collect more interest, then you               should find that they violated [the CPA].          (Emphasis added.)  Thus, in the event the jury considered whether          appellants' conduct constituted a criminal violation of the SMHLA          (as opposed  to a non-willful "technical"  violation), the quoted          instruction insulated the jury charge from  appellants' challenge             that a finding of specific intent was required.  Veranda Beach                                                              _____________          Club  Ltd. Partnership v. Western  Sur. Co., 936  F.2d 1364, 1384          ______________________    _________________          (1st Cir. 1991) (jury charge to be viewed "as a whole").                                          18          also,  e.g., Smith v.  Brady, 390 F.2d  176, 177 (4th  Cir. 1968)          ____   ____  _____     _____          (jury  instruction on damages which had no effect on verdict held          "harmless").                    The gratuitous instruction  on willfulness  conceivably          could  have had  relevance  to two  statutory provisions,  SMHLA,          section 7a, and CPA, section 10, neither of which was read to the          jury.   The  SMHLA provides  but two  remedies for  violations of          SMHLA, section  3.   If a  lender knowingly16  omits the  rate of          interest  from a promissory note    willfully or otherwise    the          borrower may  maintain a  private  cause of  action under  SMHLA,          sections 2, 3  and 7,  to recover  any interest  received by  the          lender in excess of the interest rate "agreed upon in the  note."          See supra pt. II.A.1.   If the section 3 violation was "willful,"          ___ _____          however,  the lender is  subject to  criminal penalties  as well.          SMHLA, section 7a, provides:                    Any   person   who   wilfully  violates   any                                         ________  ________                    provision  of this  chapter [SMHLA]  shall be                    guilty of a misdemeanor if  a natural person,                    or guilty  of a  felony if any  other person,                    for each such violation.          (Emphasis added.)                      The special  verdict form reflects a  jury finding that          appellants "knowingly"  failed to disclose the  rate of interest.          Since the  "willfulness" element (i.e., appellants'  knowledge or                                            ____          disregard of the statutory requirement that the  rate of interest                                        ____________________               16As the notes were prepared  by Roberts' attorney, the jury          was  asked  to  determine whether  Roberts  had  notice that  the          percentage  rates of  interest  were omitted,  and whether  these          omissions had the capacity to deceive, within the meaning of CPA,            2.                                          19          be stated in  the note) would be relevant  only to the imposition          of a criminal penalty  under section 7a (section 7a  never having          been read to the jury),  the failure to give a "specific  intent"          instruction was  "harmless" error  at most;17  at best, the  jury          instruction  amounted to beneficial  error, as  it placed  on the          plaintiff a more difficult burden of proof.                      The  only other  statute  to which  a determination  of          "willfulness"  would have been relevant is CPA, section 10, which          provides  that "[i]f the [factfinder]  finds that the  use of the          method of competition  or the act or  practice was a  willful and                                                                _______ ___          knowing violation of  this chapter, it shall  award as much as  3          _______          times,  but not  less  than 2  times,  such amount."    (Emphasis          added.)  Like SMHLA, section 7a, this portion of CPA, section 10,          was never read to the  jury.18  The special verdict form  did not          request a finding as  to whether plaintiff's "damages" should  be          doubled or trebled, and the district court did not in fact double          or  treble the award.  Any error in the "willfulness" instruction          was therefore harmless.               4.  "Incidental" Exemption Instruction               4.  "Incidental" Exemption Instruction                    _________________________________                    SMHLA,   section  10(II),  exempts  from  its  coverage          "individuals  or corporations who  make mortgage loans incidental                                                                 __________                                        ____________________               17In closing argument, plaintiff's counsel never referred to          a "criminal" violation of the SMHLA.  Moreover, the jury instruc-          tion  simply referred  to  a "violation"  of  SMHLA,   3,  not  a          "criminal violation."               18Prior to  the jury charge,  plaintiff's counsel disclaimed          double or treble damages.                                          20          to the conduct or the operation of another business, such as real          __                                                   ____ __ ____          estate  or  construction."    (Emphasis added.)    The  jury  was          ______  __  ____________          instructed to determine:  (1) whether "the principal  activity of          Golden Investment Corporation" was real estate investment and (2)          if so, whether these  loans were "incidental" to its  real estate          investment  business.    The  district  court  defined  the  term          "incidental" to encompass a matter which "inseparably depends on,          pertains  to, and is subordinate to the main or principal project          [of the business]."                    Appellants argue that  the court improperly required  a          threshold determination  that  the principal  activity of  Golden          Investment was  real estate investment,  thereby disenfranchising          its  defense if the jury found that general investment was Golden                                              _______          Investment's principal business activity.  We disagree.                      Section 10 itself restricts  the exemption to a limited          category  of businesses;  namely, those  already engaged  in real                                                                       ____          estate-related activities "such  as" real estate construction  or          ______          investment.   In real  estate-related activities, there  exists a          greater business  need to afford mortgage loan  financing to cus-          tomers  as an  ancillary commercial  service.   Cf. Moore  v. New                                                          ___ _____     ___          Hampshire Ins. Co., 122 N.H. 328,  333, 444 A.2d 543, 546  (1982)          __________________          (defining plain meaning of  term "incidental"; "'a hardware store          dealing in paint and wallpaper would commonly  rent equipment for                                               ________  ____          removal of wallpaper and  a reasonable person . . . would  assume          such  rental  is incidental  to  the operation  of  the store.'")          (emphasis added) (citation omitted).  The necessary nexus was not                                          21          lost  on the district court; its instruction required the jury to          consider  whether the  loans "inseparably  depend[ed]" on  appel-          lants' main business activity.19                    Appellants  claim that  the jury  should have  been in-          structed that  "incidental" means "occurring merely  by chance or          without intention or calculation,  or being likely to inure  as a          minor  consequence."     To  the  extent   appellants  suggest  a          definition  based on mere  fortuity, it clearly  does not comport          with the statutory context, or the legislative intent, underlying          the section  10 exemption.20    Moreover, we  see no  significant          difference between the language  utilized in the jury instruction          ("subordinate  to the main or principal  project") and the second          element in  the definition proposed by  appellants ("minor conse-          quence"), as  both  require the  jury  to determine  whether  the          second  mortgage lending  activity on  which Pugliese's  cause of          action  is predicated  constituted a  relatively minor  aspect of                                                __________          appellants' overall  business activity.  We  find further support          for our  interpretation of the  term "incidental" in  the opinion          previously rendered by  the New Hampshire  Supreme Court in  this          case:                                        ____________________               19We note further that appellants did not produce sufficient          evidence to  support their contention that  Golden Investment was          formed to engage in  general investment.  The two  mortgage loans          to  Pugliese  were the  only  significant  business conducted  by                                  ____          appellants during the entire time period at issue in the case.               20The  first  element  in  the  proposed   definition  seems          especially  discordant  in  the  present context,  as  few  loans          totalling  $95,000 could ever be found to have been made "without          intention or calculation."                                          22                    [L]oans  made  by  a  corporation  formed  to                    engage in  real estate investment  are exempt                               ____ ______ __________                    from  the requirements of  RSA chapter 398-A,                    assuming they are "incidental" to the conduct                    of that business.  . . . [W]e  do not  ignore                    the  improbability that  a loan  advanced for                    purposes of posting bail or purchasing a boat                    trailer could ever  be considered  incidental                    to the  business of a  corporation formed  to                    engage in real estate investment.                              ____ ______ __________          Chroniak v. Golden Inv. Corp., 133 N.H. 346, 352, 577 A.2d  1209,          ________    _________________          1214  (1990) (emphasis added).  The evidence not only showed that          these  loans were not a  subordinate or minor  activity of Golden          Investment,  the evidence disclosed that Golden Investment's only                                                                       ____          significant income-generating activity during the entire relevant          period derived from these two loans to Pugliese.                    We conclude that the jury instruction on SMHLA, section          10, did not constitute reversible error.21                                        ____________________               21Appellants raise four other unsuccessful claims on appeal,          based   generally  on   their   characterization  of   the   jury          instructions  as  "confusing."     First,  appellants  failed  to          preserve their claim that the jury may  have been misled when the          district court read CPA,   10, out of sequence (i.e., between its                                                          ____          reading of SMHLA,   3, and SMHLA,   10).  When asked by the court          whether the  provision of  photocopies of  these statutes  to the          jury in  the correct  sequential order would  satisfy appellants'          objections, defense counsel responded in the affirmative.                    Second,  appellants  maintain  that the  statutes  were          inherently confusing, and  should not have been  read verbatim to          the  jury.  We do  not conclude that  the statutes are inherently          confusing;  moreover, even  such a  conclusion would  not benefit          appellants since the jury was guided by the special verdict form,          which described  the essential findings required  under the three          statutes.  See supra p. 7.                       ___ _____                    Third,  appellants argue  that  the  court should  have          defined  the  statutory term  "ordinary  course  of business,"  a          relevant  term under  both the  CPA and  the UCPA.   In  Chase v.                                                                   _____          Dorais, 122  N.H. 600, 448 A.2d  390 (1982), the court  held that          ______          the  CPA  does  not apply  "'where  the  transaction is  strictly          private in nature,  and is in  no way undertaken in  the ordinary          course of a trade or business.'"   Id. at 602, 448 A.2d at 391-92                                             ___          (quoting  Lantner v. Carson, 374  Mass. 606, 610,  373 N.E.2d 973                    _______    ______                                          23          B.  The Pugliese Cross-appeal          B.  The Pugliese Cross-appeal              _________________________                    Pugliese claims  he was  entitled  to recover  attorney          fees  because the jury  must have based  its award on  one of the          three  fee shifting statutes (SMHLA,     2 & 7;  CPA,   10; UCPA,            4).22    The  district  court  denied  an  attorney  fee  award          because  it  could not  exclude  the  possibility that  the  jury          verdict was based on  a violation of SMHLA, section 3, which does          not authorize attorney fees.  As we have determined that a viola-          tion of SMHLA, section 3, would necessarily entail a violation of          SMHLA, section 2,  see supra pt. II.A.1, we are  able to conclude                             ___ _____          that the jury verdict was based on a fee shifting statute, either          SMHLA,    2 & 7, CPA,    2 & 10, or UCPA,    2 & 4.  Accordingly,          we  remand  for reconsideration  of the  motion  for an  award of          attorney fees.                                        ____________________          (1978)).  UCPA,   1, likewise provides in pertinent part:               IV.   "Creditor"  means a  person who  in  the ordinary                                                              ________               course   of  business   engages   in  consumer   credit               ______   __  ________               transactions with consumers.          (Emphasis added.)  We do not believe the term "ordinary course of          business" was  used in any  technical sense, or  required further          explanation by the  court.  The  special verdict form  adequately          formulated  the  essential   distinction  raised  by  appellants'          defense      whether  appellants  were engaged  in  a  "business"          activity when they loaned these funds to Pugliese, or whether the          loans were between "private" individuals.               Finally, appellants  incorrectly  assert that  the  district          court  did  not  read  the  statutory  definition  of  "creditor"          appearing in UCPA,   1(IV).  See Tr. at 771-72.                                       ___               22Pugliese theorized that the jury must  have found that the          $27,000 note  contained a  $7,000 prepayment penalty,  which con-          stituted an independent violation of SMHLA,   2.  See supra p. 3.                                                            ___ _____          We need not address this issue.                                          24                    The district  court judgment is affirmed  on the merits                    _______________________________________________________          and the case is remanded for reconsideration of the motion for an          _________________________________________________________________          award of attorney fees.          ______________________                                          25
