BASS RIVER LOBSTERS, INC., and others [Note 1] vs. DONALD R. SMITH.

PERRETTA, J. The plaintiffs, Bass River Lobsters, Inc., and two of its officers, brought suit under G. L. c. 231A,

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seeking a determination that a promissory note they had executed in the defendant's favor violated the disclosure requirements of G. L. c. 140C, inserted by St. 1969, c. 517, Section 1, commonly known as the Truth-in-Lending Act. They also sought the civil penalty prescribed by Section 10(b) of the statute. A judge granted the defendant's motion to dismiss for failure to state a claim (Mass.R.Civ.P. 12[b][6], 365 Mass. 755 [1974]), but allowed the plaintiffs "leave to file a motion to amend together with proposed amendment." This subsequent motion was denied, and a judgment of dismissal was entered. The plaintiffs appeal, claiming error in the rulings on these two motions. We affirm the judgment.

The plaintiffs argue that their motion to amend should have been allowed because "leave shall be freely given when justice so requires." Mass.R.Civ.P. 15(a), 365 Mass. 761 (1974). Notwithstanding the liberality of rule 15(a) "a judge properly may deny a motion to amend because the complaint as amended would fail to state a claim on which relief could be granted." Jessie v. Boynton, 372 Mass. 293 , 295 (1977).

The proposed amended complaint alleges that the plaintiffs are engaged in the business of harvesting and marketing for sale fish and shellfish. In May of 1977, they purchased the defendant's property as a location for this business. In return they gave him the promissory note which they now claim violates the mandates of G. L. c. 140C, Sections 3, 4, and 5, entitling them to the civil penalty set forth in Section 10(b), [Note 2] and which was secured by a second mortgage on that property.

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While both the original and amended complaints sought a "determination" that the defendant had violated the disclosure provisions of the statute, the amended complaint, unlike the original one, made no reference to G. L. c. 231A. If we view the amended complaint as seeking a declaration pursuant to c. 231A, then the denial of the motion to amend was proper because the plaintiff had failed to "allege an injury within the area of concern of the statute or regulatory scheme under which the injurious action has occurred." Massachusetts Assn. of Independent Ins. Agents & Brokers, Inc. v. Commissioner of Ins., 373 Mass. 290 , 293 (1977). Holden v. Division of Water Pollution Control, 6 Mass. App. Ct. 423 , 428 (1978). If we view the amended complaint as seeking relief directly under c. 140C, the denial of the motion to amend was still proper because "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Nader v. Citron, 372 Mass. 96 , 98 (1977), quoting from Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In either event, because the sole controversy or claim was based upon alleged violations of c. 140C, the denial was proper, as there was no factual averment from which it could be found that the transaction falls within the scope of the statute.

In these circumstances the defendant would be liable under Section 10(b) only if the amount financed was $25,000 or less, [Note 3] the credit was extended primarily for agricultural

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purposes, [Note 4] and the defendant was a creditor, [Note 5] each as defined by the statute. Although the loan, which was for $22,500, does not exceed the maximum amount set by Section 2(e), the plaintiffs do not claim either that the loan was for an agricultural purpose within the meaning of Section 1(b), or that the defendant is a creditor, as defined in Section 1(l). Harvesting and marketing fish become an agricultural pursuit only when they are done by a natural person [Note 6] who cultivates, plants, propagates, or nurtures those products. This limitation on the meaning of agricultural purpose is not insignificant, as it serves to narrow the otherwise broad scope of the definition. [Note 7] The plaintiffs nowhere claim that they cultivate, plant, propagate, or nurture those products which they harvest and market, nor do they allege facts from which such activities could be inferred. They have, therefore, failed to allege that credit was extended for an agricultural purpose.

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There is no doubt that the plaintiffs have pleaded an extension of credit by the defendant (see G. L. c. 140C, Section 1[e]), but that is not sufficient, as Section 10(b) pertains only to creditors, as defined by Section 1(l). The plaintiffs make no allegations which, if proved, would establish that the defendant is such. Section 1(l) limits the application of Section 10(b) to one "who in the ordinary course of business regularly extends" credit, thereby exempting those who do so as "an occasional, isolated, and incidental portion of their business." Eby v. Reb Realty, Inc., 495 F.2d 646, 649 (9th Cir. 1974). See Regulation Z of the Federal Reserve Board, 12 C.F.R. Section 226.2(s) (1978). Such an exemption would also apply to an isolated extension of credit for a purpose unrelated to a defendant's business, as may well have been the case here.

We deem these factual omissions to be fatal to the amended complaint, and in so doing we have construed our statute with an eye toward the "substantially similar" Federal statute (15 U.S.C. Sections 1601 et seq. [1976]) and interpretations thereunder. Such guidance is proper. Lynch v. Signal Fin. Co. 367 Mass. 503 , 505 (1975); McKinney v. Liberty Mut. Ins. Co., 1 Mass. App. Ct. 569 , 572 (1973); Carter v. Empire Mut. Ins. Co., 6 Mass. App. Ct. 114 , 129 n.15 (1978). A literal interpretation of these definitions promotes, rather than frustrates, the basic purpose of the statute, which is to create greater competition among consumer credit finance institutions and organizations by mandating disclosure of credit cost data. 15 U.S.C. Section 1601. Carter, 6 Mass. App. Ct. at 128. None of the facts alleged could, if proved, establish this to be other than strictly a private transaction not within the purview of the statute. Compare Lantner v. Carson, 374 Mass. 606 , 607-608 (1978), with Slaney v. Westwood Auto, Inc., 366 Mass. 688 , 693 (1975). The motion to amend was properly denied.

Because the judgment rests upon the allowance of the motion to dismiss for failure to state a claim, we also pass upon the propriety of that ruling. The defendant's motion

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was based upon the sole contention that the loan was a business transaction dealing with a mortgage on commercial property. Supporting affidavits and exhibits were attached to the motion. The plaintiffs filed a motion which sought to have the motion to dismiss treated as one for summary judgment, requiring the matter to be reassigned for hearing in order that the plaintiffs be given notice, an opportunity to present further material, and a hearing. See and compare Mass.R.Civ.P. 12(b) with 56, 365 Mass. 755 , 824 (1974). See also Capodilupo v. Petringa, 5 Mass. App. Ct. 893 , 894-895 (1977). The defendant, who did not receive a copy of the plaintiffs' motion until the day his own motion was heard, prepared and presented to the plaintiffs a handwritten "memorandum in reply," specifying that the complaint failed to show both that the loan was for an "agricultural purpose" and that the defendant was a "creditor." Allowance of the plaintiffs' demand for rule 56 treatment would have been required if the judge included the affidavits and exhibits in his consideration of the motion to dismiss. However, the record amply demonstrates the basis for the court's ruling (Jessie v. Boynton, 372 Mass. at 295), and it was not necessary to resort to matters outside the pleadings in allowing the motion to dismiss. Even if we were to assume that the affidavits and exhibits were considered, we fail to see how the plaintiffs were prejudiced. No judgment was entered that day, and they were given three weeks to amend their complaints. By virtue of the defendant's specification of the material omissions from the complaint, they had the opportunity to present sufficient allegations. Under these circumstances there was no error.

Judgment affirmed.