Keiran et al v. Home Capital Inc. et al
Filing
39
ORDER granting 11 Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 11/30/2011. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 10-4418(DSD/JSM)
Alan G. Keiran and
Mary J. Keiran,
Plaintiffs,
ORDER
v.
Home Capital, Inc.; BAC Home
Loans Servicing LP; Bank of
New York Mellon, as Trustee
for the Holders of CWABS, Inc.,
Asset-Backed Certificates,
Series 2007-6; John and Jane
Does 1-10,
Defendants.
Amoun Van Sayaovong, Esq. and Legal Solutions LLC, 150
Eaton Street, Suite 105, St. Paul, MN 55107, counsel for
plaintiffs.
Michelle E. Weinberg, Esq., D. Charles Macdonald, Esq.,
Elasalo V. Ale, Esq. and Faegre & Benson, 90 South
Seventh Street, Suite 2200, Minneapolis, MN 55402,
counsel for defendants.
This matter is before the court upon the motion for summary
judgment by defendants BAC Home Loans Servicing LP (BAC) and Bank
of New York Melon (Bank of New York).1
Based on a review of the
file, record and proceedings herein, and for the following reasons,
the court grants the motion.
1
The Keirans also named Home Capital Inc. and John and Jane
Does 1-10, but never served those defendants.
BACKGROUND
This mortgage dispute arises out of a mortgage loan from Home
Capital Inc. (Home Capital) to plaintiffs Alan G. Keiran and Mary
J. Keiran.
See Compl. ¶¶ 5-6.
On December 30, 2006, Mr. Keiran
and Home Capital executed a promissory note (Note) for the amount
of $404,000 in exchange for a mortgage of real property located at
7820 200th Street West, Lakeville, Minnesota.
Alvarado Aff. Exs. A, B.
See id. ¶¶ 15, 17;
Mortgage Electronic Registration System
(MERS) was the nominal mortgagee.
See Alvarado Aff. ¶ 4.
On February 1, 2007, the Note was assigned to Countrywide Home
Loans, Inc. (Countrywide).
1, at 22.
The Note was later assigned to, and is now held by, Bank
of New York.
Note.2
See Compl. ¶ 30; id. Ex. 1, ECF No. 1-
See Alvarado Aff. ¶ 6.
BAC is the servicer of the
Id.
The Keirans stopped making payments on the Note in November
2008.
See id. ¶ 7.
On October 8, 2009, the Keirans sent
rescission notices to Bank of New York and BAC alleging that they
did not receive sufficient copies of disclosures required by the
Truth in Lending Act (TILA), 15 U.S.C. §§ 1601-1667f, at the
December 2006 closing.
See Compl. Ex. 3, ECF No. 1-1, at 46-53.
On January 7, 2010, BAC informed the Keirans that no basis for
rescission existed.
See id. Ex. 6, ECF No. 1-1, at 87.
2
BAC is a subsidiary of Bank of America N.A. (Bank of
America). Bank of America became the successor in interest after
its merger with Countrywide.
2
On
October
29,
2010,
the
Keirans
filed
a
claim seeking
rescission of the mortgage loan, money damages and a declaratory
judgment voiding defendants’ security interest in the Keirans’
mortgage loan.
Defendants move for summary judgement.
DISCUSSION
I.
Standard of Review
The court “shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).
Fed. R. Civ.
A fact is material only when its resolution affects the
outcome of the case.
242, 248 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S.
A dispute is genuine if the evidence is such that
it could cause a reasonable jury to return a verdict for either
party.
See id. at 252.
The court views all evidence and inferences in a light most
favorable to the nonmoving party.
See id. at 255.
The nonmoving
party, however, may not rest upon mere denials or allegations in
the pleadings but must set forth specific facts sufficient to raise
a genuine issue for trial.
See Celotex v. Catrett, 477 U.S. 317,
324 (1986). Moreover, if a plaintiff cannot support each essential
element of his claim, the court must grant summary judgment,
because a complete failure of proof regarding an essential element
necessarily renders all other facts immaterial.
3
Id. at 322-23.
II.
TILA
Congress enacted the TILA “to assure a meaningful disclosure
of credit terms so that the consumer will be able to compare more
readily the various credit terms available to him and avoid the
uninformed use of credit ....”
15 U.S.C. § 1601(a).
broadly construes the TILA in favor of consumers.
The court
Rand Corp. v.
Yer Song Moua, 559 F.3d 842, 847-48 (8th Cir. 2009).
In transactions secured by a principal dwelling, the TILA
gives borrowers an unconditional three-day right to rescind.
15
U.S.C. § 1635(a); see also id. § 1641(c) (extending rescission to
assignees).
The three-day rescission period begins upon the
consummation of the transaction or the delivery of the required
rescission notices and disclosures, whichever occurs last.
§ 1635(a).
Id.
Required disclosures must be made to “each consumer
whose ownership interest is or will be subject to the security
interest” and must include two copies of a notice of the right to
rescind, see 12 C.F.R. § 226.23(a)–(b)(1), and a TILA disclosure
statement, outlining:
the annual percentage rate, the method of
determining the finance charge and the balance
upon which a finance charge will be imposed,
the amount of the finance charge, the amount
to be financed, the total of payments, the
number and amount of payments [and] the due
dates or periods of payments scheduled to
repay the indebtedness....
15 U.S.C. § 1602(u).
These disclosures must be made “clearly and
conspicuously in writing, in a form that the consumer may keep.”
4
12 C.F.R. § 226.17(a)(1).
If the creditor fails to make the
required disclosures or rescission notices, the borrower’s “right
of
rescission
shall
expire
three
consummation of the transaction.”
years
after
the
date
of
15 U.S.C. § 1635(f); see 12
C.F.R. § 226.23(a)(3).
A.
Claim for Monetary Damages
The TILA allows for actual damages and attorney fees when a
creditor violates the statute. See 15 U.S.C. §§ 1635(g), 1640(a).
A claim for monetary damages under § 1640 must be brought “within
one year from the date of the occurrence of the violation.”
Id.
§ 1640(e).
The Keirans first claim that they are entitled to monetary
damages, because defendants failed to provide two copies of the
TILA disclosure statement at closing.3
The Keirans, however, filed
the present suit on October 29, 2010, well after the one-year
statute of limitations lapsed.4
Therefore, this claim is barred.
3
It is not clear that the Keirans’ pro se complaint alleges
a damages claim for the failure to provide an adequate number of
TILA disclosure statements. Given the subsequent appointment of
counsel, the Keirans arguably are not entitled to a liberal
interpretation. See Prince v. Lockhart, 971 F.2d 118, 121 n.5 (8th
Cir. 1992).
The court, nevertheless, broadly interprets the
Keirans’ claim for monetary damages.
4
Moreover, the Keirans acknowledged receipt of the TILA
disclosure statement and the notices of right to cancel.
See
Alvarado Aff. Ex. C.
These signed acknowledgments create a
rebuttable presumption of delivery of these documents. 15 U.S.C.
§ 1635(c).
5
The Keirans also claim that they are entitled to monetary
damages for defendants’ failure to rescind the mortgage loan.
Failure to rescind may constitute a separate violation under the
TILA. See Tacheny v. M&I Marshall & Ilsley Bank, No. 10-2067, 2011
WL 1657877, at *5 (D. Minn. Apr. 29, 2011).
After receiving a
rescission notice, a creditor has twenty days to return money and
property to the obligor.
§ 226.23(d)(2).
See 15 U.S.C. § 1635(b); 12 C.F.R.
As a result, if defendants are liable for failure
to rescind, the statute-of-limitations period began on November 2,
2009, twenty days after the Bank of New York received the Keirans’
rescission notice.5
The Keirans filed this action on October 29,
2010, within the one-year limitations period.
The defendants argue that they are not liable as assignees.
Section 1641(a) states:
[A]ny civil action for a violation of ... [the
TILA] which may be brought against a creditor
may be maintained against any assignee of such
creditor only if the violation for which such
action or proceeding is brought is apparent on
the face of the disclosure statement, except
where the assignment was involuntary.
15 U.S.C. § 1641(a) (emphasis added).
The Eighth Circuit has yet to address whether an assignee that
fails to rescind a mortgage loan can be liable for monetary damages
when the disclosure violations are not evident on the face of the
5
As a loan servicer, BAC is not liable for monetary damages.
See 15 U.S.C. § 1641(f)(1); Bills v. BNC Mortg., Inc., 502 F. Supp.
2d 773, 775 (N.D. Ill. 2007)
6
document.
A majority of courts to address the issue explain that
allowing monetary damages would “end run” the stated congressional
purpose of § 1641.
See Bills v. BNC Mortg., Inc., 502 F. Supp. 2d
773, 776 (N.D. Ill. 2007) (codifying a bona fide purchaser rule);
see also Little v. Bank of Am., N.A., 769 F. Supp. 2d 954, 968
(E.D. Va. 2011); Russell v. Mortg. Solutions Mgmt., Inc., No. 081092, 2010 WL 3945117, at *9 (D. Or. Apr. 6, 2010); Brodo v.
Bankers Trust Co., 847 F. Supp. 353, 359 (E.D. Pa. 1994).
But see
Fairbanks Capital Corp. v. Jenkins, 225 F. Supp. 2d 910, 916-17
(N.D. Ill. 2002).
The Keirans argue that § 1641(a) does not apply to violations
based on a failure to rescind.
The statute does not exempt
rescission failures; instead it applies to “any civil action for a
violation of this subchapter.” 15 U.S.C. § 1641(a). Moreover, the
Keirans’
proposed
interpretation
of
§
1641(a)
would
require
assignees to look beyond the notice of the right to rescind and the
TILA
disclosure
statements
and
investigate
the
factual
circumstances surrounding each borrower’s closing.
Section 1641,
however, “does
inquiry
not
impose
a
duty of
additional
upon
assignees,” rather assignees are liable “[o]nly [for] violations
that a reasonable person can spot on the face of the disclosure
statement.”
Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 694
7
(7th Cir. 1998).
Thus, an assignee cannot be liable for monetary
damages when a TILA violation is not evident on the face of the
loan document.
Bank of New York claims that no violations of the TILA were
evident on the face of the Keirans’ loan documents.
The court
agrees. A violation is facially apparent when the document “can be
determined to be incomplete or inaccurate from the face of the
disclosure statement or other documents assigned, or ... does not
use the terms required” by the TILA.
15 U.S.C. § 1641(a)(1)-(2).
In other words, an assignee is only liable for “violations that a
reasonable person can spot on the face of the disclosure statement
or other assigned documents.”
Taylor, 150 F.3d at 694.
The loan
documents contain the Keirans’ signed acknowledgment that they each
received the TILA disclosure statement and two copies of the notice
of the right to rescind.
Ex. C.
See Weinberg Aff. Ex. D; Alvarado Aff.
When Bank of New York acquired the Note, there was no
indication from the loan documents that any material defect was
present.
Therefore, dismissal of the Keirans’ claim for monetary
damages is warranted.
B.
Claim for Rescission
The TILA provides a three-day right of rescission when the
transaction is secured by a principal dwelling.
8
See 15 U.S.C.
§ 1635(a).
The rescission right is extended by three years if
lenders do not provide the notice of the right to cancel or the
TILA disclosure statements. See id. § 1635(f).
Even if not entitled to monetary damages, the Keirans argue
that the court should rescind the loan.
See 15 U.S.C. § 1641(c)
(“Any consumer who has the right to rescind ... may rescind the
transaction as against any assignee of the obligation.”); PetersonPrice v. U.S. Bank Nat’l Ass’n, No. 09-495, 2010 WL 1782188, at *3
(D. Minn. May 4, 2010) (explaining that claims for monetary damages
and rescission are separate causes of action).
The Keirans claim
that their request for rescission was timely, because it was
received by the Bank of New York and BAC within three years of the
December 30, 2006, closing.
The court disagrees.
The TILA imposes a three-year statute of repose on claims for
rescission.
See 15 U.S.C. § 1635(f); Beach v. Ocwen Fed. Bank, 523
U.S. 410, 417–19 (1998).
Unlike a statute of limitation, which
regulates remedies, a statute of repose regulates rights and
“operates
as a
statutory
bar
inaction) of the litigants.”
independent
of
the
actions
(or
Nesladek v. Ford Motor Co., 46 F.3d
734, 737 (8th Cir. 1995); see Beach, 523 U.S. at 417 ([“Section
1635] talks not of a suit’s commencement but of a right’s duration
9
as well.”).
As a result, the ability to rescind a transaction
under the TILA expires three years after consummation of the
transaction.6
Neither Beach nor the TILA specifically address whether a
claim for rescission survives the three-year period if an obligor
sends a rescission request to a bank within three years, but fails
to file suit until the statute of repose lapses.
The majority of
courts to address this question hold that such a suit is barred by
§ 1635(f).
See, e.g., Williams v. Wells Fargo Home Mortg., Inc.,
410 F. App’x 495, 499 (3d Cir. 2011); Sall v. Bounassissi, No. 102245, 2011 WL 2791254, at *6 (D. Md. July 13, 2011); Barry v.
Countrywide Home Loans, F.S.B., No. 10-1525, 2011 WL 441508, at
*2–3 (D. Colo. Feb 8, 2011); Rosenfeld v. HSBC Bank, USA, No.
10–CV–00058, 2010 WL 3489926, at *5 (D. Colo. Aug. 31, 2010);
DeCosta v. U.S. Bankcorp, No. 10-301, 2010 WL 3824224, at *5 (D.
Md. Sept. 27, 2010); Gilbert v. Deutsche Bank Trust Co. Ams., No.
09–CV–181–D, 2010 WL 2696763, at *5 (E.D.N.C. July 7, 2010); Sam v.
Am. Home Mortg. Servicing, No. 09–CV–2177, 2010 WL 761228, at *2
(E.D. Cal. Mar. 3, 2010).
Other courts disagree.
See, e.g.,
Stewart v. BAC Home Loans Servicing, LP, No. 10 C 2033, 2011 WL
6
A statute of repose is jurisdictional by nature, and
deprives a plaintiff of the ability to state a claim. See Roskam
Baking Co., Inc. v. Lanham Mach. Co., 288 F.3d 895, 901 (6th Cir.
2002). Defendants do not argue that the Keirans’ rescission claim
is time barred, but “the court may, at any time, raise the issue of
subject matter jurisdiction.” See GMAC Commercial Credit LLC v.
Dillard Dep’t Stores, Inc., 357 F.3d 827, 828 (8th Cir. 2004).
10
862938, at *5–6 (N.D. Ill. Mar. 10, 2011); Brisos v. Wells Fargo
Bank, 737 F. Supp. 2d 1018, 1026 (N.D. Cal. 2010) (adopting “the
minority approach within [the Ninth] Circuit” and allowing a suit
for rescission after three years).
Recently, this court sided with the majority position in
Geraghty v. BAC Home Loans Servicing LP.
See No. 11-336, 2011 WL
3920248 (D. Minn. Sept. 7, 2011) (Ericksen, J.).
In Geraghty, the
court determined that the language of the TILA, the holding in
Beach and the strong public policy favoring certainty of title all
support “the majority view that Congress intended that any lawsuit
to enforce the right of rescission be brought within the three-year
repose period.”
Id. at *5.
The court finds the reasoning of
Geraghty persuasive.
The history of the statute further supports the majority
position.
As originally enacted, the rescission period continued
until a lender provided the required TILA disclosure statements.
In
1974,
however,
Congress
amended
the
TILA,
changing
the
potentially indefinite rescission period to a three-year right of
rescission.7
See Act of Oct. 28, 1974, Pub. L. No. 93-495, § 405,
88 Stat. 1500, 1517. Under the Keirans’ interpretation, a borrower
who sends a letter claiming some disclosure defect, but who does
7
Congress still expresses concerns about “the devastating
liability” that results from the “most draconian” remedy of
rescission, which can be triggered by “small violations of the
disclosure requirements.” 141 Cong. Rec. S14566, S14567 (daily ed.
Sept. 28, 1995) (statement of Sen. D’Amato).
11
not file suit, has indefinitely tolled the rescission period. Such
an interpretation is improper, because it contradicts Congress’s
intent to create a three-year recession period.
The court joins the Geraghty court in holding that a suit for
rescission filed more than three years after consummation of an
eligible transaction is barred by the TILA’s statute of repose. In
the present case, the Keirans did not file suit until nearly four
years after consummation.
Therefore, the claim is barred, and
summary judgment is warranted.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that the
motion for summary judgment [ECF No. 11] is granted.
LET JUDGMENT BE ENTERED ACCORDINGLY
Dated:
November 30, 2011
s/David S. Doty
David S. Doty, Judge
United States District Court
12
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