Sobieniak et al v. BAC Home Loans Servicing LP et al
Filing
53
ORDER granting 33 Motion to Dismiss(Written Opinion). Signed by Senior Judge David S. Doty on 12/8/2011. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-110(DSD/TNL)
Steven J. Sobieniak, an individual,
Victoria McKinney, an individual,
Plaintiffs,
ORDER
v.
BAC Home Loans Servicing, LP, a
Texas Limited Partnership, as
successor in interest to
Countrywide Home Loans Servicing,
LP, Mortgage Electronic Registration
Systems, Inc., a Delaware corporation,
John and Jane Does 1-10,
Defendants.
Amoun Van Sayaovong, Esq., Legal Solutions, LLC, 150
Eaton Street, Suite 105, St. Paul, MN 55107, counsel for
plaintiffs.
Ronn B. Kreps, Esq., Leaf Dilts McGregor, Esq., Andre
Hanson, Esq. and Fulbright & Jaworski, 2100 IDS Center,
80 South Eighth Street, Minneapolis, MN 55402 and Andrew
Messite, Esq., Kerren B. Zimmer, Esq. and Reed Smith,
LLP, 599 Lexington Avenue, New York, NY 10022, counsel
for defendants.
This matter is before the court upon the motion to dismiss by
defendants
BAC
Home
Loans
Servicing
LP
(BAC)1
Electronic Registration Systems, Inc. (MERS).2
and
Mortgage
Based upon a review
1
In 2008, Bank of America purchased Countrywide Financial.
It appears that defendant BAC was formerly known as Countrywide
Home Loans Servicing, L.P. and that Bank of America, N.A. is
successor by merger to BAC Home Loan Servicing, L.P.
2
Plaintiffs also name John and Jane Does 1-10 but never
served those individuals.
of the file, record and proceedings herein, and for the following
reasons, the court grants the motion.
BACKGROUND
This mortgage-loan dispute arises out of a refinanced mortgage
loan from nonparty Countrywide Home Loans, Inc. (Countrywide) to
plaintiffs Stephen J. Sobieniak and Victoria McKinney.
Second Am.
Compl. ¶ 1. On March 6, 2007, plaintiffs contacted Countrywide and
requested to “convert a previous adjustable rate mortgage loan to
a conventional fixed rate loan.”
Id. ¶ 12.
Countrywide sent
plaintiffs Truth in Lending Act (TILA) disclosures showing a
principal value of $567,000 and an annual percentage rate (APR) of
6.021%, leading to total payments of $1,207,446.33.
Am. Compl.
Exs. 1-2, ECF No. 3-1. at 2–6; Second Am. Compl. ¶ 15.
On March 22, 2007, plaintiffs executed a promissory note with
a principal value of $562,600 and a fixed APR of 5.875%, leading to
a total payment amount of $1,198,077.73.
3-1.
Am. Compl. Ex. 2, ECF No.
The note was secured by plaintiffs’ principal residence,
located at 3399 Crystal Bay Road, Wayzata, Minnesota.
At closing,
plaintiffs each signed two copies of a notice of right to cancel
attesting that “each acknowledge receipt of two copies of NOTICE of
RIGHT TO CANCEL and one copy of the federal Truth in Lending
Disclosure Statement.”
Second Am. Compl. Ex. 2, ECF No. 30-1, at
55–57. Plaintiffs each also signed and “acknowledge[d] reading and
2
receiving a complete copy of [the TILA disclosure statement].”
McGregor Decl. Ex. B, ECF No. 16.
On January 15, 2010, plaintiffs sent notice of rescission to
Countrywide and BAC.
Second Am. Compl. ¶ 34; id. Ex. 3.
The
notice instructed BAC to provide documentation “[i]f you believe
that you are not required to rescind.”
Id. Ex. 3, at 2.
BAC
denied the request to rescind based on the signed copies of the
notices of right to cancel and TILA disclosures.
BAC stated, “this matter is now closed.”
Id. Exs. 5-6.
Id. Ex. 6.
On January 14, 2011, plaintiffs filed the present action pro
se.
Thereafter, plaintiffs obtained counsel and filed an amended
complaint and a second amended complaint, seeking rescission,
damages and a declaration that the mortgage is void.
move to dismiss for failure to state a claim.
Defendants
Because the parties
presented matters outside the pleadings that the court did not
exclude, the motion converts to a motion for summary judgment
pursuant to Federal Rule of Civil Procedure 12(d).3
3
The court gave the parties notice of its intent to treat the
motion as a motion for summary judgment, and allowed the parties to
submit additional evidence. See ECF No. 49. Defendants submitted
additional affidavits; plaintiffs did not submit additional
material but object to the foundation of certain statements
contained in defendants’ additional filings. The court need not
resolve the dispute, because it did not consider the objected-to
material.
3
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.
II.
Id. at 322-23.
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).
4
The court broadly
construes the TILA in favor of consumers.
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
disclosures, whichever occurs last.
Id. § 1635(a).
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.”
12 C.F.R. § 226.17(a)(1).
required
disclosures
or
If the creditor fails to make the
provide
cancellation
notices,
the
borrower’s “right of rescission shall expire three years after the
date of consummation of the transaction.” 15 U.S.C. § 1635(f); see
12 C.F.R. § 226.23(a)(3).
5
A.
Claims for Monetary Damages
The TILA allows 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).
1.
Document Delivery at Closing
Plaintiffs first claim that they are entitled to monetary
damages, arguing that defendants failed to provide two copies of
the TILA disclosure statement at closing.
March 22, 2007.
Closing occurred on
Plaintiffs filed the present suit on January 14,
2011, well after the one-year statute of limitations lapsed.
Therefore, this claim is barred.
2.
Refusal to Rescind
Plaintiffs next claim that they are entitled to damages for
BAC’s failure to rescind the transaction in January 2010.
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).
Plaintiffs sent their
rescission notice on January 15, 2010, and filed this action on
January 14, 2011.
As a result, this claim is timely.
Defendants argue that plaintiff’s signatures attesting receipt
of
the
required
number
of
notices
rebuttable presumption of receipt.
6
and
disclosures
create
See 15 U.S.C. § 1635(c).
a
Plaintiffs
respond
that
they
kept
the
transaction
documents
together in a safe place and that they “did not receive a signed
copy of Truth in Lending Disclosure Statement.”
3–4, Aug. 12, 2011 (emphasis added).
Sobieniak Aff. ¶¶
Merely contradicting a prior
signature does not overcome the statutory presumption.
See, e.g.,
Siffel v. NFM, 386 F. App’x 169, 170-71 (3d Cir. 2010); Sibby v.
Ownit Mortg. Solutions, Inc., 240 F. App’x 713, 717 (6th Cir.
2007); McCarthy v. Option One Mortg. Corp., 362 F.3d 1008, 1011
(7th Cir. 2004) (finding mere assertion of non-receipt insufficient
to rebut written evidence that disclosures were provided); Williams
v. First Gov’t Mortg. & Investors Corp., 225 F.3d 738, 751 (D.C.
Cir. 2000); Williams v. GM Mortg. Corp., No. 03-74788, 2004 WL
3704081, at *8 (E.D. Mich. Aug. 18, 2004) (“[A] Plaintiff’s bare
bones, self-serving denial is not sufficient to rebut § 1635(c)’s
statutory presumption.”); Golden v. Town & Country Credit, No. 023627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (Frank, J.)
(deposition testimony insufficient to overcome presumption).
But
see Stutzka v. McCarville (Stutzka I), 420 F.3d 757, 761S62 (8th
Cir. 2005) (finding erroneous district court’s failure to consider
several affidavits).4
4
Stutzka I is distinguishable from the instant case, because
it addressed whether a court should consider an affidavit, not
whether the particular affidavit overcame the presumption. Upon
remand, the district court determined that the affidavit was
insufficient to overcome the presumption, and the Eighth Circuit
affirmed. See Stutzka v. McCarville (Stutzka II), 243 F. App’x
(continued...)
7
In the present case, plaintiffs offer no evidence that their
signatures on the cancellation notices and TILA disclosure do not
mean what they say.
For example, there is no evidence that
Countrywide procured their signatures by misrepresentation, forged
their signatures, coerced them to sign under duress or wrested a
second copy of the disclosures from them before they left the
closing.
Instead, plaintiffs offer only a bald assertion that,
years later, they determined that they did not receive two copies
of the disclosures, contrary to what they acknowledged at the time
they
consummated
the
transaction.5
This
assertion
is
not
sufficient to overcome the presumption, and summary judgment is
warranted.6
4
(...continued)
195, 197 (8th Cir. 2007).
5
The court notes that plaintiffs admit receiving two copies
of the TILA disclosures: one disclosure before closing and one
disclosure at closing. The finance charge in the first disclosure,
$558,161.10, is greater than the finance charge in the second
disclosure, $556,127.70. As a result, the two disclosures are not
materially different. See 12 C.F.R. 226.23(g)(1). However, the
court does not rely on § 226.23(g)(1) in disposing this motion.
6
Section 1641(a) allows a civil action against an assignee
“only if the violation for which such action or proceeding is
brought is apparent on the face of the disclosure statement ....”
15 U.S.C. § 1641(a).
In the present case, the loan documents
contain plaintiffs’ signed acknowledgment that they each received
the TILA disclosure statement and two copies of the notice of the
right to cancel.
No violation appears on the face of the
documents. The Eighth Circuit has not addressed whether a merger
constitutes an assignment for purposes of § 1641, but plaintiffs
allege that BAC is an assignee.
See Second Am. Compl. ¶ 30.
Therefore, under plaintiffs’ pleaded facts, summary judgment is
(continued...)
8
B.
Rescission
Even if not entitled to monetary damages, plaintiffs argue
that the court should rescind the loan. See Peterson-Price 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
rescission are separate causes of action).
damages
and
Plaintiffs argue that
their claim for rescission was timely, because it was received by
BAC within three years of the March 22, 2007, 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
as well.”).
As a result, the ability to rescind a transaction
under the TILA expires three years after consummation of the
transaction.
Neither Beach nor the TILA specifically address whether a
claim for rescission survives the three-year period if an obligor
6
(...continued)
also warranted under § 1641(a).
9
sends a rescission request to a bank within three years, but fails
to file suit until the time allowed by the statute of repose
expires. 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. 10-2245, 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 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 agreed with the reasoning of Geraghty v.
BAC Home Loans Servicing LP, No. 11-336, 2011 WL 3920248 (D. Minn.
Sept.
7,
2011)
(Ericksen,
J.),
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.
10
See Keiran v. Home Capital, Inc., No. 10-4418, 2011 WL 6003961, at
*3–5 (D. Minn. Nov. 30, 2011).
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.”
Geraghty, 2011 WL 3920248 at *5.
As the court noted in Keiran, 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
three years.7
See Act of Oct. 28, 1974, Pub. L. No. 93-495, § 405,
88 Stat. 1500, 1517.
Under plaintiffs’ interpretation, a borrower
who sends a letter claiming some disclosure defect, but who does
not file suit, has indefinitely tolled the rescission period. Such
an interpretation is improper, because it contradicts Congress’s
intent to create repose from the threat of rescission after three
years.
In the present case, plaintiffs did not file suit until nearly
four years after consummation of the transaction.
Therefore, the
claim is barred, and summary judgment is warranted.
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
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.
The motion to dismiss [ECF No. 33] is treated as a motion
for summary judgment and is granted;
2.
This action is dismissed with prejudice.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:
December 8, 2011
s/David S. Doty
David S. Doty, Judge
United States District Court
12
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