McFarlane-Hammond v. Premium Capital Funding, LLC et al

Filing 30

MEMORANDUM OPINION AND ORDER granting 19 Defendants' Motion for Summary Judgment; all claims in the Complaint 1 are DISMISSED WITH PREJUDICE (Written Opinion). Signed by Judge Ann D. Montgomery on 12/21/2012. (TLU)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

Anthony McFarlane-Hammond,
Plaintiff,
MEMORANDUM OPINION
AND ORDER
Civil No. 11-cv-01927 ADM/JSM

v.
Premium Capital Funding, LLC (d/b/a
TopDot Mortgage), LoanCare Servicing
Center, Inc., FNF Servicing, Inc., and
John and Jane Does 1-10,

Defendants.
______________________________________________________________________________
James L. Gunn IV, Esq., Gunn Legal Services, LLC, Woodbury, MN, on behalf of Plaintiff.
Kevin T. Dobie, Esq., Usset, Weingarden & Liebo, PLLP, Minneapolis, MN, on behalf of
Defendants LoanCare Servicing Center, Inc. and FNF Servicing, Inc.
______________________________________________________________________________
I. INTRODUCTION
The undersigned United States District Judge heard oral argument on Defendants
LoanCare Servicing Center, Inc.’s and FNF Servicing, Inc.’s (together, “Defendants”) Motion
for Summary Judgment [Docket No. 19] on November 1, 2012.1 In his Complaint, Plaintiff
Anthony McFarlane-Hammond alleges: (1) a failure to rescind his mortgage refinancing
transaction as required by the Truth in Lending Act (TILA) and Regulation Z; (2) entitlement to
a declaratory judgment voiding Defendants’ security lien on Plaintiff’s property; and (3) a
violation of Minn. Stat. § 58.137, which governs lender fees in residential mortgage transactions.
[Docket No. 1]. For the reasons stated herein, Defendants’ motion is granted.

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Plaintiff named FNF Servicing, Inc. as a defendant only because FNF owns LoanCare.
Compl. ¶ 7.

II. BACKGROUND
In July 2009, Plaintiff sought refinancing for his home mortgage loan from Defendant
Premium Capital Funding, LLC (“TopDot”). Christopher Kalla Aff. [Docket No. 21] Ex. F at 7
(foreclosure notices and affidavit of service). Although Plaintiff offers conflicting statements
about where the closing took place, the parties agree that on September 4, 2009, Plaintiff
executed a mortgage note for $171,512 to refinance his previous home loan from Bank of
America. Compl. ¶ 17, Ex. 1; Pl.’s Mem. Opp’n Summ. J. [Docket No. 26] (“Pl.’s Opp’n”) 2;
Kalla Aff. Ex. E. Mortgage Electronic Registration Systems, Inc. (“MERS”) served as the
mortgagee, and LoanCare, the moving party, was the mortgage servicer. Kalla Aff. Ex. F at 7.
At the closing, Plaintiff signed various documents, including a Department of Housing
and Urban Development Settlement Statement (commonly known as a “HUD-1”), HUD-1
addenda, a notice of right to cancel disclosure form, and a Truth in Lending disclosure statement.
Compl. ¶ 19, Ex. 1. TopDot did not provide Plaintiff with copies of his notice of right to cancel
form or his Truth in Lending disclosure at the closing itself. Instead, TopDot mailed a packet of
documents to Plaintiff approximately one week later.2 Id. ¶ 19. The packet included:
(1) Plaintiff’s mortgage note;
(2) Plaintiff’s mortgage security instrument;
(3) a HUD-1 imprinted with “HUD FAILED QC” and “DO NOT CLOSE”;
(4) Plaintiff’s signed HUD-1, with an additional copy that does not include Plaintiff’s
signature but states identical terms;

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Neither the Complaint nor the parties’ summary judgment memoranda indicate the
exact date on which TopDot mailed the listed documents.
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(5) signed HUD-1 addenda;
(6) two signed copies of Plaintiff’s notice of right to cancel disclosure;
(7) a Truth In Lending disclosure signed by Plaintiff; and
(8) an unsigned Truth in Lending disclosure containing somewhat different terms than
the signed disclosure.
Id. at Ex. 1.
Plaintiff defaulted on his loan by December 2010. See Kalla Aff. Ex. F at 10. In March
2011, Plaintiff sent a letter to TopDot in which he stated TopDot had failed to provide proper
disclosures as required by TILA. Compl. Ex. 2. As a result of these claimed violations, Plaintiff
sought rescission of the entire loan transaction. Id. Sometime thereafter, TopDot, through
MERS, assigned its interest in Plaintiff’s property to LoanCare. Kalla Aff. Ex. F at 1. In May
2011, LoanCare initiated foreclosure proceedings against Plaintiff. Id. at 8-9.
On July 15, 2011, Plaintiff filed a verified complaint against Defendants, TopDot, and
John and Jane Does 1-10.3 Plaintiff did not serve TopDot in this action, and TopDot did not
respond to the Complaint. In addition, Plaintiff alleged John and Jane Does 1-10 were “involved
in the instant case and transaction” and would be identified upon the completion of further
discovery, but Plaintiff did not identify or serve these persons. See Compl. ¶ 8. On September
1, 2012, the remaining Defendants brought the present motion for summary judgment, seeking
dismissal of the Complaint.

3

A verified complaint is equivalent to an affidavit for purposes of summary judgment.
Davis v. Jefferson Hosp. Ass’n, 685 F.3d 675, 682 (8th Cir. 2012) (citation omitted).
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III. DISCUSSION
A. Summary Judgment Standard
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall
be rendered if there exists no genuine issue as to any material fact and the moving party is
entitled to judgment as a matter of law.
The United States Supreme Court, in construing Federal Rule 56(c), stated in Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986):
In our view, the plain language of Rule 56(c) mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who
fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will bear the burden of proof
at trial.
On a motion for summary judgment, the court views the evidence in the light most
favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995).
If evidence sufficient to permit a reasonable jury to return a verdict in favor of the nonmoving
party has been presented, summary judgment is inappropriate. Krenik v. Cnty of Le Sueur, 47
F.3d 953, 957 (8th Cir. 1995). However, the nonmoving party may not “rest on mere allegations
or denials, but must demonstrate on the record the existence of specific facts which create a
genuine issue for trial.” Id. As a result, the “mere existence” of an alleged factual dispute will
not defeat a properly supported motion for summary judgment . . . .” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). Instead, “[o]nly disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude the entry of summary
judgment.” Id.

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B. Plaintiffs’ Truth In Lending Act Claims
TILA requires creditors to disclose certain credit terms in a “clear and conspicuous”
manner before the completion of a consumer credit transaction. See, e.g., 15 U.S.C. § 1635(a).
If a creditor fails to do so, the consumer may seek statutory damages. In addition, depending on
the nature of the alleged violations, the consumer may also seek rescission of the entire
transaction. In this case, Plaintiff focuses his TILA claims solely on the remedy of rescission,
and damages from Defendants’ failure to honor Plaintiff’s request for rescission.
1. Assignee Liability
Defendants argue that they are not liable for rescission because the disclosure defects in
this case are “hidden violations” of TILA. TopDot, the originator of Plaintiff’s mortgage, had
responsibility as creditor to provide Plaintiff with the required TILA disclosures.4 TILA also
attaches liability for these disclosures to LoanCare as the assignee of the mortgage. However,
TILA places certain limits on the liability allowed against assignees for disclosure defects. 15
U.S.C. § 1641(a) states that a consumer may seek liability against an assignee for a disclosure
violation only if the violation is “apparent on the face of the disclosure statement

. . . .” As

a result, a plaintiff may not seek TILA statutory damages against an assignee for “hidden”
disclosure violations. Apart from statutory damages, however, § 1641(c), titled “Right of
rescission by consumer unaffected,” states that “[a]ny consumer who has the right to rescind
under section 1635 of this title may rescind the transaction as against any assignee of the
obligation.”
Courts have disagreed whether an assignee is liable for rescission when a disclosure
4

At oral argument, Defendants conceded TopDot was not a necessary party to this

action.
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defect is not “apparent on the face” of the disclosure. See, e.g., Iroanyah v. Bank of Am., N.A.,
851 F. Supp. 2d 1115, 1129-30 (N.D. Ill. 2012) (noting division within Northern District of
Illinois regarding assignee liability for rescission based on facial defects). This Court previously
held that consumers entitled to seek rescission under § 1635 may do so against assignees
regardless of whether a disclosure defect is facially apparent. Peterson-Price v. U.S. Bank, Nat’l
Ass’n, No. 09-495, 2010 WL 1782188, at *3 (D. Minn. May 4, 2010). Defendants attempt to
distinguish Plaintiff’s claims from the Peterson-Price holding, but do so using questionable logic.
See Defs.’ Mem. Reply Supp. Summ. J. [Docket No. 27] (“Defs.’ Reply”) 13. However, it is
ultimately unnecessary to revisit the issue in this case. As demonstrated below, Plaintiff’s claims
fail as a matter of law.
2. Notice Of Right To Cancel Disclosures
Section 1635 allows consumers to rescind certain credit transactions, including
mortgages secured by primary dwellings. Under the statute, creditors must “clearly and
conspicuously” disclose this right of rescission and provide the forms necessary for the
consumer to exercise the right. 15 U.S.C. § 1635(a). To implement TILA, the Federal Reserve
Board promulgated a set of administrative rules referred to as Regulation Z. Regulation Z
specifies that the creditor must provide two copies of the consumer’s notice of the right to
rescind (also referred to as the “notice of right to cancel”). 12 C.F.R. § 226.23(b)(1). The notice
must provide certain information, including the date the rescission period expires. Id.
Regulation Z also provides a model form that creditors may use in notifying consumers of their
right to rescind. Id. § 226, Appx. H. Form H-8 states in relevant part:
You are entering into a transaction that will result in a [mortgage/lien/security interest]
[on/in] your home. You have a legal right under federal law to cancel this transaction,
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without cost, within three business days from whichever of the following events occurs
last:
(1) the date of the transaction, which is __________; or
(2) the date you received your Truth in Lending disclosures; or
(3) the date you received this notice of your right to cancel.
Id. The form further states: “If you cancel by mail or telegram, you must send the notice no later
than midnight of (date) (or midnight of the third business day following the latest of the three
events listed above).” Id. It also details the rescission process and the consumer’s rights under
TILA. See id.
As the form indicates, the consumer may rescind a credit transaction up to three days
after the latest of the three events listed above occurs. Id., see also id. §226.23(a)(3). If the
creditor fails to deliver the proper disclosures altogether, then the consumer may rescind the
transaction up to three years after its consummation. Id.
Plaintiff argues TopDot’s notice of right to cancel violates § 1635(a) in two ways. First,
Plaintiff argues that TopDot violated TILA because it did not provide the notice of right to
cancel before the mortgage refinancing closed, but instead mailed the notices a week later. In
support of this argument, Plaintiff cites § 1638(b), which requires creditors to provide
disclosures about the terms of the credit agreement before the extension of credit. Second,
Plaintiff refers to a portion of TopDot’s notice of right to cancel, which states: “you must send
the notice [of right to cancel] no later than midnight of SEPTEMBER 9, 2009 (or midnight of the
third business day following the latest of the three events listed above).” Plaintiff argues this
language is “inherently confusing” because Plaintiff received this letter after September 9, 2009.
Defendants respond that TopDot provided proper notices of the right to rescind, and that § 1635
specifically contemplates allowing creditors to mail these notices after a credit transaction
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closes.
Addressing Plaintiff’s first argument, TopDot’s mailing of the notices of the right to
cancel did not violate § 1635 or Regulation Z. Plaintiff correctly notes that § 1638 states
creditors shall disclose various specific aspects of a proposed credit transaction, such as the
annual percentage rate (APR), before the actual extension of credit. But § 1635, which
authorizes Plaintiff’s rescission claims, does not impose this timing requirement. Instead, § 1635
specifically contemplates situations in which a creditor provides notice of the right to cancel
after the consummation of the credit transaction. See Simmons v. Mortg. Elec. Registration
Sys., No. 09-162, 2010 WL 428784, at *3 (D. Minn. Feb. 2, 2010) (“Thus, TILA contemplates
delivery of the required disclosures and forms at a time other than the consummation of the
transaction.”). The statute protects a consumer’s right to rescind by allowing the consumer to
rescind after the completion of the transaction or the delivery of the proper disclosures,
necessarily implying that the disclosures may be delivered after the transaction is completed.
Regulation Z and the model forms further support this interpretation. 12 C.F.R. §§ 226.23(a)(3),
Appx. H. As a result, when a lender delays providing the required disclosures, the consumer’s
right to rescind the credit transaction simply continues until three days after he or she actually
receives the disclosures.
In this case, TopDot satisfied TILA’s rescission notice requirements. TopDot’s “Notice
of Right to Cancel” forms match the model Regulation Z form exactly, except that TopDot
completed the necessary details such as names and dates. Compare Compl. Ex. 1 at 18-19 with
12 C.F.R. § 226, Appx. H, Form H-8. Plaintiff admits in the Complaint that he signed the notice,
and that he received two copies of the notice about one week later. Compl. ¶ 19. TopDot’s

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delay in sending the notice of right to cancel did not violate § 1635; it extended the window in
which Plaintiff could rescind his refinance transaction.
Addressing Plaintiff’s second argument, the language of TopDot’s notice of right to
cancel is not inherently confusing. The notice states “. . . [Y]ou must send notice no later than
midnight of SEPTEMBER 9, 2009 (or midnight of the third business day following the latest
events listed above).” This language—the same language suggested by Regulation Z—must be
read objectively to determine whether it stated Plaintiff’s rescission rights “clearly and
conspicuously.” Peterson-Price, 2010 WL 1782188, at *4-6 (adopting standard by which courts
view alleged violations of “clear and conspicuous requirement under standard of “objective
reasonableness”); see also Simmons, 2010 WL 428784, at *5; Brown v. Wells Fargo & Co., 284
F.R.D. 432, 442 (D. Minn. 2012). Viewed objectively, Plaintiff’s receipt of the notice of right to
cancel after September 9, 2009, did not create a contradiction or potential for confusion. The
parenthetical in the very same sentence makes clear that Plaintiff had the alternate rescission
deadline of three business days from his receipt of the disclosures. As a result, Plaintiff’s claims
regarding TopDot’s notice of the right to cancel fail as a matter of law.
3. Failure To Make Material Disclosures
In addition to notice of right to cancel, § 1635(a) requires creditors to provide certain
“material” disclosures to consumers in a clear and conspicuous manner. Regulation Z states that
the following disclosures are “material” for purposes of a consumer’s right to rescind: “the
annual percentage rate, the finance charge, the amount financed, the total of payments, the
payment schedule, and the disclosures and limitations referred to in §§ 226.32(c) and (d) and

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226.35(b)(2).”5 12 C.F.R. § 226.23(a)(3). As with notice of the right to cancel, a delay in
providing these “material” disclosures will extend the time within which a consumer may
rescind. 15 U.S.C. § 1635(a), (f). Similarly, a complete failure to provide the disclosures will
allow a consumer to rescind the credit transaction up to three years after the transaction’s
consummation. Id.; 12 C.F.R. § 226.23(a)(3).
The majority of courts have held that TILA does not require “perfect” or “punctilious”
compliance to satisfy the “clear and conspicuous” disclosure requirement. See Watkins v.
SunTrust Mortg., Inc., 663 F.3d 232, 239-40 (4th Cir. 2011) (collecting cases). The documents
provided at closing will satisfy TILA if, when read together as a whole, they would not confuse
the average consumer. Peterson-Price, 2010 WL 1782188, at *4 (citations omitted).
As discussed above, Plaintiff received both his signed Truth in Lending disclosure as
well as an unsigned Truth in Lending disclosure. The unsigned disclosure discloses several
terms, including:
(1) an APR of 7.057%;
(2) a finance charge of $219,396.52;
(3) an amount financed of $160,339.65;
(4) payments totaling $379,738.17; and
(5) a 5% charge for late payments.
In comparison, the signed disclosure states:
(1) an APR of 7.043%;

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12 C.F.R. §§ 226.32(c), (d) and 226.35(b)(2) refer to certain limitations and necessary
disclosures for mortgage transactions, including a requirement that the creditor disclose the total
amount borrowed in a mortgage refinancing. See id. § 226.32(c)(5)
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(2) a finance charge of $219,169.49;
(3) an amount financed of $160,568.68;
(4) payments totaling $379,738.17; and
(5) a 4% charge for late payments.
Compl. Ex. 1 at 20-21. Both disclosures also contain an identical schedule of payments
extending until 2039. And where the signed disclosure includes terms completed by the marking
of a checkbox, the unsigned disclosure has several incomplete terms.
In his Complaint, Plaintiff alleges that receiving two “different and conflicting” Truth in
Lending disclosures creates an “inherent ambiguity” in violation of TILA and Regulation Z.
Compl. ¶¶ 24-26, 33. In addition, Plaintiff argues TopDot violated Regulation Z by failing to
provide the required disclosures “in a form that the consumer may keep.” Pl.’s Opp’n at 8.
Defendants respond that Plaintiff signed a Truth in Lending disclosure, creating conclusive proof
that Plaintiff received the material disclosures in a timely manner. Defendants also argue that
Plaintiff has not disputed the accuracy of his signed Truth in Lending disclosure.
Receiving two somewhat inconsistent Truth in Lending disclosures at the same time has
the potential to create impermissible ambiguity as to the terms of a loan. See, e.g., PetersonPrice, 2010 WL 1782188, at *4-6; see also Trombley v. SunTrust Mortg., Inc., No. 10-3089,
2012 WL 3029645, at *5 (D. Minn. July 24, 2012). In Peterson-Price, the plaintiff received
three Truth in Lending disclosures, two of which she signed and each of which bore different
dates and different APRs. Peterson-Price, 2010 WL 1782188, at *4. One of the disclosures also
stated a variable APR while the other two disclosed fixed rates. Id. In Trombley, the plaintiff
received two Truth in Lending disclosures that also stated conflicting APRs. Trombley, 2012

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WL 3029645, at *2. The first, unsigned disclosure stated a lower APR than the final, accurate
disclosure. Id.
In both cases, the court held a reasonable factfinder might or might not conclude that
plaintiff’s Truth in Lending disclosures would have confused the average consumer.
Significantly, in both cases the final Truth in Lending disclosure form included an unfavorable
adjustment to the consumer’s APR.
Unlike in Peterson-Price, Plaintiff’s disclosures state nearly-identical loan terms. Both
disclosures state the “total of payments” as $379,738.17, and both include identical schedules of
payment through 2039.6 And unlike the facts in Trombley, the signed disclosure in this case
states loan terms more favorable than those in the unsigned disclosure, precluding the possibility
of a “bait-and-switch.” In addition, the unsigned disclosure is facially incomplete and undated,
and none of the other documents Plaintiff received from TopDot contradict Plaintiff’s actual loan
terms.7 Given these specific circumstances, it is clear that the signed disclosure states the final
terms of Plaintiff’s loan, and the incomplete, unsigned disclosure does not have the potential to
confuse an average consumer.
Plaintiff’s argument that he did not receive the disclosures in a form he could keep is also
unavailing. Regulation Z does require lenders to make the required disclosures “in a form that
the consumer may keep.” 12 C.F.R. § 226.17(a). But as discussed above, mailing the

6

Combining the “finance charge” and the “amount financed” results in the “total of
payments.”
7

Although Plaintiff received an incomplete HUD-1 with “DO NOT CLOSE” imprinted
on it, he also received a copy of his signed HUD-1 statement, the accuracy of which he does not
dispute. Plaintiff offers no allegations or argument regarding how the incomplete HUD-1 might
have led to the alleged violations of § 1635.
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disclosures required by § 1635 satisfies the requirements of that section, and Plaintiff admits that
he received and kept these disclosures. Compl. ¶ 20; see Simmons, 2010 WL 428784, at *3.
Because Plaintiff has not demonstrated the existence of a genuine issue of material fact with
regard to the disclosures at issue, Count 2 of the Complaint is dismissed.
4. Failure To Rescind And Other TILA Damages
Because the Court holds that TopDot satisfied the disclosure requirements of § 1635,
Plaintiff had three days after he received his mailed disclosures within which to rescind his
transaction. Plaintiff did not seek rescission until March 2011, well after his time for rescission
expired. As a result, Count 1 of the Complaint, alleging damages for a failure to rescind, is
dismissed.
In his prayer for relief, Plaintiff also appears to seek statutory damages for TILA
disclosure violations. Compl. at 14. As Defendants correctly argue, the statute of limitations for
damages under 15 U.S.C. § 1640 is one year after the violation occurs. Id. § 1640(e). Because
the disclosures at issue occurred in September 2009, Plaintiff has not timely brought any claims
under § 1640. All alleged claims for TILA statutory damages are dismissed.
5. Ability To Tender
It is not necessary to reach the question of whether Plaintiff’s ability to tender is relevant
in a claim for rescission under § 1635 because the Court grants summary judgment in favor of
Defendants.
C. Minn. Stat. § 58.137
At oral argument, Plaintiff conceded that Minn. Stat. § 58.137 did not apply in this
action. As a result, Count 3 of the Complaint is dismissed.

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D. Other Claims
In his brief, Plaintiff summarily argues that he should be entitled to plead additional
theories of recovery, including under the Home Ownership Equity Protection Act and common
law causes of action for tortious actions, unjust enrichment, fraud, and promissory estoppel.
Pl.’s Opp’n at 13. Although courts allow a liberal pleading standard for civil complaints, this
standard “does not afford plaintiffs with an opportunity to raise new claims at the summary
judgment stage.” Gilmour v. Gates, McDonald and Co., 382 F.3d 1312, 1314-15 (8th Cir. 2004).
And, “a plaintiff may not amend her complaint through argument in a brief opposing summary
judgment.” Id. (citation omitted). As a result, any additional claims stated in Plaintiff’s
memorandum are not properly raised and will not be addressed here.
IV. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that Defendants LoanCare Servicing, Inc.’s and FNF Servicing, Inc.’s
Motion for Summary Judgment [Docket No. 19] is GRANTED. All claims in the Complaint
[Docket No. 1] are DISMISSED WITH PREJUDICE.
LET JUDGMENT BE ENTERED ACCORDINGLY.
BY THE COURT:

s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: December 21, 2012.

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