Bakker v. Wells Fargo Home Mortgage et al
Filing
96
OPINION AND ORDER: Denying Motion for Summary Judgment 74 ; Adopting Findings and Recommendation 89 . Signed on 10/19/12 by Judge Michael W. Mosman. (dls)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
VIRGINIA L. BAKKER,
No. 3:10-cv-00082-HU
Plaintiff,
OPINION AND ORDER
v.
WELLS FARGO HOME MORTGAGE
et al.,
Defendants.
MOSMAN, J.,
On June 26, 2012, Magistrate Judge Hubel issued his Findings and Recommendation
(“F&R”) [89] in the above-captioned case, recommending that I deny defendants’ motion for
summary judgment [74]. Defendants filed objections [91], and plaintiff filed a response [95].
Upon review, I agree with Judge Hubel’s recommendation, and I ADOPT the F&R [89] as my
own opinion. I write separately only to address defendants’ objections.
STANDARD OF REVIEW
The magistrate judge makes only recommendations to the court, to which any party may
file written objections. The court is not bound by the recommendations of the magistrate judge,
but retains responsibility for making the final determination. The court is generally required to
make a de novo determination regarding those portions of the report or specified findings or
1 – OPINION AND ORDER
recommendation as to which an objection is made. 28 U.S.C. § 636(b)(1)(C). However, the
court is not required to review, de novo or under any other standard, the factual or legal
conclusions of the magistrate judge as to those portions of the F&R to which no objections are
addressed. See Thomas v. Arn, 474 U.S. 140, 149 (1985); United States v. Reyna-Tapia, 328
F.3d 1114, 1121 (9th Cir. 2003). While the level of scrutiny under which I am required to
review the F&R depends on whether or not objections have been filed, in either case, I am free to
accept, reject, or modify any part of the F&R. 28 U.S.C. § 636(b)(1)(C).
DISCUSSION
Although defendants raise seven objections to the F&R, they can be reduced to three
fundamental arguments: (1) the court improperly considered evidence of plaintiff’s intent when
entering into the HAMP agreement; (2) the court improperly relied on an erroneous
interpretation of Regulation Z; and (3) the court conflated the legally distinct concepts of
ratification and waiver. I will address each of these arguments in turn.
I.
Plaintiff’s Intent
Defendants’ first four objections are that the court improperly considered evidence of
plaintiff’s intent when entering into the HAMP agreement despite there being no dispute that the
agreement was unambiguous. (Defs.’ Obj. [91] at 2–4.) According to defendants, the HAMP
agreement is a contract like any other. Based on that assumption, defendants argue that Oregon
law provides the rule of decision and that Oregon courts look beyond a document to the intent of
the parties only if a provision is unclear. Wicker v. Ebner, 543 F.3d 1168, 1174 (9th Cir. 2008)
(“If the provision is clear, the analysis ends.”) (quoting Yogman v. Parrott, 325 Or. 358, 361, 937
P.2d 1019, 1021 (1997)). Defendants are incorrect.
2 – OPINION AND ORDER
First, the HAMP agreement is not an ordinary contract. TILA cases consistently hold that
“issues relating to the validity of and defenses to purported releases of federal statutory causes of
action are matters of federal law.” Parker v. DeKalb Chrysler Plymouth, 673 F.2d 1178, 1180
(11th Cir. 1982); see also Dice v. Akron, Canton & Youngstown Railroad Co., 342 U.S. 359,
361–62 (1952) (reasoning that “federal rights . . . under a federally declared standard could be
defeated if states were permitted to have the final say as to what defenses could and could not be
properly interposed”). Thus, federal law rather than state law provides the rule of decision here.
Second, in applying federal law, Judge Hubel found Mills v. Home Equity Group, Inc.,
871 F. Supp. 1482 (D.D.C. 1994), persuasive in light of the factual similarities to this matter. To
find waiver in a factually similar context, the Mills court held that a consumer must at least be
told she had a right to rescind and then must decline to exercise that right. Id. at 1486. Neither
occurred here, and Judge Hubel therefore concluded that a finding of waiver would thwart the
legislative policy that TILA was designed to effectuate. (F&R [89] at 13.) Any discussion of
plaintiff’s intent when entering into the HAMP agreement is superfluous to this analysis. As a
result, I reject defendants’ first four objections.
II.
Regulation Z
Defendants’ fifth objection is that the court relied too heavily on the requirements for
waiver in Regulation Z. (Defs.’ Obj. [91] at 4–5.) According to defendants, to the extent that
Regulation Z purports to regulate post-transaction agreements made after a TILA lawsuit has
been filed, it goes beyond the implementation authority granted to the agency. Specifically,
defendants argue that Judge Hubel’s interpretation of Regulation Z would grant the agency the
power to dictate the means by which a consumer could reach a settlement and would eliminate
3 – OPINION AND ORDER
the doctrine of ratification. Defendants do not believe that Congress intended either result. Thus,
they argue that Judge Hubel adopted on an erroneous interpretation of Regulation Z.
As I read the F&R, however, Judge Hubel’s interpretation of Regulation Z is not as
expansive as defendants suggest. In fact, the F&R acknowledges alternative common law bars to
TILA rescission claims in circumstances distinguishable from those in the present case. In
Tucker v. Beneficial Mortgage Company, 437 F. Supp. 2d 584, 587–88 (E.D. Va. 2006), for
example, the court held that consumers need not be told about their right to rescind where the
Attorney General effectively took on the role of enforcement in their behalf. Similarly, in In re
DiVitterio, 670 F.3d 273, 285–86 (1st Cir. 2012), the court analyzed a common law, rather than
statutory, right to rescind where the consumer had not attempted to rescind within the three-year
statutory period.
Plainly, then, Judge Hubel did not adopt a categorical rule that a consumer must always
be told she has the right to rescind and then must decline to exercise it in order to find waiver
under TILA. Instead, Judge Hubel found that where a consumer attempts to exercise her
statutory right to rescind in this particular factual context, that right cannot be waived absent the
narrowly drawn conditions found in TILA and its implementing regulations. See Mills, 871 F.
Supp. at 1485–86. Therefore, I reject defendants’ fifth objection.
III.
Ratification v. Waiver
Defendants’ sixth and seventh objections are that the court conflated the legally distinct
concepts of ratification and waiver. (Defs.’ Obj. [91] 5–6.) In support of these objections,
defendants rely on In re Crevier, 820 F.2d 1553 (9th Cir. 1987). In a footnote, the Crevier court
stated that a trustee had extinguished any right to rescind he had under TILA by ratifying a
lender’s trust deed when he settled his action to avoid a lien. Id. at 1557 n.4. Based on this
4 – OPINION AND ORDER
footnote, defendants argue that ratification is a legally distinct concept from waiver in the TILA
context and that plaintiff ratified the original loan transaction when she signed the HAMP
agreement. As a result of this alleged ratification, defendants’ position is that I am not presented
with the question of waiver at all. I disagree.
The footnoted language upon which defendants rely indicates only that a settlement
agreement can validly extinguish a TILA rescission claim. Here, in contrast, plaintiff signed a
HAMP loan modification agreement rather than a settlement agreement. The distinction is
significant. Indeed, at least one court has previously highlighted the distinction between
settlement agreements and loan modification agreements. See Tucker, 437 F. Supp. at 588–89
(distinguishing Mills on the fact that it dealt with “a loan restructuring rather than a settlement
agreement”). The wisdom of this distinction is manifest in the fact that loan modification
agreements often include language reaffirming the validity of the original loan transaction.
Therefore, if Crevier stood for the proposition that any reaffirmation of the original loan
transaction relinquished all TILA rescission claims, there would be a categorical bar to these
claims whenever loan modification agreements generally reaffirmed the original loan
transaction. Such a bar would seem to thwart the legislative policy TILA was designed to
effectuate. Accordingly, I reject defendants’ sixth and seventh objections.
5 – OPINION AND ORDER
CONCLUSION
Defendants’ motion for summary judgment [74] is therefore DENIED for the reasons
outlined in Judge Hubel’s F&R.
IT IS SO ORDERED.
DATED this
19th
day of October, 2012.
/s/ Michael W. Mosman
MICHAEL W. MOSMAN
United States District Judge
6 – OPINION AND ORDER
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