v. Young et al
Filing
78
OPINION AND ORDER: Based on the foregoing reasons, I DENY defendant's Converted Motion for Summary Judgment 16 . Defendant's Motion to Strike pursuant to Fed. R. Civ. P. 56(c)(2) contained within its Reply in Support of its Converted Summary Judgment Motion 56 is DENIED. Signed on 3/30/12 by Judge Michael W. Mosman. (dls)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION
MARTHA R. YOUNG,
Plaintiff,
No. 3: 10-cv-00830-MO
v.
OPINION AND ORDER
ONE WEST BANK, FSB,
Defendant.
MOSMAN,J.,
Plaintiff, Martha Young, brings one Truth in Lending Act ("TILA") claim agaillst
defendant, One West Bank, FSB ("OWB"), seeking damages and rescission of her adjustable
rate home loan. Defendant filed a Motion to Dismiss [16] plaintiffs first amended complaint,
which I subsequently converted into a motion for summary judgment. OWB filed a
memorandum in support of the converted summary judgment motion [40], plaintiff responded
[51], defendant replied [56], and Ms. Young filed a suneply [64]. I held oral argument on March
12,2012, and thereafter requested that the pm1ies submit two-page letters [76] [77], as stated on
the record. I have reviewed the extensive filings in this case, including the original briefing with
1 - OPINION AND ORDER
regard to the motion to dismiss, and deny defendant's Motion for Summary Judgment [16] for
the following reasons.
UNDISPUTED FACTS
Ms. Young was contacted about the possibility of refinancing her home loan in Mayor
June of2007, by Richard Ortiz, an agent for U.S. Financial Funding ("USFF"). (Kono Dec!. [41]
Ex. 1, 30). She spoke with Mr. Ortiz between five and ten times over the following few weeks,
as well as mailed him several documents in order to apply for the loan. (!d. at 32; 37). Plaintiff
was approved and the loan closing took place on July 19,2007. (Id. at 65).
The signing on July 19, 2007, was conducted by mobile notary Gail Sams. See (id. at 66).
In relevant patt, Ms. Young endorsed the following documents: (1) TILA disclosure statement
("TILDS") dated July 2, 2007, (Del Carlo Dec!. [53] Ex. D); (3) TILDS dated July 10, 2007, (Id.,
Ex. E); and a (3) TILDS dated July 19,2007. (Id., Ex. F).
Despite the fact the three TILA disclosure statements (" TILDSs") at issue list varying
signature dates, the patties do not dispute that Ms. Young signed all three documents on July 19,
2007. There are two significant inconsistencies between the three TILDSs. First, there are
discrepancies between the "material" TILA disclosures. I Second, the TILDSs dated July 2, 2007,
and July 10,2007, specify via a """at the bottom of the documents that "all dates and numerical
TILA MATERIAL
DISCLOSURES
APR
Finance Charge
Amount Financed
Total of Payments
Payment Plan (Number
and Amount)
TILDSDated
7/2107
6.766%
$226,096.37
$132,512.00
$358,608.37
TILDS Dated
7/10/07
0.075%
$224,563.37
$134,045.00
$358,609.37
$476.57 (60)
$596.52 (12)
8726.98 (12)
8565.80 (12)
$1,011.04 (12)
$1,157.20(251)
$1,152.89 (I)
$476.57 (60)
$596.52 (12)
8726.98 (12)
$565.80 (12)
81,011.04 (12)
$1,157.20 (251)
$1,152.89 (I)
2 - OPINION AND ORDER
TILDS Dated 7/19/07
8.328%
$289,277.57
$128,873.83
$418,151.40
$476.57 (48)
$975.16 (36)
$1.074.33 (36)
81,339.56 (240)
disclosures except the late payment disclosures" are "estimates." (ld., Ex. D; Ex. E). On the other
hand, the July 19, 2007, TILDS indicates that USFF was the creditor, that plaintiff was the
borrower, and that the numerical disclosures were not estimates. (ld., Ex. F). The "material"
TILA disclosures in the July 19,2007, TILDS accurately reflect the terms of Ms. Young's loan,
and this was the only TILDS that she took home from closing. (Fir. Am. Compl. [11]
~
8.A).
USFF assigned plaintiffs loan to IndyMac in July 2007. IndyMac failed, and the FDIC
took over to create a new bank conservatorship, known as IndyMac Federal Bank. The FDIC
then placed IndyMac Federal Bank into receivership and entered into a Master Purchase
Agreement for OWB to purchase some ofIndyMac Federal Bank's assets, including residential
mortgages. OWB eventually became the holder of plaintiffs loan. (Def. Supp. Resp. [56]2).
STANDARD
Summary judgment is appropriate "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 oflaw." Fed R. Civ. P.
56(a). A patty seeking summary judgment "bears the initial responsibility of.. .identifying those
portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue
of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). I must view the evidence in
the light most favorable to the nonmoving party, as well as draw all "reasonable" inferences in
the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986).
DISCUSSION
Defendant's convelted motion for summary judgment raises two primary issues. The first
issue is whether the material TILA disclosures at issue here were clearly and conspicuously
3 - OPINION AND ORDER
disclosed. Second, it must be detennined whether Ms. Young can tender the outstanding
principal loan balance as required under the TILA.
I.
Clear and Conspicuous Disclosures
The TILA requires that "material" disclosures be made "clearly and conspicuously." 15
U.S.C. § 1632(a); 12 C.F.R. § 226.17(a). The lender must disclose the APR, the finance charge,
the amount financed, the total number of payments, and the payment schedule. 15 U.S.C.
§ 1638(a); 12 C.F.R. § 226.18. "Clear and conspicuous disclosures" are disclosures that a
"reasonable" consumer would "notice and understand." Barrel' v. Chase Bank USA, NA., 566
F.3d 883, 892 (9th Cit'. 2009). "[Cllarity and conspicuousness [under TILA] is a question of
law." Rubio v. Capital One Bank, 613 F.3d 1195, 1200 (9th Cir. 2010). "The courts have
construed TILA as a remedial statute, intelJlreting it liberally for the consumer." King v.
California, 784 F.2d 910, 915 (9th Cit'. 1986).
Neither party disputes the accuracy of the material TILA disclosures provided to plaintiff
in the TILDS dated July 19,2007. Nonetheless, plaintiff argues that the compliant TILA form
still violates the TILA because the material disclosures conflict with the disclosures in the earlier
dated TILDSs, thereby rendering the accurate disclosures unclear and inconspicuous. Ms. Young
cites Pulphus v. Sullivan, in which the plaintiff signed "two conflicting" TILDSs at closing. No.
02 C 5794, 2003 WL 1964333, at *2 (N.D.Ill., Apri128, 2003). One TILDS appeared to have
been prepared before closing and the other on the day thereof. ld at * 13. The court denied
defendant's motion to dismiss, holding that plaintiff s allegation was a "paradigmatic violation
of TILA" because receiving "two, contradictory TILA disclosures simultaneously is equivalent
to alleging that she received none." ld. at *15.
4 - OPINION AND ORDER
Also relevant is Michalowski v. Flagstar Bank, FSB, in which the plaintiffs alleged a
TILA violation because defendant issued two TILA disclosures at closing ofthe mortgage loan
transaction-one marked as an estimate and the other not-"without specifYing which was the
. operative statement." No. 01 C 6095, 2002 WL 113905, at *4 (N.D. Ill., January 25,2002).
Plaintiffs only signed one statement, the statement that was not marked as an estimate, and thus,
the court held that the endorsed TILDS was the only operative statement and dismissed for
failure to state a claim. Id. In this case, by contrast, Ms. Young signed both the final TILDS and
the TILDSs marked as estimates, and the figures between the three signed documents conflicted.
Similarly, in Bowmer, plaintiff received two estimated TILDSs and one final TILDS at
closing. Bowmer v. NovaStar ,\;for/g. Funding Trust, Series 2006-1, 711 F.Supp. 2d 390, 395
(E.D. Pa. 2010). Plaintiff signed one estimate TILDS and the final TILDS, and the APR varied in
all three. Id. The court preliminarily found that the multiple TILDSs did not violate any of the
technical requirements of TILA 01' Regulation Z, as the terms in the final TILDS, like in this
case, were accurate and timely delivered. Moreover, the court noted that providing TILDSs that
are "clearly labeled" as estimates is not a per se TILA violation. Id. The court did not then
analyze however whether the final, accurate material TILA disclosures were rendered unclear
and inconspicuous by the estimate TILDS that plaintiff signed at closing, and instead solely
addressed plaintiffs argument that the variations between the TILDSs constituted an illegal baitand-switch.ld. at 397. ("Absent an allegation that the disclosures were intentionally misleading,
I cannot conclude that the first TILDS-or the "bait"-is inaccurate for purposes of TIL A.").
I agree that the TILDSs in this case do not violate any of the technical requirements of
the TILA or Regulation Z. However, technical compliance does not fully answer the question of
whether the technically satisfactory final material TILA disclosures were clear and conspicuous.
5 - OPINION AND ORDER
Instead, the sole issue is whether a "reasonable" consumer would "notice and understand" the
accurate TILA material disclosures, despite signing estimate TILDSs at closing that conflicted
with the final TILDS. Barrer, 566 F.3d at 892.
Plaintiff was presented with and signed three TILDSs, all on the day of closing. The
APR, finance charge, amount financed, total number of payments, and payment plan disclosures
all varied between the estimate TILDSs and the final TILDS. The fact that the estimate TILDSs
were marked as such is not dispositive, considering that Ms. Young was asked to sign all three
documents on the same day, and that the estimates are marked as such only by a single checked
dI1m"-..othing in this record indicates any further instruction or warning to plaintiff; she
e forms in front of her, in the presence of a notary public, in order to figure out the
material disclosures. Through this lens, I find that the final, accurate material disclosures in this
case were unclear and inconspicuous.
The one constant underlying the TILA material disclosures here is that Ms. Young
entered into a negative amortization loan. But, an average consumer is left to guess the
significance of the variations between the APR, finance charge, number of payments, and total
payments between the three TILDSs. For example, the TILDS dated July 2, 2007, indicates that
Ms. Young was financing more in comparison to the July 19,2007, TILDS, and paying less in
total and in telms of APR, but all the while scheduled to make additional reduced payments. This
is not the type of clarity required by the TILA, bearing in mind this Court interprets the Act
liberally for the consumer.
Defendants argue that I should nonetheless grant summary judgment in OWB's favor
because plaintiff has not produced evidence showing that USFF directed the notary, who was an
independent contractor hired by a notary signing company, to have Ms. Young sign the estimate
6 - OPINION AND ORDER
TILDSs. In other words, defendant asserts that they can only be found liable here if there is
evidence that the notary was an agent ofUSFF. However, OWB cites no authority that holds the
involvement of a third-party signing service effectively eliminates potential liability for the
creditor when the creditor produces unclear documents. Even assuming plaintiff is required to
produce evidence to this end, there is a material dispute of fact whether USFF did indeed direct
that Ms. Sams provide the three TILDSs to Ms. Young at closing. The "Specific Closing
Instruction" provided by USFF to the notary signing company indicates "Truth in Lending" as a
category of documents that was necessary to complete the closing. (Kono Dec!. [41] Ex. 1, 175).
There is nothing conclusive later in the instructions whether the "Truth in Lending" category
encompassed only the final TILDS, or both the final and the estimates, and I therefore find it
reasonable to infer the latter considering Ms. Young's status here as the nonmoving party.
I do note that the instructions later indicate that the notary was to "deliver" one copy of
the TILDS, although as defendant's counsel has aptly noted, delivery of the final TILDS is a
different instruction altogether, and thus, it is also reasonable when viewing the facts in the light
most favorable to Ms. Young to infer that this separate instruction merely limited the notary to
only sending the final TILDS home with plaintiff, which is what happened in this case. (Id.).
Moreover, it is clear that the "Specific Closing Instruction" is not comprehensive. For example,
it did not instruct the notary to provide the borrower with two copies of the Notice of Right to
Cancel, which is clearly required under TILA. Accordingly, there are material issues of fact on
the issue of agency.
Therefore, I find that the TILA material disclosures in this case were not made "clearly
and conspicuously" as a matter oflaw.
7 - OPINION AND ORDER
II.
Tender
The TILA requires the consumer to tender back loan proceeds received once a creditor
performs its rescission-related obligations. 15 U.S.C. § 1635(b). The facts in this case, even
when viewed in light most favorable to the nonmoving party, are undisputed that plaintiff would
not be able to tender the full amount of the loan if defendant performed its rescission-related
obligations. The issue then is whether I should exercise my "equitable discretion" to impose
conditions allowing Ms. Young to tender back the loan proceeds over time, as opposed to a lump
sum tender of the outstanding principal balance. See Yamamoto v. Bank o/New York, 329 F.3d
1167, 1171-73 (9th Cir. 2003); see also Semar v. Plalle Valley Fed Savings & Loan Ass 'n, 791
F.2d 699,705-06 (9th Cir. 1986).
In detelmining whether to exercise my equitable discretion, I must take "into
consideration all the circumstances including the nature ofthe violations and the borrower's
ability to repay the proceeds." Yamamoto, 329 F.3d at 1173. Plaintiff entered into a negatively
amOliizing loan based on an unclear and inconspicuous TILDS, as well an inflated income
figure. Ms. Young indicates that she intends to obtain a reverse mOligage for $120,000 and then
pay the remaining tender amount in monthly installments over time. (Young Deci. [52]
~
6); (PI.
Resp. to Conv. Mot. for Sum. J. [51]19). While she has not offered definitive proof in support of
this statement, neither has defendant definitively proven the contrary. Moreover, it would defy
the logic behind the TILA to hold that a consumer, who is rightfully entitled to rescission of a
negatively amortizing loan, cannot then obtain said rescission because the interest previously
added to the loan's principal balance forecloses the consumer from prequalifying for a reverse
mortgage before the negatively amOliized interest is removed through the rescission process.
8 - OPINION AND ORDER
Upon consideration of all the circumstances in this case, I find that the equities favor
allowing Ms. Young to tender in monthly installments, with defendant maintaining a security
interest in her home until the outstanding principal balance is paid back in full. My finding does
not give Ms. Young carte blanche in fashioning a rescission remedy. It remains to be seen
whether plaintiff will be able to obtain a reverse mortgage, and if! subsequently leam that she is
unable to do so, I will revisit whether the equities continue to favor conditional tender based on
the nature of the requested remedy.
CONCLUSION
Based on the foregoing reasons, I DENY defendant's Converted Motion for Summary
Judgment [16]. Defendant's Motion to Strike pursuant to Fed. R. Civ. P. 56(c)(2) contained
within its Reply in Support of its Converted Summary Judgment Motion [56] is DENIED.
IT IS SO ORDERED.
DATED this
3D
day of March, 2012
AN
United States District COUli
9 - OPINION AND ORDER
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?