Thursday, October 5, 2017

Eleventh Circuit applies TILA time limitations after Jesinoski

The Supreme Court states in black and white that, where a homeowner sends a valid notice of rescission, the TILA "statute does not also require him to sue within three years."  So when CAN a homeowner sue?  Here's the latest from the Eleventh Circuit.

STEVEN W. BERNSTEIN, Plaintiff-Appellant,
No. 16-16440
July 12, 2017
Non-Argument Calendar
D.C. Docket No. 1:15-cv-02520-RWS
Appeal from the United States District Court for the Northern District of Georgia
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Before TJOFLAT, JULIE CARNES, and JILL PRYOR, Circuit Judges.
        In November 2007, Steven Bernstein gave Terrace Mortgage Company a security deed to secure a $400,000 note, the proceeds of which he used to refinance the mortgage on his residence. The deed and note were subsequently assigned to Wells Fargo. On February 22, 2010, Bernstein exercised his right to rescind the loan transaction under the Truth in Lending Act, 15 U.S.C. § 1601, et seq., specifically § 1635(a), by sending Wells Fargo a notice of his intent to rescind the transaction.1 Under § 1635(b), Wells Fargo had 20 days after receipt of Bernstein's notice to return to Bernstein "any money or property given as earnest money, down payment, or otherwise, and . . . take any action necessary or appropriate to reflect the termination of any security interest created upon the
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transaction."2 If the creditor fails to take these steps, it is amenable to suit under § 1640(e), which provides that an action may be brought in district court "within one year from the date of the occurrence of the violation." Id. § 1640(e). Wells Fargo failed to take any of these steps. In consequence, Bernstein had "three years after the date of the consummation of the [loan] transaction," to enforce his right to rescission; otherwise, it would expire. Id. § 1635(f).
        Bernstein brought this action pro se to enforce his right to rescission on July 15, 2015.3 He alleged that he exercised his § 1635(a) right to rescind on February 22, 2010, by sending Wells Fargo a notice to that effect, and that when Wells Fargo failed to respond, the notice rendered both Wells Fargo's security interest and the note he executed void by operation of law. Wells Fargo moved to dismiss Bernstein's claim, arguing that § 1635(f)'s three-year provision did not apply
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because the loan was a "residential mortgage transaction" and § 1635(e)(1) rendered that provision inapplicable.4 It argued alternatively that the three-year provision provided Bernstein no benefit because he waited more than five years after sending his notice of intent to rescind before filing suit.
        The District Court gave Bernstein the benefit of the doubt as to whether the loan was a residential mortgage transaction such that § 1635(f)'s three-year provision was rendered inapplicable by § 1635(e)(1)'s bar, but nonetheless concluded that his TILA claim was untimely. Under 15 U.S.C. § 1640(e), all TILA claims must be brought "within one year from the date of the occurrence of the [creditor's] violation." Wells Fargo's failure to discharge its § 1635(b) obligations within 20 days after receiving Bernstein's notice to rescind constituted a violation within the meaning of § 1640(e), and thus set the clock for the one-year period that section provides. That period began to run on March 14, 2011. Applying the three-year limitations period of § 1635(f), Bernstein had until March 13, 2014 to sue. He waited too long, until July 15, 2014, to act.
        Bernstein urged the District Court to hold that he was enforcing "an already-effective rescission of his mortgage, relying on Jesinoski vCountrywide Home LoansInc., 135 S. Ct. 790 (2015), for the proposition that giving notice alone affects a rescission by operation of law." Doc. 29 at 14. He posits that "pursuant
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to the 'roadmap' provided by Jesinoski he did not have to file a lawsuit to compel rescission." The burden was on Wells Fargo. Id. at 14-15. The District Court was not persuaded. Nor are we. We therefore affirm the District Court's ruling that Bernstein's claim is time-barred. In doing so, we reject his equitable-tolling argument as frivolous. We reject as meritless his argument that the Court erred in dismissing his claim for declaratory relief under the Georgia Declaratory Judgment Act, O.C.G.A. § 9-4-2.
        1. Section 1635(a), Disclosure of obligor's right to rescind, states in pertinent part:
[I]n the case of any consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Bureau, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Bureau, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Bureau, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.
15 U.S.C. § 1635(a).
        2. Section 1635(b), Return of money or property following rescission, states in pertinent part:
When an obligor exercises his right to rescind under subsection (a), he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, down payment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value.
15 U.S.C. § 1635(f).
        3. Bernstein's complaint contained other claims arising out of the loan transaction not implicated in this appeal.

        4. Section 1635(e)(1) provides that § 1635, which includes § 1635(f), does not apply to "(1) a residential mortgage transaction as defined in section 1602(w) of this title."

Ninth Circuit reverses dismissal of TILA rescission suit

TIMOTHY BARNES, Plaintiff-Appellant,
Delaware corporation; CHASE BANK
USA, N.A., a subsidiary of JP Morgan
Chase & Co., a Delaware corporation;
SERVICES, INC., a Delaware corporation;
ASSOCIATION, Defendants-Appellees.
No. 13-35716
Argued and Submitted: May 10, 2017
August 10, 2017
D.C. No. 3:11-cv-00142-PK
Appeal from the United States District Court for the District of Oregon
Anna J. Brown, District Judge, Presiding
Argued and Submitted May 10, 2017 Portland, Oregon
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Before: BYBEE and HURWITZ, Circuit Judges, and RAKOFF,** District Judge.
        Timothy Barnes mailed a notice that he was exercising his right to rescind his mortgage to his creditor, Chase Bank USA, N.A. (CBUSA), and the loan servicers to which he had been making monthly payments, Chase Home Finance, LLC (CHF) and later IBM Lender Business Process Services, Inc. (LBPS). For reasons that are unclear from the record, the letter to the creditor was returned to Barnes undelivered. The loan was not rescinded, and Barnes brought suit for rescission and violation of the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., and its requirements regarding rescission procedures against CBUSA, CHF, and LBPS.1 The district court granted the defendants' motion for summary judgment. Because notice of rescission was properly given, we vacate the grant of
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summary judgment on Barnes's claims for rescission and failure to effect rescission and remand for further proceedings.2
        1. A borrower may rescind a loan within three years of the loan transaction if the creditor fails to provide specific disclosures required by TILA. See 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). To exercise that right, a borrower must "notify[] the creditor, in accordance with regulations of the Bureau, of his intention to do so." 15 U.S.C. § 1635(a); see also Jesinoski vCountrywide Home LoansInc., 135 S. Ct. 790, 792 (2015) ("[R]escission is effected when the borrower notifies the creditor of his intention to rescind."). TILA's core implementing regulation, known as Regulation Z, outlines further details on how the borrower is to exercise the right to rescind. See 12 C.F.R. § 226(a). Specifically, Consumer Financial Protection Bureau (CFPB) Official Staff Commentary to Regulation Z provides: "Where the creditor fails to provide the consumer with a designated address for sending the notification of rescission, delivery of the notification to the person or address to which the consumer has
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been directed to send payments constitutes delivery to the creditor or assignee." 12 C.F.R. § 226, Supp. I, para. 23(a)(2); Truth in Lending, 69 Fed. Reg. 16,769-03, 16,771 (Mar. 31, 2004).
        Barnes attempted to notify both the creditor, CBUSA, and the servicer, CHF, of his intent to rescind by mailing letters to the addresses they had provided him. CBUSA "fail[ed] to provide [Barnes] with a designated address for sending the notification of rescission" because the address it did provide was not successfully receiving mail when Barnes sent his notice there. See 12 C.F.R. § 226, Supp. I, paras. 15(a)(2), 23(a)(2). The only remaining action for Barnes to take, per Regulation Z and the CFPB Official Staff Commentary, was to notify the servicer, which he had already done. Barnes's letter to CHF therefore provided sufficient notice to CBUSA that he was exercising his right to rescind.
        2. There remain disputed issues of fact warranting reversal of summary judgment for the claims against the defendants for failure to effect rescission in accordance with TILA's requirements. Because the rescission notice was timely provided, failure to comply with the requirements in 15 U.S.C. § 1635(b) within 20 days is actionable under 15 U.S.C. § 1640(a). Barnes's claim for damages, a declaratory judgment, and injunctive relief for failure to effect rescission following
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timely notice of intent to rescind against CBUSA and Fannie Mae were thus improperly dismissed on summary judgment by the district court.
        Barnes also argues that CHR and LBPS are liable for failure to rescind based on the theory that they are assignees. Due to the lack of clarity in the record on the relationship between the lenders and the servicers, Barnes has established a genuine dispute as to material fact on this question sufficient to survive summary judgment.
        3. Barnes argues that the servicers, CHF and LBPS, are liable under 15 U.S.C. § 1640(a) for failure to provide requested information about the creditor under § 1641(f)(2) ("Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation."). Barnes requested information about the name, address, and telephone number of the creditor from CHF and LBPA, and the record is not clear whether he actually received it. Because Barnes has raised a genuine issue of material fact regarding compliance with TILA, the district court erred in granting summary judgment on this issue.
        *. This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
        **. The Honorable Jed S. Rakoff, Senior United States District Judge for the Southern District of New York, sitting by designation.
        1. The Federal National Mortgage Association (Fannie Mae) was later added as a defendant in an amended complaint.

        2. Fannie Mae became a creditor after the three-year statute of repose date passed. Any claim against CBUSA can be brought against Fannie Mae as an assignee of CBUSA's interest, and should not have been be dismissed. See 15 U.S.C. § 1641(c) ("Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation.").