THE CURRENT BIAS: EVEN IF HOMEOWNER WINS, NO FEE RECOVERY

Dear Neil Garfield:

You recently complained that the Florida 4th DCA in Sabido v Bank of NY Mellon, the court denied recovery of attorney fees to the Sabidos even though they won at trial.

Clearly you don’t understand the American Rule, or you wouldn’t complain. That rule provides that each party is responsible for paying its own attorney fees unless specific authority granted by statute or contract allows assessment of fees against the other party.

The Florida uniform mortgage security instrument does provide the creditor with the right to recover from the borrower all costs of collecting the mortgage debt, including attorney fees. If Sabidos wanted the same right, they should have written it into the security instrument before signing it.

Florida Statute 57.105 provides for sanctions and recovery of attorney fees by a party that raised unsupported claims. You know about that law first hand because the appellate court awarded recovery of fees to the creditors you sued in the Maslanka case because you lodged unsupported (some might say delusional) claims on behalf of Zdzislaw Maslanka.

The Sabido court based its opinion on the following:

“The borrowers’ motion for fees is denied because the Bank of New York Mellon was not a party to the note and mortgage, and because the borrowers successfully argued that the Bank of New York Mellon was not entitled to enforce the instrument containing the attorney fee provision.”

Ooops.  Maybe the Sabidos should have asked the court to sanction Bank of New York Mellon for lodging an unsupportable claim.  In this case, the borrower stuck his hand in the wrong cookie jar.

Bob Hurt
Mortgage Attack

On 2018-02-13 10:39, Livinglies’s Weblog wrote:

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HSBC v BUSET FLA 3rd DCA Remands for Final Judgment of Foreclosure

nuke going off
Sorry, Neil. Bad Idea.

A few months ago, attorney Neil Garfield wrote a glowing endorsement of the Florida 11th Circuit trial opinion in HSBC v Buset sending forth HSBC without day for a variety of reasons, none of them sensible. The Stop-Foreclosure blog echoed Garfield’s sentiment.  In due course the Florida 3rd District Court of Appeals overturned all of the holdings of the Buset opinion, and remanded the case back to trial court for a final judgment of foreclosure, holding the following:

  1. The trial court erred in accepting expert testimony on legal issues;
  2. The note is not merely a secured interest under UCC Article 9, but rather a negotiable instrument under UCC Article 3 and Florida law, in spite of its reference to the mortgage without incorporating it, and the definition of Note Holder does not destroy negotiability of the note;
  3. HSBC, as note holder and “PETE” (Person Entitled To Enforce the note under the UCC) or agent of the PETE, had standing to foreclose, irrespective of the incomplete or broken chain of ownership of the note during its securitization, and does not need to prove ownership or an unbroken chain of ownership of the note, AND the trial court erred by focusing on the irrelevant chain of ownership of the note instead of the relevant PETE;
  4.  Purported violations of the Pooling and Servicing Agreement (PSA) are irrelevant to the PETE status of the note holder and did not destroy HSBC’s standing to sue for foreclosure because borrowers are not parties to or beneficiaries of the PSA, and therefore borrowers may not raise PSA violations as defenses to foreclosure
  5. Assignment of the mortgage did not destroy HSBC’s standing to foreclose because the mortgage always follows the note and the PETE always has authority over the mortgage.
  6. The servicer’s business records were admissible, and the trial court erred by blocking admission of borrower payment history, default letters, and payoff printout.
  7. HSBC did not have unclean hands justifying dismissal

What does this prove?

Well, to begin with, borrowers facing foreclosure cannot trust attorneys like Bruce Jacobs and Neil Garfield to save them from foreclosure.  They will just make failing arguments, and waste a lot of money while leading their victim into the hungry jaws of foreclosure.

Second, it suggests that borrowers must find out how the creditor, servicer, lender, mortgage broker, loan officer, title company, or appraiser injured them in the loan transaction, and then GO ON THE ATTACK.

Where do we find such a strategy in action?

In foreclosure activities across the land every business day.  The borrower injures the creditor by breaching the loan agreement, so the creditor files a foreclosure lawsuit or takes the case to the trustee, and a foreclosure and sale of the property follow in due course.

Of course, creditors and their allies in the loan transaction make a host of errors in most loans, and if the borrower hires a competent examination firm like Mortgage Fraud Examiners to look for tortious conduct, legal errors, contract breaches, or violations of law, the examination will turn up injuries (typical of 95% of the loans in the past 15 years).  Some of the injuries might justify huge compensatory and punitive damages.

Don’t expect a foreclosure pretense defense attorney to look for causes of action in a loan transaction.  Such attorneys usually bilk their clients and withdraw from the case just in time for foreclosure.

Bob Hurt

Maven at MortgageAttack

 

 

Judges Spank Garfield Disciple for Scam TILA Rescission Arguments

Neil Garfield, Esq:

You might feel particular chagrin over this trio of judgments that shred some of your favorite TILA rescission delusions.  Litigant Dana Grant-Covert foolishly propounded them in New Jersey Bankruptcy Court.

The judge shredded those frivolous legal theories, leaning heavily on the very good lessons from Mortgage Examiner Storm Bradford’s stellar performance in his own TILA rescission case, which hundreds of courts have cited.

Bradford and his family have luxuriated in their Washington, D.C. area home for 9 years since he initiated rescission of his loan under TILA.  The creditor, for some mysterious reason, has still failed to tender in spite of Bradford’s stated ability to.

Grant-Covert appealed and lost in both NJ USDC and the 3rd Circuit.

She could become the poster child for losing TILA rescission in the Garfield tradition.  She sought TILA rescission of a purchase money loan years after end of the 3 year repose period even though no TILA violation occurred, and claimed the loan was never consummated – you cannot rescind a contract that was not consummated.

Please stop leading your trusting followers over a cliff of litigation disaster.

See the full opinion of the Bankruptcy Court appended below.
Bob Hurt
727 669 5511

IN RE GRANTCOVERT

Bankr. Court, D. New Jersey, 2016 – Google Scholar
The matter before the court is a core proceeding pursuant to 28 USC § 157(b)(2)(O), and the court has jurisdiction pursuant to 28 USC § 1334, 28 USC § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23,
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GRANTCOVERT v. WELLS FARGO BANK, NA

Dist. Court, D. New Jersey, 2016 – Google Scholar
… On February 27, 2007, debtor/appellant Dana N. GrantCovert borrowed $265,900 from Weichert Financial Services in connection with the purchase of her residence on 69 Green Vale Road, Cherry Hill, New Jersey … In re United Healthcare Sys., Inc., 396 F.3d 247, 249 (3d
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IN RE GRANTCOVERT

Court of Appeals, 3rd Circuit, 2016 – Google Scholar
Because the parties are familiar with the history and facts of the case, we will limit our discussion to those facts essential to our decision. Appellant filed a Chapter 7 bankruptcy proceeding in June of 2015. Wells Fargo Bank, NA, claiming to be a secured creditor based on a first mortgage
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******************  In Re Grant-Covert ************************

In Re: Dana N. Grant-Covert, Chapter 7.
Dana N. Grant-Covert, Plaintiff,
v.
Mortgage Access Corp., d/b/a Weichert Financial Services, Wells Fargo Bank, NA, Zucker, Goldberg & Ackerman, LLC, and Reed Smith LLP, Defendants.

Case No. 15-20394-ABA, Adv. No. 15-2041-ABA.United States Bankruptcy Court, D. New Jersey.

November 18, 2016.

NOT FOR PUBLICATION

MEMORANDUM DECISION

ANDREW B. ALTENBURG, Jr., Bankruptcy Judge.

The plaintiff/debtor, Dana N. Grant-Covert (“Plaintiff”), filed an adversary proceeding against Mortgage Access Corp. d/b/a Weichert Financial Services (“Weichert”), Wells Fargo Bank, NA (“Wells Fargo”), Zucker, Goldberg & Ackerman, LLC (“ZGA”), and Reed Smith LLP (“Reed Smith”), seeking to rescind a mortgage pursuant to the Truth in Lending Act, 15 U.S.C. § 1601, et. seq., (“TILA”). Weichert filed a motion to dismiss, which will be granted.

The matter before the court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(O), and the court has jurisdiction pursuant to 28 U.S.C. § 1334, 28 U.S.C. § 157(a) and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on July 23, 1984, as amended on September 18, 2012, referring all bankruptcy cases to the bankruptcy court. The following constitutes this court’s findings of fact and conclusions of law as required by Federal Rule of Bankruptcy Procedure 7052 material to this decision.

PROCEDURAL HISTORY

On June 2, 2015 Plaintiff voluntarily filed for protection under chapter 7 of the United States Bankruptcy Code. On July 15, 2015 the Plaintiff filed an adversary complaint in her bankruptcy case against Weichert, Wells Fargo, Reed Smith and ZGA. Doc. No. 1. On November 23, 2015, this court granted a Motion to Dismiss filed by Reed Smith and Wells Fargo Bank (the “Wells Fargo Opinion”). See Doc. Nos. 21, 22. On January 20, 2016, the court dismissed the complaint as against ZGA on its own Order to Show Cause for the failure to obtain relief from the stay against ZGA, which had filed its own bankruptcy case. Doc. No. 43. Thus only Weichert remains as a defendant.

On December 21, 2015 Weichert purported to answer the complaint by letter filed by an assistant vice president, Doc. No. 37, but the court entered an Order to Show Cause why that answer should not be stricken for failure to appear through counsel. Doc. No. 38. Before the Show Cause Order was heard, the Plaintiff filed a Request to Enter Default against Weichert. Doc. No. 40. Weichert not responding to either, the court struck Weichert’s answer on January 19, 2016 and entered default against Weichert on January 21, 2016. Doc. No. 44.

On June 23, 2016, this court entered an Order to Show Cause why the adversary proceeding should not be dismissed as to Weichert for the Plaintiff’s failure to seek default judgment against it. Doc. No. 50. Weichert then filed a Motion to Vacate Entry of Default. Doc. No. 54. This court granted that motion by order dated September 1, 2016. Doc. No. 59. Weichert then filed a Motion to Dismiss Adversary Proceeding, on September 9, 2016, Doc. No. 62, but failing to properly serve it, withdrew that document and re-filed it on September 26, 2016 with proper service. Doc. No. 64. The Plaintiff filed a Certification in Opposition to Motion to Dismiss Adversary Proceeding on November 7, 2016. Doc. No. 72. Weichert then filed a Response to the Plaintiff’s Opposition. Doc. No. 73.

This court held a hearing on November 15, 2016 on the motion, and the matter is now ripe for consideration.

FACTUAL ALLEGATIONS

As this is a motion to dismiss, the court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Accordingly, this court recites the facts as alleged by the Plaintiff. In addition, as the Complaint was filed by a self-represented party, the court shall construe it liberally in favor of the Plaintiff. Telfair v. Tandy, No. CIV.A. 08-731(WJM), 2008 WL 4661697, at *3 (D.N.J. Oct. 20, 2008) (citing Erickson v. Pardus, 551 U.S. 89, 94 (2007)). In doing so, it also considers the documents attached to the Complaint, Pryor v. Nat’l Collegiate Athletic Ass’n., 288 F.3d 548, 559-560 (3d Cir. 2002), particularly to the extent that they contradict the Plaintiff’s allegations. See Adler Engineers, Inc. v. Dranoff Properties, Inc., CIV. 14-921 RBK/AMD, 2014 WL 5475189, at *2 (D.N.J. Oct. 29, 2014) (accepting number stated in attached contract rather than number alleged by the plaintiff in the complaint).

On February 12, 2007, the Plaintiff and Jason Covert executed a promissory note and security agreement on her personal dwelling, located at 69 Greenvale Road, Cherry Hill, New Jersey. Complaint, ¶ 32 and ex. B. Upon completion of the transaction, Weichert “transferred servicing right of the loan to Wells Fargo” thus the “Weichert Disclosure Statement being a `lender’ was not `accurate.’ See [15] U.S.C. 1638(a).” Id., at ¶ 33. The Plaintiff further alleges that:

On February 12, 2007 to present, Weichert and its successors and assigns violated multiple counts of Truth in Lending Act by failing to disclose to Plaintiff who the true lender is and using subterfuge to hide the fact that Weichert acted as a “lender” at closing and were paid to pose as the “lender” when in fact the lender is undisclosed unregistered third party.

Id., at ¶ 34.

The Plaintiff argued that, as a result, the transaction “was never consummated” and “[t]he limitation on the right to rescind was extended indefinitely.” Id., at ¶ 35.

The note attached to the Complaint, dated February 12, 2007, identifies the lender as Weichert Financial Services in a loan of $265,900. Complaint, ex. B. The note is signed by the Plaintiff and Jason Covert as borrowers, and is stamped “Pay to the order of Wells Fargo Bank, NA, without recourse Weichert Financial Services.” Id. A mortgage, also dated February 12, 2007, was entered into by the Plaintiff and Mr. Covert, with MERS solely as nominee for lender Weichert Financial Services. Id. The mortgage states that the borrowers mortgaged the property for the purpose of obtaining $265,900, the property “[b]eing the same premises conveyed to the mortgagors herein mentioned by deed dated and recorded simultaneously herewith. The within mortgage is a first purchase money mortgage, the consideration for which constitutes part of the purchase price of the property.” Id., p. 2.

More than eight years later, on March 23, 2015, the Plaintiff sent “Notices of Rescission/Cancellation” to Weichert, Wells Fargo, and Mortgage Electronic Registration Systems (“MERS”). Id., at ¶¶ 37, 40, 43; ex. C. Since none responded within 20 days she contends that the rescission is “affected [sic] and fully enforced and Plaintiff is entitled to the benefits and reimbursements accorded under the TILA.” Id., at ¶¶ 39, 42, 45. She argued that the mortgage is now “extinguished and any rights under the mortgage have terminated.” Id.

The notices sent by Plaintiff and Mr. Covert stated that rescission was based on the following violations:

(a) Weichert Financial Services failed to disclose to Jason Covert who the true lender is and as a result the transaction did not consummate;

(b) Weichert Financial Services did not fund the loan;

(c) Weichert Financial Services posed as a straw entity in dealing with me;

(d) Jason Covert did not receive two signed copies of the loan documents from lender;

(e) Jason Covert did not receive two copies of a Right to Rescind/Cancel Notice as required by law from lender. All consumers with rescission rights must receive two copies of signed loan documents and a Right to Rescind/Cancel Notice from lender.

Complaint, ex. C. An identical list of violations naming the Plaintiff was also included in the letter. Id. Both the Plaintiff and Jason Covert signed the letter under the words “I wish to cancel.” Id.

A signed certified mail card acknowledging receipt of the Notice to Rescind from Weichert supports that the notice was received. Complaint, ex. D. See In re Cendant Corp. Prides Litig., 311 F.3d 298, 304 (3d Cir. 2002) (noting rebuttable presumption that properly addressed and stamped mail was received).

The Plaintiff’s first cause of action seeks enforcement of her rescission of the transaction. Complaint, p. 11. She argues that she had a right to rescind pursuant to 15 U.S.C. § 1635 due to the failure to properly disclose the lender, and her sending notice of that intent effected that rescission. Id., ¶¶ 47-53. She further argues that she is entitled to her costs to enforce the rescission pursuant to 15 U.S.C. § 1640(a)(3). Id., at ¶¶ 56, 58. She states that she acted within the one year statute of limitations of section 1635, measured from the date she sent the notices of rescission. Id., at ¶ 57.

The Plaintiff’s second cause of action seeks enforcement of the rescission under 12 C.F.R. § 226.23. The Plaintiff again argues that rescission was effective as of her mailing of the notices, and that she did not need to first tender the proceeds received under the transaction, citing the Supreme Court’s Jesinoski v. Countrywide Home Loans, Inc., decision. Id., at ¶¶ 62-63, 76. In this count, she adds an allegation that she was never provided closing documents, “called `material disclosures[.]'” Id., at ¶ 67. She argues that the latter entitles her to damages including twice the finance charge, actual damages, and costs, citing 15 U.S.C. § 1640. Id., at ¶ 84.

In her third cause of action, the Plaintiff alleges that the transaction was never consummated. Id., at ¶ 95. “Under these circumstances, the loan is not `consummated’ until the actual lender is identified, because until that point there is no legally enforceable contract.” Id., at ¶ 95. She alleges that because of this, the requirement that she rescind within three years “after the date of the consummation of the transaction” does not apply. Id., at ¶¶ 92, 97.

A fifth count[1] seeks “Enforcement of Restitution” pursuant to 12 C.F.R. § 1026.23(d)(2). The Plaintiff here repeats her allegation about the lender not being identified, the loan not being consummated, and failure of the defendants to file a lawsuit within 20 days of receiving the Notices of Intent to Rescind. Id., at ¶¶ 3, 6. She requests that the court issue a declaratory judgment that the note and mortgage are rescinded and that all monies paid by her, plus fees, costs and damages, should be returned. Id., at ¶ 7.

The Plaintiff’s Prayer for Relief includes enjoining any state court proceeding against her, return of the note marked cancelled, return of the mortgage, actual damages pursuant to 15 U.S.C. §§ 1640(a)(1) and 1611, statutory damages of twice the finance charge pursuant to 15 U.S.C. § 1640(a)(2), costs and reasonable attorney’s fees pursuant to 15 U.S.C. § 1640, return of $71,415.27 plus escrow fees, costs and assessments, and closing costs, compensatory damages and damages for emotional distress, and such other relief as the court deems just and proper. Id., at pp. 23-24.

Finally, the court notes that the Plaintiff filed a no asset chapter 7 case on June 2, 2015. See Fed. R. Evid. 201 (incorporated into bankruptcy cases by Fed. R. Bankr. P. 9017) (the court may take judicial notice of the documents filed by the debtor); Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n. 3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991); see generally In re Indian Palms Associates, Ltd., 61 F.3d 197 (3d Cir. 1995). On Schedule A she disclosed joint ownership of her residence, located at 69 Greenvale Road. She estimated the value of her interest in the property as $167,400 and the amount of the secured claim as $265,000. On Schedule D, she disclosed a creditor of a claim in the amount of $521,181.27 incurred on February 12, 2007 as “unknown unsecured nonpriority ??” and as unliquidated and disputed.

CONCLUSIONS OF LAW

A. Objection to hearing the Motion to Dismiss

Preliminarily, the court notes that at the hearing held on this motion, the Plaintiff objected to Weichert’s asserting a motion to dismiss, stating that Weichert had received “excessive opportunities to answer, in which they failed. I move the court to rule in my favor based on due process and equal protection. A default should be in place. There’s been no excusable reason presented as to why they have neglected. However they have. So this violates my equal protection. Generally speaking, people in my position would not be given multiple opportunities to respond.” Audio, 11/15/16 at 2:05. The court denied the Plaintiff’s request from the bench, noting that the issue of Weichert’s filing of an answer pro se, entry of default, and vacating of the entry of default, had been argued by the parties and decided previously by the court on September 1, 2016. See Doc. No. 59.

B. Motion to Dismiss

Weichert proceeds pursuant to Federal Rule of Civil Procedure 12(b)(6), incorporated into bankruptcy adversary proceedings by Federal Rule of Bankruptcy Procedure 7012(b). Rule 12(b)(6) provides for the dismissal of a complaint if a plaintiff fails to state a claim upon which relief can be granted. Stover v. Freedom Health Care, No. CIV. 13-119 WJM, 2013 WL 2420643, at *1 (D.N.J. June 3, 2013). The moving party bears the burden of showing that no claim was stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). The Supreme Court has instructed that the court must engage in “a context-specific task that requires [it] to draw on its judicial experience and common sense” to determine whether the complaint states a plausible claim for relief. Ashcroft v. Iqbal, 556 U.S. at 678.

Weichert argues that as the TILA does not apply to a “residential mortgage transaction,” which includes purchase money mortgages, the remedy of rescission is not available to the Plaintiff. It continues that, even if she had a right to rescission, the claim would be barred by the statute of limitations. Moreover, as these issues were decided by this court in the Wells Fargo Opinion, that decision should continue to govern.[2]

1. Residential Mortgage Transaction

Rescission is not available to a borrower in “a residential mortgage transaction as defined in section 1602[x] of this title[.]” 15 U.S.C. § 1635(e)(1), 12 C.F.R. §§ 226.23(f)(1), 1026.23(f)(1). Section 1602(x) provides:

(x) The term “residential mortgage transaction” means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.

15 U.S.C.A. § 1602(x). See In re Ramirez, 329 B.R. at 732 (stating that rescission available only for non-purchase money consumer credit transactions secured by the consumer’s home). Logically, where rescission does not apply, a creditor has no obligation to deliver a notice of right of rescission. Perkins v. Cent. Mortgage Co., 422 F. Supp. 2d 487, 489 (E.D. Pa. 2006).

But the Plaintiff now argues that subsection (x) only excludes a “purchase money security interest arising under an installment sales contract.” She states that since her transaction did not involve an installment sales contract, it is not excluded from the rescission remedy of section 1635.

While the court agrees that the Plaintiff did not enter into an installment sales contract, it disagrees with her reading of section 1602(x). Though a purchase money security interest arising under an installment sales contract is excluded, the statute also expressly excludes a mortgage, a deed of trust, and any other equivalent consensual security interest that is created or retained against the consumer’s dwelling to finance the acquisition or initial construction of such dwelling. The mortgage documents here clearly show that the Plaintiff purchased her home with the proceeds from this loan—a fact the Plaintiff does not deny. As a mortgage was created or retained against her residence to finance her purchase of the residence, it is a residential mortgage transaction that is excluded from the rescission provision of TILA and Plaintiff’s claim fails.

2. Failure to Respond to Notice of Intent to Rescind

It then follows that the Plaintiff’s sending notices of rescission did not bring about a rescission of the note and mortgage. Dalton v. Countrywide Home Loans, Inc., 828 F. Supp. 2d 1242, 1249 (D. Colo. 2011) (holding that section 1635 did not apply to allow the plaintiff to rescind the transaction and thus the three-year statute of limitations in section 1635(f) did not assist her, because the definition under section 1602(x) of exempt transactions includes loans obtained by the plaintiff to finance the purchase of her primary residence). Therefore Weichert did not violate TILA by refusing to honor the purported rescission and it is not liable for damages under section 1640.

But the Plaintiff argues that her rescission attempt was successful because, regardless of whether she was entitled to rescind, Weichert had to respond within 20 days. “The instant suit is to enforce the steps after rescission, and NOT a suit to make the rescission effective by operation of law.” Doc. No. 72, p. 10 (emphasis in original). Plaintiff cited 12 C.F.R. § 226(d)(2) as supporting that Weichert was required to respond, else it would be liable to her.

Section 1635 provides that “[w]ithin 20 days of receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction.” 15 U.S.C. § 1635(b). Thereafter, “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.” Id. “If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it.” Id.

Section 226.32(d)(2) of Title 12 of the Code of Federal Regulations, cited by the Plaintiff, provides:

(d) Effects of rescission. . . .

(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.

12 C.F.R. § 226.23(d)(2).

Both section 1635(b) and section 226.23(d) provide for court discretion, the former stating “The procedures prescribed by [15 U.S.C. § 1635(b)] shall apply except when otherwise ordered by a court.” 15 U.S.C. § 1635(a) (last sentence), and the latter stating “The procedures outlined in paragraphs (d)(2) and (3) of this section may be modified by court order.” 12 C.F.R. § 226.23(d)(4).

As explained in the Wells Fargo Opinion, courts have construed sections 1635(b) and 226.32(d) as not automatically voiding a transaction. “[U]nder § 1635(b), the lender has twenty days to decide whether it will (i) recognize the existence of a rescission right and privately arrange rescission with the borrower and any other interested parties, or instead (ii) dispute the existence of a rescission right and await the borrower’s initiation of suit.Bradford v. HSBC Mortgage Corp., 838 F. Supp. 2d 424, 429 (E.D. Va. 2012) (emphasis supplied). The notice of intent is just that—making the lender aware that the borrower intends to rescind, not a rescission in fact. Id. Thus when a lender does not respond within 20 days, the borrower may, as the Plaintiff did here, file an action seeking to enforce rescission. Id. As explained by the Ninth Circuit Court of Appeals: “Otherwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any. Rather, under the statute and the regulation, the security interest `becomes void’ only when the consumer `rescinds’ the transaction. In a contested case, this happens when the right to rescind is determined in the borrower’s favor.” Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003) (emphasis in original). See also Lenhart v. Bank of Am., N.A., 2:12-CV-4184, 2013 WL 1814820, at *7 (S.D. W. Va. Apr. 29, 2013) (noting that a creditor might be liable for damages under section 1640 if it improperly refused rescission).

In coming to this conclusion, the Bradford court discussed American Mortgage Network, Inc. v. Shelton, 486 F.3d 815 (4th Cir. 2007), which affirmed that a secured loan “is rendered void only when a creditor voluntarily voids the security interest or a court orders rescission.Bradford v. HSBC Mortgage Corp., 838 F. Supp. 2d at 430, citing Shelton at 821. The Shelton court described this as the majority view of reviewing courts. American Mortgage Network, Inc. v. Shelton, 486 F.3d at 820-21. The Bradford court explained its reasoning:

Because § 1635(b) merely prescribes `procedural requirements’ that a district court may adapt at its discretion, it is clear that mere notice of intent to rescind does not trigger a lender’s obligation to effect rescission immediately given that a lender cannot know with certainty ex ante whether a court will deny rescission or modify the procedure for effecting rescission. In other words, § 1635(b) cannot, at once, be a set of default procedures a court may equitably alter after a borrower’s notice of intent to rescind and, at the same time, require a lender to effect rescission immediately upon receiving such notice.

Bradford v. HSBC Mortg. Corp., 838 F.Supp.2d at 433-34. See Iroanyah v. Bank of Am., N.A., 851 F. Supp. 2d 1115, 1125 (N.D. Ill. 2012) (following Bradford), aff’d sub nom. Iroanyah v. Bank of Am., 753 F.3d 686 (7th Cir. 2014).

Since this court’s Wells Fargo Opinion, at least one more court has agreed with this analysis. In Sluka v. Rushmore Loan Mgmt. Servs., LLC, 16-00357 JMS-KSC, 2016 WL 6275387 (D. Haw. Oct. 26, 2016), the plaintiff similarly argued “that Defendant’s failure to respond to her notice of rescission within 20 days entitles her to rescission even though the notice is time-barred.” Id., at *3. The court explained that “the statute is not self-effectuating and imposes no automatic obligation on Defendant to rescind the mortgage loan.” Id. “Construing the statute otherwise `would give TILA claimants the right to simply walk away with a windfall . . . without any further obligation,’ a result certainly not intended by Congress.'” Id. (quoting Bradford v. HSBC Mortg. Corp., 838 F. Supp. 2d at 429, which was quoting Shelton, 486 F.3d at 820). See Baker v. Bank of Am., N.A., 5:13-CV-92-F, 2014 WL 298909, at *6 (E.D.N.C. Jan. 27, 2014) (same) (appeal pending).

The Jesinoski opinion cited by the Plaintiff is not to the contrary. There, the Supreme Court stated that “The language [of section 1635(a)] leaves no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind.” Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). But it so stated in determining whether an obligor had to notify a creditor of rescission within three years, or actually sue within three years: “It follows that, so long as the borrower notifies within three years after the transaction is consummated, his rescission is timely. The statute does not also require him to sue within three years.” Id. See Sherzer v. Homestar Mortgage Servs., 707 F.3d 255 (3d Cir. 2013) (same). The Supreme Court was concerned only with the statute of repose. The decision does not stand for allowing a rescission where one has no such right.

Plaintiff’s theory here, that she can rescind by default, is correspondingly incorrect. As explained to the Plaintiff several times throughout this case, where a defendant fails to answer a complaint, the plaintiff must still prove that he or she has cause for relief. Pfeiffer v. Wulster, 09-13388 MBK, 2011 WL 1045355, at *2 (Bankr. D.N.J. Mar. 17, 2011) (stating that plaintiff must demonstrate a prima facie case to be entitled to entry of judgment by default), aff’d sub nom. In re Wulster, ADV 09-2015 MBK, 2012 WL 589564 (D.N.J. Feb. 22, 2012). Thus, even had Weichert not appeared in this proceeding, the Plaintiff would not have won her case, as she has no right to rescind under TILA.

3. Statute of Limitations

Both Weichert and the Plaintiff are correct on parts of their statute of limitations arguments. A creditor who fails to comply with any requirement under section 1635—which provides for rescission—may be liable for certain damages, including “in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court[.]” 15 U.S.C. § 1640(a)(3). An action for damages for violation of section 1635 may be brought within one year from the date of the occurrence of the violation. 15 U.S.C. § 1640(e). Thus, the Plaintiff is correct that she had one year from Weichert’s failure to respond to her Notice of Intent to Rescind to bring a lawsuit to seek damages for failure to rescind. She sent those notices on March 23, 2015 and filed this adversary proceeding on July 15, 2015, thus was within the one year period.

But an obligor’s right to rescind runs “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.” 15 U.S.C. § 1635(a). If the creditor never delivers the material disclosures, as alleged here, then an obligor has “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” to assert a right of rescission. 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3). The Supreme Court has stated that the latter “talks not of a suit’s commencement but of a right’s duration.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 417 (1998). This has been interpreted to mean that, rather than a statute of limitations, the three-year period is a statute of repose. In re Cmty. Bank of N. Virginia, 622 F.3d 275, 301 n. 18 (3d Cir. 2010), as amended (Oct. 20, 2010). Statutes of repose are not subject to extension by application of equitable tolling. Williams v. Wells Fargo Home Mortgage, Inc., 410 Fed. Appx. 495, 499 (3d Cir. 2011). Thus the three-year period is absolute. Luther v. Wells Fargo Bank, 4:11CV00057, 2012 WL 4405318, at *4 (W.D. Va. Aug. 6, 2012).

Therefore, even if the Plaintiff had a right to rescind, because she did not seek to rescind within three years from the date of consummation of the transaction, she cannot sue to enforce rescission or for damages for failure to rescind. The transaction occurred on February 12, 2007. She sent the Notices of Intent to Rescind more than eight years later, on March 23, 2015. Since she did not timely rescind, she has no cause of action for failure to rescind. Smith v. Fid. Consumer Disc. Co., 898 F.2d 896, 903 (3d Cir. 1990) (“The Coplins’ entitlement to statutory damages under 15 U.S.C. § 1640 is, therefore, wholly dependent upon, and flows directly from, their entitlement to rescissory relief.”); Maines v. Guillot, 5:16CV00009, 2016 WL 3556258, at *3 (W.D. Va. June 16, 2016) (“Because the plaintiff no longer had the right to rescind her 2005 loan transaction at the time foreclosure proceedings were initiated in 2015, she has no plausible claim for damages under TILA.”).

The Plaintiff argues that the statutes of limitations never ran because “the transaction was never consummated as alleged in the complaint, a fact that must be taken as true on the 12(b)(6) motion.” The basis of that allegation in the Complaint was that the “true lender” was never disclosed. But the Plaintiff also alleges that “Upon completion of the signing of the loan documents on February 12, 2007, Weichert has transferred servicing right of the loan to Wells Fargo [sic] Weichert Disclosure Statement being a `lender’ was not `accurate.'” Complaint, ¶ 33. Lenders and servicers are two distinct roles: Wells Fargo being the servicer did not negate Weichert being the lender. The mortgage documents the Plaintiff attached to her Complaint clearly show that Weichert originated this mortgage. See Jiaxing Hongyu Knitting Co. v. Allison Morgan LLC, 11 CIV. 09342 AJN, 2013 WL 81320, at *6 (S.D.N.Y. Jan. 8, 2013) (stating that documentary evidence attached to a complaint that contradicted the allegations of the complaint may render the allegations insufficient to defeat a motion to dismiss). That Weichert transferred it after consummation does not mean either than the transaction was not consummated or that Weichert was not the lender.

The Plaintiff also asserts that the transaction was not consummated because she cancelled it in 2015 when she sent her notices of rescission. “Consummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13). The Plaintiff alleged in her Complaint that “On February 12, 2007, in anticipation of a home loan in the amount of $265,900.00, Dana Grant-Covert executed a promissory note and security agreement on Plaintiff’s personal dwelling[.]” Complaint, ¶ 32. Thus she admits that she entered into the transaction. Indeed, had the loan transaction never consummated, the Plaintiff could not have purchased her residence. And she could not later cancel something that did not occur in the first place.

The Plaintiff also cites Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015), for the proposition that the statute of limitations did not run. But as explained above, Jesinoski held that a borrower need only send a written notice of intent to rescind within three years of the transaction, not file suit within that period.

4. The Accardi doctrine

One argument of the Plaintiff remains. In her opposition to the Motion to Dismiss, she asserts that:

This Court is bound by the Accardi Doctrine and cannot decline jurisdiction by dismissing the complaint, such action would constitute an abandonment of, inter alia, multiple Supreme Court Precedent, misapplication of the Rooker-Feldman Doctrine, misinterpretation and misapplication of TILA and Regulation Z, violation of the Federal Rules of Civil Procedure which govern almost all litigations in this Court; and in doing so the Court would not construe the Federal Rules of Evidence to secure fairness to the end that the truth may be ascertained and proceeding justly determined in accordance with the Accardi Doctrine.

Doc. No. 72, p. 9.

The Plaintiff argues that the doctrine, based on United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954), stands for the proposition that administrative agencies must follow their own regulations. She alleges that this court is a federal agency, citing 28 U.S.C. § 2671. Id., pp. 8-9.

The Accardi decision held that an agency’s failure to comply with its own rules automatically nullified its actions. Leslie v. Attorney Gen. of U.S., 611 F.3d 171, 178 n.4 (3d Cir. 2010). The Third Circuit Court of Appeals distinguished this to apply only where the regulation was “promulgated to protect fundamental statutory or constitutional rights[.]” Id., at 178.

This doctrine has no application to this case, as this court is not a federal agency. Section 2671 of Title 28, cited by the Plaintiff, defines agencies only for the purpose of the Federal Tort Claims Act, which “protects Federal employees from personal liability for common law torts committed within the scope of their employment, while providing persons injured by the common law torts of Federal employees with an appropriate remedy against the United States.” Pub. L. 100-694, § 2, Nov. 18, 1988, 102 Stat. 4563. It is not applicable here.

The court knows of no regulations applicable to bankruptcy courts and the Plaintiff did not proffer any. Rather, the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure govern cases brought in this court. Dismissing an adversary proceeding for failure to state a cause of action under Federal Rule of Civil Procedure 12(b) (incorporated into adversary proceedings by Federal Rule of Bankruptcy Procedure 7012), is not a declination of jurisdiction, but a proper exercise of the court’s jurisdiction over adversary proceedings.

CONCLUSION

The Plaintiff failed to state causes of action against Weichert, the Motion to Dismiss all counts against Weichert will be granted.

An appropriate judgment will be entered consistent with this decision.

The court reserves the right to revise its findings of fact and conclusions of law.

[1] The Plaintiff’s fourth count alleges violation of 15 U.S.C. § 1611 by Wells Fargo and ZGA and therefore is not relevant here.

[2] Weichert’s argument that the court’s decision as to Wells Fargo applies here and cannot be challenged now by the Plaintiff is well placed.

The “law of the case” doctrine reflects courts’ general reluctance to reconsider matters soundly decided. “The doctrine is designed to protect traditional ideals such as finality, judicial economy and jurisprudential integrity.” In re City of Phila. Litig., 158 F.3d 711, 717-18 (3d Cir. 1998). In many ways, “law of the case” disputes are the opposite side of the motion for reconsideration coin. The only difference between the two is the filing party: prevailing parties or similarly-situated parties seek to apply the “law of the case” against subsequent parties in similar circumstances, and losing parties seek reconsideration of the adverse decision. Not surprisingly, the Third Circuit has adopted the same basic “extraordinary circumstances” framework for reviewing “law of the case” disputes that applies to motions for reconsideration: the “law of the case” doctrine does not apply where “(1) new evidence is available; (2) a supervening new law has been announced; or (3) the earlier decision was clearly erroneous and would create manifest injustice.” In re City of Phila. Litig., 158 F.3d at 718 (citing Pub. Interest Research Group of N.J., Inc. v. Magnesium Elektron, Inc., 123 F.3d 111, 116-17 (3d Cir. 1997)); cf. N. River Ins. Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1218 (3d Cir. 1995) (motion for reconsideration standard). However, the “law of the case” doctrine only applies to a court’s decisions of law. See, e.g., In re City of Phila. Litig., 158 F.3d at 718; Wright & Miller, Federal Practice and Procedure § 4478. In other words, dicta does not have precedential value such that a court may consider a matter previously decided.

Falor v. G & S Billboard, CIV A 04-02373(HAA), 2008 WL 5190860, at *2 (D.N.J. Dec. 10, 2008) (stating that law of the case mandated dismissal of case against defendant since case had been dismissed against other defendants on same products liability claim); McKowan Lowe & Co. v. Jasmine, Ltd., CIV. 94-5522 (RBK), 2005 WL 3500032 (D.N.J. Dec. 20, 2005), aff’d, 231 Fed. Appx. 216 (3d Cir. 2007) (holding that as absence of loss causation was now the law of the case, defendants were entitled to summary judgment).

However, as the Plaintiff is pro se, the court finds it preferable to issue this full opinion, explaining again its reasoning and why any variations on the arguments that the Plaintiff presented here yet do not entitle her to denial of this motion to dismiss.

Garfield Rescission Theory Leads Borrowers into Trouble

 

Neil Garfield:

I write to disagree with your explanation of TILA rescission in your blog entry “Rescission is not a claim – No Lawsuit Necessary” (appended below) because it leads borrowers into trouble.

You wrote:

“Rescission is an event. Either it happened or it didn’t. If the notice was sent, it happened. If the notice wasn’t sent then it didn’t happen.”

Rescission is a process, not an event.  The process consists of several events including mutual tender and release of lien.  If the parties don’t agree, one or the other must act to press the issue.  Typically the creditor will foreclose or the borrower will sue to enforce the rescission or raise the rescission defensively in foreclosure or bankruptcy.

TILA allows the borrower to rescind for any or no reason within 3 days after loan consummation.  Rescission beyond that requires timely notice by the borrower to the creditor AND a TILA violation – creditor failure to deliver required disclosures to the borrower.

TILA rescission more than 3 days after consummation requires the borrower to mail notice of intent to rescind to the creditor, tender and release of lien by the creditor, tender by the borrower, and finally a handover of respective properties to finish unwinding the transaction and return the parties to their condition prior to the loan, as though the loan had not occurred.

TILA and Regulation Z impose a condition upon initiation of the rescission process:  failure of the creditor to deliver required disclosures or notice.  If this condition does not exist, the borrower has no right to rescind more than 3 days after consummation under TILA .

Regulation Z – 12 C.F.R. 1026.23(3)(i).

“If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer‘s interest in the property, or upon sale of the property, whichever occurs first.”

The above three year repose window never opens if the creditor timely delivered the required documents to the borrower. If the borrower sends the creditor a notice of intent to rescind, and the the creditor knows he did not violate TILA, then the creditor will typically acknowledge the notice of intent to rescind, deny the rescission, and then take no further action until the time comes to foreclose.

The process can continue or abort in a number of ways.

The process will abort if the loan does not qualify for TILA rescission, OR if no TILA violation occurred, OR if the creditor fails to tender and release the lien and the borrower and creditor fail to raise the issue in court, OR if the borrower fails to tender and the creditor sues, OR if the court orders a dismissal of the borrower’s TILA rescission complaint for cause.

In many cases, the creditor receives the notice of intent to rescind, acknowledges it, and rejects it. Often the borrower, after having signed an acknowledgement of receipt of the disclosures, will claim he did not receive them. The court always rules in favor of the creditor in such cases unless the borrower can demonstrate that he left closing without the disclosures and the creditor never mailed them.

The court may modify the rescission.  In some cases, the court will help the borrower and creditor work out the borrower’s inability to tender, such as through a periodic payment program.  In that case the TILA rescission process can take a long time to finish.

You wrote:

” The moment that a rescission notice is dropped in US Mail the note and mortgage are void ‘by operation of law.'”

As I stated above, and as corroborated by 12 C.F.R. 1026.23(3)(i), the mortgage does not become void upon mailing of notice of rescission UNLESS the creditor violated TILA by not timely delivering the required notices/disclosures to the borrower.

I imagine if the creditor knew he did not violate TILA and the borrower recorded the rescission notice with the county clerk to cloud the creditor’s mortgage, the creditor would most likely initiate foreclosure or sue to remove the cloud.

Yes, the elements of TILA rescission can become draconian against the creditor who does not timely tender and release the lien.  But ONLY if he violated TILA as above.

You wrote:

“it remains a question of fact as to the exact moment of consummation — assuming there was any ‘consummation’ with anyone in the chain upon which the present forecloser relies.”

No court that I know of has embraced your pet theory that consummation never occurred because the lender was unknown.  If you have a supporting citation, please pass it over to me.

The name of the lender appears on the note, and the borrower, in signing it, states “For a loan I have received, I hereby promise to pay…”  Now, the funds might be withheld for 3 days to allow the unconditional right to cancel to expire, so as to ensure that the borrower doesn’t abscond with funds and then cancel.  But once the borrower has signed the note and security instrument and the closer has released the funds to the proper parties, that loan has become consummated.

I consider reckless your preachment that borrowers should send notice of intent to rescind more than 3 years after consummation.  A borrower who does that will stop making mortgage payments and that will put him in jeopardy of foreclosure, all in the hope that some court will idiotically embrace your theory that consummation did not occur at or within 3 days of closing.

A borrower who wants to prove some tardy date of consummation should bring the question before a judge in a declaratory judgment action before sending out a notice of intent to rescind.

In summary, Neil, you are

  1. wrong about TILA rescission being merely an event,
  2. wrong about the 3-year right to rescind being unconditional, and
  3. wrong about consummation occurring a long time after closing.I have no trouble pulling up hundreds of post-Jesinoski court opinons to prove my assertions above.  I have shown a bunch of them at my web site.  I have yet to see any court opinion supporting your theory on the issues above.

I find it appalling that you, a seasoned attorney, so blithely lead borrowers astray with a frivolous and failing legal theory that can get them into a lot of trouble with a mortgage.

Bob Hurt
727 669 5511
http://mortgageattack.com

On 02/01/2018 08:35 AM, Livinglies’s Weblog  (Neil Garfield) wrote:

Rescission is not a Claim — No Lawsuit Necessary

To those who think that this a gotcha moment consider this: Your lack of understanding of civil court procedure is what is preventing you from seeing the obvious — claims are not granted relief unless they are litigated — no matter how “obvious” the outcome. Rescission is an event not a claim. It’s the contest of the rescission that is the claim. It is therefore the contest of rescission that must be litigated.

Rescission is not a claim. Rescission is an event. Either it happened or it didn’t. If the notice was sent, it happened. If the notice wasn’t sent then it didn’t happen.

If the rescission is contested it is still effective and the note and mortgage are still void. If anyone thinks the rescission was not sent under the right circumstances they must establish standing and sue to vacate the rescission — not just ignore it. SCOTUS specifically stated that there is no difference between a contested rescission or an uncontested one. They are both effective on mailing.

Those who take a contrary view are ignoring basic procedural law. Under their “theory” the fact that someone contests it is enough to require the borrower to prove a “claim.” That is exactly the opposite of what is stated in the statute and what was confirmed by a unanimous SCOTUS opinion in Jesinoski. There is no “claim” of rescission under the TILA rescission statute. There is only an event that either happened or didn’t happen.

Since this is a jurisdictional matter it can be raised at any time. Assuming nobody has stepped in to plead and prove ownership of the debt, there is nobody with standing that can attack the rescission. Once the 20 days expires, and no court has extended the period during which the actual creditor could bring a claim, the “lender” duties require compliance no matter how wrongful they think the rescission notice was sent.

If the lender remains in noncompliance for more than a year, their right to claim tender of the amount due expires by the express terms of the TILA statute. So at that point the note is void, the mortgage is void, the loan contract is canceled and the right to receive the principal back is time barred.

The standing issue is the key. The moment that a rescission notice is dropped in US Mail the note and mortgage are void “by operation of law.” Any “holder” of the note or mortgage is no longer the holder of anything that is legally relevant. The note and mortgage don’t exist. Hence while some named party might have had standing to foreclose they no longer have standing to foreclose or contest the rescission unless they can plead and prove standing by establishing themselves as the owner of the debt.

Some people consider it a slam dunk against the borrower if the rescission notice is sent more than 3 years from presumed consummation — i.e., the date on the documents. But we all know that funding usually doesn’t occur until hours, days, weeks and sometimes months after the loan documents are signed. So consummation is a question of fact UNLESS the homeowner admits that consummation of a loan contract occurred on specific date more than three years before the notice of rescission.

Many people, including those who see rescission as I do (as SCOTUS does) believe that SCOTUS will ultimately carve out an exception to accommodate the three year limitation on rescission under TILA. I admit that is possible but here is why I think they won’t.

In order to establish a doctrine that a rescission is to be conclusively presumed to be beyond the three year limitation you need a statute, not common law, stating exactly that. The Courts lack the authority to invent a new law of evidence. While it may be “obvious” to some people that the rescission notice was sent more than 3 years after consummation, it remains a question of fact as to the exact moment of consummation — assuming there was any “consummation” with anyone in the chain upon which the present forecloser relies.

Proving the loan and the status of the “lender” would therefore be a requirement to establish that the rescission was sent beyond three years from consummation. Proving that requires showing the holy grail of foreclosure litigation that the banks have successfully hidden since the 1990’s — who paid who for what and when?

Could SCOTUS go the other way? Of course! There is no appeal from their decision. I’m more optimistic that eventually SCOTUS will rule consistently with the Jesinoski decision. That means that if anyone has a gripe about a rescission they must file a lawsuit, establish standing and then plead and prove their case to vacate the rescission.

Understanding Jesinoski and TILA Rescission

Dear ReadTheCases:

I understand your authoring comments from a pseudonym because the outcome of your messages embarrasses you so. Here’s a case in point.  You have misconstrued the SCOTUS Jesinoski opinion as allowing a TILA rescission without a preceding TILA violation. I have pointed out that the Jesinoski trial court ruled against Jesinoskis and denied Jesinoskis their requested TILA resscission and damages because no TILA violation occurred to trigger the right to rescind. But you have repeatedly stuck to your wrongful thinking by claiming that the trial court was wrong.  You think Jesinoskis had the right to rescind without any TILA violation.

Your interpretation of TILA rescission would allow a borrower to put a creditor to an enormous amount of trouble and expense and then force rescission for no reason whatsoever.

Government would not create or enforce a law allowing a borrower to impair the obligations of a contract through unjust rescission because such a law would violate the US and state constitutions.

Florida Constitution Article I, Declaration of Rights, typical of state Constitutions:

SECTION 10. Prohibited laws.—No bill of attainder, ex post facto law or law impairing the obligation of contracts shall be passed.

Article I of the US Constitution contains a similar provision:

Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

You might want to read the Wikipedia article about rescission.

A borrower has two rights to rescind under TILA:

  1. 3-day absolute;
  2. 3-year conditional.

We’re talking about the conditional version.

A failure to give disclosures in a purchase money loan does not justify TILA rescission because TILA rescission does not apply to those loans. Purchase Money Loan = no conditional TILA rescission.

So that proves that circumstances must be right (HELOC or Refi) to “open the gate”to TILA rescission. That means a borrower cannot invoke conditional TILA rescission if the gate is closed (purchase money loan). No HELOC/Refi = no conditional TILA rescission.

Well, there’s another gate to conditional rescission: the loan must have been consummated (TILA rescission is, after all, a CONTRACT REMEDY, so a contract must exist before a party can rescind it). No consummation = no conditional TILA rescission.

Here’s yet another gate to conditional rescission: the borrower must not have sold or transferred the property. Property sold or transferred = no conditional TILA rescission.

And, there’s yet another gate (condition) to conditional TILA rescission: a TILA VIOLATION must have occurred. EVEN IF all those other gates are open, the borrower cannot force conditional TILA rescission if NO TILA VIOLATION occurred. So, NO TILA VIOLATION = NO conditional TILA RESCISSION

I explained this to you and showed you the regulation a couple of days ago:

12 C.F.R. §1026.23 “… If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the property, whichever occurs first. ”

As you can see from the explanation of Regulation Z above, the right to rescind extends beyond 3 days ONLY IF the required notice or material disclosures are not delivered.

Fail to deliver required disclosures is a TILA VIOLATION, and that triggers the right to rescind beyond 3 days after consummation. Thus, after 3 days, NO TILA VIOLATION = NO RESCISSION.

Moreover, NUMEROUS courts across the land before and since Jesinoski have endorsed the above principal: no TILA violation = no conditional TILA rescission.

Yes, a borrower can in the absence of a TILA violation wrongfully send a notice of rescission (as Jesinoskis did), or SUE to enforce the rescission (as Jesinoskis did). But, such a suitor will get no rescission and no damages (as happened to Jesinoskis).

Read through those opinions I listed below for you. You’ll see that the courts support my explanation of how TILA rescission operates, and that people lose who buck against the law and common sense.

Try to remember that, other than for an unconditional TILA 3-day right to cancel, Rescission is ALWAYS a REMEDY for a violation of an actual contract or related law. If no contract exists, or if the creditor does not breach the contract or related law, then no contract remedy applies.

Bob Hurt

On 2018-01-25 17:34, Readthecases wrote:

And that list of cases you posted (thank you for that) are dwarfed by the amount of cases that, over the period of decades, explicitly or implicitly held or presumed that a borrower cannot unilaterally rescind under TILA by simply mailing a letter.

They were wrong.

The Jesinoski SCOTUS opinion laid them in the trash bin.  For DECADES most of the federal judiciary was wrong on the fact that a homeowner can rescind his loan pursuant to TILA – and that’s despite the plain wording of the statute unequivocally stating so.

I haven’t read all those cases you listed here.  Some may have ended well for the lender because the borrower litigated the case poorly, like Jesinoski did – if there’s a way a court can use such mistakes to make a homeowner lose – it will.  Perhaps others were litigated well and should have been won by the borrowers, but the courts wanted the borrowers to lose anyway, so they lost.

In any event, as I said, the number of those cases you posted is absolutely dwarfed by the the decades of bad decisions by courts who couldn’t read the plain wording of a simple statute and had to be corrected by SCOTUS.

If that is true, such cases do not invalidate what I’ve been saying:  you sue for a declaration of rights that the forecloser has no standing to foreclose because the deed of trust it relies upon no longer has legal effect as a matter of law due to the borrower’s TILA rescission.

At that point, the lender can only properly defend by saying the borrower did not mail a rescission notice or it didn’t give the lender proper notice.  Whether the borrower actually had grounds for the rescission is at that point not relevant to the proceeding.  All that is relevant is whether or not the notice was sufficient on its face and whether or not it was mailed to the originator on the note.

Not that the lender doesn’t have a remedy.  It can attack the declaratory judgment collaterally by pleading extrinsic fraud.

Sent from Outlook

From: Maven <maven@mortgageattack.com>
Sent: Wednesday, January 24, 2018 12:17 PM
To: ReadTheCases@outlook.com
Subject: Regarding your comments at my mortgage attack blog

Dear ReadThe Cases:

You made this comment on my blog:

So SCOTUS states Jesinoski's rescission was effective upon mailing and you think the lower court's opinion (who already had to corrected once by SCOTUS) invalidates the SCOTUS opinion.

You do know that SCOTUS is the highest court in the land, don't you Bob?

My answer:

The Trial court heeded the SCOTUS opinion.  Read the Post-Jesinoski opinions below to see how the courts disagree with Garfield (and you, apparently).

Remember the nature of the dispute.  Jesinoskis had mailed his notice of rescission exactly 3 years after loan consummation, but the district and circuit denied the rescission because Jesinoskis sued AFTER mailing the notice.  So the only issue before the SCOTUS was the question of whether Jesinoskis had to sue within the three year period of repose. SCOTUS said no because TILA does not require that.

The sole principle that Jesinoski clarified was that the three year limitation on notice did not extend to the filing of a lawsuit. 135 S.Ct. at 793

Brown v. Gorman, Dist. Court, ED Virginia 2016

Post-Jesinoski Opinions

Courts across the land rendered these opinions AFTER the US Supreme Court rendered the Jesinoski opinion about TILA rescission in January 2015. Most of these opinions debunk the utter nonsense that attorney Neil Garfield propounds on his LivingLies blog about TILA rescission. Sadly, most of these borrowers seem to have heeded Garfield’s false legal theories instead of pursuing the mortgage attack method.  That explains why those borrowers lost.

Randy Kelton says Bob Hurt is a “Mean Son-of-a-bitch?”

Dear Randy Kelton:

Rumor has it that you referred to me as a “Mean Son-of-a-bitch” on Talkshoe.  I write this in response.  Feel free to promulgate it to others.

First of all, I have never met you in person, but when I mused over the spanking a Texas judge gave in a foreclosure defense effort, and you said you lost the case intentionally, I concluded that you are a better enemy than friend to foreclosure victims, and I wrote something similar on the LivingLiesTheTruth.com blog.  Maybe that’s why you think I’m mean. As I see it, anyone who would lose a foreclosure case on purpose is mean.

I used to put on seminars to teach foreclosure defense. I quit after I concluded that NEARLY ALL foreclosure defenses fail utterly because borrowers agreed to allow foreclosure for failure to make timely loan payments.  At best, most typical foreclosure defenses have standing as their basis, and ultimately the right party with standing will come forth, foreclose, and force a sale of the property, OR the borrower might convince the creditor to take a keys-for-cash or other deed-in-lieu-of-foreclosure deal.  And sometimes the borrower can arrange for the creditor to approve of a short sale.

In any case, foreclosure defense efforts result in the borrower LOSING the house, LOSING all the cost of the defense, LOSING at least part of opponent’s attorney fees and costs, and LOSING in terms of the emotional wear and tear on the family.  A temporary dismissal of a foreclosure action is NOT a win.  It’s a dilatory ploy that violates bar rules, and actually just prolongs eventually losing the foreclosure defense effort.

I concluded after some investigation that fraud and other tortious conduct, legal errors, contract breaches and regulatory violations underlie MOST home loans of the past 15+ years, and that gives salient causes of action to borrowers who choose to go on the attack and seek damages in court or in negotiated settlement.  So I created the Mortgage Attack web site to teach people to ATTACK the perpetrators of those causes of action.  As you will see from  a careful examination of the web site, I explain why foreclosure pretender defender attorneys (and similar practitioners) are nothing more or less than SCAMMERS trying to bilk their feckless clients out of money while leading those clients inexorably into the jaws of foreclosure.  And I do not charge any money for giving people that education.

I do, however, recommend to all mortgagors that they enlist the services of a competent mortgage examiner who will find all the causes of action underlying the loan transaction and related events throughout the life of the loan, including litigation.  I know only one firm competent enough to do that job, and I refer interested parties to that firm at NO CHARGE.  Sure, the company charges a fee for that service, but it is about 1/3 of what a lawyer would charge IF the mortgage victim could find a lawyer competent to do the work, which he cannot.

It takes a monumental amount of knowledge and skill to find all the causes of action underlying the loan transaction.  An investigatory team must know cold and have a profound WORKING KNOWLDGE of all the regulatory state and federal laws including FDCPA, FCRA, HOEPA, TILA, RESPA, ECOA, HAMP, HARP, etc., all the typical means of cheating borrowers, the intricacies of appraisal and lending practice and scams, mortgage lending processes nationwide, meticulous details of uniform lending instruments, contract law, tort law, statutes of limitations, unique laws, rules, and binding court opinions of various jurisdictions related to mortgage/deed-of-trust lending, the intricacies of mortgage loan servicing, loan modifications, forebearances, bankruptcies, foreclosure actions, non-judicial foreclosure process, note assignments, Federal and State rules of evidence, civil procedure, and LITIGATION PRACTICE.  The team must examine the appraisal, loan application, note and allonges, security instrument, closing documents, escrow statements, servicer/creditor correspondence, legal notices, AND court filings, pleadings, petitions, motions, notices, transcripts, rulings, opinions, judgments, and orders.

WHO, Randy Kelton, DO YOU KNOW with that kind of knowledge and skill?  Certainly none of the pompous pretenders pontificating about mortgage litigation on TalkShoe beyond the point of embarrassment.

Let me tell you what I consider constitutes “HELPING” a mortgagor facing foreclosure:

  1. Tell him the truth that he deserves to lose the house for failing to make proper, timely monthly payments and/or maintain the property in accordance with the loan security instrument.
  2. Tell him the truth that his best way of negotiating a loan mod favorable to him OR of winning MONEY DAMAGES is to get a competent loan examination team to examine all the documents and circumstances having anything to do with that loan from day zero to present time, including litigation documents, to FIND the proof of his injuries, present the statement of injuries with evidence to the creditor and other injurious parties, then demand settlement or sue.
  3. Tell him the truth that hiring a team to do that can easily cost $5,000, and if he cannot afford that, then …
  4. Tell him the truth that the honorable thing to do is to sell what he doesn’t need, rent another dwelling, call 800-689-8684 (Allied Van Lines) to schedule the family’s move, pack the household belongings, hand the keys to the creditor/servicer, shut off the utilities, and MOVE.
  5. Tell him the truth that attacking standing through responsive pleading or declaratory judgment / quiet title action will at best prolong the agony of loss of the property.
  6. Tell him the truth that short sale or deed in lieu of foreclosure are the best options if he cannot go on the attack, because those will minimize the damage to his credit rating.
  7. Tell him the truth that foreclosure defense through the courts will cost him money that he needs to save for moving his family, that he will ultimately lose, and that he will end up having to pay not only his own legal fees and costs, but also his adversary’s legal fees and costs.
  8. Tell him the truth that a loan modification is ONLY for people who can actually pay their mortgage payments fully and timely, and it is not for mortgagors who must struggle to pay because the balloon that comes due will put them right back into foreclosure if they are typical.
  9. Tell him the truth that a foreclosure battle can damage him and his family emotionally, and even cause the family to break up.

If you sell your mortgage rescue services to people WITHOUT telling them all the above, then how does my warning people to beware of your service make ME a “MEAN SON-OF-A-BITCH?”

Oh, you want to know WHO does that mortgage examination service that you cannot do because of your paucity of technical knowledge and meager experience?

Mortgage Fraud Examiners

I have yet to find ANY comparable service anywhere.

“Mortgage Fraud Examiners doesn’t save homes, the evidence in their mortgage transaction does” says Storm Bradford

Storm Bradford founded a litigation support company decades ago (see http://LawPartnerOnCall.com) to help attorneys win cases.  As an adjunct to that activity, he founded Mortgage Fraud Examiners to aid attorneys for borrowers with mortgage problems. Bradford’s team examines every aspect of a loan transaction from inception to present time in order to discover who injured the borrower and how. THIS, according to Storm Bradford, is the ONLY way to end foreclosure because it enables the borrower to attack the injurious parties in court and win legal fees plus compensatory and punitive damages.

Around the same time, attorney Neil Garfield came out of retirement with a new and different business plan.  He started delivering seminars across the land encouraging attorneys to take on broke mortgage foreclosure victims as clients, and charge them $500 to $1500 per month to drag out the foreclosure proceedings as long as possible, sometimes as much as 5 or 6 years.  In that way, the attorneys could earn $20,000 to $50,000 per client and use only cookie-cutter / copy-machine pleadings without doing any real work other than leading the client by the hand into the inexorable jaws of foreclosure.

Those who learned first hand the value of MFE’s comprehensive mortgage examination discovered that they could negotiate settlements with the injurious parties and never have to go through foreclosure.  They look at MFE as their “SAVIOR” because the examination report provides information that enables them to end the foreclosure and settle with the creditor.

MFE is NOT a home savior,” declared Bradford in an interview. “We just give the loan transaction the equivalent of an MRI [magnetic resonance imaging, Ed.], showing evidence of the injuries to the borrower, just as an MRI shows evidence of a medical problem. A patient may need a competent surgeon to remove a brain tumor. A borrower might need a competent attorney to sue the servicer, creditor, lender, appraiser, mortgage broker, title company, or other party.  But usually the borrower can negotiate a settlement because the injurious party wants to avoid the expense of losing in court.

“So, while borrowers might see MFE as a savior, actually, we just show them how they got injured in the loan transaction,” Bradford said,  “and if presented in court, that evidence is worth its weight in GOLD because it can win a judgment in favor of the borrower!”

These days, Neil Garfield still schemes to get clients for mortgage-related services that some consider worthless.

Meanwhile, Storm Bradford’s MFE still performs comprehensive mortgage examinations that give borrowers evidence of injuries, and their only possibility of prevailing in a dispute involving the foreclosure and related counter claims and cross claims.

To many, Storm Bradford and MFE are both Heros and SAVIORS!

Share your comments below.

Mortgage Fraud Examiners And CFPB Go After Common Foes

Reston, VA – 26 November 2017 – The Consumer Finance Protection Bureau (CFPB) slammed online mortgage lender Amerisave with a $19.3 million disciplinary penalty for bait-and-switch mortgage lending tactics.  While the CFPB started its work of policing lenders in 2010, Virginia’s Mortgage Fraud Examiners has worked assiduously years before helping borrowers hold accountable banks and related entities involved in the mortgage transactions for their scurrilous tactics. MFE services complement those of the CFPB, providing a rounded solution for consumers.

Mortgage Fraud Examiners specializes in examining borrower’s mortgage transaction documents, to expose evidence of contract breaches, legal errors, tortious conduct, regulatory violations, etc.  This evidence provides borrowers with proof that the bank and others may have injured them.

This process differs dramatically from CFPB’s process.  The CFPB requires the borrower to submit a written complaint providing evidence of wrongdoing. If the CFPB accepts the dispute, a specialist will review it for violations of consumer protection laws, and take action against the lender if a violation warrants it.

Storm Bradford, the Founder of Mortgage Fraud Examiners provided insight into the borrower dilemma. “Banks, appraisers, mortgage brokers, title companies, realtors and sellers have dozens of ways they can injure borrowers,” Bradford said. “The CFPB is unaware of these damages because the borrower doesn’t know about them and therefore cannot report them.  That’s where MFE comes in to save the day,” he continued.

Borrowers provide their mortgage transaction documents to MFE. The examination team evaluates every piece of paper, to find the actual evidence of injuries and violations. The borrower or an attorney uses them to negotiate a settlement with, or to formulate complaints against, the injurious party.

“The homeowners and attorneys that have utilized the methodologies of MFE have received financial settlements, set-offs, free and clear property to millions dollar awards,” Bradford added.  “MFE and the CFPB give the borrower the only practical ways to hold lenders and their associates accountable for injuring the borrower.”

MFE serves the CFPB as well as the borrower by operating like a Crime Scene Investigation (CSI), according to Bradford.  “We have our clients file complaints with the CFPB detailing the injuries they suffered and the parties responsible.”  “The CFPB can start their own investigation.  That saves them an enormous amount of time.  In that way they get to use our expertise free, ” he concluded.

Mortgage Fraud Examiners service provides top value to borrowers with mortgage trouble, according to California-based loss-mitigation negotiator Suzanne Reed.  “Consumers desperately need the service of Mortgage Fraud Examiners to help them save their homes from foreclosure,” she said.  “Without MFE’s mortgage examination analysis, borrowers have no hope of avoiding loss of the house.  That MFE examination is a bargain because attorneys generally cannot or will not do it, and the exam report gives me enormous leverage in my negotiation efforts.”

Reed went on to acknowledge the CFBP’s value. “I applaud the CFPB,” she said, “for what they have accomplished in spanking the lending industry for its abuses against borrowers.  We need more organizations like it for oversight of the real estate and appraisal industry.”

For more information, contact Storm Bradford:

Mortgage Fraud Examiners

Telephone: (844) 920-7400

Web site:  http://MortgageFraudExaminers.com

E-mail:  http://MortgageFraudExaminers.com/email

Sanctions Pummel Neil Garfield Legal Theories

Neil Garfield’s frivolous filings and bogus legal theories have already cost at least one client, Zdislaw Maslanka, a wad of attorney fees in an utterly frivolous action to get his house free even though he remained current in his mortgage payments.  As the below docket entries show, the Florida 4th District appellate panel affirmed the 17th Circuit trial court’s dismissal of the case and ordered Maslanka to pay the attorney fees of the two mortgage creditors that he sued.

  • 4D14-3015-Zdzislaw E. Maslanka v. Wells Fargo Home Mortgage and Embrace Home Loans
05/12/2016 Affirmed ­ Per Curiam Affirmed  
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Embrace Home Loans Inc.’s September 2, 2015 motion for attorney’s fees is granted. On remand, the trial court shall set the amount of the attorney’s fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Wells Fargo Home Mortgage’s September 3, 2015 motion for attorneys’ fees is granted. On remand, the trial court shall set the amount of the attorneys’ fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee.

Federal Rules of Civil Procedure Rule 11 (See Below) allows the court to award attorney fees to the party against whom a litigant files frivolous (unsupported or nonsensical) motions.

34 States have embraced FRCivPro Rule 11 in their own rules of civil procedure, but Florida embraced it in Florida Statute 57.105 (See Below).  It requires the attorney propounding the unsupported motion to pay one half of the sanction cost and the attorney’s client to pay the other half.  That has raised the hackles of a lot of attorneys who claim it chills their willingness to mount an aggressive advocacy on behalf of the client.  Obviously, lawmakers see overaggressiveness as vexatious, and they decided, finally, to punish the lawyer for it.

Mortgage loan creditors have begun to get sick and tired of dealing with mindless litigation by idiotic practititoners like Neil Garfield.

Johnson v. BANK OF NEW YORK MELLON, Dist. Court, WD Washington 2016

I write now to show a case in point (full text of opinion below).  Lajuana Locklin Johnson, a TILA rescission mortgagor,  provoked the ire of a USDC judge in Washington State by filing a notice of rescission 10 (TEN!) years after consummation of the loan (obviously following Neil Garfield’s ridiculous strategy) when the TILA statute of repose window closes after 3 years.  She knew she had no case, but filed it anyway in a silly and misguided effort to get a free house.  So, the judge spanked her.

Oh, and she claimed she relied on the clear meaning of the SCOTUS Jesinoski opinion to do it. She claimed SCOTUS meant one can send notice of rescission after 3 years, but the high court actually meant the borrower with a valid TILA rescission claim may sue after 3 years.  Incidentally, the Minnesota USDC ruled in July 2016 that Jesinoski had no TILA rescission case because he and his wife had written an acknowledged receipt of the proper TILA disclosures. Jesinoski claimed he had invested over $800,000 in the case, much of which came from attorney fees.

Well, first Judge James L. Robart ordered Lajuana and her attorney Smith to show cause why he shouldn’t sanction them under Rule 11 for bringing an utterly hopeless TILA rescission action she knew would fail.  And in that order he berated attorney Jill J. Smith of Natural Resource Law Group, PLLC, for filing the action in spite of having filed and been sanctioned for one or more prior frivolous actions like Lajuana’s.  Smith idiotically claimed the table-funding meant the loan had never been consummated and so the statute of repose could not have tolled.  But she did not explain how Lajuana could rescind a non-consummated loan.

The judge said this about the essential argument Smith (taken directly from Garfield) propounded:

Excerpt from opinion

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

Then, Judge Robart ordered these sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

I would raise yet another point about this case.  The above excerpt provided that “Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property…  Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property.”

I fail to see how TILA rescission can apply at all to a purchase money loan.

12 CFR Part 1026.23(f) “Exempt transactions.  The right to rescind does not apply to the following:  1. A residential mortgage transaction.” (“Residential mortgage transaction means a transaction in which a mortgage, deed of trust, purchase money security interestarising under an installment sales contract, or equivalent consensual security interestis created or retained in the consumer‘s principal dwelling to finance the acquisition or initial construction of that dwelling.”)

See the whole opinion below.

And let this be a lesson to Neil Garfield Klingons (those who cling to his every utterance:

Heed Neil Garfield at your peril!

 

FRCivPro Rule 11. Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions

(a) Signature. Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney’s name—or by a party personally if the party is unrepresented. The paper must state the signer’s address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper unless the omission is promptly corrected after being called to the attorney’s or party’s attention.

(b) Representations to the Court. By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

(c) Sanctions.

(1) In General. If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation. Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.

(2) Motion for Sanctions. A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. If warranted, the court may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion.

(3) On the Court’s Initiative. On its own, the court may order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated Rule 11(b).

(4) Nature of a Sanction. A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated. The sanction may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.

(5) Limitations on Monetary Sanctions. The court must not impose a monetary sanction:

(A) against a represented party for violating Rule 11(b)(2); or

(B) on its own, unless it issued the show-cause order under Rule 11(c)(3)before voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.

(6) Requirements for an Order. An order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction.

(d) Inapplicability to Discovery. This rule does not apply to disclosures and discovery requests, responses, objections, and motions under Rules 26 through37.

 

Florida Statute
57.105 Attorney’s fee; sanctions for raising unsupported claims or defenses; exceptions; service of motions; damages for delay of litigation.

(1) Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

(a) Was not supported by the material facts necessary to establish the claim or defense; or
(b) Would not be supported by the application of then-existing law to those material facts.
(2) At any time in any civil proceeding or action in which the moving party proves by a preponderance of the evidence that any action taken by the opposing party, including, but not limited to, the filing of any pleading or part thereof, the assertion of or response to any discovery demand, the assertion of any claim or defense, or the response to any request by any other party, was taken primarily for the purpose of unreasonable delay, the court shall award damages to the moving party for its reasonable expenses incurred in obtaining the order, which may include attorney’s fees, and other loss resulting from the improper delay.

(3) Notwithstanding subsections (1) and (2), monetary sanctions may not be awarded:

(a) Under paragraph (1)(b) if the court determines that the claim or defense was initially presented to the court as a good faith argument for the extension, modification, or reversal of existing law or the establishment of new law, as it applied to the material facts, with a reasonable expectation of success.
(b) Under paragraph (1)(a) or paragraph (1)(b) against the losing party’s attorney if he or she has acted in good faith, based on the representations of his or her client as to the existence of those material facts.
(c) Under paragraph (1)(b) against a represented party.
(d) On the court’s initiative under subsections (1) and (2) unless sanctions are awarded before a voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.
(4) A motion by a party seeking sanctions under this section must be served but may not be filed with or presented to the court unless, within 21 days after service of the motion, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.
(5) In administrative proceedings under chapter 120, an administrative law judge shall award a reasonable attorney’s fee and damages to be paid to the prevailing party in equal amounts by the losing party and a losing party’s attorney or qualified representative in the same manner and upon the same basis as provided in subsections (1)-(4). Such award shall be a final order subject to judicial review pursuant to s. 120.68. If the losing party is an agency as defined in s. 120.52(1), the award to the prevailing party shall be against and paid by the agency. A voluntary dismissal by a nonprevailing party does not divest the administrative law judge of jurisdiction to make the award described in this subsection.
(6) The provisions of this section are supplemental to other sanctions or remedies available under law or under court rules.
(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.
History.s. 1, ch. 78-275; s. 61, ch. 86-160; ss. 1, 2, ch. 88-160; s. 1, ch. 90-300; s. 316, ch. 95-147; s. 4, ch. 99-225; s. 1, ch. 2002-77; s. 9, ch. 2003-94; s. 1, ch. 2010-129.

57.115 Execution on judgments; attorney’s fees and costs.

(1) The court may award against a judgment debtor reasonable costs and attorney’s fees incurred thereafter by a judgment creditor in connection with execution on a judgment.

(2) In determining the amount of costs, including attorney’s fees, if any, to be awarded under this section, the court shall consider:

(a) Whether the judgment debtor had attempted to avoid or evade the payment of the judgment; and
(b) Other factors as may be appropriate in determining the value of the services provided or the necessity for incurring costs in connection with the execution.
History.s. 13, ch. 87-145.

 

LAJUANA LOCKLIN JOHNSON, Plaintiff,
v.
BANK OF NEW YORK MELLON, et al., Defendants.

Case No. C16-0833JLR.United States District Court, W.D. Washington, Seattle.

August 10, 2016.Lajuana Locklin Johnson, Plaintiff, represented by Jill J. Smith, NATURAL RESOURCE LAW GROUP PLLC.

ORDER ISSUING SANCTIONS AND DISMISSING CASE

JAMES L. ROBART, District Judge.

I. INTRODUCTION

This matter comes before the court sua sponte. Previously, the court ordered Jill J. Smith of the Natural Resource Law Group, PLLC, counsel for Plaintiff Lajuana Locklin Johnson, to show cause why the court should not sanction her pursuant to Federal Rule of Civil Procedure 11. (OSC (Dkt. # 3); see alsoCompl. (Dkt. # 1).) The court then ordered Ms. Smith to appear, and she presented argument on July 28, 2016, on why the court should not issue sanctions. Having considered the written and oral arguments of counsel, the appropriate portions of the record, and the relevant law, and considering itself fully advised, the court DISMISSES this case WITH PREJUDICE and SANCTIONS Ms. Smith as described more fully herein.

II. BACKGROUND

On June 6, 2016, Ms. Smith filed a complaint on behalf of Ms. Johnson seeking to enforce and obtain damages pertaining to her purportedly rescinded loans. (Compl.) The rescission notices that Ms. Johnson attached to her complaint make clear that she sent those notices more than a decade after executing the loans. (See Rescission Notices (Dkt. # 1-1).) The Truth in Lending Act (hereinafter, “TILA”), 15 U.S.C. § 1635 et seq., permits rescission of certain loans but includes a three-year statute of repose. Jesinoski v. Countrywide Home Loans, Inc., ___ U.S. ___, 135 S. Ct. 790, 792-93 (2015)(“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated.”).

Having presided over several of Ms. Smith’s TILA rescission cases that feature substantially similar complaints to the one in this case, the court researched Ms. Smith’s other filings in this district. (See OSC at 5-6 (collecting cases).) Ms. Smith has filed a troubling series of such cases.[1] The Honorable Thomas S. Zilly sanctioned Ms. Smith $5,000.00 plus over $10,000.00 in attorneys’ fees after ordering Ms. Smith to show cause regarding how binding Supreme Court caselaw does not foreclose her claim and receiving no response.Johnson v. Nationstar Mortg. LLC, et al., No. C15-1754TSZ, Dkt. ## 35, 41. The claim in Johnson v. Nationstar strongly resembles Ms. Johnson’s untimely effort to rescind pursuant to TILA in this case.

In light of this backdrop, the court stayed this case and ordered Ms. Smith to show cause no later than July 7, 2016, why the court should not issue sanctions pursuant to Federal Rule of Civil Procedure 11. (OSC at 8-10.) The court indicated that it was specifically considering sanctioning Ms. Smith and Ms. Johnson by “dismissing this case, issuing monetary sanctions against Ms. Smith, and requiring Ms. Smith to file a copy of this order each time she files a new case in federal court.” (Id. at 9.) Ms. Smith failed to file a timely response to the court’s order to show cause. (See Dkt.) The court therefore ordered Ms. Smith to appear on July 28, 2016, for an in-court sanctions hearing. (7/18/16 Min. Ord. (Dkt. # 4) at 1-2.)

On July 27, 2016, almost three weeks after her response was due and the day before the sanctions hearing, Ms. Smith filed a response to the order to show cause. That response states the facts of the case as Ms. Smith sees them but without reference to any affidavit or other verified source. (OSC Resp. (Dkt. # 5) at 1-4.) In addition, Ms. Smith attempts to address some of the specific considerations the court ordered her to respond to in its prior order. (Id. at 5-6.) However, she makes no reference to any of the prior cases she has filed in this court or “the Ninth Circuit and Supreme Court cases cited” in the order to show cause. (See OSC at 9 (“Ms. Smith’s response to this order must address how Ms. Johnson’s claims, as stated in the complaint, comply with Rule 11(b)(2) in light of Nieuwejaar, Green Tree, the other cases in this District identified above, and the Ninth Circuit and Supreme Court cases cited therein. Finally, Ms. Smith must address what “information and belief” she has that Ms. Johnson’s loan in this case “was never consummated.”); see generally OSC Resp.)

Ms. Smith appeared in court on July 28, 2016, and defended the factual allegations and legal theory underpinning Ms. Johnson’s claim. (7/28/16 Min. Entry (Dkt. # 6).) In general terms, Ms. Smith argued that circumstances surrounding the loan, such as the manner in which it was funded, make it questionable whether the loan was ever consummated. If the loan was never consummated, she reasons, the three-year statute of repose never began and therefore never expired.

The matter of Rule 11 sanctions is now before the court.

III. ANALYSIS

A. Legal Standard

Federal Rule of Civil Procedure 11 governs sanctions of the type issued herein. Rule 11(b) provides in full:

By presenting to the court a pleading, written motion, or other paper— whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Fed. R. Civ. P. 11(b). In its June 22, 2016, order, the court placed Ms. Smith on notice and allowed her to respond regarding potential violations of Rules 11(b)(2) and 11(b)(3).

B. Violations of Rule 11

Ms. Johnson alleges that “[u]pon information and belief, the subject loan was never consummated.” (Compl. ¶ 13.) This conclusory allegation appears intended to circumvent TILA’s three-year statute of repose, which begins upon consummation of the loan.[2] See 15 U.S.C. § 1635(f) (“An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first. . . .”);Jesinoski, 135 S. Ct. at 792-93. At the hearing, Ms. Smith argued that if the loan was never consummated, the three-year statute of repose has not begun, has not expired, and therefore the rescission is timely.

In the numerous opportunities the court has afforded Ms. Smith to provide a factual basis for this allegation, she has provided none. Ms. Smith has also provided no evidence of any legal or factual “inquiry” that she performed, and accordingly the court can only determine whether the inquiry was “reasonable under the circumstances” based on the allegations and arguments that Ms. Smith has advanced in opposition to the frivolity of Ms. Johnson’s claim. Fed. R. Civ. P. 11(b).

Under TILA, “[c]onsummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13); see also Grimes v. New Century Mortg. Corp., 340 F.3d 1007, 1009 (9th Cir. 2003). “Under the Official Staff interpretation, state law determines when a borrower is contractually obliged.” Grimes, 340 F.3d at 1009 (citing 12 C.F.R. § 226, Supp. 1 (Official Staff Interpretations), cmt. 2(a)(13)); see also id. at 1010 (applying California law to determine whether a California loan was consummated for purposes of TILA). In Washington, “for a contract to form, the parties must objectively manifest their mutual assent” to “sufficiently definite” contractual terms. Keystone Land & Dev. Co. v. Xerox Corp., 94 P.3d 945, 949 (Wash. 2004). In addition, “the contract must be supported by consideration to be enforceable.” Id. (citing King v. Riveland, 886 P.2d 160, 164 (Wash. 1994)).

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

C. Appropriate Sanctions

Rule 11(d) limits sanctions to “what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Fed. R. Civ. P. 11(d). Ms. Smith’s actions in this case demonstrate that the previous sanctions she incurred—dismissal with prejudice, $11,972.50 in attorneys’ fees payable by her client, and a $5,000.00 sanction payable to the court—constituted insufficient specific deterrence. See Johnson v. Nationstar, No. C15-1754TSZ, Dkt. ## 35, 41-43. The court finds it appropriate to impose greater monetary sanctions payable by Ms. Smith and her law firm and dismiss the case with prejudice.[7] The court accordingly issues the following sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

IV. CONCLUSION

Based on the foregoing analysis, the court DISMISSES the case WITH PREJUDICE and SANCTIONS Ms. Smith as described above.

[1] See Pelzel v. GMAC Mortg. Grp., LLC, No. C16-5643RBL, Dkt. # 1 (filing a complaint on July 20, 2016, which alleges that “[u]pon information and belief, the subject loan was never consummated” and appears to suffer the same legal and factual deficiencies as this case); Elder v. Pinnacle Capital Mortg. Corp., et al., No. C16-5355RBL, Dkt. ## 1, 1-1 (filing a complaint on May 13, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Velasco, et al. v. Mortg. Elec. Registration Sys., Inc., et al., No. C16-5022RBL, Dkt. # 30 (dismissing a claim for enforcement of TILA rescission filed more than six years after the date of the rescission notice on res judicata grounds); Maxfield v. Indymac Mortg. Servs., et al., No. C16-0564RSM, Dkt. # 3 (filing a complaint on April 19, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Jenkins, et al. v. Wells Fargo Bank, N.A., No. 16-0452TSZ, Dkt. # 1 (filing a complaint on March 31, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Burton, et al. v. Bank of Am., et al., No. C15-5769RBL, Dkt. # 20 at 5 (citing Jesinoski, 135 S. Ct. at 792) (“The Supreme Court’s Jesinoskidecision— quoted by the Burtons—reiterates that while the three year limitation period may not apply to the commencement of an action, it absolutely applies to the time frame for sending a rescission notice. . . . The Burtons’ loan was consummated in 2005. Their conditional right to rescind expired in 2008—seven years before they sent the notice upon which this action relies. . . .”);Johnson v. Green Tree Servicing, LLC, et al., No. C15-1685JLR, Dkt. # 22 at 8-9 (dismissing the case and rejecting the arguments that TILA “rescission is effective upon mailing, regardless of when mailing occurs” and that “the court cannot presume consummation until after discovery is conducted on the matter”); Stennes-Cox v. Nationstar Mortg., LLC, et al., No. C15-1682TSZ, Dkt. # 15 at 3-5 (rejecting the plaintiff’s arguments based on Jesinoski and Paatalo and dismissing with prejudice her claim seeking to rescind a loan eight years after consummation); Nieuwejaar, et al. v. Nationstar Mortg. LLC, et al., No. C15-1663JLR, Dkt. ## 22 at 6-7 (“Plaintiffs also attempt to address the timeliness issue by raising the possibility that the loan was never consummated. . . . Plaintiffs’ complaint contains no allegations regarding the failure to establish a contractual obligation. . . . Thus, Plaintiffs have not pleaded facts that allow the court to reasonably infer that Plaintiffs’ notice of rescission was effective. . . .” (internal citations omitted)), 28 at 7 (“Moreover, despite the court’s guidance that Plaintiffs must allege facts about the loan transaction before the court can infer a problem with consummation . . ., Plaintiffs’ second amended complaint does not contain a single factual allegation to suggest the subject loan was never consummated. . . . Thus, Plaintiffs again fail to allege facts from which the court can infer that their May 2015 notice of rescission was timely.” (internal citations omitted)).

[2] In Nieuwejaar, the plaintiffs—also represented by Ms. Smith—”attempt[ed] to address the timeliness issue by raising the possibility that the loan was never consummated.” Nieuwejaar, Dkt. # 22 at 6. However, the plaintiffs’ original complaint “contain[ed] no allegations regarding the failure to establish a contractual obligation,” and the court accordingly dismissed that complaint with leave to amend. Id. at 7-8. The plaintiffs’ amended complaint added the same conclusory allegation that Ms. Johnson alleges in this case—that “[u]pon information and belief, the subject loan was never consummated.” Id., Dkt. # 24 ¶ 12. In dismissing the amended complaint with prejudice, the court unequivocally indicated to the plaintiffs that this allegation is insufficient:

[L]ike their original complaint, Plaintiffs’ second amended complaint makes no factual allegations about consummation of the subject loan. . . . Plaintiffs’ only allegation about consummation is that “[u]pon information and belief, the subject loan was never consummated.” . . . That statement is a legal conclusion, which is not entitled to a presumption of truth. . . . At this stage, the court considers the factual allegations in the complaint in the light most favorable to Plaintiffs. . . . However, as the court explained in its previous order of dismissal, Plaintiffs must actually allege facts that, if true, would support their claims. . . . The court still cannot infer a problem with consummation because Plaintiffs still have not pleaded any facts to support such an inference.

Id., Dkt. # 28 at 7 (internal citations omitted).

These events occurred before Ms. Smith filed the instant case on behalf of Ms. Johnson. (SeeCompl.) Ms. Smith’s troubling inability or unwillingness to heed the court’s prior ruling further demonstrates that Ms. Smith is engaged in progressively more frivolous efforts at pleading around TILA’s period of repose despite lacking a factual basis for her allegations.

[3] This court has previously rejected this argument by Ms. Smith. See Johnson v. Green Tree Servicing, LLC, No. C15-1685JLR, 2016 WL 1408115, at *4 n.9 (W.D. Wash. Apr. 6, 2006) (“Ms. Johnson’s only challenge to consummation suggests that `if the loan was never actually funded, but was part of a hedge fund investing scheme . . . then the loan was never consummated, for example.’ This hypothetical fails to support a plausible inference that the subject loan was not consummated because Ms. Johnson does not connect her hypothetical situation with specific allegations about the subject loan.” (alteration in original) (internal citations omitted)).

[4] “In a table-funded loan, the originator closes the loan in its own name, but is acting as an intermediary for the true lender, which assumes the financial risk of the transaction.” Easter v. Am. W. Fin., 381 F.3d 948, 955 (9th Cir. 2004).

[5] Ms. Smith’s argument regarding consummation is also inconsistent with her theory of the case. If the subject loan was never consummated, Ms. Johnson need not bring “an enforcement action of the rescission notice.” (OSC Resp. at 1.)

[6] In previous cases before the court, Ms. Smith has advanced a different—but equally frivolous—legal theory in support of her clients’ untimely TILA rescission actions. In Nieuwejaar, Dkt. # 14 at 4-6, for instance, Ms. Smith argued that Jesinoski vitiates the three-year statute of repose imposed by TILA. According to this theory, irrespective of the timeliness or legal effect of an obligor’s notice of rescission, sending such notice triggers a 20-day period in which the lender must respond; otherwise the loan is deemed rescinded. Id. Ms. Smith supported that argument by taking out of context the Supreme Court’s statement that the right to rescind under TILA is effective upon providing notice to the creditor. Id. at 4 (“Justice Scalia made a point of repeating that the rescission was effective by operation of law on the date that it was mailed and pointed out that the statute makes no distinction between disputed and undisputed rescissions — they are all effective when mailed.”). However, as Judge Zilly made clear in sanctioning Ms. Smith, “because plaintiff’s attempt at rescission was void ab initio, there was no obligation for defendants to file a suit challenging the attempted rescission.” Johnson v. Nationstar Mortg., Dkt. # 35 at 4; see also Jesinoski, 135 S. Ct. at 791 (“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated. The question presented is whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.”).

When confronted with Jesinoski at the hearing, Ms. Smith fell back on the factually unsupported and legally frivolous consummation argument described above. The consummation argument represents only the most recent permutation of Ms. Smith’s futile efforts to maintain frivolous, untimely TILA rescission claims in federal court.

[7] The court liberally considers granting amendment. See Fed. R. Civ. P. 15(a). However, after affording Ms. Smith numerous opportunities to persuade the court otherwise, the court concludes that Ms. Johnson’s case is based on frivolous legal theories. Accordingly, the court finds that amendment would be futile. See Greenspan v. Admin. Office of the U.S. Courts, No. 14cv2396 JTM, 2014 WL 6847460, at *11 (N.D. Cal. Dec. 4, 2014) (citing Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991)) (“While leave to amend is to be freely given under [Federal Rule of Civil Procedure] 15(a), the court denies the motion [to amend] because . . . amendment is futile under the legal theories asserted in the proposed [amended complaint].”).

In addition, the court considered requiring Ms. Smith to file a copy of this order with each new TILA-based complaint she files in this District. (See OSC at 9.) However, because that sanction could prejudice Ms. Smith’s present and future clients, the court declines to impose that sanction at this time.

 

Garfield Wrong – Jesinoski Loses

Neil Garfield Wrong – Jesinoski Loses, Big Time

Jesinoski v. Countrywide Home Loans, Inc., 134 S. Ct. 1935 – Supreme Court 2014

JESINOSKI v. Countrywide Home Loans, Inc., Dist. Court, Minnesota 2016

Neil Garfield and his minions and fellow incompetent “Lawyers who get it” across America have ballyhooed the January 2015 SCOTUS decision that Larry and Cheryle Jesinoski did not have to sue for TILA rescission within the 3 year period of repose after loan consummation for violation of the Truth In Lending Act by failing to give the necessary disclosures of the right to rescind. Well, the case went back to the US 8th Circuit Court of Appeals and thence back to the Minnesota District Court for trial of the question of rescission for the Jesinoskis.

A few days ago Judge Donovan Frank issued the below Order dashing Jesinoskis’ ill-founded hopes. The order granted summary judgment to the creditor because Jesinoskis had signed an acknowledgment of receipt of the disclosures, and because they did not have the money to tender as required by TILA for a rescission. It also denied statutory damages because no TILA violations occurred, even thought Jesinoskis claimed they spent $800,000, mostly in lawyer fees, prosecuting their case all the way up to the US Supreme Court and back.

It looks to me like they stupidly heeded some nonsense Garfield or one of his foreclosure pretense defense attorney buddies “who get it” had written. Ever since the 2015 SCOTUS Jesinoski opinon, Garfield has insisted that every mortgage loan borrower should send a notice of TILA rescission to the creditor. He has insisted that the creditor must terminate the lien immediately upon receipt of notice of rescission, AND tender return of what the borrower paid. The Jesinoski opinion shows with crystal clarity why Garfield was dead wrong – many borrowers have no just reason to rescind, and creditors would be idiots to go through the rescission trouble without just cause.

 

WARNING to Home Loan Borrowers:

Listen to foreclosure pretense defense lawyers at your peril.  Most will not diligently look for injuries you have suffered in your loan (TILA violations is one kind, but many other kinds are typical), and most litigate ONLY to delay the ultimate loss of your home.  Both delay and non-diligence violate bar rules, so you should file a bar complaint against your attorney if he did that.  And you should get a competent professional to examine your loan transaction comprehensively to dig out the valid causes of action you have against the appraiser, mortgage broker, loan officer, title company, lender, servicer, creditor, or other scalawag involved in your loan process.  The mortgage exam will give you the evidence of your injuries to show the judge, AND it will give you the basis for suing your incompetent, negligent, scamming attorney for legal malpractice.

Note to Borrowers Hoping for a Favorable Yvanova Decision

 

Yvanova v. New Century Mortgage Corp., 365 P. 3d 845 – Cal: Supreme Court 2016

Forget about it.  The California Supreme Court ruled in the Yvanova case that the borrower has the right to challenge the right of a creditor to foreclose a loan that the borrower breached. Yvanova had lost her house to foreclosure, and sued for wrongful foreclosure because New Century, instead of its bankruptcy liquidation trustee, sold Yvanova’s loan to a securitization trust sponsor.  Yvanova claimed New Century did not have the right to do that.  Now her case heads back to trial court like Jesinoskis’ did.  She will get a similar result.  After she has blown all that money of her husband’s on pointless litigation, probably at Garfield’s urging, she will now learn the hard way that the foreclosure was legitimate because she has no right to challenge the validity of New Century’s sale of her loan because she was not a party to it, did not get injured by it, and had no beneficial interest in it.  She has told me that I don’t understand her case.  Oh, yes I do.  And she will lose it.

TRENDING:  Creditors make Foreclosed Borrowers Pay Legal Fees

I have seen several cases recently where the foreclosing creditor has asked the court to award legal fees, which the borrower must pay, for litigation related to the foreclosure.  Most borrowers do not put up a fight.  But look at the Jesinoski and Yvanova cases.  They have dragged on for years, stupidly.  Creditors have grown sick and tired of the frivolous efforts by borrowers to challenge righteous foreclosures.  Jesinoski said he spent nearly $800,000 on his legal fees.  I imagine he padded the bill, but I imagine the creditor padded theirs even more.  Maybe they will ask the court to award legal fees and costs.  In my opinion, they should.

I shudder to contemplate the damage Neil Garfield has done to borrowers across America by encouraging them to fight pointless battles (hiring him as a consultant or attorney, of course) to defeat foreclosure.  You cannot win with his ridiculous methods.

If you want to win, and I mean win MONEY or its equivalent, get your mortgage examined (call me for a recommendation), and go on the attack.
Get more info at http://mortgageattack.com.

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JESINOSKI v. Countrywide Home Loans, Inc., Dist. Court, Minnesota 2016

Larry D. Jesinoski and Cheryle Jesinoski, individuals, Plaintiffs,
v.
Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, subsidiary of Bank of America N.A.; BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A., a Texas Limited Partnership f/k/a Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation; and John and Jane Does 1-10, Defendants.

Civil No. 11-474 (DWF/FLN).United States District Court, D. Minnesota.

July 21, 2016.Larry D. Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Cheryle Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Countrywide Home Loans, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

BAC Home Loans Servicing, LP, Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

Mortgage Electronic Registration Systems, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on a Motion for Summary Judgment brought by Defendants Countrywide Home Loans, Inc. (“Countrywide”), Bank of America, N.A. (“BANA”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (together, “Defendants”) (Doc. No. 51).[1] For the reasons set forth below, the Court grants Defendants’ motion.

BACKGROUND

I. Factual Background

This “Factual Background” section reiterates, in large part, the “Background” section included in the Court’s April 19, 2012 Memorandum Opinion and Order. (Doc. No. 23.)

On February 23, 2007, Plaintiffs Larry Jesinoski and Cheryle Jesinoski (collectively, “Plaintiffs”) refinanced their home in Eagan, Minnesota, by borrowing $611,000 from Countrywide, a predecessor-in-interest of BANA. (Doc. No. 7 (“Am. Compl.”) ¶¶ 7, 15, 16, 17; Doc. No. 55 (“Hanson Decl.”) ¶ 5, Ex. D (“L. Jesinoski Dep.”) at 125.) MERS also gained a mortgage interest in the property. (Am. Compl. ¶ 25.) Plaintiffs used the loan to pay off existing loan obligations on the property and other consumer debts. (L. Jesinoski Dep. at 114-15; Hanson Decl. ¶ 6, Ex. E (“C. Jesinoski Dep.”) at 49-50; Am. Compl. ¶ 22.)[2] The refinancing included an interest-only, adjustable-rate note. (L. Jesinoski Dep. at 137.) Plaintiffs wanted these terms because they intended to sell the property. (L. Jesinoski Dep. at 125-26, 137; C. Jesinoski Dep. at 38, 46-7.)

At the closing on February 23, 2007, Plaintiffs received and executed a Truth in Lending Act (“TILA”) Disclosure Statement and the Notice of Right to Cancel. (Doc. No. 56 (Jenkins Decl.) ¶¶ 5, 6, Exs. C & D; L. Jesinoski Dep. at 61, 67, 159; C. Jesinoski Dep. at 30-33; Hanson Decl. ¶¶ 2-3, Exs. A & B.) By signing the Notice of Right to Cancel, each Plaintiff acknowledged the “receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D.) Per the Notice of Right to Cancel, Plaintiffs had until midnight on February 27, 2007, to rescind. (Id.) Plaintiffs did not exercise their right to cancel, and the loan funded.

In February 2010, Plaintiffs paid $3,000 to a company named Modify My Loan USA to help them modify the loan. (L. Jesinoski Dep. at 79-81; C. Jesinoski Dep. at 94-95.) The company turned out to be a scam, and Plaintiffs lost $3,000. (L. Jesinoski Dep. at 79-81.) Plaintiffs then sought modification assistance from Mark Heinzman of Financial Integrity, who originally referred Plaintiffs to Modify My Loan USA. (Id. at 86.) Plaintiffs contend that Heinzman reviewed their loan file and told them that certain disclosure statements were missing from the closing documents, which entitled Plaintiffs to rescind the loan. (Id. at 88-91.)[3] Since then, and in connection with this litigation, Heinzman submitted a declaration stating that he has no documents relating to Plaintiffs and does not recall Plaintiffs’ file. (Hanson Decl. ¶ 4, Ex. C (“Heinzman Decl.”) ¶ 4.)[4]

On February 23, 2010, Plaintiffs purported to rescind the loan by mailing a letter to “all known parties in interest.” (Am. Compl. ¶ 30; L. Jesinoski Dep., Ex. 8.) On March 16, 2010, BANA denied Plaintiffs’ request to rescind because Plaintiffs had been provided the required disclosures, as evidenced by the acknowledgments Plaintiffs signed. (Am. Compl. ¶ 32; L. Jesinoski Dep., Ex. 9.)

II. Procedural Background

On February 24, 2011, Plaintiffs filed the present action. (Doc. No. 1.) By agreement of the parties, Plaintiffs filed their Amended Complaint, in which Plaintiffs assert four causes of action: Count 1—Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Count 2—Rescission of Security Interest; Count 3—Servicing a Mortgage Loan in Violation of Standards of Conduct, Minn. Stat. § 58.13; and Count 4—Plaintiffs’ Cause of Action under Minn. Stat. § 8.31. At the heart of all of Plaintiffs’ claims is their request that the Court declare the mortgage transaction rescinded and order statutory damages related to Defendants’ purported failure to rescind.

Plaintiffs do not dispute that they had an opportunity to review the loan documents before closing. (L. Jesinoski Dep. at 152-58; C. Jesinoski Dep. at 56.) Although Plaintiffs each admit to signing the acknowledgement of receipt of two copies of the Notice of Right to Cancel, they now contend that they did not each receive the correct number of copies as required by TILA’s implementing regulation, Regulation Z. (Am. Compl. ¶ 47 (citing C.F.R. §§ 226.17(b) & (d), 226.23(b)).)

Earlier in this litigation, Defendants moved for judgment on the pleadings based on TILA’s three-year statute of repose. In April 2012, the Court issued an order granting Defendants’ motion, finding that TILA required a plaintiff to file a lawsuit within the 3-year repose period, and that Plaintiffs had filed this lawsuit outside of that period. (Doc. No. 23 at 6.) The Eighth Circuit affirmed. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period.Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants now move for summary judgment.

DISCUSSION

I. Summary Judgment 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 of law.” Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the light most favorable to the nonmoving party. Weitz Co. v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). A party opposing a properly supported motion for summary judgment “must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).

II. TILA

Defendants move for summary judgment with respect to Plaintiffs’ claims, all of which stem from Defendants’ alleged violation of TILA—namely, failing to give Plaintiffs the required number of disclosures and rescission notices at the closing.

The purpose of TILA is “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). In transactions, like the one here, secured by a principal dwelling, 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 rescission notices and disclosures, whichever occurs later. 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. 12 C.F.R. § 226.23(a)-(b)(1). If the creditor fails to make the required disclosures or rescission 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).

If a consumer acknowledges in writing that he or she received a required disclosure or notice, a rebuttable presumption of delivery is created:

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

15 U.S.C. §1635(c).

A. Number of Disclosure Statements

Plaintiffs claim that Defendants violated TILA by failing to provide them with a sufficient number of copies of the right to rescind and the disclosure statement at the closing of the loan. (Am. Compl. ¶ 47.) Defendants assert that Plaintiffs’ claims (both TILA and derivative state-law claims) fail as a matter of law because Plaintiffs signed an express acknowledgement that they received all required disclosures at closing, and they cannot rebut the legally controlling presumption of proper delivery of those disclosures.

It is undisputed that at the closing, each Plaintiff signed an acknowledgement that each received two copies of the Notice of Right to Cancel. Plaintiffs argue, however, that no presumption of proper delivery is created here because Plaintiffs acknowledged the receipt of two copies total, not the required four (two for each of the Plaintiffs). In particular, both Larry Jesinoski and Cheryle Jesinoski assert that they “read the acknowledgment . . . to mean that both” Larry and Cheryle “acknowledge receiving two notices total, not four.” (Doc. No. 60 (“L. Jesinoski Decl.”) ¶ 3; Doc. No. 61 (“C. Jesinoski Decl.”) ¶ 3.) Thus, Plaintiffs argue that they read the word “each” to mean “together,” and therefore that they collectively acknowledged the receipt of only two copies.

The Court finds this argument unavailing. The language in the Notice is unambiguous and clearly states that “[t]he undersigned each acknowledge receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D (italics added).) Plaintiffs’ asserted interpretation is inconsistent with the language of the acknowledgment. The Court instead finds that this acknowledgement gives rise to a rebuttable presumption of proper delivery of two copies of the notice to each Plaintiff. See, e.g., Kieran v. Home Cap., Inc., Civ. No. 10-4418, 2015 WL 5123258, at *1, 3 (D. Minn. Sept. 1, 2015) (finding the creation of a rebuttable presumption of proper delivery where each borrower signed an acknowledgment stating that they each received a copy of the disclosure statement—”each of [t]he undersigned acknowledge receipt of a complete copy of this disclosure”).[5]

The only evidence provided by Plaintiffs to rebut the presumption of receipt is their testimony that they did not receive the correct number of documents. As noted inKieran, this Court has consistently held that statements merely contradicting a prior signature are insufficient to overcome the presumption. Kieran, 2015 WL 5123258, at *3-4 (citing Gomez v. Market Home Mortg., LLC, Civ. No. 12-153, 2012 WL 1517260, at *3 (D. Minn. April 30, 2012) (agreeing with “the majority of courts that mere testimony to the contrary is insufficient to rebut the statutory presumption of proper delivery”)); see also Lee, 692 F.3d at 451 (explaining that a notice signed by both borrowers stating “[t]he undersigned each acknowledge receipt of two copies of [notice]” creates “a presumption of delivery that cannot be overcome without specific evidence demonstrating that the borrower did not receive the appropriate number of copies”); Golden v. Town & Country Credit, Civ. No. 02-3627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (finding deposition testimony insufficient to overcome presumption); Gaona v. Town & Country Credit, Civ. No. 01-44, 2001 WL 1640100, at *3 (D. Minn. Nov. 20, 2001)) (“[A]n allegation that the notices are now not contained in the closing folder is insufficient to rebut the presumption.”), aff’d in part, rev’d in part, 324 F.3d 1050 (8th Cir. 2003).

Plaintiffs, however, contend that their testimony is sufficient to rebut the presumption and create a factual issue for trial. Plaintiffs rely primarily on the Eighth Circuit’s decision in Bank of North America v. Peterson, 746 F.3d 357, 361 (8th Cir. 2014),cert. granted, judgment vacated, 135 S. Ct. 1153 (2015), and opinion vacated in part, reinstated in part, 782 F.3d 1049 (8th Cir. 2015). In Peterson, the plaintiffs acknowledged that they signed the TILA disclosure and rescission notice at their loan closing, but later submitted affidavit testimony that they had not received their TILA disclosure statements at closing. Peterson, 764 F.3d at 361. The Eighth Circuit determined that this testimony was sufficient to overcome the presumption of proper delivery. Id. The facts of this case, however, are distinguishable from those inPeterson. In particular, the plaintiffs in Peterson testified that at the closing, the agent took the documents after they had signed them and did not give them any copies. Id.Here, it is undisputed that Plaintiffs left with copies of their closing documents. (L. Jesinoski Dep. at 94-95.) In addition, Plaintiffs did not testify unequivocally that they did not each receive two copies of the rescission notice. Instead, they have testified that they do not know what they received. (See, e.g., id. at 161.) Moreover, Cheryle Jesinoski testified that she did not look through the closing documents at the time of closing, and therefore cannot attest to whether the required notices were included. (C. Jesinoski Dep. at 85.)[6]

Based on the evidence in the record, the Court determines that the facts of this case are more line with cases that have found that self-serving assertions of non-delivery do not defeat the presumption. Indeed, the Court agrees with the reasoning in Kieran,which granted summary judgment in favor of defendants under similar facts, and which was decided after the Eighth Circuit issued its decision in Peterson.Accordingly, Plaintiffs have not overcome the rebuttable presumption of proper delivery of TILA notices, and Defendants’ motion for summary judgment is granted as to the Plaintiffs’ TILA claims.

B. Ability to Tender

Defendants also argue that Plaintiffs’ claims fails as a matter of law on a second independent basis—Plaintiffs’ admission that they do not have the present ability to tender the amount of the loan proceeds. Rescission under TILA is conditioned on repayment of the amounts advanced by the lender. See Yamamoto v. Bank of N.Y.,329 F.3d 1167, 1170 (9th Cir. 2003). This Court has concluded that it is appropriate to dismiss rescission claims under TILA at the pleading stage based on a plaintiff’s failure to allege an ability to tender loan proceeds. See, e.g., Franz v. BAC Home Loans Servicing, LP, Civ. No. 10-2025, 2011 WL 846835, at *3 (D. Minn. Mar. 8, 2011); Hintz v. JP Morgan Chase Bank, Civ. No. 10-119, 2010 WL 4220486, at *4 (D. Minn. Oct. 20, 2010). In addition, courts have granted summary judgment in favor of defendants where the evidence shows that a TILA plaintiff cannot demonstrate an ability to tender the amount borrowed. See, e.g., Am. Mortg. Network, Inc. v. Shelton,486 F.3d 815, 822 (4th Cir. 2007) (affirming grant of summary judgment for defendants on TILA rescission claim “given the appellants’ inability to tender payment of the loan amount”); Taylor v. Deutsche Bank Nat’l Trust Co., Civ. No. 10-149, 2010 WL 4103305, at *5 (E.D. Va. Oct. 18, 2010) (granting summary judgment on TILA rescission claim where plaintiff could not show ability to tender funds aside from selling the house “as a last resort”).

Plaintiffs argue that the Supreme Court in Jesinoski eliminated tender as a requirement for rescission under TILA. The Court disagrees. In Jesinoski, the Supreme Court reached the narrow issue of whether Plaintiffs had to file a lawsuit to enforce a rescission under 15 U.S.C. § 1635, or merely deliver a rescission notice, within three years of the loan transaction. Jesinoski, 135 S. Ct. at 792-93. The Supreme Court determined that a borrower need only provide written notice to a lender in order to exercise a right to rescind. Id. The Court discerns nothing in the Supreme Court’s opinion that would override TILA’s tender requirement. Specifically, under 15 U.S.C. § 1635(b), a borrower must at some point tender the loan proceeds to the lender.[7] Plaintiffs testified that they do not presently have the ability to tender back the loan proceeds. (L. Jesinoski Dep. at 54, 202; C. Jesinoski Dep. at 118-119.) Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground.[8]

Plaintiffs argue that if the Court conditions rescission on Plaintiffs’ tender, the amount of tender would be exceeded, and therefore eliminated, by Plaintiffs’ damages. In particular, Plaintiffs claim over $800,000 in damages (namely, attorney fees), and contend that this amount would negate any amount tendered. Plaintiffs, however, have not cited to any legal authority that would allow Plaintiffs to rely on the potential recovery of fees to satisfy their tender obligation. Moreover, Plaintiffs’ argument presumes that they will prevail on their TILA claims, a presumption that this Order forecloses.

C. Damages

Next, Defendants argue that Plaintiffs are not entitled to TILA statutory damages allegedly flowing from Defendants’ decision not to rescind because there was no TILA violation in the first instance. Plaintiffs argue that their damages claim is separate and distinct from their TILA rescission claim.

For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan.

D. State-law Claims

Plaintiffs’ state-law claims under Minn. Stat. § 58.13 and Minnesota’s Private Attorney General statute, Minn. Stat. § 8.31, are derivative of Plaintiffs’ TILA rescission claim. Thus, because Plaintiffs’ TILA claim fails as a matter law, so do their state-law claims.

ORDER

Based upon the foregoing, IT IS HEREBY ORDERED that:

1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED.

2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

[1] According to Defendants, Countrywide was acquired by BANA in 2008, and became BAC Home Loans Servicing, LP (“BACHLS”), and in July 2011, BACHLS merged with BANA. (Doc. No. 15 at 1 n.1.) Thus, the only two defendants in this case are BANA and MERS.

[2] Larry Jesinoski testified that he had been involved in about a half a dozen mortgage loan closings, at least three of which were refinancing loans, and that he is familiar with the loan closing process. (L. Jesinoski Dep. at 150-51.)

[3] Plaintiffs claim that upon leaving the loan closing they were given a copy of the closing documents, and then brought the documents straight home and placed them in L. Jesinoski’s unlocked file drawer, where they remained until they brought the documents to Heinzman.

[4] At oral argument, counsel for Plaintiffs requested leave to depose Heinzman in the event that the Court views his testimony as determinative. The Court denies the request for two reasons. First, it appears that Plaintiffs had ample opportunity to notice Heinzman’s deposition during the discovery period, but did not do so. Second, Heinzman’s testimony will not affect the outcome of the pending motion, and therefore, the request is moot.

[5] See also, e.g., Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 451 (6th Cir. 2012) (rebuttable presumption arose where each party signed an acknowledgement of receipt of two copies);Hendricksen v. Countrywide Home Loans, Civ. No. 09-82, 2010 WL 2553589, at *4 (W.D. Va. June 24, 2010) (rebuttable presumption of delivery of two copies of TILA disclosure arose where plaintiffs each signed disclosure stating “[t]he undersigned further acknowledge receipt of a copy of this Disclosure for keeping prior to consummation”).

[6] This case is also distinguishable from Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir. 2005), a case in which a borrower’s assertion of non-delivery was sufficient to overcome the statutory presumption. In Stutzka, the plaintiffs signed acknowledgements that they received required disclosures but left the closing without any documents. Stutzka, 420 F.3d at 776.

[7] TILA follows a statutorily prescribed sequence of events for rescission that specifically discusses the lender performing before the borrower. See § 1635(b). However, TILA also states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.” Id.Considering the facts of this case, it is entirely appropriate to require Plaintiffs to tender the loan proceeds to Defendants before requiring Defendants to surrender their security interest in the loan.

[8] The Court acknowledges that there is disagreement in the District over whether a borrower asserting a rescission claim must tender, or allege an ability to tender, before seeking rescission. See, e.g. Tacheny v. M&I Marshall & Ilsley Bank, Civ. No. 10-2067, 2011 WL 1657877, at *4 (D. Minn. Apr. 29, 2011) (respectfully disagreeing with courts that have held that, in order to state a claim for rescission under TILA, a borrower must allege a present ability to tender). However, there is no dispute that to effect rescission under § 1635(b), a borrower must tender the loan proceeds. Here, the record demonstrates that Plaintiffs are unable to tender. Therefore, their rescission claim fails on summary judgment.