Rodash v. AIB Mortg. Co.

• Decision Date: 21 March 1994
• Docket Number: No. 93-4125,93-4125
• Citation: 16 F.3d 1142
• Parties: Martha RODASH, Plaintiff-Counter-Defendant-Appellant, v. AIB MORTGAGE COMPANY, Defendant-Appellee, Empire of America Realty Credit Corporation, Defendant-Counter-Claimant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1142

16 F.3d 1142

62 USLW 2599

Martha RODASH, Plaintiff-Counter-Defendant-Appellant, v. AIB MORTGAGE COMPANY, Defendant-Appellee,

Empire of America Realty Credit Corporation,

Defendant-Counter-Claimant-Appellee.

No. 93-4125.

United States Court of Appeals,

Eleventh Circuit.

March 21, 1994.

Charles M. Baird, Legal Services of Greater Miami, Inc., Miami, FL, for appellant.

R. Hugh Lumpkin, Michael B. Berger, Keith, Mack, Lewis, Cohen & Lumpkin, Miami, FL, for appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before CARNES, Circuit Judge, FAY ^* and JOHNSON, Senior Circuit Judges.

JOHNSON, Senior Circuit Judge:

The appellant, Martha Rodash, appeals the district court's denial of her motion for summary judgment regarding violations of the federal Truth in Lending Act ("TILA") and its grant of the appellees' cross-motion for summary judgment. Because we conclude that TILA was violated, we hold that the district court's orders were erroneous as a matter of law. We therefore reverse the district court.

I. STATEMENT OF THE CASE

A. Factual Background

The material facts in this case are not disputed. On January 18, 1991, Rodash obtained a home equity mortgage on her principal residence with appellee AIB Mortgage Company ("AIB") to pay for medical treatment for her multiple sclerosis. Rodash executed (1) a Promissory Note in favor of AIB evidencing an obligation to repay $102,000 and (2) a mortgage securing repayment of the Note to AIB. Later that day, AIB assigned its interest to appellee Empire of America Realty Credit Corporation ("Empire"). At the loan closing, the appellees gave Rodash the following four documents (1) a federal Truth-in-Lending Disclosure Statement, (2) a Mortgage Settlement Statement, (3) a Notice of Right to Cancel, which stated that Rodash had three days to rescind the mortgage, and (4) an Acknowledgment of Receipt of Notice of Right to Cancel and Election Not to Cancel. The Settlement Statement reflected itemized charges of $22 for Federal Express delivery, $204 for intangible Florida taxes, and $6 for assignment of the mortgage. These charges were itemized under the "amount financed" in the transaction. Rodash signed the Election Not to Cancel on January 18, 1991, and the loan proceeds were distributed sometime after January 23, 1991. Rodash stopped making her mortgage payments as of July 1, 1991, and on December 26, 1991, Rodash's counsel wrote the appellees, stating she was rescinding the transaction under TILA and seeking cancellation of the security interest therein. Empire accelerated the balance due under the Note and filed a foreclosure action in state court.

B. Procedural History

On February 13, 1992, Rodash filed an action against the appellees under TILA, 15 U.S.C.A. Secs. 1601-1641 (West 1982 & Supp.1993), and the Act's accompanying regulation, Regulation Z, 12 C.F.R. Sec. 226 (1993), seeking rescission of the transaction and statutory penalties. In April 1992, the district court denied the appellees' motions to dismiss the case or, in the alternative, for a stay pending the outcome of the state court foreclosure action. That same April, Rodash moved for summary judgment. The appellees jointly cross-motioned for summary judgment in June 1992. In December 1992, the district court entered an order of final summary judgment in favor of the appellees and against Rodash, holding that TILA had not been violated and that, as a matter of law, Rodash was not entitled to relief thereunder.

C. Standard of Review

This Court reviews de novo a district court's disposition of summary judgment motions. Ordway v. United States, 908 F.2d 890, 893 (11th Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 2916, 115 L.Ed.2d 1080 (1991). We "must determine whether there is any genuine issue of material fact and whether the moving party is entitled to a judgment as a matter of law. All evidence and reasonable factual inferences drawn therefrom are reviewed in the light most favorable to the party opposed to the motion." Warren v. Crawford, 927 F.2d 559, 561-62 (11th Cir.1991). See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (setting out summary judgment standard). We review de novo a district court's interpretation and application of a statute. Williams v. Homestake Mortgage Co., 968 F.2d 1137, 1139 (11th Cir.1992).

II. ANALYSIS

According to Rodash, the district court erred by finding that (1) the appellees provided clear and conspicuous disclosure of her right to rescind the transaction and (2) the appellees did not understate the finance charge. After setting out general principles, we address each of these contentions in turn.

A. General Principles

Congress designed TILA to promote the informed use and awareness of the cost of credit by consumers. Shroder v. Suburban Coastal Corp., 729 F.2d 1371, 1380 (11th Cir.1984). The Act ensures a meaningful disclosure of credit terms to enable consumers to compare readily the various credit terms available in the marketplace. Id. Congress intended the statute to create a system of private attorneys general to aid its enforcement; thus, to further its remedial purpose, we liberally construe its language in favor of the consumer. McGowan v. King, Inc., 569 F.2d 845, 848 (5th Cir.1978). ¹ Accord Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3rd Cir.1990). Additionally, creditors must strictly comply with TILA's requirements. Shroder, 729 F.2d at 1380 (The creditor's disclosures must be in "the proper technical form and in the proper locations on the contract, as mandated by the requirements of TILA and Regulation Z. Liability will flow from even minute deviations from requirements."). Moreover, the consumer may sue for enforcement even if she is not actually deceived or harmed. Zamarippa v. Cy's Car Sales, 674 F.2d 877, 879 (11th Cir.1982) ("An objective standard is used to determine violations of the TILA, based on the representations contained in the relevant disclosure documents; it is unnecessary to inquire as to the subjective deception or misunderstanding of particular consumers.").

B. Rodash's Rescission of the Transaction

On the closing date of January 18, 1991, the appellees provided Rodash the Notice of the Right to Cancel. On a separate, single sheet of paper, the appellees provided an acknowledgment that the Notice of Right to Cancel was received and provided an Election Not to Cancel, a pre-printed waiver of that right. ² Beneath the waiver provision, Rodash signed the sole signature line on the paper. The appellees maintain that by signing this document Rodash waived her right to rescind the contract. Rodash, who rescinded the agreement in December 1991, contends that Empire's provision of the Election Not to Cancel on January 18 violated TILA because she had an unqualified right to rescind the transaction within three business days. Rodash also contends that the appellees violated TILA because they did not clearly disclose her right to rescind as required by the Act.

As part of TILA, Congress provided the consumer with the right to rescind a credit transaction by notifying the creditor within set time limits of the consumer's intent to rescind. ³ Williams, 968 F.2d at 1139. See 12 C.F.R. Sec. 226.23(a) (restating consumer's right of rescission). TILA specifically permits a consumer borrower to rescind a loan transaction that results in the creditor taking a security interest in the consumer's principal dwelling. In re Porter, 961 F.2d 1066, 1073 (3d Cir.1992); see 15 U.S.C.A. Sec. 1635(a). The consumer has an absolute right to rescind the agreement for three business days following the closing of the transaction. 15 U.S.C.A. Sec. 1635(a); 12 C.F.R. Sec. 226.23(a)(3). In addition, the consumer's ability to rescind an agreement may be extended for up to three years if the creditor fails to make all material disclosures to the borrower, including disclosure of the right to rescind. 12 C.F.R. Sec. 226.23(a)(3).

The purpose of the three-day waiting period is "to give the consumer the opportunity to reconsider any transaction which would have the serious consequence of encumbering the title to his [or her] home." S.Rep. No. 368, 96th Cong., 2d Sess. 28 (1980), reprinted in 1980 U.S.C.C.A.N. 236, 264. Thus, the sole instance in which the statute and its implementing regulations allow the consumer to waive her right to rescind within three days is where the consumer believes that a bona fide emergency necessitates an immediate extension of credit, in which case the consumer must sign a dated, handwritten statement that describes the emergency. 12 C.F.R. Sec. 226.23(e). Printed forms may not be used for this purpose. Id. Here, the appellees attempted to modify the rescission by having Rodash sign a pre-printed waiver of her right to rescind. This is prohibited. See id. Hence, we find the putative waiver to be invalid. Accordingly, our inquiry is whether the appellees' Notice of Right to Cancel is deficient, as Rodash's attempt to rescind came after the three-day cancellation period following the transaction but before three years had passed. ⁴

Under the Act, the creditor must "clearly and conspicuously disclose" the consumer's right to rescind the transaction. 15 U.S.C.A. Sec. 1635(a); see 12 C.F.R. Sec. 226.23(b)(2) ("Notice [of right to rescind] shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose ... [t]he consumer's right to rescind the transaction."). To determine whether the notice given Rodash was confusing or misleading, this Court must scrutinize the circumstances of the transaction. See In re Porter, 961 F.2d at 1076 (determination of clear and conspicuous notice of rescission rights under TILA is intensely fact-based). As noted supra, the creditor's subjective intent is irrelevant to this determination; rather, notice of the right to rescind must be objectively...