Keiran v. Home Capital, Inc.

• Decision Date: 12 July 2013
• Docket Number: 12–1053.,Nos. 11–3878,s. 11–3878
• Citation: 720 F.3d 721
• Parties: Alan G. KEIRAN and Mary Jane Keiran, Plaintiffs–Appellants, v. HOME CAPITAL, INC., a Georgia Corp.; BAC Home Loans Servicing, L.P.; Bank of New York Mellon, as Trustee for the Holders of CWABS, Inc., Asset–Backed Certificates, Series 2007–6; and John and Jane Does 1–10, Defendants–Appellees. Steven J. Sobieniak, an individual; Victoria McKinney, an individual Plaintiffs–Appellants, v. BAC Home Loans Servicing, LP, a Texas Limited Partnership, as successor in interest to Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware corporation; John and Jane Does 1–10 Defendants–Appellees. Consumer Financial Protection Bureau, Amicus on Behalf of Appellant. American Bankers Association; Consumer Bankers Association; Consumer Mortgage Coalition, Amici on Behalf of Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

720 F.3d 721

Alan G. KEIRAN and Mary Jane Keiran, Plaintiffs–Appellants,

v.HOME CAPITAL, INC., a Georgia Corp.; BAC Home Loans Servicing, L.P.; Bank of New York Mellon, as Trustee for the Holders of CWABS, Inc., Asset–Backed Certificates, Series 2007–6; and John and Jane Does 1–10, Defendants–Appellees.

Steven J. Sobieniak, an individual; Victoria McKinney, an individual Plaintiffs–Appellants,

v.BAC Home Loans Servicing, LP, a Texas Limited Partnership, as successor in interest to Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware corporation; John and Jane Does 1–10 Defendants–Appellees.

Consumer Financial Protection Bureau, Amicus on Behalf of Appellant.

American Bankers Association; Consumer Bankers Association; Consumer Mortgage Coalition, Amici on Behalf of Appellee.

Nos. 11–3878, 12–1053.

United States Court of Appeals,

Eighth Circuit.

Submitted: Oct. 16, 2012.

Filed: July 12, 2013.

Jeramie Steinert, argued, Minneapolis, MN, Jeffrey R. Vesel, Stillwater, on the brief, for Plaintiffs–Appellants.

Aaron Daniel Van Oort, argued, Andre Hanson, Minneapolis, D. Charles Macdonald, Charles F. Weber, and Michelle E. Weinberg, all of Minneapolis, MN, Andrew B. Messite, New York, NY, on the brief, for Defendants–Appellees.

Rachel Rodman, argued, Washington DC, Leonard J. Kennedy, To–Quyen Truong, David M. Gossett, Peter G. Wilson, Kristin Bateman, Jefrey P. Naimon, Kirk D. Jensen, and Michael R. Williams, on the brief, for Amicus on Behalf of Appellant and Interested Party Consumer Financial Protection Bureau.

Before MURPHY, BEAM, and SHEPHERD, Circuit Judges.

BEAM, Circuit Judge.

These consolidated cases involve claims brought under the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., related to the plaintiffs' mortgage transactions. Stephen Sobieniak and Victoria McKinney (collectively “Sobieniaks”) seek rescission and money damages from BAC Home Loans Servicing (BAC). Alan and Mary Jane Keiran seek the same relief from Bank of New York Mellon (BNYM). We affirm the district court.¹

I. BACKGROUND

Due to the similarity of issues, these cases were consolidated for appeal, but we set forth the facts of each separately. On March 6, 2007, the Sobieniaks contacted Countrywide bank, requesting to essentially refinance their mortgage loan. Countrywide sent Sobieniaks TILA disclosures showing a principal value of $567,000 and an annual percentage rate of 6.021%, leading to total payments of $1,207,446.33. On March 22, 2007, the Sobieniaks executed a promissory note with a principal value of $562,600 and a fixed annual percentage rate of 5.875%, leading to total payments amount of $1,198,077.73. The note was secured by the Sobieniaks' principal residence, located in Wayzata, Minnesota. At closing, each of the Sobieniaks acknowledged receiving, as relevant to this action, two copies of the notice of right to cancel (rescind), and one copy of the TILA disclosure statement.

On January 15, 2010, the Sobieniaks sent a notice of rescission to BAC (which merged with Countrywide and became its successor in interest). On January 29, BAC denied the request to rescind because, in BAC's view, the Sobieniaks had received the correct number of copies of the required notices of right to cancel and TILA disclosures. On January 14, 2011, the Sobieniaks filed the present action pro se, but later obtained counsel and filed an amended complaint seeking rescission, money damages and a declaration that the mortgage is void, all due to BAC's alleged failure to provide two copies of a TILA disclosure at closing. The district court granted summary judgment in favor of BAC, finding that the Sobieniaks' claim for money damages for the failure to provide documents at closing was barred by the one-year statute of limitations in 15 U.S.C. § 1640(e); that the Sobieniaks were not entitled to money damages for failure to rescind because the Sobieniaks had not rebutted the presumption that they received all of the required TILA disclosures, and alternatively that the disclosure documents were valid on their face. The court further held that the Sobieniaks had no right to rescind because they did not file the suit for rescission within the three-year statute of repose contained in 15 U.S.C. § 1635(f).

The facts in the Keiran case are similar. In December 2006, the Keirans and Home Capital, Inc. (HCI) executed a promissory note in the amount of $404,000 in exchange for a mortgage of real property located in Lakeville, Minnesota. The loan was subsequently assigned to, and is currently held by BNYM. At closing, each of the Keirans acknowledged receiving, as relevant to this action, two copies of the notice of right to cancel (rescind), and one copy of the TILA disclosure statement. The Keirans stopped making payments on the note in November 2008. On October 8, 2009, the Keirans sent rescission notices to BNYM and to BAC—which services the Keirans' note for BNYM—alleging that they did not receive sufficient copies of disclosures required by TILA at the December 2006 closing. On January 7, 2010, BAC informed the Keirans that no basis for rescission existed. On October 29, 2010, the Keirans filed the current action seeking rescission of the mortgage loan, money damages and a declaratory judgment voiding BNYM's security interest in the Keirans' mortgage loan. Like the Sobieniaks, they alleged rescission was proper because they were entitled to, and did not receive, more than one copy of the TILA Disclosure Statement at closing. The bank moved for summary judgment, which the district court granted, holding that the claims for money damages for TILA deficiencies at closing were barred by the one-year statute of limitations, that the claim for money damages for the bank's failure to rescind was without merit because there were no evidently deficient TILA notices in the Keirans' paperwork at closing, and that the claim for rescission was barred by the three-year statute of repose.

On appeal, plaintiffs challenge the district court's rulings regarding whether filing suit, or instead simply giving notice to the bank within three years is required to preserve the right of rescission under 15 U.S.C. § 1635(f). Additionally, they challenge the district court's rulings that the banks were entitled to summary judgment on plaintiffs' claims for money damages.

II. DISCUSSION

We review the district court's grant of summary judgment de novo, viewing the evidence and inferences in favor of the nonmoving party, and affirming if there is no genuinely material factual dispute and the movant is entitled to judgment as a matter of law. Davis v. U.S. Bancorp, 383 F.3d 761, 765 (8th Cir.2004). A complete failure to prove an essential element of a case renders all other facts immaterial. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Congress enacted TILA “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). We broadly construe TILA in favor of consumers. Rand Corp. v. Moua, 559 F.3d 842, 845 (8th Cir.2009). In transactions secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. 15 U.S.C. §§ 1635(a), 1641(c). The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs last. Id. § 1635(a). Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest,” 12 C.F.R. § 226.23(a), and must include two copies of a notice of the right to rescind (also referred to as the Notice of Right to Cancel), id. § 226.23(b)(1), and a TILA disclosure statement, outlining:

the annual percentage rate, the method of determining the finance charge and the balance upon which a finance charge will be imposed, the amount of the finance charge, the amount to be financed, the total of payments, the number and amount of payments [and] the due dates or periods of payments scheduled to repay the indebtedness.

15 U.S.C. § 1602(u).

These disclosures must be made “clearly and conspicuously in writing, in a form that the consumer may keep.” 12 C.F.R. § 226.17(a)(1). If the creditor fails to make the required disclosures or rescission notices, the borrower may rescind beyond the unconditional three-day period, but that “right of rescission shall expire three years after the date of consummation of the transaction.” 15 U.S.C. § 1635(f); see also12 C.F.R. § 226.23(a)(3). TILA allows for money damages and attorney fees when a creditor violates the statute. 15 U.S.C. §§ 1635(g), 1640(a). A claim for money damages must be brought within one year ² from the date of the occurrence of the violation. Id. § 1640(e).

A. Rescission

The first issue we consider is whether the plaintiffs timely filed this action to enforce their right of rescission, which “shall expire three years after the date” of the consummation of their loan transactions. Id. § 1635(f). Plaintiffs contend that to preserve that right, they needed only to inform the lender, within three years and in writing, of their intent to rescind. The banks argue that the borrower must instead file suit for rescission within three years of closing or the right expires pursuant to the terms of § 1635(f). Our sister circuits are split on this issue.

In Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir.2012). the Fourth Circuit came to the conclusion that giving the creditor written notice, in any form, was enough to satisfy the statute of repose. Id. at 277–78. The Gilbert court relied heavily upon the statute's implementing regulation, known as Regulation Z:

To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice...