Deutsche Bank Nat'l Trust Co. v. Gardner
| Decision Date | 14 October 2015 |
| Citation | 2015 PA Super 219,125 A.3d 1221 |
| Parties | DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for the Registered Holders of Ameriquest Mortgage Securities, Inc., Asset–Backed Pass Through Certificates, Series 2005–R2, Appellant v. Michael S. GARDNER, Appellee. |
| Court | Pennsylvania Superior Court |
125 A.3d 1221
2015 PA Super 219
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for the Registered Holders of Ameriquest Mortgage Securities, Inc., Asset–Backed Pass Through Certificates, Series 2005–R2, Appellant
v.
Michael S. GARDNER, Appellee.
Superior Court of Pennsylvania.
Argued Aug. 19, 2015.
Filed Oct. 14, 2015.
Reargument Denied Dec. 2, 2015.
Brett L. Messinger, Philadelphia and Courtenay R. Dunn, Reston, VA, for appellant.
Michael S. Gardner, appellee, pro se.
OpinionOPINION BY STRASSBURGER, J.:
Deutsche Bank National Trust Company, as Trustee for the Registered Holders of Ameriquest Mortgage Securities, Inc., Asset–Backed Pass Through Certificates, Series 2005–R2 (Deutsche Bank), appeals from the judgment entered in favor of Michael S. Gardner in this mortgage foreclosure action. We vacate the judgment and the judgment order in equity upon which it was based and remand with instructions.
The trial court offered the following summary of the case.
Gardner lives in a residence he owns at 9887 Verree Road, Philadelphia, PA. In June 2003, he signed a mortgage on his home and borrowed $140,000 from Ameriquest. In January 2005, Gardner and Ameriquest refinanced in the amount of $185,400, adding $45,400 to the loan. A second mortgage was signed. At closing Ameriquest gave Gardner a federal H–8 Form to advise Gardner of his rescission rights.
At the early stages of the economic downturn in October 2007 and facing economic pressure, Gardner applied to rescind the refinance agreement and stopped repaying the loan. He learned he had not been given correct disclosure of his rescission rights, and this had taken place at a time when Ameriquest's mortgage practices were coming under national scrutiny. Hundreds of actions had been filed against Ameriquest under the [Truth in Lending Act (TILA) ], and Gardner added his own complaint in the U.S. Court for the Eastern District of Pennsylvania. Gardner's action to enforce his rescission rights for the refinance loan was transferred and consolidated with an ongoing TILA class action against Ameriquest in the U.S. Court for the Northern District of Illinois. When this class action settled, Gardner waived his direct TILA claims against Ameriquest and kept the right to defend himself against mortgage foreclosure. Gardner also preserved his right to assert an affirmative defense based on inadequate notice.
* * *
On January 12, 2008, Deutsche Bank, trustee for Ameriquest, filed this mortgage foreclosure action against [ ] Gardner. This case was in limbo for five years until the federal class action settled.
A bench trial took place on April 14, 2014. Gardner represented himself pro se. Findings of fact and conclusions of law were entered on April 28, 2014. Among the points: 1) Deutsche Bank had standing as an Ameriquest trustee to bring this mortgage foreclosure action ...; 2) Ameriquest did not comply with the TILA requirements, and therefore, Gardner's affirmative defense was valid and prevented foreclosure; 3) Gardner was entitled to rescind his refinance loan, but only up to the $45,400 which was added during the refinance, and so was not permitted to rescind the original $140,000 loan; and 4) Gardner's home remains mortgaged to Deutsche Bank
under terms of the first mortgage in the amount of $140,000.
Trial Court Opinion, 3/26/2015, at 1–3.
Deutsche Bank timely filed a post-trial motion. By order of September 5, 2014, the trial court denied the motion without prejudice for Deutsche Bank to seek in an in personam action recovery of the $45,400 Gardner received pursuant the refinance agreement.1 Judgment was entered on September 23, 2014, and Deutsche Bank timely filed a notice of appeal. Both Deutsche Bank and the trial court complied with Pa.R.A.P.1925.
Deutsche Bank presents this Court with the following questions:
A. Whether the trial court committed an error of law in holding that Gardner's right to rescind his 2005 loan refinance transaction with Deutsche Bank's predecessor in interest pursuant to [TILA] was extended from three days to three years because, at closing, Gardner received the incorrect model Federal Reserve Board form notice of that right to rescind, notwithstanding that the form delivered to Gardner “clearly and conspicuously” informed him of his right to rescind the refinance transaction at issue?
B. Whether the trial court committed an error of law or abused its discretion in structuring its Judgment Order in Equity to permit Gardner to rescind his 2005 loan refinance transaction where it (1) failed to require Gardner to tender back to Deutsche Bank all funds received by Gardner or expended on his behalf following the rescission, as required by TILA, and (2) refused to condition Gardner's ability to rescind on his first tendering to Deutsche Bank the funds necessary to make it whole, given the evidence that Gardner has no ability to repay Deutsche Bank?
Deutsche Bank's Brief at 2–3 (trial court answers omitted).
“In reviewing a decision of a court after a non-jury trial, we will reverse the trial court only if its findings are predicated on an error of law or are unsupported by competent evidence in the record.” Boehm v. Riversource Life Ins. Co., 117 A.3d 308, 321 (Pa.Super.2015) (quoting Wallace v. Pastore, 742 A.2d 1090, 1092 (Pa.Super.1999)).
In construing the federal statutes and regulations at issue in this case, we bear in mind that “[w]e are not bound by decisions of the federal courts, but we may rely on them for persuasive authority.” EMC Mortgage, LLC v. Biddle, 114 A.3d 1057, 1064 n. 6 (Pa.Super.2015). Furthermore, “whenever possible, Pennsylvania courts follow the Third Circuit [courts] so that litigants do not improperly walk across the street to achieve a different result in federal court than would be obtained in state court.” Parr v. Ford Motor Co., 109 A.3d 682, 693 n. 8 (Pa.Super.2014) (en banc ) (internal citations and quotation marks omitted).
We begin with an overview of TILA.
Congress enacted TILA in 1968 to promote the informed use of credit. To achieve this goal, TILA sought 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. A consumer who does not receive the requisite disclosures regarding a loan secured by his principal dwelling may rescind the loan agreement.
Consumers have an absolute right to rescind for three business days after closing on the loan. To exercise this no questions asked right of rescission, the obligor on the mortgage note must simply notify the creditor of his intention to do so, consistent with the applicable regulations. No court filing is necessary to effectuate this right.
If the lender fails to make the requisite disclosures before the loan commences, the three-day restriction on the right of rescission does not begin to run. A consumer who does not receive the requisite disclosures has a right to rescind that lasts until three days after the disclosures are received. That right of rescission is not perpetual, however, even if the consumer never receives all of the requisite disclosures. The right expire[s] three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first.
Sherzer v. Homestar Mortgage Servs., 707 F.3d 255, 255–56 (3d Cir.2013) (internal citations and quotation marks omitted).
The Board of Governors of the Federal Reserve System created the H–8, a model form for general usage by lenders to satisfy the notice provision of TILA. Porter v. Mid–Penn Consumer Discount Co., 961 F.2d 1066, 1067 (3d Cir.1992). However, it is not necessary that any particular form is used because “the law does not require an ideal notice of rescission rights, just a clear, accurate, and conspicuous one.” Id. at 1076.
There are exceptions to the right to rescind. The portion of the Code of Federal Regulations implementing TILA, known as Regulation Z, provides, in relevant part, as follows:
The right to rescind does not apply to ... [a] refinancing or consolidation by the same creditor of an extension of credit already secured by the consumer's principal dwelling. The right of rescission shall apply, however, to the extent the new amount financed exceeds the unpaid principal balance, any earned unpaid finance charge on the existing debt, and amounts attributed solely to the costs of the refinancing or consolidation.
12 C.F.R. § 226.23(f)(2). In other words, with a TILA violation in the context of a refinance loan, “a borrower may rescind the ‘new money’ portion ... but not the ‘old money’ portion” of the loan. Porter, 961 F.2d at 1074. “Because rescission rights in ‘refinancing’ situations differ from those applicable in new-loan situations, the Board promulgated, in addition to the H–8, a model rescission form H–9 for partially exempt ‘refinancings.’ ” Id.
These differences in rescission rights are demonstrated by the comparison of the H–8 and H–9 model forms. The H–8 model form provides, inter alia, as follows:
You are entering...
To continue reading
Request your trial