Harris v. Schonbrun

• Decision Date: 10 December 2014
• Docket Number: No. 13–15505.,13–15505.
• Citation: 773 F.3d 1180
• Parties: Darcel D. Fisher HARRIS, Plaintiff–Appellant–Cross Appellee, v. Harvey SCHONBRUN, Trustee, Defendant–Appellee–Cross Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

773 F.3d 1180

Darcel D. Fisher HARRIS, Plaintiff–Appellant–Cross Appellee

v.Harvey SCHONBRUN, Trustee, Defendant–Appellee–Cross Appellant.

No. 13–15505.

United States Court of Appeals, Eleventh Circuit.

Dec. 10, 2014.

Julianna Easter Groot, Brett A. Mearkle, Mearkle Trueblood Adam, PL, Jacksonville, FL, for Plaintiff–Appellant–Cross Appellee.

Joseph Anthony Eustace, Jr., Anthony Joseph Laspada, Anthony J. Laspada, PA, Tampa, FL, for Defendant–Appellee–Cross Appellant.

Appeals from the United States District Court for the Middle District of Florida. D.C. Docket No. 3:12–cv–00488–MCR.

Before WILLIAM PRYOR and JORDAN, Circuit Judges, and JONES,^* District Judge.

Opinion

WILLIAM PRYOR, Circuit Judge:

This appeal requires us to decide two questions: (1) whether a lender can satisfy a statutory obligation to give a borrower clear and conspicuous notice of a right to rescind a loan, see Truth in Lending Act, 15 U.S.C. § 1635, when the lender instructs the borrower to sign simultaneously both the loan and a postdated waiver of the borrower's right to rescind; and (2) if it rescinds the loan, whether the district court must award the borrower statutory damages, attorney's fees, and costs. Darcel D. Fisher Harris sought to rescind a loan she entered into years earlier with Harvey Schonbrun, a trustee of a mortgage investment trust. Harris contended that, because the mortgaged property was her “principal dwelling” and Schonbrun failed to give her “clear [ ] and conspicuous[ ]” notice that she had a statutory right to rescind the loan within the three business days after the “consummation of the transaction,” id. § 1635(a), her statutory right to rescind was extended to three years from the date of the loan, id. § 1635(f). The district court found that the mortgaged property was Harris's “principal dwelling” and Schonbrun failed to give Harris adequate notice of her right to rescind. Id. § 1635. The district court granted rescission, id. § 1635(a), but denied Harris's request for statutory damages, attorney's fees, and costs, id. § 1640(a). We affirm the grant of rescission; reverse the denial of statutory damages, attorney's fees, and costs; and remand for further proceedings.

I. BACKGROUND

On October 16, 2009, Schonbrun and Harris entered into a loan agreement, secured by a mortgage for Harris's residential property. In 2011, after Harris defaulted on the loan and Schonbrun sued Harris to foreclose on the property, Harris notified Schonbrun that she wanted to rescind the loan transaction. Harris alleged that Schonbrun had failed to comply with the requirement of the Truth in Lending Act, id. § 1635, to notify Harris “clearly and conspicuously” that she had a right to rescind the loan within three business days, id. § 1635(a). Because Harris never received the required notice, she argued, her statutory right of rescission was extended to October 16, 2012, id. § 1635(f), and Schonbrun had to rescind the loan, id. § 1635(a).

After Schonbrun denied Harris's request, Harris filed a complaint in the district court on April 27, 2012. She sought rescission, id. , and an award of statutory damages, attorney's fees, and costs, id. § 1640(a). Harris alleged that she did not receive clear and conspicuous notice of her right to rescind, in violation of the Act and an associated regulation, id. § 1635(a) ; 12 C.F.R. § 226.23(b)(1). She alleged that the notice she received was inadequate because Schonbrun instructed her to sign a postdated waiver of her right to rescind when she signed the loan documents, 15 U.S.C. § 1635(a) ; 12 C.F.R. § 226.23(e), and Schonbrun did not give her two copies of the notice of her right to rescind, 12 C.F.R. § 226.23(b)(1).

The parties consented to have their dispute decided in a bench trial before a magistrate judge. Fed.R.Civ.P. 73. Harris and Schonbrun presented conflicting evidence about whether Harris was entitled to the protections of the Act and whether Schonbrun violated the Act. Harris presented evidence that she lived and kept most of her personal belongings at the residential property. She testified that she received only one copy of the notice of her right to rescind, and that she signed both the loan documents and a waiver of her right to rescind on October 16, 2009. Schonbrun presented evidence that Harris lived at a different address at the time of the transaction; Harris knew about her right to rescind; and Harris signed the waiver of her right to rescind on October 21, 2009, after the statutory three-day period for rescission expired. The signed waiver form had a typewritten date of “October 21st, 2009,” but Harris handwrote “16 Oct. 09” next to her signature. The waiver stated, “I, the undersigned, am aware that today, OCTOBER 21, 2009, is after the expiration date of the Right of Rescission for the ... transaction ... [and] I hereby elect not to rescind this transaction.”

The magistrate judge ruled in Harris's favor and ordered rescission of the loan, but the magistrate judge denied Harris's request for statutory damages, attorney's fees, and costs. The magistrate judge determined that Schonbrun did not “materially violate” the Act and Harris was not actually harmed by Schonbrun's violation. The magistrate judge decided that rescission was a sufficient remedy and that an award of statutory damages, attorney's fees, and costs was not “equitable and just to the parties.”

II. STANDARDS OF REVIEW

Two standards of review govern this appeal. First, “[w]e review for clear error factual findings made by a district court,” Morrissette–Brown v. Mobile Infirmary Med. Ctr., 506 F.3d 1317, 1319 (11th Cir.2007), and we review de novo the application of law to those facts, Lykes Bros., Inc. v. U.S. Army Corps of Eng'rs, 64 F.3d 630, 634 (11th Cir.1995). A factual finding is clearly erroneous only if we are “left with the definite and firm conviction that a mistake has been committed.” Id. (internal quotation marks and citation omitted). Second, we review de novo “a district court's rulings on the interpretation and application of a statute.” Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1139 (11th Cir.1992) (internal quotation marks and alteration omitted). We also review de novo “[t]he proper standard for an award of attorney's fees.” Smalbein ex rel. Estate of Smalbein v. City of Daytona Beach, 353 F.3d 901, 904 (11th Cir.2003).

III. DISCUSSION

The parties present three issues. First, Schonbrun argues that the findings of fact by the district court are clearly erroneous. Second, Schonbrun asks us to reverse the grant of rescission on the ground that Harris received clear and conspicuous notice of her right to rescind. Third, Harris contends that the district court lacked the discretion to deny her an award of statutory damages, attorney's fees, and costs. We address each argument in turn.

A. The Record Fairly Supports the Findings of Fact.

Schonbrun argues that the district court clearly erred in its findings of fact. Schonbrun argues that Harris was not entitled to the protections of the Act because the property that secured the loan was not Harris's “principal dwelling” at the time of the transaction, 15 U.S.C. § 1635(a). He also argues that Harris received two copies of the notice of her right to rescind the loan, and Harris signed a waiver of her right to rescind on October 21, 2009, three business days after she signed the loan documents.

The district court was entitled to find that the mortgaged property was Harris's principal dwelling and that she signed both the loan and the waiver at the same time, as she testified. We defer to the “credibility choices” made by the district court and its decision to credit Harris's testimony. Hiram Walker & Sons, Inc. v. Kirk Line, 30 F.3d 1370, 1374 (11th Cir.1994). The record “as a whole” supports the findings of fact, id. (internal quotation marks and citation omitted), and we are not left with a “definite and firm conviction that a mistake has been committed,” Lykes Bros., Inc., 64 F.3d at 634 (internal quotation marks and citation omitted).

B. Harris Was Entitled to Rescission Because Schonbrun Failed to Give Harris Clear and Conspicuous Notice of Her Right to Rescind.

The Truth in Lending Act requires a lender to give a borrower clear and conspicuous notice of the borrower's right to rescind a loan transaction. 15 U.S.C. § 1635(a). A regulation requires that “a [lender] shall deliver two copies of the notice of the right to rescind to each [borrower] entitled to rescind.” 12 C.F.R. § 226.23(b)(1). That notice must be “on a separate document that identifies the transaction and [must] clearly and conspicuously disclose ... [t]he [borrower]'s right to rescind the transaction.” Id. “If the required notice or material disclosures are not delivered, the right to rescind shall expire [three] years after consummation” of the transaction. Id. § 226.23(a)(3) ; 15 U.S.C. § 1635(f). The purpose of the notice is to give borrowers a “cooling off period” to reconsider the loan transaction, Rodash v. AIB Mortg. Co., 16 F.3d 1142, 1146 (11th Cir.1994), abrogated on different grounds by Veale v. Citibank, F.S.B., 85 F.3d 577, 580 (11th Cir.1996), and borrowers can waive the three-day rescission period only in certain emergency situations not relevant to this appeal, 12 C.F.R. § 226.23(e).

Schonbrun argues that the district court erroneously ruled that Harris was entitled to rescission. Schonbrun contends that his noncompliance with the requirements of the Act was immaterial. He contends that, because only material noncompliance violates the Act and Harris subjectively knew about her right to rescind the transaction, Harris's right to rescind was not extended beyond three business days after the transaction.

Schonbrun's argument fails. To be sure, the Act “does not require perfect notice; rather it requires a clear and conspicuous notice of [the right to rescind].” Veale, 85 F.3d at 580. And a technical violation of the Act, if immaterial, will not extend a borrower's deadline of the...