In re Escher

• Decision Date: 12 June 2007
• Docket Number: Bankruptcy No. 05-31711 SR.,Adversary No. 05-607.
• Citation: 369 B.R. 862
• Parties: In re James C. ESCHER, Debtor. James C. Escher and Viola Escher, Plaintiffs, v. Decision One Mortgage Company, LLC, Mortgage Electronic Registration Systems, Inc., Countrywide Home Loans, Inc., and Mortgage Management Specialists, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

369 B.R. 862

In re James C. ESCHER, Debtor.

James C. Escher and Viola Escher, Plaintiffs, v. Decision One Mortgage Company, LLC, Mortgage Electronic Registration Systems, Inc., Countrywide Home Loans, Inc., and Mortgage Management Specialists, Defendants.

Bankruptcy No. 05-31711 SR.

Adversary No. 05-607.

United States Bankruptcy Court, E.D. Pennsylvania.

June 12, 2007.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

George Conway, Esquire, Office Of The U.S. Trustee, Philadelphia PA, Interested Parties.

David A. Scholl, Esquire, Regional Bankruptcy Center of Southeastern Pennsylvania, Newtown Square, PA, for Plaintiffs.

Andrew K. Stutzman, Esquire, Stradley Ronon Stevens & Young LLP, Philadelphia, PA, for Decision One.

Martin C. Bryce, Jr., Esquire, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, PA, for Countrywide.

OPINION

STEPHEN RASLAVICH, Bankruptcy Judge.

INTRODUCTION.

The Plaintiffs (the Debtor and his wife) have filed suit against Decision One Mortgage Company (Decision), Mortgage Electronic Registration Systems, Inc. (MERS), Countrywide Home Loans, Inc. (Countrywide) and Mortgage Management Specialists (MMS). Their Complaint raises claims under federal and state consumer lending law. Decision and Countrywide/MERS¹ have filed Motions for Summary Judgment as to all of the claims. The Plaintiffs oppose both motions. For the reasons which follow, the Motions will be granted.²

The Causes of Action

The Complaint pleads' four counts: Count I — Truth in Lending³ ("TILA"); Count II — the Real Estate Settlement Procedures Act (RESPA);⁴ Count III — the Pennsylvania Credit Services Act (CSA)⁵ and the Pennsylvania Loan Brokers Trade Practices Regulations (LBTPR);⁶ and Count IV — the Pennsylvania Uniform Trades Practices and Consumer Protection Law.⁷ Count I is directed at Decision, Countrywide and MERS. Count II has since been abandoned. Plaintiffs' Brief, 2. Count III has been limited to MMS. Id. Count IV is directed against all Defendants.

Standard for Summary Judgment

Motions for summary judgment are governed by Rule 56 of the Federal Rules of Civil Procedure ("Fed.R.Civ.P."). Pursuant to Rule 56, summary judgment should be granted when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). For purposes of Rule 56, a fact is material if it might affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). The moving party has the burden of demonstrating that no genuine issue of fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986).

The court's role in deciding a motion for summary judgment is not to weigh evidence, but rather to determine whether the evidence presented points to a disagreement that must be decided at trial, or whether the undisputed facts are so one sided that one party must prevail as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. at 247-252, 106 S.Ct. at 2509-12. In making this determination, the court must consider all of the evidence presented, drawing all reasonable inferences therefrom in the light most favorable to the nonmoving party, and against the movant. See United States v. Premises Known as 717 South Woodward Street, 2 F.3d 529, 533 (3rd Cir.1993); J.F. Feeser, Inc. v. Sere -A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir.1990), cert. denied, 499 U.S. 921, 111 S.Ct. 1313, 113 L.Ed.2d 246 (1991); Gould, Inc. v. A & M Battery and Tire Service, 950 F.Supp. 653, 656 (M.D.Pa.1997).

To successfully oppose entry of summary judgment, the nonmoving party may not simply rest on its pleadings, but must designate specific factual averments through the use of affidavits or other permissible evidentiary material that demonstrate a triable factual dispute. Celotex Corp. v. Catrett, 477 U.S. at 324, 106 S.Ct. at 2553; Anderson v. Liberty Lobby, Inc., 477 U.S. at 247-50, 106 S.Ct. at 2509-11. Such evidence must be sufficient to support a jury's factual determination in favor of the nonmoving party. Id. Evidence that merely raises some metaphysical doubt regarding the validity of a material fact is insufficient to satisfy the nonmoving party's burden. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986). If the nonmoving party fails to adduce sufficient evidence in connection with an essential element of the case for which it bears the burden of proof at trial, the moving party is entitled to entry of summary judgment in its favor as a matter of law. Celotex Corp. v. Catrett, 477 U.S. at 322-23, 106 S.Ct. at 2552-53.

The Respective Roles of Decision. One, MERS and Countrywide

The Court begins with what it sees as the threshold issue: what exactly are the interests of Decision, MERS and Countrywide in this transaction? This matters as Countrywide/MERS has enunciated inconsistent interests in the loan. In its Amended Answer, Countrywide/MERS admitted that the loan had been assigned to it but denied that it was the present holder. Amended Answer, ¶ 4. Yet at the hearing, Countrywide did not deny that it was the holder of the loan. See Transcript (T-) 21. This caused the Court to schedule a supplemental hearing to clarify the point. At that hearing, counsel for Countrywide and Decision appeared but Plaintiffs' counsel did not. Notwithstanding, the two Defendants informed the Court that they had reached a stipulation as to the parties' respective interests in the loan. According to the Stipulation, Decision was the original lender; the loan was transferred to Countrywide who, in turn, transferred it to Bank of New York; Bank of New York remains the holder; Countrywide is the servicer; and MERS is the nominee who assisted in the assignment and recording of the mortgage.⁸ See Stipulation dated May 9, 2007. Although Plaintiffs' counsel was not present, he later agreed to the terms of the stipulation. See Letter of Plaintiffs' Counsel dated May 11, 2007. The Court turns now to the merits of the motions.

The TILA Claim

Count I alleges violations of TILA. Specifically, it is alleged that the lender failed to disclose certain fees as "finance charges." Complaint ¶ 7. These violations, the Plaintiffs conclude, entitle them to three forms of relief: first they are entitled to monetary damages for the lender's failure to disclose; second, they may rescind the loan because of that non-disclosure; and third, they are entitled to an additional money judgment for Countrywide's refusal to honor their rescission request. Id. ¶¶ 11-15. Decision responds that the claim is neither supported by the record nor was it timely brought. Decision's Brief, 4-6. Countrywide argues that as a good faith assignee, it is not liable for any failure to disclose on the part of its predecessor. Countrywide's Brief, 7-12.

Statute of Limitations

The Court begins with Decision's assertion that Count I is stale. A claim for a failure to make the disclosures required under TILA is subject to the one year statute of limitations:

(a) Individual or class action for damages; amount of award; factors determining amount of award "

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part⁹, including any requirement under section 1635 of this title, ... is liable to such person in an amount equal to the sum of —

(1) any actual damage sustained by such person as a result of the failure;

(2)(A)(I) in the case of an individual action twice the amount of any finance charge in connection with the transaction,... (iii) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $200 or greater than $2,000;

. . .

(e) Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation...

15 U.S.C. § 1640(a),(e) (emphasis added). See Oldroyd v. Associates Consumer Discount Co., 863 F.Supp. 237, 240 (E.D.Pa. 1994) ("Actions under the Truth in Lending Act must be brought within one year of the violation, though a consumer may raise violations of the Act as a defense to a collection action after the expiration of the filing period."). Because the disclosures are required to be made before the credit is extended (see 15 U.S.C. § 1638(b)(1); 12 C.F.R. § 226.17(b)), the violation occurs when the loan is made. Ralls v. Bank of New York (In re Rails), 230 B.R. 508, 515 (Bankr.E.D.Pa.1999). The applicable regulation provides that "[t]he creditor shall make disclosures before consummation of the transaction." See 12 C.F.R. 226.17(b); see also Chevalier v. Baird S & L, 371 F.Supp. 1282, 1284 (E.D.Pa.1974) ("The date of the violation is deemed to be the date the transaction was consummated"); Smith v. EquiCredit Corp., 2002 WL 32349873 *3 (E.D.Pa.) (same); McMaster v. CIT Group/Consumer Finance, Inc., 2006 WL 1314379 *4 (E.D.Pa.) ("A violation occurs when a consumer become contractually obligated on a credit transaction" citing 12 C.F.R. § 226.2(13))

In this case, Decision points out, the loan closed (that is, the transaction consummated) on November 5, 2003. Complaint, ¶ 5. The Complaint, however, was not filed until September 29, 2005, a date well more than one year from the date of the violation. See Adversary Docket, 05-607 # 1. For purposes of affirmative monetary recovery¹⁰ resulting from a failure to disclose, then, Count I must be dismissed.

Deadline to Rescind

Plaintiffs' response to all this is that they made a timely request for rescission because certain disclosures weren't made. Complaint, ¶ 14; T-...