Jenkins v. Landmark Mortg. Corp. of Virginia

• Decision Date: 04 October 1988
• Docket Number: Civ. A. No. 88-0173-H.
• Citation: 696 F. Supp. 1089
• Parties: Dorothy B. JENKINS, Plaintiff, v. LANDMARK MORTGAGE CORPORATION OF VIRGINIA and Vernon L. Evans, Defendants.
• Court: U.S. District Court — Western District of Virginia

696 F. Supp. 1089

Dorothy B. JENKINS, Plaintiff, v. LANDMARK MORTGAGE CORPORATION OF VIRGINIA and Vernon L. Evans, Defendants.

Civ. A. No. 88-0173-H.

United States District Court, W.D. Virginia, Harrisonburg Division.

October 4, 1988.

John E. Whitfield, Blue Ridge Legal Services, Inc., Harrisonburg, Va., for Dorothy B. Jenkins.

Vernon L. Evans, Fairfax, Va., pro se, and for Landmark.

MEMORANDUM OPINION

MICHAEL, District Judge.

This matter is before the court on plaintiff's motion for declaratory judgment under 28 U.S.C. § 2201 (1988). Plaintiff seeks to have this court declare that her June 22, 1988, rescission of a credit transaction governed by the federal Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et. seq., was valid. For the reasons elaborated below, this court finds that the provisions of TILA empower plaintiff to rescind the consumer credit transaction into which plaintiff entered on August 25, 1987.

I. Background

On August 25, 1987, plaintiff and her son went to the law office of W. Dale Houff, Esq., in order to close a consumer credit transaction whereby First American Mortgage and Loan Association of Virginia ("First American") gained a security interest in plaintiff's home. Complaint ¶ 6. On September 4, 1987, plaintiff was notified that defendant Landmark Mortgage had purchased her note and deed of trust from First American. Complaint ¶ 27.

Houff ("the attorney") merely acted as an agent for the original lender in order to complete the closing process and to convey to plaintiff the necessary TILA disclosures. At the closing, plaintiff and her son signed the "Acknowledgement of Receipt" appearing at the bottom of the TILA disclosure statement. The closing attorney testified that it was his usual practice to explain the contents of the disclosure statement to obligors, but that he could not recall the details of that particular transaction. Plaintiff testified that the documents were not explained or summarized to her. The attorney testified that it was his usual practice to ask consumer if they wished to take a copy of the TILA disclosure form with them or to have it mailed to them, along with the other loan documents. Plaintiff testified that neither she nor her son were offered a copy of the disclosure form at the closing but, instead, simply told that a copy would be mailed to them. Regardless of the apparent conflict in the testimony between the attorney and plaintiff, it is clear that plaintiff and her son left the office without the TILA disclosure form in their possession.

Plaintiff did sign, date, and take with her the creditor's copy of the "Notice of Right to Cancel." That notice correctly sets out the three alternate terminus post quem events which could establish the expiration date of the consumer's right to rescind the credit transaction. The consumer has the right "to cancel this transaction without cost, within three business days from whichever of the following events occurs last: 1) the date of the transaction, which is August 25, 1987; or 2) the date you received your Truth in Lending disclosures; or 3) the date you received this notice of your right to cancel." As indicated, the transaction occurred August 25, 1987. That is the date plaintiff and son signed the instrument which encumbered her home. Clearly, since plaintiff and son signed the notice of the right to cancel on August 25, 1987, and took it with them that same day, that date must be considered the date upon which condition (3), described supra, occurred. The threshold question in this matter is when the effective receipt of the item described in (2) supra, the Truth in Lending disclosures, occurred.

Plaintiff was advised that her right to rescind expired on Friday, August 28, 1987, and, further, the attorney testified that he believed that he told her that her notice of rescission would need to be received by the lender by midnight of that date in order to be effective. While in the office on August 25, 1987, plaintiff and her son also signed a "Statement of Non-Rescission," purporting to indicate that plaintiff and her son had not rescinded the transaction as of August 28, 1987. The attorney testified that his normal practice was to offer to have the consumer sign and post-date that document while in his office so that, if they decided not to rescind within that three-day period, they would not need to make an additional trip to his office. His policy in post-dating the "Statement of Non-Rescission" was to void that statement in the event that the creditor consumer exercised his right to rescind in a timely fashion. The closing attorney signed off on this document to the effect that it had been received by him on August 31, 1987.

On August 26, 1987, a complete set of the loan documents, including the TILA disclosure statement, was mailed to plaintiff. In addition, a cover letter was enclosed, stating, in relevant part,

Please let me know if you have any questions and as I discussed with you at closing if you desire to cancel this transaction you must do so by Friday night August 28, 1987, but that will not mean that you are relieved of all fees or expenses associated with the transaction as it has advanced to this point.

Neither plaintiff nor her son rescinded the transaction before midnight on August 28, 1987.

Plaintiff has admittedly defaulted in her payments on the note. Complaint, ¶ 28. Defendant Evans, as trustee of the Deed of Trust, proceeded to arrange for a foreclosure sale of plaintiff's house and notified plaintiff to that effect by a letter of May 19, 1988. On June 21, 1988, plaintiff, through her counsel, indicated in a letter to defendants that she wished to rescind the transaction of the prior August.

II. The Statutory and Regulatory Structure

The rights which plaintiff seeks to invoke are wholly statutory creatures. The Truth in Lending Act clearly establishes the right of a consumer to rescind the credit transaction within a given time period. 15 U.S.C. § 1635(a) (1982); 12 C.F.R. § 226.23 (1988). The period for rescission is normally that circumscribed by the latest of the series of events listed in the "Notice of Right to Cancel" supra. 12 C.F.R. § 226.23(a)(3). However, certain omissions in notification or failures of disclosure can trigger a longer rescission period.

If the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property, whichever occurs first.

Id.; 15 U.S.C. § 1635(f). Most important for this matter, the statute provides that these rights should be "clearly and conspicuously" disclosed to the consumer. 15 U.S. C. § 1635(a); 12 C.F.R. 226.23(b).

Not only are the statutory provisions extensive in the protection they provide for the consumer, but judicial interpretation of those provisions has only buttressed the paternalistic rationale of the TILA scheme. See e.g., Sellers v. Wollman, 510 F.2d 119, 122 (5th Cir.1975). The few cases which seem to undercut or pare back on the borrower's shield of TILA are readily distinguishable from the instant matter on a clear factual basis. For example, when a district court in the Eastern District of Pennsylvania held that there was no violation of the disclosure requirements of TILA, it did so within the context of a transactional history where the mortgagors had the representation of counsel at all stages of the proceeding. McCarrick v. Polonia Federal Savings & Loan Assn., 502 F.Supp. 654, 657 (E.D.Pa.1980).

The protective posture of this legislation is also reflected in the legal standard to which lenders are held. "The purposes of the Act are further demonstrated through a standard of strict liability against creditors who fail to make mandated disclosures." Curry v. Fidelity Consumer Discount Co., 656 F.Supp. 1129, 1131 (E.D.Pa. 1987) (citation omitted). Technical defects in the disclosure process, even the solely oral transmission of information which must be disclosed in writing, are matters of which a court must take cognizance. Dryden v. Lou Budke's Arrow Finance Co., 661 F.2d 1186, 1190 (8th Cir.1981). Such a strict standard of interpretation may well be more Draconian than Solomonic, especially in its effect on lenders. But there can be no doubt that the resemblence in TILA to the regime of Draco was intentional.

III. Defects in the Credit Transaction

First, the court finds that there was a failure of delivery in regard to the TILA disclosure statement. The "Notice of Right to Cancel" was accurate and correctly delivered to plaintiff at the closing on August 25, 1987. Plaintiff was advised orally and in the cover letter of August 26, 1987, that the deadline for rescission was midnight Friday, August 28, 1987. Had proper delivery of all the mandated forms been made on the day of the closing, August 25, 1987, then plaintiff's right of rescission would have run only until August 28, 1987, because the transaction date, date of delivery of the TILA disclosure materials, and the delivery of the "Notice of Right to Cancel" would all have occurred on August 25, 1987. However, plaintiff did not take the TILA disclosure statement with her and only received it in the mail on or about August 27, 1987.

Given the overt, undeniable policy of TILA virtually to force-feed information to the credit consumer and, therefore, reading the relevant statutory provisions as a consistent scheme, it is apparent that "delivery" of the TILA disclosure form only occurred when plaintiff received that form in the mail, not on August 25, 1987, when plaintiff and her son signed the form and returned it to the attorney. 15 U.S.C. § 1635(a); 12 C.F.R. § 226.17(a)(1). On the transaction date, August 25, 1987, plaintiff only signed and returned the original; she did not have a copy she could keep and take with her at that time. Since plaintiff did not receive a copy of the TILA...