King v. Long Beach Mortgage Company

• Decision Date: 09 December 2009
• Docket Number: Civil Action No. 06-11931-WGY.
• Citation: 672 F.Supp.2d 238
• Parties: George KING, Plaintiff, v. LONG BEACH MORTGAGE COMPANY, Defendant. Washington Mutual Bank, Third-Party Plaintiff, v. Kathleen C. Byrne, Esq., Buoniconti & Buoniconti Law Offices, Inc., Commonwealth Land Title Insurance Company, Third-Party Defendants.
• Court: U.S. District Court — District of Massachusetts

672 F.Supp.2d 238

George KING, Plaintiff, v. LONG BEACH MORTGAGE COMPANY, Defendant.

Washington Mutual Bank, Third-Party Plaintiff, v. Kathleen C. Byrne, Esq., Buoniconti & Buoniconti Law Offices, Inc., Commonwealth Land Title Insurance Company, Third-Party Defendants.

Civil Action No. 06-11931-WGY.

United States District Court, D. Massachusetts.

December 9, 2009.

COPYRIGHT MATERIAL OMITTED

Robert T. Gill, Peabody & Arnold LLP, Matthew A. Kane, Bulkley Richardson & Gelinas LLP, Jennifer L. Markowski, Peabody & Arnold LLP, Boston, MA, Mark B. Johnson, Johnson & Borenstein, LLC, Andover, MA, Angela L. Linson, Bethany Pierson Minich, Mark W. Murphy, Litch-field Cavo, LLP, Lynnfield, MA, for Third-Party Defendants.

MEMORANDUM

YOUNG, District Judge.

I. INTRODUCTION

On September 23, 2009, this Court issued an order in relation to the motions for summary judgment filed in connection with this case. Order Granting in Part and Denying in Part Mot. Summ. J., Sept. 23, 2009 [Doc. No. 90]. This memorandum explains the reasoning behind the Court's decision.

II. BACKGROUND

On Wednesday, May 25, 2005, the plaintiff George King ("King") executed a promissory note and mortgage deed (the "Loan Transaction") in favor of the defendant Long Beach Mortgage Company ("Long Beach"), in connection with a mortgage refinancing loan. See Kane's Aff. Supp. Chase's Mot. Summ. J. Ex. 5 [Doc. No. 72]. Long Beach retained outside counsel, the Buoniconti & Buoniconti Law Offices, Inc. ("Buoniconti"), for the closing of the Loan Transaction (the "Closing"). Third Party Compl. ¶ 8. Buoniconti assigned the Closing to Kathleen C. Byrne, Esq. ("Byrne"). Id. ¶ 9. Washington Mutual Bank ("Washington Mutual") became the successor-in-interest to Long Beach. Washington Mutual's Statement of Undisputed Material Facts ¶ 2 [Doc. No. 49]. Subsequently, the Federal Deposit Insurance Corporation ("FDIC") was appointed Receiver for Washington Mutual, Kane's Aff. Supp. Chase's Mot. Summ. J. Ex. 4, and by operation of law succeeded to "all rights, titles, powers and privileges of the failed bank. See 12 U.S.C. §§ 1821(d)(2)(A)(i), 1821(d)(2)(B)(i). Immediately following appointment of the FDIC as Receiver of Washington Mutual the FDIC entered into a Purchase and Assumption Agreement (the "P & A Agreement") to sell certain banking assets of Washington Mutual to JPMorgan Chase Bank, National Association ("Chase"). Included in the sale was the promissory note and mortgage deed executed by King. Kane's Aff. Supp. Chase's Mot. Summ. J. Ex. 3 ¶ 3.1 (clause in P & A Agreement stating that Chase shall acquire from the Receiver of Washington Mutual "all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired). . . ."). Pursuant to the P & A Agreement, the FDIC expressly retained the liabilities associated with King's claims. Id. ¶ 3.1.

A. CLAIMS, COUNTERCLAIMS AND THIRD-PARTY CLAIMS

King brought claims against Long Beach for violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and implementing Federal Reserve Board Regulation Z, 12 C.F.R. § 226, or its Massachusetts counterparts, the Massachusetts Consumer Credit Cost Disclosure Act (the "MCCCDA"), Mass. Gen. Laws ch. 140D, §§ 1-34, and 209 Mass.Code Regs. 32.¹ Am. Compl. ¶¶ 15-16 [Doc. No. 14]. King argued the TILA violations caused his right to rescind the loan transaction under 15 U.S.C. § 1635(b) to be extended from three business days to three years. See 12 C.F.R. § 226.23(3) (providing that certain violations of TILA trigger the extension of the rescission right). Accordingly, King argued he timely rescinded the loan transaction by sending a notice of rescission to Long Beach on or about September 13, 2006. Am. Compl. ¶ 11. King sought (1) a declaration that he is entitled to rescind under 15 U.S.C. § 1635(a), (2) rescission of the loan pursuant to that section, (3) statutory damages under TILA, (4) attorneys' fees, litigation expenses and costs and (5) such other relief as the Court deems appropriate. Am. Compl. 5.

In response, Washington Mutual brought counterclaims against King for unjust enrichment arising out of the receipt of the benefits of the loan without repayment (Count I) and breach of contract in relation to the loan agreement (Count II) and in addition, requests a declaration of rights and legal interests of King and Washington Mutual (Count III). Washington Mutual's Countercl. 7-9 [Doc. No. 16].² Further, Washington Mutual asserted third-party claims, pursuant to Federal Rule of Civil Procedure 8(a), against Buoniconti and Byrne for negligence (Count III), breach of fiduciary duty (Count IV), legal malpractice (Count V), and indemnity and contribution (Count VI). Third Party Compl. ¶¶ 31-55 [Doc. No. 18]. Washington Mutual also brought a third-party breach of contract claim (Count VII) against Commonwealth Land Title Insurance Company ("Commonwealth") for denying Washington Mutual's claim for title insurance coverage in connection with the Loan Transaction. Id. ¶¶ 56-62.

B. MOTIONS FOR SUMMARY JUDGMENT

The FDIC sought summary judgment on the ground that King cannot recover against the FDIC as matter of law. See FDIC's Mot. Summ. J. [Doc. No. 65]. First, the FDIC argued that 12 U.S.C. § 1821(j) divests federal courts of jurisdiction to grant any form of relief against the FDIC, including rescission.³ FDIC's Mem. Supp. Mot. Summ. J. 4 [Doc. No. 67]. Second, the FDIC argued that involuntary assignees are not subject to claims for damages under TILA. Id. at 5. Third, the FDIC adopted and incorporated by reference Washington Mutual's motion for summary judgment, FDIC's Mot. Summ. J. 3, which argued that as matter of law, King's rescission right was not extended to three years, Washington Mutual's Mot. Summ. J. 2 [Doc. No. 48].

Chase sought summary judgment to enforce the promissory note and mortgage deed it acquired pursuant to the P & A Agreement and to collect the entire balance plus interest, costs, and attorneys' fees. Chase's Mot. Summ. J. [Doc. No. 69]. Chase argued that King has no defense to the enforcement of the note because even if a right to rescind existed under section 1635(a), the FDIC expressly retained liability for rescission under the judicially enforceable P & A Agreement. Chase's Mem. Supp. Mot. Summ. J. 5 [Doc. No. 71].

Buoniconti sought summary judgment as to Washington Mutual's third-party claims against it. Buoniconti's Mot. Summ. J. [Doc. No. 43]. Buoniconti argued that it owed no duty of care to Long Beach and that in any case, since it did not actually perform the Closing, Buoniconti did not cause Long Beach's TILA violations (if any). Buoniconti's Mem. Supp. Mot. Summ. J. 5-7 [Doc. No. 45]. Buoniconti also sought summary judgment as to Byrne's cross-claim for indemnity against it. Id. at 13.

C. FACTS

For the purposes of Washington Mutual's motion for summary judgment, King does not dispute the facts contained in Washington Mutual's Statement of Undisputed Material Facts. King's Mem. Opp'n Washington Mutual's Mot. Summ. J. 1 n. 1 [Doc. No. 56].

King and Mrs. King obtained from Long Beach a non-purchase money loan secured by owner-occupied real property. Am. Compl. ¶ 9. With respect to these types of loans, TILA confers upon the debtor a right to rescind or cancel the transaction within three business days of the transaction's consummation or three business days from delivery of the material disclosures, whichever occurs later. 15 U.S.C. § 1635(a). The creditor must "clearly and conspicuously" disclose the statutory rescission right to the consumer by delivering a Notice of Right to Cancel (the "Notice"). Id. If a creditor fails to deliver to the consumer the "notice required by paragraph (b) of [12 C.F.R. § 226.23]," the duration of the right to rescind is extended from three days to three years. 12 C.F.R. § 226.23(a)(3). If a creditor does not respond to a rescission request within twenty days, the debtor may file suit in federal court to enforce the rescission right. 15 U.S.C. § 1635(b). See Belini v. Washington Mut. Bank, 412 F.3d 17, 20 (1st Cir. 2005).

Byrne, King, and Mrs. King were the only individuals present at the Closing, which was conducted in the Kings' kitchen. A Closing Packet was given to the Kings. Statement of Undisputed Facts ¶¶ 13, 16. It contained a single copy of a notice of right to rescind. Id. ¶ 16. The relevant parts of the Notice are duplicated below.

You have a legal right under federal law 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 ______________; or

(2) The date you received your Truth in Lending disclosures; or

(3) The date you received this notice of your right to cancel.

. . . .

If you cancel by mail or telegram, you must send the notice no later than MIDNIGHT of ______________ (or MIDNIGHT of the THIRD BUSINESS DAY following the latest of the three events listed above.) If you send or deliver your written notice to cancel some other way, it must be delivered to the above address no later than that time.

Compl. Ex. A.

On the Notice, the blank following "(1) The date of the transaction, which is" was not filled in by hand. Id. The Closing date, however, does appear in typeface on the top right hand corner of the Notice. See id. Also, the blank following "you must send the notice no later than MIDNIGHT of" was not filled in with the expiration date of the rescission right. Id.

In Washington Mutual's file concerning King's loan, there is a second copy of the Notice which contains (1) the handwritten dates of the Closing and expiration of the rescission right, (2) initials of the Kings next to both dates, and (3) Mr. King's signature acknowledging receipt of two copies of the Notice. Statement of Undisputed Facts ¶ 17. This copy apparently was delivered to the Kings initially, but returned to Washington...