Lowenstein v. U.S. Bank, N.A. (In re Lowenstein)

• Citation: 459 B.R. 227
• Decision Date: 05 October 2011
• Docket Number: Adversary No. 10–0409.,Bankruptcy No. 10–14860 ELF.
• Parties: In re Roger LOWENSTEIN, Debtor.Roger Lowenstein, Lynne Lowenstein, Plaintiffs, v. U.S. Bank, N.A., as Trustee of Mastr. Adj. Rate Mortgage Mortgages Trust 2007–3, BAC Home Loan Servicing, LP, Defendants.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

459 B.R. 227

In re Roger LOWENSTEIN, Debtor.Roger Lowenstein, Lynne Lowenstein, Plaintiffs,

v.U.S. Bank, N.A., as Trustee of Mastr. Adj. Rate Mortgage Mortgages Trust 2007–3, BAC Home Loan Servicing, LP, Defendants.

Bankruptcy No. 10–14860 ELF.

Adversary No. 10–0409.

United States Bankruptcy Court, E.D. Pennsylvania.

Oct. 5, 2011.

Lawrence W. Abel, Avallone Law Associates, Philadelphia, PA, Timothy Zearfoss, Law Offices of Timothy Zearfoss, Upper Darby, PA, for Debtor/Plaintiffs.

Jesse N. Silverman, Dilworth Paxson LLP, Philadelphia, PA, for Defendants.

MEMORANDUM

ERIC L. FRANK, Bankruptcy Judge.

I. INTRODUCTION

Roger Lowenstein (“the Debtor”) commenced this chapter 13 bankruptcy case on June 14, 2010. In this adversary proceeding, filed on October 26, 2010, the Debtor and his spouse, Lynne Lowenstein (collectively, “the Plaintiffs”), seek to enforce their purported pre-petition rescission of a residential mortgage transaction pursuant to the Truth–in–Lending Act, 15 U.S.C. §§ 1601–1667f (“TILA”). The Defendants are U.S. Bank, N.A., as Trustee of Master Adjustable Rate Mortgages Trust 2007–3 (“Defendant U.S. Bank”) and BAC Home Loan Servicing, L.P. (“Defendant BAC”).

Presently before the court is the Defendants' Motion for Summary Judgment (“the Defendants' Motion”) (Doc. # 33). In support of the Motion, the Defendants submitted evidentiary materials, including the transcript of the Debtor's deposition (with accompanying exhibits), the Declaration of Randi McEwing (an employee of the title company that closed the loan) and certain documents that were prepared in connection with the subject transaction.

In responding to the Motion, the Plaintiffs submitted no evidence, agreed that there are no disputed material issues of fact, but asserted that they (not the Defendants) are entitled to judgment as a matter of law. Although no formal cross-motion was filed, I will refer to the Plaintiffs' request for entry of judgment in their favor as “the Plaintiffs' Cross–Motion.” ¹

For the reasons set forth below, and contrary to the parties' agreement on the question, I find that there is a narrow, material factual issue that precludes the entry of summary judgment in favor of either party. Therefore, I will deny both motions without prejudice.²

II. FACTS

The following facts are undisputed.

The Plaintiffs jointly own their residential property, 1141 Grovania Avenue, Abington, PA (“the Property”). On February 8, 2007, they refinanced the existing mortgage on the Property (“the Transaction” or “the Loan”) through a mortgage loan extended by Countrywide Home Loans, Inc. (“Countrywide”). The original principal amount of the Loan was $262,400.00.³

In connection with the Transaction, the Plaintiffs received a TILA disclosure statement (“the TILA DS”). The TILA DS disclosed the amount financed as $260,526.84. The difference between principal amount of the loan ($262,400.00) and the disclosed amount financed ($260,526.84) is attributable to various charges assessed in the transaction which were treated as prepaid finance charges, including an underwriting fee of $675.00 and prepaid interest of $920.16.⁴ The total finance charge was disclosed as $722,670.28 and the annual percentage rate was disclosed as 8.183%. (Ex. F to Defs.' Mot.).

The loan closing was conducted by Grateful Abstract, LLC (“Grateful Abstract”). ( See Declaration of Randi McEwing ¶ 2) (Ex. E to Defs.' Mot.) (hereafter “McEwing Decl.”). At the closing, certain other charges were deducted from the loan proceeds that were not treated as finance charges, but rather as part of the amount financed. The Plaintiffs contends, and the Defendants deny, that three of those charges should have been included and disclosed as part of the finance charge in the Transaction, rather than the amount financed. The three charges at issue are:

1. a “closing services letter” charge disclosed as being $35.00, but which was assessed twice by mistake, resulting in a total charge of $70.00;

2. a notary fee of $25.00; and

3. a mortgage recording fee of $131.50.

( See Id. ¶¶ 3–6).⁵

Defendant U.S. Bank is the present holder of the mortgage securing the subject loan in the Transaction. The mortgage is being serviced by Defendant BAC.

The Plaintiffs have defaulted in their repayment of the Loan. On November 6, 2009, Defendant BAC commenced a foreclosure action against the Plaintiffs in the Court of Common Pleas, Montgomery County, Pennsylvania. On December 10, 2009, the Debtor sent a letter to U.S. Bank rescinding the Transaction pursuant to TILA (“the Rescission Letter”). (Ex. C to Defs.' Mot.). By letter dated January 20, 2010, counsel for BAC responded to the Rescission Letter and denied that the Debtor was entitled to rescind the Transaction. (Ex. D to Defs.' Mot.). Later in 2010, the Debtor commenced this bankruptcy case and, thereafter, this adversary proceeding.

III. LEGAL STANDARDS—SUMMARY JUDGMENT

The standard for evaluating a summary judgment motion is well established and has been stated in numerous written opinions in this district.⁶ Pursuant to Fed.R.Civ.P. 56(c), summary judgment should be granted when the “pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c).⁷

Before a motion for summary judgment may be granted, the court must find that the motion alleges facts that are both undisputed and if proven at trial would require a directed verdict in favor of the movant. See Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). If the movant meets this initial burden, the responding party may not rest on his or her 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. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Such evidence must be sufficient to support a factfinder's determination in favor of the nonmoving party. Anderson, 477 U.S. at 250, 106 S.Ct. 2505. Evidence that merely raises some metaphysical doubt regarding the validity of a material facts is insufficient. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

In considering the evidentiary matter submitted in support of and in opposition to a summary judgment motion, the court's role is not to weigh the evidence, but only to determine whether there is a disputed, material fact for determination at trial. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. A dispute about a “material” fact is “genuine” only if the evidence is such that a reasonable factfinder could return a verdict for the non-moving party. Id. at 248, 106 S.Ct. 2505. All reasonable inferences must be drawn in favor of the non-moving party and against the movant. United States v. 717 S. Woodward St., 2 F.3d 529, 533 (3d Cir.1993).

The parties' respective burdens of proof also play a significant role in determining the merits of a summary judgment motion.

If the movant is the defendant or the party without the burden of proof, the movant must demonstrate the absence of a genuine issue of material fact, but the movant is not required to support the motion with affidavits or other materials that negate the opponent's claim. Rather, the movant may assert that the party with the burden of proof has not come forward with evidence to support one or more elements of its claim. See Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Thus, for the Defendants to obtain summary judgment with respect to the Plaintiffs' claim, they must show that there are no material facts in dispute and that either: (a) the Plaintiffs have not come forward with any evidence to support an element of their claim or that the undisputed evidence negates an element of their claim. See, e.g., Newman, 304 B.R. at 193–94.

On the other hand, if the movant is the party with the burden of proof at trial, the standard is more stringent. The movant “must produce enough evidence to justify a directed verdict in its favor in order to meet its initial burden.” Nat'l State Bank v. Fed. Reserve Bank of New York, 979 F.2d 1579, 1582 (3d Cir.1992); see also In re Newman, 304 B.R. 188, 193 (Bankr.E.D.Pa.2002). Thus, for the Plaintiffs to prevail on the Plaintiffs' Cross–Motion, they must come forward with evidence supporting each element of the claim and demonstrate that the Defendants have not come forward with evidence sufficient to create a triable factual dispute regarding any element of the claim.

IV. THE TRUTH IN LENDING ACT

A. Overview

TILA was enacted by Congress in order to promote the informed use of consumer credit. In re Community Bank of Northern Virginia, 622 F.3d 275, 282 (3d Cir.2010); Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 248 (3d Cir.1980). To accomplish this goal, TILA mandates that certain, uniform disclosures be made to consumers in connection with consumer credit transactions. It prescribes both the content and the manner in which the disclosures are made.

TILA is designed to be an aid to the consumer so that the consumer is not easily misled as to the true costs of a consumer credit transaction and to provide some balance to the unequal positions of borrower and lender in consumer credit transactions. E.g., Smith v. Fidelity Consumer Discount Co., 898 F.2d 896, 898 (3d Cir.1990). For this reason, the statute is liberally construed in favor of the consumer. E.g., Roberts v. Fleet Bank, 342 F.3d 260, 266 (3d Cir.2003).

To implement TILA, Congress delegated to the Federal Reserve Board broad authority to promulgate regulations regarding the interpretation and implementation of the Act. See 15 U.S.C. § 1604(a).⁸ The Federal Reserve Board exercised that authority in the regulations codified at 12...