Niau v. Quick Loan Funding

• Decision Date: 25 March 2015
• Docket Number: No. CAAP–12–0000474.,CAAP–12–0000474.
• Parties: Lynette K. NIAU and Leedon K. White, Sr., Plaintiffs–Appellants, v. QUICK LOAN FUNDING ; Citigroup Global Markets Realty Corp., and Does 2–30, Defendants–Appellees, and Arch Bay Holdings, LLC–Series 2009C, Cross–Claimant–Appellee, v. Quick Loan Funding ; Citigroup Global Markets Realty Corp., Cross–Claim Defendants–Appellees.
• Court: Hawaii Court of Appeals

134 Hawai'i 539

345 P.3d 205 (Table)

Lynette K. NIAU and Leedon K. White, Sr., Plaintiffs–Appellants

v.QUICK LOAN FUNDING ;

Citigroup Global Markets Realty Corp., and Does 2–30, Defendants–AppelleesandArch Bay Holdings, LLC–Series 2009C, Cross–Claimant–Appelleev.Quick Loan Funding ;

Citigroup Global Markets Realty Corp., Cross–Claim Defendants–Appellees.

No. CAAP–12–0000474.

Intermediate Court of Appeals of Hawai‘i.

March 25, 2015.

Gary Victor Dubin, Frederick J. Arensmeyer, Daisy Lynn B. Hartsfield, on the briefs, for Plaintiffs–Appellants.

Jade Lynne Ching, J. Blaine Rogers (Alston Hunt Floyd & Ing), on the briefs, for Cross–Claimant–Appellee Arch Bay Holdings, LLC–Series 2009c.

NAKAMURA, Chief Judge, LEONARD and REIFURTH, JJ.

SUMMARY DISPOSITION ORDER

Plaintiffs–Appellants Lynette K. Niau (Lynette ) and Leedon K. White, Sr. (Leedon ) (collectively, Appellants ) appeal from the Judgment filed on April 10, 2012 (Judgment ) in the Circuit Court of the First Circuit (Circuit Court ),¹ and challenge the Circuit Court's order granting summary judgment in favor of Defendant/Cross–Claimant–Appellee Arch Bay Holdings, LLC, Series 2009C (Arch Bay ) and against Appellants.

Appellants raise three points of error on appeal, contending that the Circuit Court erred in: (1) granting Arch Bay's motion for summary judgment in light of Appellants' claims of Truth In Lending Act (TILA ) violations and Appellants' notice of rescission; (2) concluding that there were no genuine issues of material fact regarding alleged violations under Chapter 480, Hawaii Revised Statutes (HRS ), which included claims of fraud, unfair and deceptive acts and practices, and breach of contract; and (3) concluding that there were no genuine issues of material fact regarding Appellants' ability to pay the alleged outstanding debt.

Upon careful review of the record and the briefs submitted by the parties and having given due consideration to the arguments advanced and the issues raised by the parties, we resolve Appellants' points of error as follows:

(1) “TILA provides two remedies for loan disclosure violations-rescission and civil damages, each governed by separate statutory procedures.” Meritt v. Countrywide Fin. Corp., 759 F .3d 1023, 1029–30 (9th Cir.2014) (footnote omitted). We first address Appellants' claim for damages under TILA.

The declared purpose of [TILA] is “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601(a) ; see Mourning v. Family Publications Service, Inc., 411 U.S. 356, 363–368, 93 S.Ct. 1652, 1657–1660, 36 L.Ed.2d 318 (1973). Accordingly, [TILA] requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights. See §§ 1631, 1632, 1635, 1638.

Haw. Cmty. Fed. Credit Union v. Keka, 94 Hawai‘i 213, 223, 11 P.3d 1, 11 (2000) (quoting Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412–13 (1998) ). 15 U.S.C. § 1632(a) (2012) provides:

(a) Information clearly and conspicuously disclosed; “annual percentage rate” and “finance charge”; order of disclosures and use of different terminology

Information required by this subchapter shall be disclosed clearly and conspicuously, in accordance with regulations of the Bureau. The terms “annual percentage rate” and “finance charge” shall be disclosed more conspicuously than other terms, data, or information provided in connection with a transaction, except information relating to the identity of the creditor. Except as provided in subsection (c) of this section, regulations of the Bureau need not require that disclosures pursuant to this subchapter be made in the order set forth in this subchapter and, except as otherwise provided, may permit the use of terminology different from that employed in this subchapter if it conveys substantially the same meaning.

15 U.S.C. § 1632(a) ; see also 12 C.F.R. § 1026.18.

Here, Appellants alleged in the Complaint, and in opposition to summary judgment, that the loan transaction involved “inconsistent and confusing disclosure statements with materially misstated annual percentage rate disclosures and materially misstated itemizations of amounts financed[.]”

The Federal Truth–In–Lending Disclosure Statement dated February 21, 2007 listed the following: (1) an APR of 12.814%; (2) a Finance Charge of $1,214,300.84; (3) an Amount Financed of $407,177.81; (4) a Total of Payments of $1,621,478.65; (5) the number of monthly payments; (6) the amount of each monthly payment; and (7) the due dates of each monthly payment. The Itemization of Amount Financed dated February 21, 2007 listed the total Amount Financed as $407,177 .81 and a Prepaid Finance Charge of $21,722.19.

The only other evidence Appellants presented in support of their allegations that the loan documents and disclosures were “inconsistent and confusing” and contained “materially misstated annual percentage rate disclosures and materially misstated itemizations of amounts financed” was Lynette's Declaration, which merely recited the same allegations. On appeal, Appellants restate these allegations, citing only to Lynette's Declaration and to the argument section of the memorandum in opposition to Arch Bay's Motion for Summary Judgment.

Federal courts have held that “[t]he legal inquiry about the quality of disclosure is not directed at whether the credit consumer was actually confused or misled.... The court must engage only in an objective inquiry into the violation of specific provisions of TILA requirements.” Jenkins v. Landmark Mortgage Corp. of Virginia, 696 F.Supp. 1089, 1095 (W.D.Va.1988) (citing Powers, 542 F.2d at 1219 ).

Nevertheless, it has been acknowledged that “[s]trict compliance does not necessarily mean punctilious compliance if, with minor deviations from the language of [TILA], there is still a substantial, clear disclosure of the fact or information demanded by the applicable statute or regulation.” Smith v. Chapman, 614 F.2d 968, 972 (5th Cir.1980). Thus, in ruling that a particular manner of disclosure violated TILA, the courts have invariably discussed why the disclosure was confusing, misleading, or otherwise potentially detrimental to the borrower. See, e.g., Jenkins, supra.

Keka, 94 Hawai‘i at 225, 11 P.3d at 13. Appellants do not specify in what way the loan documents were “inconsistent and confusing” or how they “materially misstated annual percentage rate disclosures and materially misstated itemizations of amounts financed.” For example, Appellants did not state what the correct APR should have been or allege that the itemization of amounts financed omitted certain amounts that should have been listed.

Hawai‘i Rules of Civil Procedure (HRCP) Rule 56(e) provides, in relevant part:

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

(Emphases added). Appellants' bare allegations and the conclusory statements in Lynette's Declaration are insufficient to create a genuine issue of material fact as to whether TILA violations occurred.²

Arch Bay also argues that Appellants' Complaint for TILA damages was untimely and must fail as a matter of law. We agree. Under 15 U.S.C. § 1640,³ civil liability claims for TILA damages must be brought “within one year from the date of the occurrence of the violation[.]” 15 U.S.C. § 1640. Such claims are subject to the one-year statute of limitations set forth in § 1640(e), not the extended three-year rescission period set forth in 15 U.S.C. § 1635(f) (2012).⁴ Additionally,

For violations of TILA's disclosure requirements, the period begins to run “when the plaintiffs executed their loan documents, because they could have discovered the alleged disclosure violations and discrepancies at that time.” Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir.2011) (citing 15 U.S.C. § 1640(e) ); see also King v. California, 784 F.2d 910, 915 (9th Cir.1986) (stating that the limitations period begins to run from the date of consummation of the loan).... Plaintiff's TILA damages claim is time-barred unless Plaintiff can demonstrate that equitable tolling applies.

Young v. Bank of N.Y. Mellon, 848 F.Supp.2d 1182, 1191–92 (D .Haw.2012) ; see also Rowland v. Novus Fin. Corp., 949 F.Supp. 1447, 1455 (D.Haw.1996) ( “[T]he one-year statute of limitations runs from the date on which the parties consummated the loan[,] ... absent some showing by the Plaintiff that the court should toll the period because the Defendant fraudulently concealed its disclosure violations.”) (citation omitted).

Appellants executed the loan documents on February 21, 2007. Appellants filed the Complaint on February 22, 2010. Thus, their TILA damages claims were time-barred under 15 U.S.C. § 1640(e).

We next address Appellants' purported rescission of the Note and Mortgage.

One protection available to consumers under TILA is a right of rescission in any consumer credit transaction in which a security interest is acquired in property used as the principal dwelling of the person to whom credit is extended; this “buyer's remorse” provision extends for three business days following consummation of the transaction or delivery of the relevant disclosures to the consumer. 15 U.S.C. § 1635(a).⁵

TILA requires that creditors clearly and conspicuously disclose information regarding the right to rescind and provide borrowers with

...