Rosenfield v. HSBC Bank, USA

Decision Date11 June 2012
Docket NumberNo. 10–1442.,10–1442.
Citation681 F.3d 1172
PartiesJean C. ROSENFIELD, Plaintiff–Appellant, v. HSBC BANK, USA; Stephanie Y. O'Malley, as Public Trustee for the City and County of Denver, Defendants–Appellees. Consumer Financial Protection Bureau; American Bankers Association; Consumer Bankers Association; Consumer Mortgage Coalition, Amici Curiae.
CourtU.S. Court of Appeals — Tenth Circuit

OPINION TEXT STARTS HERE

John G. Nelson of the Law Office of John G. Nelson, Denver, CO, for PlaintiffAppellant.

Mark C. Willis (Kelly S. Kilgore, with him on the brief) of Kutak Rock, LLP, Denver, CO, for DefendantAppellee HSBC Bank, USA.

Patrick A. Wheeler of the Office of the Denver City Attorney, for DefendantAppellee Stephanie Y. O'Malley.

David M. Gossett, Assistant General Counsel, Leonard J. Kennedy, General Counsel, To–Quyen Truong, Deputy General Counsel, Rachel Rodman, Senior Counsel, and Peter G. Wilson and Kristen Bateman, Attorneys, filed an amicus brief on behalf of the Consumer Financial Protection Bureau.

Jeffrey P. Naimon, Kirk D. Jensen, and Michael R. Williams of BuckleySandler LLP filed an amicus brief on behalf of the American Bankers Association, Consumer Bankers Association, and Consumer Mortgage Coalition.

Before HOLMES, EBEL, and MATHESON, Circuit Judges.

HOLMES, Circuit Judge.

PlaintiffAppellant Jean Rosenfield appeals from the district court's order granting a motion to dismiss filed by DefendantAppellee HSBC Bank, USA (HSBC). Ms. Rosenfield brought claims seeking declaratory and injunctive relief, and damages against HSBC for alleged violations of the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601–1667f, averring that her lender failed to make required disclosures in a residential loan refinancing agreement executed by the parties, and that, as a result, she is entitled to a rescission of her loan agreement. Ms. Rosenfield argues that the district court erred in dismissing her claims and holding that she failed to timely exercise her right of rescission within the applicable three-year time bar specified by TILA. For the reasons that follow, we affirm the district court's order dismissing Ms. Rosenfield's complaint.

I. Background and Procedural History1

In 1998, Ms. Rosenfield and her husband purchased a home in Denver, Colorado. On October 10, 2006, she applied to Ownit Mortgage Solutions, Inc. (“Ownit”) to refinance an existing loan on the home. Mr. Rosenfield was not a party to the refinancing. He quitclaimed all of his right, title, and interest in the property to Ms. Rosenfield. The loan was closed by a designated title company on November 3, 2006.2 The loan was subsequently sold or assigned to HSBC. Ms. Rosenfield believed that, in connection with the loan, the original lender violated several federal statutes—specifically, TILA; the Home Ownership and Equity Protection Act of 1994 (“HOEPA”), 15 U.S.C. § 1639; and the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601– 2617—as well as state law. More importantly for purposes of this appeal, she claimed that required disclosures attendant to the transaction were omitted, including, inter alia, information on rescission rights, adjustable rates, and finance charges. On September 9, 2008, Ms. Rosenfield sent a “Notice of Rescission to the lender” and, according to her complaint, effectively “rescinded the loan transaction at issue in this case.” Aplt.App. at 4 (Pl.'s Compl., filed Dec. 21, 2009). She received no response.

Presumably because Ms. Rosenfield failed to continue meeting her obligations under the loan agreement, HSBC instituted foreclosure proceedings on July 9, 2009, by filing a Motion for Order Authorizing Sale in the District Court for the City and County of Denver “under the expedited procedure” set forth in Rule 120 of the Colorado Rules of Civil Procedure (the Rule 120 proceeding”). Id. In Ms. Rosenfield's response to the foreclosure action, she asserted a “defense of rescission,” Aplt. Opening Br. at 5, averring that she “sent a Notice of Rescission to HSBC ... [and she] received no response,” Dist. Ct. Doc. 55, Attach. 25, at 4 (Resp. to Verified Mot., filed Apr. 1, 2010). The District Court for the City and County of Denver, however, held that she could not assert this defense under the “pared-down procedure” provided by Rule 120. Aplt.App. at 38 (Pl.'s Resp. to Def.'s Mot. to Dismiss, filed Feb. 22, 2010). HSBC scheduled a foreclosure sale for December 31, 2009 with the office of DefendantAppellee Stephanie O'Malley, the city's public trustee.

On December 21, 2009, Ms. Rosenfield commenced this action in the District Court for the City and County of Denver. As relevant here, Ms. Rosenfield's complaint asserted two claims for relief against HSBC based upon her alleged right to rescind the loan in light of various disclosure violations under TILA and its implementing regulations, 12 C.F.R. §§ 226.1–.59 (“Regulation Z”).3 Specifically, Ms. Rosenfield first sought a declaratory judgment “that the mortgage on her home has been rescinded” and HSBC is “not entitled to proceed with any foreclosure.” Aplt.App. at 4–5. In her second cause of action, Ms. Rosenfield requested preliminary and permanent injunctive relief against HSBC, enjoining it from selling her home, as well as a “mandat[e] that HSBC release the deed of trust on the property and “withdraw all negative credit reports made with respect to th[e] loan ... following [a] rescission.” Id. at 5–6. On January 12, 2010, HSBC removed the case to the United States District Court for the District of Colorado pursuant to 28 U.S.C. § 1441(a), asserting jurisdiction under 28 U.S.C. §§ 1331 and 1367.

Shortly thereafter, on January 27, 2010, HSBC filed a motion to dismiss Ms. Rosenfield's complaint pursuant to Rule 12(b)(6), arguing that the complaint failed to state a claim upon which relief may be granted both on the merits of the inadequate disclosure allegations and because the claims were procedurally barred under TILA. On August 31, 2010, the district court granted HSBC's motion and dismissed the complaint in its entirety. The district court noted that “TILA sets an absolute three-year limitation on the borrower's right of [r]escission, measured from the closing of the transaction.” Aplt.App. at 61 (Dist. Ct. Op. & Order Granting Mot. to Dismiss, filed Aug. 31, 2010) (citing 15 U.S.C. § 1635(f)). It dismissed Ms. Rosenfield's claims for declaratory and injunctive relief because she filed the instant action outside of the three-year statutory period provided in § 1635(f).

Although Ms. Rosenfield alleged in her complaint that she provided her lender with written notice of rescission within the three-year period under TILA, the district court determined that the Supreme Court's decision in Beach v. Ocwen Federal Bank, 523 U.S. 410, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998), establishes that § 1635(f) is a statute of repose that extinguishes a claim for rescission, unless it is both noticed and sued upon within three years. As the district court explained, [t]o hold otherwise introduces a lacuna between the expiration of the right to rescind and the time in which the lender might learn of a purportedly timely [r]escission that it does not recall receiving, with foreclosure (and perhaps even subsequent sale) falling within that temporal no-man's-land.” Aplt.App. at 63. In other words, banks must be protected from the possibility that a foreclosed home could have a “cloudy title” because of a delayed rescission claim by a borrower.

Additionally, the district court rejected Ms. Rosenfield's argument that her assertion of the defense of rescission in her answer to the Rule 120 proceeding properly preserved her rights in the instant action. The court reasoned that “simply asserting the ‘defense’ of [r]escission in a Rule 120 proceeding is ... not the equivalent of [asserting the right in general] civil lawsuit[s],” id. at 65–66, because of the limited purpose and effect of Rule 120 proceedings, and the limited procedures made available for litigants. In this connection, the court noted that Ms. Rosenfield had not relied in her complaint on the date of her assertion of the rescission defense in the Rule 120 proceeding to support her contention that her rescission right was still viable, but rather the date of written notice to the lender. And the court declined “to re-draft the Complaint in order to rescue the Plaintiff from the untimeliness of the claims as actually pled,” id. at 66–67, and refused Ms. Rosenfield's request to permit amendment of her complaint.

Finally, the district court concluded in the alternative that even if Ms. Rosenfield's rescission claims were viable under TILA's statute of repose, they would still be barred by application of TILA's one-year statutory limitations provision in § 1640(a), (e), inasmuch as her right to “commence suit [i.e., after obtaining notice of the lender's violation] to enforce her attempted [r]escission” expired “on or about September 29, 2009, approximately two months before [the instant] suit was commenced.” Aplt.App. at 65. Ms. Rosenfield subsequently filed a timely notice of appeal.

II. Standard of Review

We review a district court's dismissal of a complaint under Rule 12(b)(6) de novo, and apply “the same legal standard as the district court.” Jordan–Arapahoe, LLP v. Bd. of Cnty. Comm'rs, 633 F.3d 1022, 1025 (10th Cir.2011). We must accept as true “all well-pleaded factual allegations in a complaint and view these allegations in the light most favorable to the plaintiff.” Smith v. United States, 561 F.3d 1090, 1098 (10th Cir.2009); see Morris v. City of Colorado Springs, 666 F.3d 654, 660 (10th Cir.2012). In order to survive a motion to dismiss brought under Rule 12(b)(6), the plaintiff must allege sufficient facts to make her claim to relief plausible on its face. See Jordan–Arapahoe, 633 F.3d at 1025;Kerber v. Qwest Grp. Life Ins. Plan, 647 F.3d 950, 959 (10th Cir.2011). [A] plaintiff's obligation to provide the ‘grounds'...

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