Jesinoski Update: Homeowner, Bank and Court All Get it Wrong

We get it. Judges don’t like statutory rescission under TILA. They are not required to like TILA rescission but they are required to follow it. This decision openly defies the SCOTUS ruling and refuses to apply it.

Despite clear legislative intent to prevent banks from stonewalling rescission they are succeeding in doing so nonetheless as they play upon the bias of courts against TILA Rescission.

This Federal Judge attempts to grapple with the issue of damages claimed by Jesinoski’s rescission. It is stunning that these are the same people who argued the case before the Supreme Court of the United States (SCOTUS). The plain truth is that nobody in that courtroom seemed to understand rescission or how to apply it. The singular overriding point is that the only substantive part of the rescission statute is that when mailed, rescission is effective and the loan contract is canceled, the mortgage and note are void.  There is no maybe in that statement. Nor is there a sentence that starts with “well, not if….”.

It appears in this case that this Jesinoski proceeding clouded the issues when plaintiff sued for damages under rescission. In so doing they apparently were trying to prove the basis of their rescission which was sent, as per SCOTUS, within the 3 years. Pleading the basis of rescission was a mistake because it raised the very issue that the statute and the SCOTUS decision said was unnecessary. The factual issue for Plaintiff was whether the rescission had been sent. PERIOD. Whether it was proper when sent was an issue the Defendant was required to raise, not the Plaintiff.

The next move within 20 days of receipt of the rescission would be for a creditor to plead a case to vacate the rescission. The danger here is that this decision could be affirmed because it was Jesinoski who raised the issue of whether or not the rescission was properly sent. Jesinoski might have snatched defeat from the jaws of victory. By raising the issue of whether the rescission was proper, Jesinoski might have waived their objection that would be based upon the fact that no creditor had filed any lawsuit at any time, much less within the 20 day window.

But the court probably erred when it ignored the fact that the rescission was effective, plain and simple. It compounded the error by effectively ruling that rescission was only effective if a Court said it was effective and only if the borrower showed the ability to tender the full amount allegedly owed. In short this federal Judge was effectively overruling SCOTUS — a legal impossibility.

The statute and the SCOTUS decision on Jesinoski both clearly state that neither a lawsuit nor tender nor anything else is required of the borrower in the unique statutory scheme of rescission. The court is once again re-introducing common law rescission in direct contravention of the unanimous SCOTUS decision. Justice Scalia made it clear that NOTHING is required from the borrower after sending that notice.

Once the rescission is effective, the Court can only vacate it upon timely proper pleading from a party claiming injury. All the rest of the rescission statute is procedural. The failure of the creditor to actually bring an action to vacate the rescission within 20 days was fatal. Any other reading would require us to overrule SCOTUS and re-write the statute. It would mean that the rescission is NOT effective when mailed despite the clear wording of the statute that says it IS effective when mailed.

We get it. Judges don’t like statutory rescission under TILA. They are not required to like TILA rescission but they are required to follow it. This decision openly defies the SCOTUS ruling and refuses to apply it.

But the Plaintiff seems to have contributed to the problem. The damages sought are not based upon whether the rescission was proper. It was based upon the statute that says only if all three conditions are satisfied may the creditor demand any money. One of those conditions is the payment of all money ever paid to the “lender”. Those are the damages.

The issue is only the factual determination of the amount of those damages — not whether they are due at all. All three parties seem to have missed that point — Plaintiff, Defendant and Judge.

By inserting the tender requirement the Judge was not only ruling opposite to the content of the statute and opposite to the SCOTUS decision; it was expressly opposite the reasoning behind the “no-tender” component of TILA rescission, to wit: that payment could only be requested after the cancellation of the note, the release of the mortgage encumbrance, and the return of all money paid by the borrower since inception.

The clear reasoning behind this was that legislators in Congress expressly did not want to provide any method of stonewalling rescission. By requiring the disgorgement of money and the release of the encumbrance, the borrower was given the means to pay through application of the money received from the bank and the ability to get a new mortgage without damage to his/her/their credit. It was presumed by Congress that virtually no homeowner would have the means to tender without being able to cancel the old mortgage, release the encumbrance and get back their money FIRST.

Judges seem not to like the punitive nature of the statute. It is intended to be punitive, covering a wide array of possible lending violations and failures — instead of establishing a huge Federal agency that would review every mortgage loan.

The idea was to make the consequences of such behavior so gothic that the banks would police themselves. There is no Judge in the country who has the power or authority to re-write this very clear statute to match their own perceptions and belief that this statute is too draconian in its results. Public policy is for the legislative branch to decide. By resisting TILA rescission courts are encouraging more of the same bank behavior that still threatens all of the world’s economies and societies. By refusing to apply TILA rescission the courts are making themselves complicit in the greatest economic crime in human history.

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Larry D. Jesinoski and Cheryle Jesinoski, individuals, Plaintiffs,
v.
Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender, subsidiary of Bank of America N.A.; BAC Home Loans Servicing, LP, a subsidiary of Bank of America, N.A., a Texas Limited Partnership f/k/a Countrywide Home Loans Servicing, LP; Mortgage Electronic Registration Systems, Inc., a Delaware Corporation; and John and Jane Does 1-10, Defendants.

Civil No. 11-474 (DWF/FLN).United States District Court, D. Minnesota.

July 21, 2016.Larry D. Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Cheryle Jesinoski, Plaintiff, represented by Bryan R. Battina, Trepanier MacGillis Battina, P.A. & Daniel P. H. Reiff, Reiff Law Office, PLLC.

Countrywide Home Loans, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

BAC Home Loans Servicing, LP, Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

Mortgage Electronic Registration Systems, Inc., Defendant, represented by Andre T. Hanson, Fulbright & Jaworski LLP, Joseph Mrkonich, Fulbright & Jaworski LLP, Ronn B. Kreps, Fulbright & Jaworski LLP & Sparrowleaf Dilts McGregor, Norton Rose Fulbright US LLP.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK, District Judge.

INTRODUCTION

This matter is before the Court on a Motion for Summary Judgment brought by Defendants Countrywide Home Loans, Inc. (“Countrywide”), Bank of America, N.A. (“BANA”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (together, “Defendants”) (Doc. No. 51).[1] For the reasons set forth below, the Court grants Defendants’ motion.

BACKGROUND

I. Factual Background

This “Factual Background” section reiterates, in large part, the “Background” section included in the Court’s April 19, 2012 Memorandum Opinion and Order. (Doc. No. 23.)

On February 23, 2007, Plaintiffs Larry Jesinoski and Cheryle Jesinoski (collectively, “Plaintiffs”) refinanced their home in Eagan, Minnesota, by borrowing $611,000 from Countrywide, a predecessor-in-interest of BANA. (Doc. No. 7 (“Am. Compl.”) ¶¶ 7, 15, 16, 17; Doc. No. 55 (“Hanson Decl.”) ¶ 5, Ex. D (“L. Jesinoski Dep.”) at 125.) MERS also gained a mortgage interest in the property. (Am. Compl. ¶ 25.) Plaintiffs used the loan to pay off existing loan obligations on the property and other consumer debts. (L. Jesinoski Dep. at 114-15; Hanson Decl. ¶ 6, Ex. E (“C. Jesinoski Dep.”) at 49-50; Am. Compl. ¶ 22.)[2] The refinancing included an interest-only, adjustable-rate note. (L. Jesinoski Dep. at 137.) Plaintiffs wanted these terms because they intended to sell the property. (L. Jesinoski Dep. at 125-26, 137; C. Jesinoski Dep. at 38, 46-7.)

At the closing on February 23, 2007, Plaintiffs received and executed a Truth in Lending Act (“TILA”) Disclosure Statement and the Notice of Right to Cancel. (Doc. No. 56 (Jenkins Decl.) ¶¶ 5, 6, Exs. C & D; L. Jesinoski Dep. at 61, 67, 159; C. Jesinoski Dep. at 30-33; Hanson Decl. ¶¶ 2-3, Exs. A & B.) By signing the Notice of Right to Cancel, each Plaintiff acknowledged the “receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D.) Per the Notice of Right to Cancel, Plaintiffs had until midnight on February 27, 2007, to rescind. (Id.) Plaintiffs did not exercise their right to cancel, and the loan funded.

In February 2010, Plaintiffs paid $3,000 to a company named Modify My Loan USA to help them modify the loan. (L. Jesinoski Dep. at 79-81; C. Jesinoski Dep. at 94-95.) The company turned out to be a scam, and Plaintiffs lost $3,000. (L. Jesinoski Dep. at 79-81.) Plaintiffs then sought modification assistance from Mark Heinzman of Financial Integrity, who originally referred Plaintiffs to Modify My Loan USA. (Id. at 86.) Plaintiffs contend that Heinzman reviewed their loan file and told them that certain disclosure statements were missing from the closing documents, which entitled Plaintiffs to rescind the loan. (Id. at 88-91.)[3] Since then, and in connection with this litigation, Heinzman submitted a declaration stating that he has no documents relating to Plaintiffs and does not recall Plaintiffs’ file. (Hanson Decl. ¶ 4, Ex. C (“Heinzman Decl.”) ¶ 4.)[4]

On February 23, 2010, Plaintiffs purported to rescind the loan by mailing a letter to “all known parties in interest.” (Am. Compl. ¶ 30; L. Jesinoski Dep., Ex. 8.) On March 16, 2010, BANA denied Plaintiffs’ request to rescind because Plaintiffs had been provided the required disclosures, as evidenced by the acknowledgments Plaintiffs signed. (Am. Compl. ¶ 32; L. Jesinoski Dep., Ex. 9.)

II. Procedural Background

On February 24, 2011, Plaintiffs filed the present action. (Doc. No. 1.) By agreement of the parties, Plaintiffs filed their Amended Complaint, in which Plaintiffs assert four causes of action: Count 1—Truth in Lending Act, 15 U.S.C. § 1601, et seq.; Count 2—Rescission of Security Interest; Count 3—Servicing a Mortgage Loan in Violation of Standards of Conduct, Minn. Stat. § 58.13; and Count 4—Plaintiffs’ Cause of Action under Minn. Stat. § 8.31. At the heart of all of Plaintiffs’ claims is their request that the Court declare the mortgage transaction rescinded and order statutory damages related to Defendants’ purported failure to rescind.

Plaintiffs do not dispute that they had an opportunity to review the loan documents before closing. (L. Jesinoski Dep. at 152-58; C. Jesinoski Dep. at 56.) Although Plaintiffs each admit to signing the acknowledgement of receipt of two copies of the Notice of Right to Cancel, they now contend that they did not each receive the correct number of copies as required by TILA’s implementing regulation, Regulation Z. (Am. Compl. ¶ 47 (citing C.F.R. §§ 226.17(b) & (d), 226.23(b)).)

Earlier in this litigation, Defendants moved for judgment on the pleadings based on TILA’s three-year statute of repose. In April 2012, the Court issued an order granting Defendants’ motion, finding that TILA required a plaintiff to file a lawsuit within the 3-year repose period, and that Plaintiffs had filed this lawsuit outside of that period. (Doc. No. 23 at 6.) The Eighth Circuit affirmed. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092 (8th Cir. 2013). The United States Supreme Court reversed, holding that a borrower exercising a right to TILA rescission need only provide his lender written notice, rather than file suit, within the 3-year period. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015). The Eighth Circuit then reversed and remanded the case for further proceedings. (Doc. No. 38.) After engaging in discovery, Defendants now move for summary judgment.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is appropriate if the “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Courts must view the evidence and all reasonable inferences in the light most favorable to the nonmoving party. Weitz Co. v. Lloyd’s of London, 574 F.3d 885, 892 (8th Cir. 2009). However, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action.'” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed. R. Civ. P. 1).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). A party opposing a properly supported motion for summary judgment “must set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); see also Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).

II. TILA

Defendants move for summary judgment with respect to Plaintiffs’ claims, all of which stem from Defendants’ alleged violation of TILA—namely, failing to give Plaintiffs the required number of disclosures and rescission notices at the closing.

The 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 . . .” 15 U.S.C. § 1601(a). In transactions, like the one here, secured by a principal dwelling, TILA gives borrowers an unconditional three-day right to rescind. 15 U.S.C. § 1635(a); see also id. § 1641(c) (extending rescission to assignees). The three-day rescission period begins upon the consummation of the transaction or the delivery of the required rescission notices and disclosures, whichever occurs later. Id. § 1635(a). Required disclosures must be made to “each consumer whose ownership interest is or will be subject to the security interest” and must include two copies of a notice of the right to rescind. 12 C.F.R. § 226.23(a)-(b)(1). If the creditor fails to make the required disclosures or rescission notices, the borrower’s “right of rescission shall expire three years after the date of consummation of the transaction.” 15 U.S.C. § 1635(f); see 12 C.F.R. § 226.23(a)(3).

If a consumer acknowledges in writing that he or she received a required disclosure or notice, a rebuttable presumption of delivery is created:

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

15 U.S.C. §1635(c).

A. Number of Disclosure Statements

Plaintiffs claim that Defendants violated TILA by failing to provide them with a sufficient number of copies of the right to rescind and the disclosure statement at the closing of the loan. (Am. Compl. ¶ 47.) Defendants assert that Plaintiffs’ claims (both TILA and derivative state-law claims) fail as a matter of law because Plaintiffs signed an express acknowledgement that they received all required disclosures at closing, and they cannot rebut the legally controlling presumption of proper delivery of those disclosures.

It is undisputed that at the closing, each Plaintiff signed an acknowledgement that each received two copies of the Notice of Right to Cancel. Plaintiffs argue, however, that no presumption of proper delivery is created here because Plaintiffs acknowledged the receipt of two copies total, not the required four (two for each of the Plaintiffs). In particular, both Larry Jesinoski and Cheryle Jesinoski assert that they “read the acknowledgment . . . to mean that both” Larry and Cheryle “acknowledge receiving two notices total, not four.” (Doc. No. 60 (“L. Jesinoski Decl.”) ¶ 3; Doc. No. 61 (“C. Jesinoski Decl.”) ¶ 3.) Thus, Plaintiffs argue that they read the word “each” to mean “together,” and therefore that they collectively acknowledged the receipt of only two copies.

The Court finds this argument unavailing. The language in the Notice is unambiguous and clearly states that “[t]he undersigned each acknowledge receipt of two copies of NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in Lending Disclosure Statement.” (Jenkins Decl. ¶¶ 5, 6, Exs. C & D (italics added).) Plaintiffs’ asserted interpretation is inconsistent with the language of the acknowledgment. The Court instead finds that this acknowledgement gives rise to a rebuttable presumption of proper delivery of two copies of the notice to each Plaintiff. See, e.g., Kieran v. Home Cap., Inc., Civ. No. 10-4418, 2015 WL 5123258, at *1, 3 (D. Minn. Sept. 1, 2015) (finding the creation of a rebuttable presumption of proper delivery where each borrower signed an acknowledgment stating that they each received a copy of the disclosure statement—”each of [t]he undersigned acknowledge receipt of a complete copy of this disclosure”).[5]

The only evidence provided by Plaintiffs to rebut the presumption of receipt is their testimony that they did not receive the correct number of documents. As noted in Kieran, this Court has consistently held that statements merely contradicting a prior signature are insufficient to overcome the presumption. Kieran, 2015 WL 5123258, at *3-4 (citing Gomez v. Market Home Mortg., LLC, Civ. No. 12-153, 2012 WL 1517260, at *3 (D. Minn. April 30, 2012) (agreeing with “the majority of courts that mere testimony to the contrary is insufficient to rebut the statutory presumption of proper delivery”)); see also Lee, 692 F.3d at 451 (explaining that a notice signed by both borrowers stating “[t]he undersigned each acknowledge receipt of two copies of [notice]” creates “a presumption of delivery that cannot be overcome without specific evidence demonstrating that the borrower did not receive the appropriate number of copies”); Golden v. Town & Country Credit, Civ. No. 02-3627, 2004 WL 229078, at *2 (D. Minn. Feb. 3, 2004) (finding deposition testimony insufficient to overcome presumption); Gaona v. Town & Country Credit, Civ. No. 01-44, 2001 WL 1640100, at *3 (D. Minn. Nov. 20, 2001)) (“[A]n allegation that the notices are now not contained in the closing folder is insufficient to rebut the presumption.”), aff’d in part, rev’d in part, 324 F.3d 1050 (8th Cir. 2003).

Plaintiffs, however, contend that their testimony is sufficient to rebut the presumption and create a factual issue for trial. Plaintiffs rely primarily on the Eighth Circuit’s decision in Bank of North America v. Peterson, 746 F.3d 357, 361 (8th Cir. 2014), cert. granted, judgment vacated, 135 S. Ct. 1153 (2015), and opinion vacated in part, reinstated in part, 782 F.3d 1049 (8th Cir. 2015). In Peterson, the plaintiffs acknowledged that they signed the TILA disclosure and rescission notice at their loan closing, but later submitted affidavit testimony that they had not received their TILA disclosure statements at closing. Peterson, 764 F.3d at 361. The Eighth Circuit determined that this testimony was sufficient to overcome the presumption of proper delivery. Id. The facts of this case, however, are distinguishable from those in Peterson. In particular, the plaintiffs in Peterson testified that at the closing, the agent took the documents after they had signed them and did not give them any copies. Id. Here, it is undisputed that Plaintiffs left with copies of their closing documents. (L. Jesinoski Dep. at 94-95.) In addition, Plaintiffs did not testify unequivocally that they did not each receive two copies of the rescission notice. Instead, they have testified that they do not know what they received. (See, e.g., id. at 161.) Moreover, Cheryle Jesinoski testified that she did not look through the closing documents at the time of closing, and therefore cannot attest to whether the required notices were included. (C. Jesinoski Dep. at 85.)[6]

Based on the evidence in the record, the Court determines that the facts of this case are more line with cases that have found that self-serving assertions of non-delivery do not defeat the presumption. Indeed, the Court agrees with the reasoning in Kieran, which granted summary judgment in favor of defendants under similar facts, and which was decided after the Eighth Circuit issued its decision in Peterson. Accordingly, Plaintiffs have not overcome the rebuttable presumption of proper delivery of TILA notices, and Defendants’ motion for summary judgment is granted as to the Plaintiffs’ TILA claims.

B. Ability to Tender

Defendants also argue that Plaintiffs’ claims fails as a matter of law on a second independent basis—Plaintiffs’ admission that they do not have the present ability to tender the amount of the loan proceeds. Rescission under TILA is conditioned on repayment of the amounts advanced by the lender. See Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1170 (9th Cir. 2003). This Court has concluded that it is appropriate to dismiss rescission claims under TILA at the pleading stage based on a plaintiff’s failure to allege an ability to tender loan proceeds. See, e.g., Franz v. BAC Home Loans Servicing, LP, Civ. No. 10-2025, 2011 WL 846835, at *3 (D. Minn. Mar. 8, 2011); Hintz v. JP Morgan Chase Bank, Civ. No. 10-119, 2010 WL 4220486, at *4 (D. Minn. Oct. 20, 2010). In addition, courts have granted summary judgment in favor of defendants where the evidence shows that a TILA plaintiff cannot demonstrate an ability to tender the amount borrowed. See, e.g., Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 822 (4th Cir. 2007) (affirming grant of summary judgment for defendants on TILA rescission claim “given the appellants’ inability to tender payment of the loan amount”); Taylor v. Deutsche Bank Nat’l Trust Co., Civ. No. 10-149, 2010 WL 4103305, at *5 (E.D. Va. Oct. 18, 2010) (granting summary judgment on TILA rescission claim where plaintiff could not show ability to tender funds aside from selling the house “as a last resort”).

Plaintiffs argue that the Supreme Court in Jesinoski eliminated tender as a requirement for rescission under TILA. The Court disagrees. In Jesinoski, the Supreme Court reached the narrow issue of whether Plaintiffs had to file a lawsuit to enforce a rescission under 15 U.S.C. § 1635, or merely deliver a rescission notice, within three years of the loan transaction. Jesinoski, 135 S. Ct. at 792-93. The Supreme Court determined that a borrower need only provide written notice to a lender in order to exercise a right to rescind. Id. The Court discerns nothing in the Supreme Court’s opinion that would override TILA’s tender requirement. Specifically, under 15 U.S.C. § 1635(b), a borrower must at some point tender the loan proceeds to the lender.[7] Plaintiffs testified that they do not presently have the ability to tender back the loan proceeds. (L. Jesinoski Dep. at 54, 202; C. Jesinoski Dep. at 118-119.) Because Plaintiffs have failed to point to evidence creating a genuine issue of fact that they could tender the unpaid balance of the loan in the event the Court granted them rescission, their TILA rescission claim fails as a matter of law on this additional ground.[8]

Plaintiffs argue that if the Court conditions rescission on Plaintiffs’ tender, the amount of tender would be exceeded, and therefore eliminated, by Plaintiffs’ damages. In particular, Plaintiffs claim over $800,000 in damages (namely, attorney fees), and contend that this amount would negate any amount tendered. Plaintiffs, however, have not cited to any legal authority that would allow Plaintiffs to rely on the potential recovery of fees to satisfy their tender obligation. Moreover, Plaintiffs’ argument presumes that they will prevail on their TILA claims, a presumption that this Order forecloses.

C. Damages

Next, Defendants argue that Plaintiffs are not entitled to TILA statutory damages allegedly flowing from Defendants’ decision not to rescind because there was no TILA violation in the first instance. Plaintiffs argue that their damages claim is separate and distinct from their TILA rescission claim.

For the reasons discussed above, Plaintiffs’ TILA claim fails as a matter of law. Without a TILA violation, Plaintiffs cannot recover statutory damages based Defendants refusal to rescind the loan.

D. State-law Claims

Plaintiffs’ state-law claims under Minn. Stat. § 58.13 and Minnesota’s Private Attorney General statute, Minn. Stat. § 8.31, are derivative of Plaintiffs’ TILA rescission claim. Thus, because Plaintiffs’ TILA claim fails as a matter law, so do their state-law claims.

ORDER

Based upon the foregoing, IT IS HEREBY ORDERED that:

1. Defendants’ Motion for Summary Judgment (Doc. No. [51]) is GRANTED.

2. Plaintiffs’ Amended Complaint (Doc. No. [7]) is DISMISSED WITH PREJUDICE.

LET JUDGMENT BE ENTERED ACCORDINGLY.

[1] According to Defendants, Countrywide was acquired by BANA in 2008, and became BAC Home Loans Servicing, LP (“BACHLS”), and in July 2011, BACHLS merged with BANA. (Doc. No. 15 at 1 n.1.) Thus, the only two defendants in this case are BANA and MERS.

[2] Larry Jesinoski testified that he had been involved in about a half a dozen mortgage loan closings, at least three of which were refinancing loans, and that he is familiar with the loan closing process. (L. Jesinoski Dep. at 150-51.)

[3] Plaintiffs claim that upon leaving the loan closing they were given a copy of the closing documents, and then brought the documents straight home and placed them in L. Jesinoski’s unlocked file drawer, where they remained until they brought the documents to Heinzman.

[4] At oral argument, counsel for Plaintiffs requested leave to depose Heinzman in the event that the Court views his testimony as determinative. The Court denies the request for two reasons. First, it appears that Plaintiffs had ample opportunity to notice Heinzman’s deposition during the discovery period, but did not do so. Second, Heinzman’s testimony will not affect the outcome of the pending motion, and therefore, the request is moot.

[5] See also, e.g., Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 451 (6th Cir. 2012) (rebuttable presumption arose where each party signed an acknowledgement of receipt of two copies); Hendricksen v. Countrywide Home Loans, Civ. No. 09-82, 2010 WL 2553589, at *4 (W.D. Va. June 24, 2010) (rebuttable presumption of delivery of two copies of TILA disclosure arose where plaintiffs each signed disclosure stating “[t]he undersigned further acknowledge receipt of a copy of this Disclosure for keeping prior to consummation”).

[6] This case is also distinguishable from Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir. 2005), a case in which a borrower’s assertion of non-delivery was sufficient to overcome the statutory presumption. In Stutzka, the plaintiffs signed acknowledgements that they received required disclosures but left the closing without any documents. Stutzka, 420 F.3d at 776.

[7] TILA follows a statutorily prescribed sequence of events for rescission that specifically discusses the lender performing before the borrower. See § 1635(b). However, TILA also states that “[t]he procedures prescribed by this subsection shall apply except when otherwise ordered by a court.” Id. Considering the facts of this case, it is entirely appropriate to require Plaintiffs to tender the loan proceeds to Defendants before requiring Defendants to surrender their security interest in the loan.

[8] The Court acknowledges that there is disagreement in the District over whether a borrower asserting a rescission claim must tender, or allege an ability to tender, before seeking rescission. See, e.g. Tacheny v. M&I Marshall & Ilsley Bank, Civ. No. 10-2067, 2011 WL 1657877, at *4 (D. Minn. Apr. 29, 2011) (respectfully disagreeing with courts that have held that, in order to state a claim for rescission under TILA, a borrower must allege a present ability to tender). However, there is no dispute that to effect rescission under § 1635(b), a borrower must tender the loan proceeds. Here, the record demonstrates that Plaintiffs are unable to tender. Therefore, their rescission claim fails on summary judgment.

 

15 Responses

  1. @david belanger: David can you provide the link to the SEC site and general info on how to search for your loan? Thanks!

  2. dolan that would be 13 million 500, thousand dollars . think about that

  3. DOLAN, first the banks would have to pay all money made on that person note and mortgage , that was many times. like in my case i have sec doc showing at lease 27 times the appraisal price on the property, so let say the note, was for 350,000, but the appraisal price was 500,000 dollars that they sold it for. that would mean allot of money going back to homeowners.

  4. OK, the court is saying that the alleged borrower must be able to show they can tender repayment of the alleged loan to make the rescission effective? If I remember right, the TILA & the SCOTUS says once the bank/lender has preform its duty to return the money paid in, returned note, and public notice of satisfaction of mortgage/DOT within 20 days, the borrower has the duty to return the amount of the loan or the home. Not both, its either the money or the home and the bank has to take possession of one or the other within 20 days or the borrower is under no further obligation to the bank/lender.

    Just a thought? If the bank did do its duty and returned all money, note, and satisfaction of mortgage. It seems the borrower could go to the bank and make an offer, without any security interest in any property to pay, say 100 or 200 a month or even less if it is all you can afford and the bank/lender refuses your offer to repay. Would that under the UCC, constitute relief from any further obligation of the borrower?

  5. just got my certified copy from secretary of state in Delaware after my foia request to doj and the Delaware secretary of state, sign stamp and certified by the secretary of state. stating that the trust named in the complaint has not ever been a registered trust with Delaware. and is not a legal ,live living, entity. , does not exists.

    The UCC Opinion

    Because perfection of a secured interest in fixtures, etc., is obtained by filing a financing statement in the domicile of the LLC or DST, an opinion as to the enforceability of the financing statement is often requested and given. This opinion requires review of the UCC Financing Statement and application of the Delaware Uniform Commercial Code — Secured Transactions, 6 Del. C. §§ 9-101 et seq.

    EXAMPLE:

    Insofar as Article 9 of the Uniform Commercial Code as in effect in the State of Delaware on the date hereof (the “Delaware UCC’) is applicable (without regard to conflict of laws principles), upon the filing of each Financing Statement with the Division, the Lender will have a perfected security interest in each Borrower’s rights in that portion of the collateral (as defined in the applicable Deed of Trust, Security Agreement and Fixture Filing, hereinafter the “Agreement’) described in the Financing Statement that may be perfected by the filing of a UCC financing statement with the Division (the “Filing Collateral’) and the proceeds (as defined in Section 9-102 (a)(64) of the Delaware UCC) thereof

    The UCC opinion expressed above is limited to the State of Delaware and is subject to a number of additional assumptions, qualifications, limitations and exceptions, including the following: (1) that Borrower has sufficient rights to the Filing Collateral and has received sufficient value and consideration in connection with the security interest granted; and (2) that each applicable security agreement and financing statement reasonably identifies the filing collateral.

    On January 17, 2002, the State of Delaware enacted the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2703A (the “ABSFA”). The ABSFA effectively creates a safe harbour under Delaware state law for determining what constitutes a true sale in securitisation transactions.

    The ABSFA first provides that “[a]ny property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.”[1] Given the foregoing provision, to the extent Delaware law applies, the traditional legal criteria used in determining what constitutes a true sale in the context of a securitisation is intended to be irrelevant.The ABSFA further states that “[a] transferor in the securitization transaction … to the extent the issue is governed by Delaware law, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the transferor any property, assets or rights purported to be transferred, in whole or in part, by the transferor.”[2] The ABSFA also provides that “[i]n the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or the transferor’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed part of the transferor’s property, assets, rights or estate.”[3] The foregoing provisions facilitate reaching the conclusion that a true sale exists in the context of a securitisation transaction where Delaware law applies.A number of issues exist that may preclude the ABSFA’s application to a particular securitisation transaction, including whether federal law will preempt the ABSFA in making a true sale determination and whether Delaware law generally, and the ABSFA in particular, will apply to a transfer in a securitisation transaction. Although not yet judicially tested, the ABSFA is nevertheless a reason to seriously consider whether the parties to a securitisation transaction should choose for Delaware law to apply to their contractual relations

    While Delaware LLCs and DSTs may be organized for any lawful purpose (except some insurance-related purposes as to LLCs) lenders and underwriters often require that the LLC or DST be restricted to having only a single purpose. Thus SPE provisions are imposed to set limitations on how business is conducted. Some common SPE provisions include:

    • Prohibitions against the acquisition or ownership of any material asset other than (i) the property that is the subject of the proposed transaction (the “Property”), and (ii) such incidental personal property as may be necessary for the operation of the Property.

    • Prohibitions or restrictions on the company’s ability to take on additional debt.

    • Requirements that the company at all times maintain its separate existence and good standing and refrain from certain types of amendments to its governing documents, fail to preserve its existence as an entity duly organized.

    • Restrictions or outright prohibition of the company acquiring any subsidiaries, merging with or consolidating with another entity, or commingling any of its assets with those of any other entity, including parent companies and affiliates.

    • Requirements that the company pay its own debts from its own assets and maintain its own separate books and records.

    • Provisions forbidding the company from serving as guarantor for another entity’s debts or obligations.37

    The UCC Opinion

    Because perfection of a secured interest in fixtures, etc., is obtained by filing a financing statement in the domicile of the LLC or DST, an opinion as to the enforceability of the financing statement is often requested and given. This opinion requires review of the UCC Financing Statement and application of the Delaware Uniform Commercial Code — Secured Transactions, 6 Del. C. §§ 9-101 et seq.

    EXAMPLE:

    Insofar as Article 9 of the Uniform Commercial Code as in effect in the State of Delaware on the date hereof (the “Delaware UCC’) is applicable (without regard to conflict of laws principles), upon the filing of each Financing Statement with the Division, the Lender will have a perfected security interest in each Borrower’s rights in that portion of the collateral (as defined in the applicable Deed of Trust, Security Agreement and Fixture Filing, hereinafter the “Agreement’) described in the Financing Statement that may be perfected by the filing of a UCC financing statement with the Division (the “Filing Collateral’) and the proceeds (as defined in Section 9-102 (a)(64) of the Delaware UCC) thereof

    The UCC opinion expressed above is limited to the State of Delaware and is subject to a number of additional assumptions, qualifications, limitations and exceptions, including the following: (1) that Borrower has sufficient rights to the Filing Collateral and has received sufficient value and consideration in connection with the security interest granted; and (2) that each applicable security agreement and financing statement reasonably identifies the filing collateral.

    On January 17, 2002, the State of Delaware enacted the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2703A (the “ABSFA”). The ABSFA effectively creates a safe harbour under Delaware state law for determining what constitutes a true sale in securitisation transactions.

    The ABSFA first provides that “[a]ny property, assets or rights purported to be transferred, in whole or in part, in the securitization transaction shall be deemed to no longer be the property, assets or rights of the transferor.”[1] Given the foregoing provision, to the extent Delaware law applies, the traditional legal criteria used in determining what constitutes a true sale in the context of a securitisation is intended to be irrelevant.The ABSFA further states that “[a] transferor in the securitization transaction … to the extent the issue is governed by Delaware law, shall have no rights, legal or equitable, whatsoever to reacquire, reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the transferor any property, assets or rights purported to be transferred, in whole or in part, by the transferor.”[2] The ABSFA also provides that “[i]n the event of a bankruptcy, receivership or other insolvency proceeding with respect to the transferor or the transferor’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed part of the transferor’s property, assets, rights or estate.”[3] The foregoing provisions facilitate reaching the conclusion that a true sale exists in the context of a securitisation transaction where Delaware law applies.A number of issues exist that may preclude the ABSFA’s application to a particular securitisation transaction, including whether federal law will preempt the ABSFA in making a true sale determination and whether Delaware law generally, and the ABSFA in particular, will apply to a transfer in a securitisation transaction. Although not yet judicially tested, the ABSFA is nevertheless a reason to seriously consider whether the parties to a securitisation transaction should choose for Delaware law to apply to their contractual relations

    While Delaware LLCs and DSTs may be organized for any lawful purpose (except some insurance-related purposes as to LLCs) lenders and underwriters often require that the LLC or DST be restricted to having only a single purpose. Thus SPE provisions are imposed to set limitations on how business is conducted. Some common SPE provisions include:

    • Prohibitions against the acquisition or ownership of any material asset other than (i) the property that is the subject of the proposed transaction (the “Property”), and (ii) such incidental personal property as may be necessary for the operation of the Property.

    • Prohibitions or restrictions on the company’s ability to take on additional debt.

    • Requirements that the company at all times maintain its separate existence and good standing and refrain from certain types of amendments to its governing documents, fail to preserve its existence as an entity duly organized.

    • Restrictions or outright prohibition of the company acquiring any subsidiaries, merging with or consolidating with another entity, or commingling any of its assets with those of any other entity, including parent companies and affiliates.

    • Requirements that the company pay its own debts from its own assets and maintain its own separate books and records.

    • Provisions forbidding the company from serving as guarantor for another entity’s debts or obligations.37

    http://www.businesslawbasics.com/sites/default/files/files/Berger%20Harris%20-%20DE%20Opinions%20booklet.pdf

  6. On the Bubble

    feel free to email me at jmsseymour07@gmail.com

    Based on a week old CA Appellate partially published opinion. Rescission with Proper notice” is retroactive post Jesinoski. That’s the big ticket. In our case we nailed the rescission within in the first two years and got a reputable attorney to assert the rescission on a more substantive basis. Wilshire Credit Corp the Servicer of the loan acknowledged the validity of the rescission of course with conditions, one year later we filed federal lawsuit after Wilshire reneged on a a long negotiated settlement discussion. We were early in the game. The banks tried to steer everyone into the modification train to the concentration camps. We resist to this day. I believe like Mr. Garfield that there are some sets of facts and circumstances that make some houses foreclosure proof. Just some. As in this case I have found the judges to rule correctly more often than not because you need a pretty strong case mess with the banks.

    Good Luck

  7. the Seymour link is a quick Google search away. Charity Seymour v BANK of America 9th circuit August 2015. Originally case in 2009 was Charity Pantalion v Resmae et al 9
    8 + years without foreclosure. long story without an end in sight. Any CA attorney want to rake over? I am getting tired.

  8. I wrote extensively on this very subject many months ago when another case did the same ridiculous thing… here is a very short version.
    The slippery slope begins when Judges take it upon themselves to be advocates for one or the other party in a case, interject their perspectives or do anything less than provide for the security of the rights of the people first.
    Here the trick is done by misquoting “consummation” of the loan for “consummation of closing”, “consummation of the transaction” even though “transaction” denotes something transacted or an exchange was made “consummation of the loan” is more specific. Once one is misdirected to believe that it is the “closing” the finishing of the signing of the papers one is locked into the narrow tube and alienated from the real and over all true picture, much like pick pockets that distract you with a tap on your shoulder while they pick your pocket it is like all magicians an attention distractor, slight of hand trick.
    The clear wording is not “consummation of the closing, transaction or other but simply “consummation” (I seem to remember in my past reading that it sais “consummation of the loan” but have not found it in Lexus… at any rate “consummation” is a very specific and unusual not used very often word and therefor we must reason that it was specifically chosen for particular reasons. and guess what .. it is self evident that with it the banksters can not get away with this thieving and the third party interlopers and not get away so easily with fraudclosuing without showing standing, interest, payment made or a “loan” as defined… no “consummation”.
    in most countries a legal marriage is not binding until “consummated” which requires the interaction of both people. In a transaction/loan the Lender must actually give something of substance and value in return for the Note and DOT. That never happened thus there is no “consummation” and the three years does not begin until “consummation”. And since you gave them a note of full value which they have since monetized, and collected on a thousand times, there is such an imbalance that they would have to return all of it .. yes millions first and then actually take out of their pocket funds and give it to you.. and then there would be a consummation. Which of course you do not need so that is why they must do all this trickery. If you ever knew that you are and always will be the creditor because only man can create and all things were given to man you would not be tricked into “borrowing” your own substance and pay pay pay interest on something that does not exist and go into “Debt”, forever appearing to be a slave to ignorance and lies.
    As to the “tender”
    What absolute bull shit!! Just reads it is clear that only after the alleged Lender has returned everything then they can sue for the amount they actually loaned which of course they can not show so can not make claim to that which they never did..

    “(2) To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication. Notice is considered given when mailed, when filed for telegraphic transmission or, if sent by other means, when delivered to the creditor’s designated place of business.”

    That is pretty clear. it is complete.. there is no pre requirement, or condition “must tender or show ability to tender along with notice of recission” … nope aint there so it aint there not a condition period.

    “(3) The consumer may exercise the right to rescind until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, 48 whichever occurs last. If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the property, whichever occurs first. In the case of certain administrative proceedings, the rescission period shall be extended in accordance with section 125(f) of the Act.

    48 The term ‘material disclosures’ means the required disclosures of the annual percentage rate, the finance charge, the amount financed, the total of payments, the payment schedule, and the disclosures and limitations referred to in §§ 226.32(c) and (d) and 226.35(b)(2).”

    Well there are several cases where the banks have admitted to manipulating LIBOR so even if they did give the amounts they are actually false and therefore are not “Disclosed”… see Cases of settlement where admissions of manipulation of LIBOR.

    as to 3. Again there is no condition precedent such as “must tender or show ability to tender with, before or after notice to “consummate” the notice. Nope ain’t there!!!

    Ok so that is all of (a) and under the title of
    “(a) Consumer’s right to rescind.”

    and a right can not be altered, diminished, licensed, regulated or otherwise taken except by due process of law.
    and no court supersedes the law. No idiot in a robe placing himself on a thrown who is subject to the laws the Constitution and “shall hold their office during good behavior”… meaning anything less than “good behavior” and they do not hold that office, which means they are imposters!!!!

    (b) is all about what the alleged “Lender” is required to do to not be subject to Rescission.

    (c)is about consumers waving rescission

    “(d) Effects of rescission.

    (1) When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.”

    Ok again we are now way past the description, requirements etc of the “Right to Rescission” and now we are into the “effects of rescission” … The Rescission is already done, finished compete, the right has been exercised now as to the “effects” of that action.
    Notice it sais “When” further confirming that it has been done, complete, not subject to anything, not partial, not temporary, not dependent upon some ass hole in a black robe that is an employee of a corporation and not a de jure judge any damn way…

    ” the security interest giving rise to the right of rescission becomes void..” that is the effect of the rescission, “and the consumer shall not be liable for any amount, including any finance charge.”…. is that not clear? ….. “shall not be liable for any amount..” including tender, dumb ass!!!

    That is complete, all of (1) not one condition there!!!

    “(2) Within 20 calendar days after receipt of a notice of rescission, the creditor shall return any money or property that has been given to anyone in connection with the transaction and shall take any action necessary to reflect the termination of the security interest.”

    “the creditor Shall return any money or property that has been given… and shall take any action necessary to reflect the termination of the security interest.”..
    No conditions, no tender needed, no excuses .. 20 days that is it, no “unless some back bought dip shit in a black skirt thinks otherwise”
    Nothing .. termination of the security interest.. = terminate the DOT, cross it out, return it, mark it void, put in a notice of termination into the public record “shall take any action necessary to reflect the termination of the security interest.” no longer available.. it is gone forever. period. No judge nobody can revive it.. period. it is gone for all time. “Terminated”

    Now we must look at (4) because it may effect (2) in some way .. lets look at in what way.

    (4) The procedures outlined in paragraphs (d) (2) and (3) of this section may be modified by court order.

    Ok the only thing being effected on (2) or (3) is the “procedures”
    thus the manner in which “the creditor shall return any money or property… and the procedure by which the creditor accomplishes “take any action to reflect the termination of the security interest.” not changing the 20 days or the “effect” of rescission, but only the procedures, the steps, taken to accomplish this requirement!!!!!!

    “(3) If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value. At the consumer’s option, tender of property may be made at the location of the property or at the consumer’s residence. Tender of money must be made at the creditor’s designated place of business. If the creditor does not take possession of the money or property within 20 calendar days after the consumer’s tender, the consumer may keep it without further obligation.”

    again These are the provisions set out the only ability a court order has is to modify the Procedures by which the requirements are accomplished. Such as if the Lender files a motion to allow an agent to take possession of the property or if the consumer “At the consumer’s option, tender of property may be made at the location of the property or at the consumer’s residence.” so perhaps a court may order that the tender of the property may be at a place more accessible to the so called creditor or allow an exception for good cause shown an extension of the 20 days to come and get it such as if a blizzard has snowed the area in for the last 60 days or a flood, etc.. but not place any requirements that are not there. only the procedures in which the requirements are accomplished.
    Notice too that it is only after “the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor or, where the latter would be impracticable or inequitable, tender its reasonable value.”
    and notice that the actual liberty which the court is granted to court is to be in favor of the consumer, as exampled by ” where the latter would be impracticable or inequitable, tender its reasonable value.” and “At the consumer’s option”… ” If the creditor does not take possession of the money or property within 20 calendar days after the consumer’s tender, the consumer may keep it without further obligation.”
    Why? because we all know that the alleged creditor could not legally or lawfully take possession of the property because they must show they are entitled to anything.
    So there ya have it the short version.. ha ha ha..
    BTW has anyone noticed the Glad-ski case is holding up and recognize that it is an opening to a major door way .. “Anything that a trustee of the REMIC does that they are not authorized to do is void”.
    So If they are not authorized to accept any deposits after closing or by anyone but the donor and the donor guarantees the instruments and must take them back and replace them with another then does it not reason that it can never be taken forward out of the trust only backwards to the donor and once it does the donor can not sell it to anyone but at face value having full knowledge that it is non performing.. so where is the donors required signature into the trust and then back to the donor to forecloses on??? And oh yea does anyone even read these things like that funny instrument known as the Deed of Trust?? It only provides for the “Lender at its option…”: to foreclose… so who are these other carpet baggers?? they do not even call themselves the lenders… what’s up with that does that not go directly to “capacity”??? I donor know… ha ha

  9. This is the problems that happens alot by judges. They don’t want to rule at all in homeowners case even though they know about all the fraud and settlements. Its been 7 years and they are still screwing it up. They know the law and ignore it. They continue to break the homeowners backs with bs.

  10. @James Seymour: Do you have a link to the Seymour v. Bank case?

  11. THIS IS NOTHING MORE THEN “HAIR SPLITTING” AN ARGUMENT IN FAVOR OF FRAUD FOR THE BANKS WHO ARE MAKING A SECONDARY WALL STREET DERIVED PRODUCT, IGNORING THE PREMISE.DUMB ASS JUDGE SAYS “BORROWER MUST TENDER FIRST” OR RESCISSION IS INEFFECTIVE, FALSE, SEE THIS ASSHOLE JUDGE IS JUST PROTECTING HIS INVESTMENT ACCOUNT,INSTEAD OF PROTECTING THE PUBLIC, HE IS A BAR PARASITE,NOTHING MORE,HE SHOULD BE EXECUTED FOR TREASON

  12. they lost because their facts and argument did not persuade the judge regarding the rebuttal of presumption of proper notice.

    If you want to see a solid basis for Rescission Google see Seymour v BANK in the 9th circuit court of appeals. opinion issued August 2015.

  13. If one were to submit there was no consummation, how might that apply here, or be different?

    Technically, if there was no consummation, there is nothing to rescind. So, to me, that is not a case that can be made either, at least to confirm rescission. No consummation would seem to need to be pled in the foreclosure case. Also, here, it did seem the Court was assuming the docs not void while ruling on rescission. The 20-day period to contest had well passed, so became valid even if not well set.
    And, on tender, the Court just got it wrong, while also ruling out of jurisdiction. My opinion.

  14. What is the lesson here that others utilizing Jesinoski in there defense must come away with? Please make it plain!

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