Filed: October 8, 1998

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT


                               No. 97-2215
                               (CA-96-918)



Milton E. Jones, Jr.,
                                                  Plaintiff - Appellant,

          versus


Saxon Mortgage, Inc., et al,
                                                 Defendants - Appellees.



                               O R D E R



     The court amends its opinion filed September 9, 1998, as follows:
     On the cover sheet, section 1 -- the status is changed from
UNPUBLISHED to PUBLISHED.
     On page 1, section 6 -- the status line is changed to read "Affirmed

by published per curiam opinion."
     On page 2, section 1 -- the reference to use of unpublished opinions
as precedent is deleted.
                                             For the Court - By Direction


                                             /s/ Patricia S. Connor
                                                    Clerk
PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MILTON E. JONES, JR.,
Plaintiff-Appellant,

v.
                                                                   No. 97-2215
SAXON MORTGAGE, INCORPORATED;
TEXAS COMMERCE BANK,
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Robert E. Payne, District Judge.
(CA-96-918)

Argued: June 3, 1998

Decided: September 9, 1998

Before NIEMEYER and HAMILTON, Circuit Judges, and
FABER, United States District Judge for the
Southern District of West Virginia, sitting by designation.

_________________________________________________________________

Affirmed by published per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Henry Woods McLaughlin, III, CENTRAL VIRGINIA
LEGAL AID SOCIETY, INC., Richmond, Virginia, for Appellant.
Robert Dean Perrow, WILLIAMS, MULLEN, CHRISTIAN & DOB-
BINS, P.C., Richmond, Virginia, for Appellees. ON BRIEF: Patrick
R. Hanes, WILLIAMS, MULLEN, CHRISTIAN & DOBBINS, P.C.,
Richmond, Virginia, for Appellees.
_________________________________________________________________

OPINION

PER CURIAM:

Milton Jones, Jr. initiated suit in federal court against Saxon Mort-
gage, Inc. ("Saxon") and Texas Commerce Bank ("TCB") on Novem-
ber 12, 1996. Jones's complaint was amended on February 10, 1997.
In his amended complaint, Jones sought damages and injunctive relief
from Saxon and TCB for alleged violations of the Truth in Lending
Act ("TILA"), 15 U.S.C. § 1601 et seq., and for alleged violations of
Virginia's fraud and usury laws. On August 5, 1997, the district court
granted defendants' motion to dismiss and dismissed Jones's TILA
claim, with prejudice, and his state fraud and usury claims, without
prejudice. Jones appeals this order, contending that the district court
erred in finding that he did not timely exercise his right to rescind
under TILA. We affirm.

I.

The facts, as pled in the plaintiff's amended complaint, are as fol-
lows. In the spring or summer of 1992, Jones determined to obtain
refinancing of a residential mortgage loan secured by a deed of trust
on his residence at 7621 River Road in Fredericksburg, Spotsylvania
County, Virginia. Jones engaged Mortgage and Equity Corporation
("Mortgage and Equity"), a licensed mortgage broker, to find a source
of the money he needed. Jones's efforts to obtain a loan through
Mortgage and Equity led to a delay of months, and Jones became con-
cerned that he would enter default on his mortgages without the loan
money. On October 23, 1992, Jones signed a note, closed on a loan
obtained by Mortgage and Equity through Lenders Financial Corpora-
tion ("Lenders") and signed a deed of trust for a mortgage on the
home to secure such note. However, Jones received less of the loan
proceeds then he had been led to believe by Mortgage and Equity,
largely because the closing costs for the loan were higher than Mort-
gage and Equity initially represented. Furthermore, the TILA docu-

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ments given to Jones were defective because they under-disclosed a
$300.00 processing fee paid to Mortgage and Equity, under-disclosed
a $27.00 express mail charge ordered by the creditor and failed to
include a notice explaining Jones's statutory right to rescind the trans-
action.

Mortgage and Equity and Lenders had an agreement by which
Lenders agreed to pay a "kickback" to Mortgage and Equity in return
for Mortgage and Equity steering loans to Lenders. Lenders, in turn,
had an agreement with Saxon for Saxon to commit in advance to pur-
chase loans to be made by Lenders. As part of the agreement, Saxon
would pay a bonus to Lenders if Lenders's loan was at a higher inter-
est rate than the agreed par rate on loans Saxon agreed in advance to
purchase. Mortgage and Equity and Lenders knew that if Jones could
be convinced to accept a loan at an interest rate higher than at par,
Saxon would pay Lenders a bonus. Therefore, Mortgage and Equity
and Lenders deliberately delayed arranging Jones's loan so that they
could force Jones to accept a loan at a higher interest rate. According
to Jones, he first became aware of the arrangements between Mort-
gage and Equity and Lenders, and Lenders and Saxon, in June of
1995.

In approximately November of 1992, Saxon paid Lenders for the
loan, including a bonus, since the loan was above par. Lenders exe-
cuted a document assigning the note and the deed of trust to Saxon.
Saxon assigned the note and the deed of trust to TCB, as trustee.

Soon thereafter, Jones fell into arrears on the loan, and TCB, on
instructions from Saxon, instituted foreclosure proceedings because
Jones was in default. Having received the notice of foreclosure pro-
ceeding, Jones filed a pro se action against Mortgage and Equity and
Lenders in the Circuit Court of Fairfax County, Virginia, on Decem-
ber 6, 1993. In October 1994, Jones's residence was sold at foreclo-
sure to TCB. On February 10, 1995, Jones took a voluntary nonsuit
in the action he initiated on December 6, 1993.

Despite the foreclosure sale, Jones continued to occupy the prem-
ises of the River Road property. To remove Jones from the property,
TCB instituted, and prevailed in, an unlawful detainer action against
Jones in the Circuit Court of Spotsylvania County, Virginia. Jones

                     3
unsuccessfully appealed the decision in the unlawful detainer action
to the Supreme Court of Virginia and the Supreme Court of the
United States. Jones was evicted from the residence in July 1996.

Meanwhile, on August 10, 1995, Jones filed a new suit in the Fair-
fax County Circuit Court. In that action, Jones named Saxon and TCB
as defendants. Subsequently, on November 12, 1996, Jones moved for
entry of a nonsuit, without prejudice. The Circuit Court granted that
motion. That same day, Jones filed this civil action in federal court
against Saxon and TCB, seeking damages and injunctive relief for
alleged violations of TILA and for alleged violations of Virginia's
fraud and usury laws. In this suit, Jones maintains that he is entitled
to a declaratory judgment; that there has been a proper rescission
under TILA; and, that he is entitled to a return of record ownership
of the subject property. The district court dismissed Jones's TILA
claim, with prejudice, and his state fraud and usury claims, without
prejudice.

II.

We review the district court's decision to grant Saxon's and TCB's
motion to dismiss de novo. Flood v. New Hanover County, 

, 251 (4th Cir. 1997). We accept the factual allegations in the
plaintiff's complaint and must construe those facts in the light most
favorable to the plaintiff. 

affirm the district court's dis-
missal only if it appears beyond doubt that the plaintiff can prove no
set of facts in support of his claim that would entitle him to relief.
Rogers v. Jefferson-Pilot Life Ins. Co., 

, 325 (4th Cir.
1989).

III.

At the district court, the parties agreed that the October 23, 1992
loan transaction was a consumer credit transaction covered by 15
U.S.C. §§ 1635, 1638 & 1640. The parties disagreed, however,
whether Jones exercised, in a timely fashion, his absolute right to
rescind, conferred by 15 U.S.C. § 1635(a). Jones's position was that
his TILA action was timely filed. He reasoned that the time period for
rescission under 15 U.S.C. § 1635 was tolled because of the doctrines
of fraudulent concealment and equitable estoppel. The district court

                    4
then thoroughly discussed these doctrines and concluded that they are
inapplicable in this case. Accordingly, the district court found that
Jones's right to rescind under TILA had expired.

On appeal, Jones maintains that, contrary to the district court's
holding, he did give timely notice of rescission under TILA by filing
and serving his December 1993 pro se lawsuit seeking TILA rescis-
sion. In any event, Jones argues that the time period for rescission
under TILA was tolled due to fraudulent concealment. We disagree.

IV.

TILA provides that, in the case of any consumer credit transaction
in which a security interest will be retained on any property used as
the consumer's principal dwelling, the consumer shall have the right
to rescind the transaction until midnight of the third business day fol-
lowing the consummation of the transaction or delivery of the mate-
rial disclosure and rescission forms, whichever is later. 15 U.S.C.
§ 1635(a). If the required notice or material disclosures are not deliv-
ered, then § 1635(f) provides a time limit for the exercise of the right.
12 C.F.R. 226.23(a)(3) (1998). 15 U.S.C. § 1635(f) states, in pertinent
part, as follows:

          Time limit for exercise of right

          (f) An obligor's right of rescission shall expire three years
          after the date of consummation of the transaction or upon
          the sale of the property, whichever occurs first, notwith-
          standing the fact that the information and forms required
          under this section or any other disclosures required under
          this part have not been delivered to the obligor . .. .

(Emphasis added.)

Congress "specifically designated the Federal Reserve Board and
staff as the primary source of interpretation and application of truth-
in-lending law." Ford Motor Credit Co. v. Milhollin, 

,
567 (1980). The Division of Consumer and Community Affairs of the
Federal Reserve Board, Official Staff Interpretations helps elucidate

                    5
the meaning of § 1635(a) & (f). The interpretation states, in pertinent
part, as follows:

          When the creditor has failed to take the action necessary to
          start the three-business day rescission period running, the
          right to rescind automatically lapses on the occurrence of
          the earliest of the following three events:

          - The expiration of three years after consummation of the
          transaction.

          - Transfer of all the consumer's interest in the property
          ....

          A sale or transfer of the property need not be voluntary to
          terminate the right to rescind. For example, a foreclosure
          sale would terminate an unexpired right to rescind.

12 C.F.R. Pt. 226.23, Supp. I (1998).

In this case, Jones has stated sufficient facts that, if taken as true,
entitle him to the application of § 1635(f) and the extended period of
rescission. Thus, pursuant to § 1635(f), Jones's right of rescission
could not have expired until three years after the date of consumma-
tion of the transaction or upon the sale of the property in question,
whichever occurred first. In this case, a foreclosure sale occurred
prior to the expiration of three years after the date of the consumma-
tion of the transaction; therefore, under the relevant statutes, Jones
would have had to give proper notice of rescission prior to the fore-
closure sale or his right of rescission would have expired on the date
of the foreclosure sale.

Jones asserts that he exercised his right of rescission by filing and
serving his pro se lawsuit on December 6, 1993. The filing of this suit
and service of the suit occurred prior to the October 1994 foreclosure
sale of the River Road property and prior to three years after the date
of consummation of the October 1992 transaction.

In order to exercise a right to rescind, a borrower must notify the
creditor of the rescission by mail, telegram, or other means of written

                    6
communication. 12 C.F.R. § 226.23(a)(2) (1998). Though the Fourth
Circuit has not addressed the issue, certain courts have held that the
filing of a lawsuit is sufficient "written communication" of the bor-
rower's election to rescind. Taylor v. Domestic Remodeling, Inc., 

, 100 (5th Cir. 1996); Elliot v. ITT Corp , 

,
106 (N.D. Ill. 1991). This court need not decide whether the filing of
a lawsuit is sufficient "written communication" of a borrower's elec-
tion to rescind under TILA because even if we were to hold that a
lawsuit may constitute sufficient notice, Jones's December 6, 1993
lawsuit does not constitute sufficient notice of rescission.

In Taylor v. Domestic Remodeling, Inc., 

, 99 (5th Cir.
1996), defendant Green Tree argued that the plaintiffs failed to exer-
cise their TILA right of rescission because they never submitted any
proof of giving written notice. Prior to the three-year expiration
period under 15 U.S.C. § 1635(f), however, the plaintiffs filed suit in
state court specifically asserting, among other things, rescission under
the provisions of TILA. 

The Fifth Circuit agreed with the
lower court's holding that the filing of the judicial complaint consti-
tuted written notice under TILA's regulations. 

Similarly, in Elliot v. ITT Corporation, 

, 105-06
(N.D. Ill. 1991), the defendants argued that the plaintiff did not
request rescission in writing within the applicable time period. The
plaintiff claimed that her complaint constituted sufficient notice. 

The plaintiff's complaint specifically requested that defendant
ITT Financial be ordered to rescind the transaction. 

district court agreed that the plaintiff's complaint constituted suf-
ficient written notice of rescission under TILA. 

of law of these cases is clear -- the filing of a lawsuit can
be sufficient written notice of rescission under TILA so long as the
complaint seeks rescission. In sharp contrast to the Taylor and Elliot
cases, Jones failed to ask for rescission in his December 6, 1993 com-
plaint. Instead of seeking rescission, Jones prayed that the lien held
by the current mortgager be rendered unenforceable, that attorney's
fees and court costs be paid and that compensatory and punitive dam-
ages be awarded. The only reference to rescission throughout the
whole complaint is in passing and in reference to one of Jones's
alleged fraud claims.

                     7
The effect of a rescission of an agreement is to put the parties back
in the same position they were in prior to the making of the contract.
Invengineering, Inc. v. Foregger Co., 

, 204 (3d Cir.
1961). On rescission of a contract, the contract is declared non-
existent, and rescission places "the parties in the position they would
have been in had the agreement never been executed . . . ." 

party seeking rescission of a contract must "disgorge the fruits of
the bargain." Woodling v. Garrett Corp., 

, 561 (2d Cir.
1987).

Thus, it is evident that when Jones sought in his 1993 suit to hold
the lien on his residence unenforceable, he sought something quite
distinct from rescission. If the plaintiff was successful in his action
filed on December 6, 1993, the relief he sought would have merely
resulted in the lien on his residence being rendered unenforceable.
Jones would not have been required to pay back any of the loan pro-
ceeds. Rescission, on the other hand, would have returned the parties
to their pre-contractual state. Thus, under rescission, Jones would
have to return the loan proceeds, and the security interest in Jones's
residence would vanish. Because an action for rescission is distinct
from an action asking that a lien on a residence be held unenforce-
able, this court finds that, even if the filing of a lawsuit can constitute
sufficient written notice of rescission, Jones's December 6, 1993 law-
suit did not constitute sufficient notice because he never requested
rescission in that action.

Jones's amended complaint in this case fails to allege any other
statement that could be construed as written notice of rescission prior
to the October 1994 foreclosure sale. Therefore, because the foreclo-
sure sale in this case occurred prior to three years after the date of
consummation of the transaction, Jones's right to rescind expired,
pursuant to 15 U.S.C. § 1635(f), upon the foreclosure sale of his prop-
erty.

V.

Next, Jones contends that even if his 1993 lawsuit did not consti-
tute sufficient notice of his intention to rescind, and there was no
notice of rescission prior to the foreclosure, the expiration period in

                     8
15 U.S.C. § 1635(f) should be tolled by fraudulent concealment.
Again, we disagree.

All the parties to this lawsuit concede that § 1635(f) is a statute of
repose and not a statute of limitation. This distinction is key to this
case. A statute of limitations "is a procedural device that operates as
a defense to limit the remedy available from an existing cause of
action." First United Methodist Church of Hyattsville v. United States
Gypsum Co., 

, 865 (4th Cir. 1989), cert. denied, 

(1990). One of the purposes of a statute of limitations is
to encourage prompt resolution of disputes and to provide to defen-
dants a mechanism to dispose of stale claims. 

In this
regard, "the terms of a typical statute of limitations provide that a
cause of action may or must be brought within a certain period of
time." Beach v. Ocwen Federal Bank, 

, 1412 (1998).

In contrast, a statute of repose creates a substantive right in those
protected to be free from liability after a legislatively-determined
period of time. First United Methodist Church of 

. Statutes of repose are motivated by "considerations of the
economic best interest of the public as a whole and are . . . based on
a legislative balance of the respective rights of potential plaintiffs and
defendants struck by determining a time limit beyond which liability
no longer exists." 

differences between statutes of limitations and statutes
of repose, it is understandable that a statute of limitations is tolled by
a defendant's fraudulent concealment. To disallow tolling when a
defendant has fraudulently concealed an injury would permit a defen-
dant to use a device, that was created out of considerations of fairness,
inequitably. 

is easy to understand why a statute of
repose is typically an absolute time limit beyond which liability no
longer exists and is not tolled for any reason. 

tolling of
a statute of repose would upset the economic best interests of the pub-
lic as a whole.

In Beach v. Ocwen Federal Bank, 

, 1411-12 (1998),
the United States Supreme Court indicated that 15 U.S.C. § 1635(f)
was not a statute of limitations, noting that § 1635(f) provides that the
right of rescission shall expire at the end of the time period. 

1412. Though not a statute of limitations, § 1635(f) is, as the parties
concede, a statue of repose. By its terms, § 1635(f) mirrors a typical
statute of repose in that it "precludes a right of action after a specified
period of time rather than" providing that a cause of action must be
brought within a certain period of time after the cause of action
accrued. Beach v. Ocwen Federal Bank, 

, 152 (Fla.
1997), aff'd, 

(1998).

Because § 1635(f) is a statute of repose, the time period stated
therein is typically not tolled for any reason. First United Methodist
Church of Hyattsville v. United States Gypsum Co., 

, 865
(4th Cir. 1989), cert. denied, 

(1990). Even so, to per-
mit tolling under § 1635(f) to allow a party to rescind after a foreclo-
sure sale would be unwise. First, after a foreclosure sale, rescission
is often impossible because the real estate has been purchased by an
innocent third party at the foreclosure sale. Consequently, the creditor
would not be able to return the property and the contracting parties
would not be able to return to their pre-contractual state by rescission
unless the innocent third party was divested of his or her interest in
the property.

Moreover, allowing tolling under § 1635(f) and permitting a party
to rescind after a foreclosure sale would create uncertainty in any
chain of title of real estate purchased from a foreclosure sale. Real
estate purchased from a foreclosure sale would be less marketable if
purchasers could somehow later be divested of title. Similarly, title to
real estate purchased from a foreclosure sale would be clouded.

Accordingly, we hold that § 1635(f) is an absolute time limit and
cannot be tolled to allow a party to rescind after a foreclosure sale.
For all these reasons, the order of the district court is affirmed.

AFFIRMED

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