J. MICHAEL SEABRIGHT, District Judge.
This action is again before the court after two prior dispositive Orders. Defendant Bank of New York Mellon ("Defendant" or "BONYM") moves for summary judgment on Plaintiffs Edward and Saranne Abubo's (the "Abubos" or "Plaintiffs") only remaining Count — a claim for damages under 15 U.S.C. § 1640(a) for BONYM's alleged failure to honor Plaintiffs' notice of rescission under 15 U.S.C. § 1635. Based on the following, the Motion is DENIED.
The court's two previous Orders have narrowed and refined the scope of this action, which arises from a January 22, 2007 refinancing transaction where Plaintiffs borrowed $1,375,000 from former Defendant Countrywide Home Loans, Inc. ("Countrywide"), secured by a promissory note and real property located in Hanalei, Hawaii (the "subject property"). See Abubo v. Bank of N.Y. Mellon, 2011 WL 6011787 (D.Haw. Nov. 30, 2011) ("Abubo I"); Abubo v. Bank of N.Y. Mellon, 2012 WL 2022327 (D.Haw. June 5, 2012) ("Abubo II"). The parties are familiar with those Orders, and the court need not repeat all of the factual background. Instead, the court reiterates only the particular details of the transaction and of the court's prior rulings that are necessary to understand the context for this Motion.
In January 2007, a Countrywide loan officer solicited Plaintiffs to refinance their loan on the subject property. Doc. No. 29, Third Amended Complaint ("TAC") ¶ 8.
BONYM has, however, produced a copy of a January 23, 2007 Notice of Right to Cancel form with Plaintiffs' signatures and initials "acknowledg[ing] receipt of two copies" of the Notice. Doc. No. 67-6, Def.'s Ex. D. Plaintiffs do not dispute that they signed and initialed the form, but deny actually receiving completed and signed copies of the Notices. See Doc. No. 67-16, Def.'s Ex. N, Edward Abubo Dep. at 116 ("That's my signature.... My understanding is that I should have been given this at the time of closing. And I
From January 2007 through March 2009, Plaintiffs made regular monthly payments on their loan. Doc. No. 67, Def.'s CSF ¶ 11. In April, May, June, and August 2009, however, Plaintiffs failed to make their payments, and thus defaulted on their loan. Id. Accordingly, Bank of America (which had acquired Countrywide in the meantime) sent Notices of Intent to Accelerate to Plaintiffs in May and August 2009, but the default was not cured. Id. ¶¶ 12-13.
The mortgage was assigned on October 12, 2009 by Mortgage Electronic Registration Systems, Inc. ("MERS") (as nominee for Countrywide) to BONYM, "acting as Trustee of the Alternative Loan Trust 2007-HY3 Mortgage Pass-Through Certificates, Series 2007-HY3," which is a "mortgage securitization trust and Pooling and Servicing Agreement." Doc. No. 29, TAC ¶ 15; Doc. No. 77, Pls.' CSF ¶ 3. The assignment to BONYM was recorded in the Hawaii Bureau of Conveyances on October 28, 2009. Doc. No. 29-6, TAC Ex. 6. After being assigned the Mortgage, BONYM initiated non judicial foreclosure proceedings on the subject property. Specifically, on or about October 13, 2009, BONYM issued a "Notice of Mortgagee's Intention to Foreclose Under Power of Sale," which set an auction date of December 18, 2009. Doc. No. 67, Def.'s CSF ¶¶ 14-15.
On December 17, 2009, Plaintiffs attempted to cancel the January 22, 2007 loan transaction by sending a cancellation letter from their counsel, Gary Dubin, by certified mail to "all current and former parties to the mortgage loan contract." Doc. No. 77, Pls.' CSF ¶ 5; Doc. No. 77-6, Pls.' Ex. 5. Although many of the Defendants received the letter after the auction was to be held, see Doc. No. 77-7, Pls.' Ex. 6, the letter also indicates that a copy was hand delivered on December 17, 2009 to the office of David Rosen, Esq., who was identified on the foreclosure notice as counsel for BONYM. Doc. No. 77-6, Pls.' Ex. 5.
Despite Plaintiffs' cancellation letter, the foreclosure auction proceeded on December 18, 2009. Doc. No. 67, Def.'s CSF ¶ 15. At the auction, BONYM purchased the subject property for $1,021,500.00, id. Ex. L at 2, with a "credit bid." Doc. No. 77, Pls.' CSF ¶ 6. On March 10, 2010, BONYM recorded a quitclaim deed to obtain title to the subject property. Doc. No. 67, Defs.' CSF ¶ 16 & Ex. M. BONYM then filed an ejectment action against Plaintiffs in state court. The TAC alleges that the Plaintiffs "have since prevailed in that ejectment action, which was dismissed for lack of subject matter jurisdiction." Doc. No. 29, TAC ¶ 21.
A year after their attempted cancellation, Plaintiffs filed a December 17, 2010 Complaint in the Circuit Court of the First Circuit, State of Hawaii ("State Court"). Doc. No. 15, State Ct. Docket, at 3. On April 11, 2011, Plaintiffs filed a First Amended Complaint in State Court, and Defendants removed the action to this court on May 12, 2011. Doc. No. 1, Notice of Removal. Plaintiffs then filed a Second Amended Complaint ("SAC") on August 12, 2011, Doc. No. 18, which the court dismissed on November 30, 2011. See Abubo I, 2011 WL 6011787 at *1.
Abubo I dismissed all Counts of the SAC, including Plaintiffs' claim for rescission of the refinancing transaction under 15 U.S.C. § 1635(a).
Id. ¶ 24. Section 1640(a) provides in pertinent part, that
In turn, 15 U.S.C. § 1641(a), regarding liability of assignees, provides in part that an action "which may be brought against a creditor may be maintained against an assignee of such creditor" (such as BONYM), if the violation "is apparent on the face of the disclosure statement[.]" Id. Such an action for damages under § 1640(a) may be brought "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e).
On June 5, 2012, Abubo II dismissed the § 1640(a) claim against MERS and Countrywide, but allowed it to proceed against BONYM. 2012 WL 2022327, at *4-5. Among other matters, Abubo II rejected the argument that the claim was time-barred under § 1640(e), ruling that the one-year limitations period did not begin to run until BONYM failed to respond to the December 17, 2009 cancellation letter (and by statute, BONYM had twenty days within which to respond). Id. at *3 (citing 15 U.S.C. § 1635(b)). That is, the action — having been filed on December 17, 2010 — was timely filed within a year of BONYM's alleged failure to honor the notice of rescission.
On May 22, 2013, BONYM filed its Motion for Summary Judgment as to Plaintiffs' sole remaining claim seeking damages under § 1640(a). Doc. No. 66. Plaintiffs filed their Opposition on August 26, 2013, Doc. No. 76, and BONYM filed its Reply on August 30, 2013. Doc. No. 78.
Summary judgment is proper where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Rule 56(a) mandates summary judgment "against a party who fails to make a showing sufficient to establish the existence of an element essential to the party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Broussard v. Univ. of Cal. at Berkeley, 192 F.3d 1252, 1258 (9th Cir.1999).
"A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007) (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548); see also Jespersen v. Harrah's Operating Co., 392 F.3d 1076, 1079 (9th Cir.2004). "When the moving party has carried its burden under Rule 56[(a)], its opponent must do more than simply show that there is some metaphysical doubt as to the material facts [and] come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and internal quotation signals omitted); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (stating that a party cannot "rest upon the mere allegations or denials of his pleading" in opposing summary judgment).
"An issue is `genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party, and a dispute is `material' only if it could affect the outcome of the suit under the governing law." In re Barboza, 545 F.3d 702, 707 (9th Cir.2008) (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505). When considering the evidence on a motion for summary judgment, the court must draw all reasonable inferences on behalf of the nonmoving party. Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. 1348; see also Posey v. Lake Pend Oreille Sch. Dist. No. 84, 546 F.3d 1121, 1126 (9th Cir.2008) (stating that "the evidence of [the nonmovant] is to be believed, and all justifiable inferences are to be drawn in his favor." (citations omitted)).
Both 15 U.S.C. § 1635(a) and 12 C.F.R. § 226.23(b)(1) require a creditor to "deliver" two copies of a Notice of Right to Cancel to each person to whom credit is extended. Plaintiffs contend they were not properly provided with such notices, that they exercised their right to cancel on December 17, 2009, and that BONYM is
BONYM does not dispute that, if indeed Countrywide failed to deliver the necessary copies of the Notice of Right to Cancel, then Plaintiffs' right to rescind would extend from three days to three years. See Balderas v. Countrywide Bank, N.A., 664 F.3d 787, 789 (9th Cir. 2011) ("If the [borrowers] can prove that they were not allowed to keep two completed and accurate copies of the disclosure notice, the bank will have forfeited the benefit of the three-day cooling off period and the [borrowers] would have three years to rescind.") (citing Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699, 701-02 (9th Cir.1986)). "`To insure that the consumer is protected ... [TILA and accompanying regulations must] be absolutely complied with and strictly enforced.'" Semar, 791 F.2d at 704 (quoting Mars v. Spartanburg Chrysler Plymouth, Inc., 713 F.2d 65, 67 (4th Cir.1983)); see also, e.g., Rubio v. Capital One Bank, 613 F.3d 1195, 1199 (9th Cir. 2010) ("In applying TILA and its implementing regulations, we `require absolute compliance by creditors,' and `[e]ven technical or minor violations of the TILA impose liability on the creditor[.]'") (citations omitted).
BONYM, however, contends there was no violation at all. As explained above, BONYM has produced a signed January 23, 2007 copy of Plaintiffs' Notice of Right to Cancel, where Plaintiffs acknowledged that they received two copies of a Notice of Right to Cancel. Doc. No. 67-6, Def.'s Ex. D. But this acknowledgment only creates a "rebuttable presumption" that the necessary copies were "delivered." See 15 U.S.C. § 1635(c) ("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.").
To rebut this presumption, Plaintiffs declare under penalty of perjury that, although they signed the document, they did not each actually receive two completed and signed copies. See Doc. No. 77-1, Pls.' Decl. ¶ 7 ("Upon signing all of the closing documents, we were not each provided with two completed and signed copies of the Notice of Right to Cancel form[.]"). And although their deposition testimony is equivocal, it is not necessarily inconsistent with their declaration. See Doc. No. 67-16, Def.'s Ex. N, Edward Abubo Dep. at 116 ("That's my signature.... My understanding is that I should have been given this at the time of closing. And I don't believe I was."); Doc. No. 67-17, Def.'s Ex. O, Saranne Abubo Dep. at 112 ("I think it was inaccurate but we signed it.").
In this regard, however, Keka is completely consistent with a myriad of federal authorities, including persuasive decisions by judges of this court. See, e.g., Cavaco v. Mortg. Elec. Registration Sys., Inc., 2011 WL 1565979, at *4 (D.Haw. Apr. 25, 2011) ("Cavaco's affidavit creates a genuine issue of fact as to whether she received copies of the TILA disclosures, as Cavaco denies receipt and describes her loan closing procedure as having given her no time to read what she was signing, implying that she did not know she was acknowledging receipt of the TILA disclosures."); Rodrigues v. Newport Lending Corp., 2010 WL 4960065, at *6 (D.Haw. Nov. 29, 2010) ("Plaintiffs' declaration rebuts the presumption of delivery, creating a genuine issue of fact as to whether Plaintiffs were given copies of the disclosures required under TILA.") (citing Stutzka v. McCarville, 420 F.3d 757, 762 (8th Cir.2005), and Iannuzzi v. Am. Mortg. Network, Inc., 727 F.Supp.2d 125, 136 (E.D.N.Y.2010) ("Numerous courts applying the rebuttable presumption of 15 U.S.C. 1635(c) have held that sworn statements by the borrowers asserting that they did not receive the required [notices and disclosures] ..., despite signed acknowledgments to the contrary, are sufficient to preclude summary judgment.")). Cf. Balderas, 664 F.3d at 790 (holding, at a motion to dismiss stage, that a signed acknowledgment "only proved that the [borrowers] signed the document in [the lender's] possession.... The [borrowers] allege in their complaint that they did not, in fact, get a properly prepared notice. If they testify to that effect at trial, the trier of fact could believe them, despite their signed statement to the contrary.").
And numerous courts outside this jurisdiction follow the same rule. See, e.g.,
Given this great weight of authority, and construing the evidence in the light most favorable to Plaintiffs, there is a genuine issue of material fact as to whether the required copies under TILA of the Notice of Right to Cancel were properly delivered to Plaintiffs.
Next, BONYM raises a "bona fide error" defense to liability under 15 U.S.C. § 1640(c). Section 1640(c) provides:
BONYM contends that, even assuming two copies of the complete Notice of Right to Cancel were not delivered to each Plaintiff, it cannot be liable because such error was an unintentional "bona fide error." BONYM produces evidence that Countrywide (now Bank of America) had a standard practice to provide its escrow agent with a copy of the Notice of Right to Cancel, and "[t]hereafter, it was the responsibility of the escrow agent to complete the [notice] at closing ... and then provide two copies to each borrower[.]" Doc. No. 67, Def.'s CSF ¶ 3; Doc. No. 67-1, Jenkins Decl. ¶ 6. Thus, BONYM argues essentially that any failure to deliver the
A two-part test applies. BONYM has the burden to demonstrate (1) "that the error was unintentional and clerical in nature," and (2) that "it had procedures reasonably adapted to prevent the type of error which occurred." Davison v. Bank One Home Loan Servs., 2003 WL 124542, at *7 (D.Kan. Jan. 13, 2003) (numerous citations omitted). See also Palmer v. Wilson, 502 F.2d 860, 861 (9th Cir.1974) ("The defendants' omissions ... were not the result of clerical errors, which are the only violations [§ 1640(c)] was designed to excuse."); Hutchings v. Beneficial Fin. Co. of Or., 646 F.2d 389, 391 (9th Cir.1981) ("The Act ... provides creditors with a defense for clerical errors. The issue is whether [the creditor] maintained `procedures reasonably adapted to avoid any such error.'") (citing § 1640(c) and Ives v. W.T. Grant Co., 522 F.2d 749, 757 (2d Cir.1975)).
"The Act does not specify the type of system a creditor must maintain to avoid liability." Hutchings, 646 F.2d at 391.
Id. (quoting Mirabal v. Gen. Motors Acceptance Corp., 537 F.2d 871, 878-79 (7th Cir.1976), overruled on other grounds by Brown v. Marquette Sav. & Loan Ass'n, 686 F.2d 608 (7th Cir.1982)). This bona fide error defense requires an "extra step," something more than just carefully delegating responsibility to an escrow company:
Mirabal, 537 F.2d at 878-79.
With these standards in mind, the court explains why the bona fide error defense does not apply.
At the first step, persuasive authority indicates that the failure to deliver the necessary copies of a Notice of Right to Cancel is not "clerical in nature," rendering the bona fide error defense unavailable. See, e.g., Thomka v. A.Z. Chevrolet, Inc., 619 F.2d 246, 251 (3d Cir.1980) (citing cases holding that a complete failure to disclose, such as failing to give a borrower a copy of a required document, does not constitute a "clerical" error for purposes of the bona fide error defense); Wells Fargo Bank v. Jaaskelainen, 407 B.R. 449, 458 (D.Mass.2009) (rejecting the lender's assertion of a § 1640(c) defense, where the lender required its agent to provide each borrower with two copies of a Notice of Right to Cancel and required the agent to verify it had done so, concluding that "the failure to give each Debtor two copies of the [Notice of Right to Cancel] at the
Rather, providing proper disclosures is at TILA's very core. See, e.g., Koons Buick Pontiac GMC, Inc. v. Nigh, 543 U.S. 50, 54, 125 S.Ct. 460, 160 L.Ed.2d 389 (2004) ("Congress enacted TILA ... to `assure a meaningful disclosure of credit terms.'") (quoting 15 U.S.C. § 1601(a)); Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir.2009) ("[T]he concept of `meaningful disclosure' ... animates TILA.") (quoting Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 568, 100 S.Ct. 790, 63 L.Ed.2d 22 (1980)). And these basic TILA disclosure rights certainly include proper notice of TILA's rescission provisions. See, e.g., Jones v. E*Trade Mortg. Corp., 397 F.3d 810, 812 (9th Cir.2005) ("The purpose of [TILA] is to ensure that users of consumer credit are informed as to the terms on which credit is offered them. To that end, the law requires creditors to `clearly and conspicuously disclose' borrowers' rights to rescind a home mortgage loan.") (citing § 1601); Davison, 2003 WL 124542, at *6 n. 12 ("TILA's requirement of two rescission notice copies to each obligor is not a mere technicality. Effective exercise of the right to rescind obviously depends upon the delivery of one copy of the rescission form to the creditor and the retention by the obligor of the other copy.") (quoting Stone v. Mehlberg, 728 F.Supp. 1341, 1353 (W.D.Mich.1989)).
Stated differently, the alleged failure to comply with this basic notice provision "was of an `informational' nature, not merely `clerical'" in nature. In re Ralls, 230 B.R. 508, 520 (Bankr.E.D.Pa.1999). Thomka explained that the bona fide error defense was originally enacted "in response to fears that simple clerical mistakes in mathematical calculations of the lease financial charge and annual percentage rate would create unavoidable liability." 619 F.2d at 251. Thomka then rejected the defense where an agreement failed to provide several mandated disclosures in a "clear and conspicuous manner," id. at 249, reasoning:
619 F.2d at 251. See also Jaaskelainen, 407 B.R. at 458; Horton, 2010 WL 55902, at *5.
In response, BONYM argues in supplemental briefing that § 1640(c) was amended in 1980 specifically to narrow creditors' civil liability and "eliminate litigation which is based on violations of a purely technical
Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 559 U.S. 573, 589, 130 S.Ct. 1605, 176 L.Ed.2d 519 (2010) (quoting § 1640(c) as enacted in 1968). Congress amended § 1640(c) in 1980, adding the following text:
See Pub. L. 96-221, Title VI, § 615. According to statements in legislative history, this amendment meant to "`clarify' the meaning of TILA's bona fide error defense `to make clear that it applies to mechanical and computer errors, provided they are not the result of erroneous legal judgment as to the act's requirements.'" Jerman, 559 U.S. at 591 n. 12, 130 S.Ct. 1605 (quoting S.Rep. No. 96-73, at 7-8, reprinted in 1980 U.S.C.C.A.N. 280, 284-86). That is, "the amendment `was intended merely to clarify what was then the prevailing view, that the bona fide error defense applies to clerical errors, not including errors of legal judgment.'" Id. (quoting Lockhart, 153 A.L.R. Fed. 211-12 § 2[a] (1999)).
BONYM thus attempts to distinguish the authorities cited above (which often limit their description of a bona fide error as "clerical") because they (1) either pre-date the 1980 amendment to § 1640(c), and thus refer to the old version; or (2) are wholly derived from pre-amendment authorities. See Doc. No. 84, Def.'s Suppl. Mem. at 4. BONYM argues that "non-clerical" errors are permitted under § 1640(c), given the added phrase "but are not limited to" clerical error. BONYM reads the statute as juxtaposing the types of errors — those that are "clerical or mechanical in nature" (which are "bona fide"), as opposed to those "which result from erroneous legal judgments as to the act's requirements" (which are not). Id. at 5. It thus contends that "there are but two types of TILA errors: those which result from `erroneous legal judgments as to the act's requirements;' and everything else." Id. Given that interpretation, BONYM argues that, "to grant Defendant's Motion and dismiss the Complaint, this Court needs to only acknowledge that the alleged error is not the result of `erroneous legal judgments as to the act's requirements.'" Id. at 7.
BONYM's reading, however, assumes too much. Under its interpretation, any unintentional error (other than a legal error) — that is, "everything else" — would be a bona fide error under § 1640(c). But this reading would swallow the rule. BONYM's interpretation would vitiate an accepted premise of TILA — followed for over thirty years after the 1980 amendment to § 1640(c) — that "[e]ven technical or minor violations of the TILA impose liability on the creditor." Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) (citing Semar, 791 F.2d at 704); Balderas, 664 F.3d at 789 (same); Amonette v. Indy-Mac
And in fact, contrary to BONYM's interpretation, "the [§ 1640(c)] defense applies in a very narrow range of fact situations." In re Boganski, 322 B.R. 422, 427 (9th Cir. BAP 2005); see also In re Ralls, 230 B.R. 508, 519 (Bankr.E.D.Pa.1999) ("[S]trict liability in favor of consumers subjected to TILA violations is released only in narrow circumstances, strictly construed [given] [t]he limited nature of the § 1640(c) defense[.]"); Smith v. Cash Store Mgmt., Inc., 195 F.3d 325, 328 (7th Cir.1999) ("Subject to narrow exceptions, `hypertechnicality reigns' in the application of TILA.") (citation omitted); Cf. McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939, 948 (9th Cir.2011) (characterizing the parallel bona fide error defense under the Fair Debt Collection Practices Act as "narrow").
BONYM's reading also conflicts with two principles of statutory interpretation: noscitur a sociis ("a word is known by the company it keeps")
In sum, the 1980 amendment to § 1640(c) does not help BONYM. Its legislative history confirms that Congress meant to "narrow a creditor's liability to only those disclosures which are of central importance in understanding a credit transaction's cost or terms." S.Rep. No. 96-73. at 7, reprinted in 1980 U.S.C.C.A.N. at 285. Proper compliance with the Notice of Right to Cancel provisions is surely "of central importance" to TILA, and is thus not purely technical. The alleged error in failing to deliver the Notices of Right to Cancel was not "clerical or mechanical" in nature. Thus, the bona fide error defense does not apply.
Moreover, even if the error could have been "bona fide" under § 1640(c), the defense fails at the second step — nothing in the evidence provided to the court regarding Countrywide's procedures indicates it adopted a "re-checking" or
BONYM argues that Countrywide's use of a written acknowledgment of receipt of the Notice of Right to Cancel functions as a "rechecking mechanism." Doc. No. 84, Def.'s Suppl. Mem. at 1. The written acknowledgment, so the argument goes, confirms that the Notice of Right to Cancel was delivered to the borrowers. This argument, however, is circular — the use of a written acknowledgment is already contemplated in TILA, both in the statute itself (15 U.S.C. § 1635(c)), and in Regulation Z (12 C.F.R. § 226.17(a)(1) n. 37, providing that "disclosures may include an acknowledgment of receipt[.]"). But, as analyzed above, TILA specifically provides that such a written acknowledgment creates only a rebuttable presumption of delivery. 15 U.S.C. § 1635(c). If the written acknowledgment could suffice as a "rechecking" mechanism (the "extra step") that is necessary for the bona fide error defense, it would not create only a "rebuttable presumption" of delivery — it would confirm delivery. Such a reading is contrary to § 1635(c).
In short, BONYM has no valid § 1640(c) defense. Accordingly, BONYM is not entitled to summary judgment on this ground.
Next, relying on McOmie-Gray v. Bank of America Home Loans, 667 F.3d 1325, 1328-29 (9th Cir.2012), BONYM argues that the § 1640(a) claim for damages is time-barred under § 1635(f).
Abubo I dismissed Plaintiffs' § 1635(a) rescission claim because the property had been sold. See § 1635(f) (providing that the right to rescission expires "three years after the date of consummation of the transaction or upon the sale of the property,
After Abubo I, McOmie-Gray resolved the question, holding that an action seeking § 1635(a) rescission must be filed within § 1635(f)'s three-year statute of repose. 667 F.3d at 1328-29. But McOmie-Gray provides no basis for this court to conclude that the separate claim for damages under § 1640(a) should be dismissed. That is, McOmie-Gray did not overrule Abubo I — nothing in McOmie-Gray necessarily bars a distinct claim for damages under § 1640(a) for failure to honor a notice of rescission (even where a rescission claim under § 1635(a) is time barred). Indeed, McOmie-Gray did not rule on § 1640(a) at all.
Moreover, the Ninth Circuit long ago held that damages under § 1640 and rescission under § 1635 are distinct remedies:
Palmer, 502 F.2d at 861. And recent authority from outside the Ninth Circuit also specifically confirms that a § 1640(a) damages claim (based on an alleged failure to honor a notice of rescission) may stand, even if a rescission claim under § 1635(a) itself is time-barred. See Keiran v. Home Capital, Inc., 720 F.3d 721, 729 (8th Cir. 2013) ("Even though [the borrowers'] claim for actual rescission is not timely ... the plaintiffs' claims for money damages based upon the banks' failure to rescind is, at the very least, cognizable.").
If Plaintiffs ultimately prove liability, the question still remains as to how to measure Plaintiffs' actual damages under § 1640(a) for BONYM's failure to honor the notice of rescission, where rescission is no longer possible. Such questions regarding damages, however, are not before the court. Further, even if Plaintiffs can prove no actual damages, § 1640(a) also provides for statutory damages of (1) "twice the amount of any finance charge in connection with the transaction" and (2) "not less than $400 or greater than $4,000." 15 U.S.C. § 1640(a)(2)(A) & (B). In short, whether or not rescission itself under § 1635(a) is time-barred, Plaintiffs' claim under § 1640(a) for damages may still proceed.
To determine on the merits whether BONYM erred in not honoring Plaintiffs' December 18, 2009 notice of rescission, it requires not only assessing whether TILA was actually violated in January 2007, but also whether Plaintiffs could have rescinded at all (an inquiry BONYM did not make in December 2009). BONYM argues that Plaintiffs lacked the ability to tender the loan proceeds and undo the loan transaction
The case presents an unusual procedural posture. The question is not whether Plaintiffs can tender the loan proceeds now — any claim for rescission under § 1635(a) has been dismissed with prejudice. The question is whether they could have tendered in December 2009, when they sent their notice of cancellation. Plaintiffs' ability to tender in 2009 is difficult to assess now — four years after the fact — in part because BONYM ignored the cancellation notice in the first place. In this regard, the evidence indicates that Plaintiffs did not want to, and perhaps had no real intention to, actually rescind the transaction at that time. The timing (one day before the foreclosure sale), indicates they may have been primarily motivated only to stop the sale. But the question at this point, and for purposes of a § 1640(a) damages claim, is whether they had the ability to have tendered in 2009, and not how rescission might have been accomplished or whether they desired to sell their property if that is what needed to be done at that time to actually rescind.
Ultimately, however, the evidence regarding Plaintiffs' ability to tender in December 2009 is mixed. Construing the evidence in Plaintiffs' favor, there is at least some indication that they could have tendered. See, e.g., Doc. No. 77-1, Pls.' Decl. ¶ 18 ("[W]e had income of about $5,000 per month.... [O]ur son and his wife, and their children lived in the subject property with us, and contributed substantially to household expenses."), ¶ 19 ("[T]he subject property was worth more than was necessary to rescind the loan.... [T]here was sufficient equity in the property to satisfy the tender amount, which we could have borrowed against, or we could have sold the property and used the proceeds to complete rescission."), ¶¶ 20-21 ("[I]n 2009, Saranne owned another real property, free and clear.... The equity in that property could also have been borrowed against to obtain sufficient funds to rescind the subject mortgage loan.").
For the foregoing reasons, Defendant Bank of New York Mellon's Motion for Summary Judgment is DENIED. Genuine issues of material fact remain as to whether Countrywide complied with TILA. BONYM has not met its summary judgment burden to demonstrate that it is entitled to a bona fide error defense under 15 U.S.C. § 1640(c). And questions of fact likewise remain as to Plaintiffs' ability to tender the loan proceeds for purposes of rescission in December 2009.
IT IS SO ORDERED.
BONYM's relevancy objections are DENIED. Many of the statements are background information. In any event, the court refuses to strike these assertions on relevancy grounds when raised in opposition to a summary judgment motion. Relevancy objections serve little, if any, purpose where the court is considering whether a non-movant has created a genuine issue of material fact under Federal Rule of Civil Procedure 56. See Burch v. Regents of Univ. of Cal., 433 F.Supp.2d 1110, 1119 (E.D.Cal.2006) ("[O]bjections to evidence on the ground that it is irrelevant, speculative, and/or argumentative, or that it constitutes an improper legal conclusion are all duplicative of the summary judgment standard itself.... A court can award summary judgment only when there is no genuine dispute of material fact. It cannot rely on irrelevant facts, and thus relevance objections are redundant."). See also, e.g., Perez-Denison v. Kaiser Found. Health Plan of the Nw., 868 F.Supp.2d 1065, 1088 (D.Or. 2012) (same) (following Burch); Harris Technical Sales, Inc. v. Eagle Test Sys., Inc., 2008 WL 343260, at *3 (D.Ariz. Feb. 5, 2008) (same).
But Parker concerned trial testimony, where the trier of fact disbelieved a borrower, not a summary judgment motion where disputes of fact are construed in favor of the non-movant. See 534 F.Supp.2d at 536 ("The Parkers' claims, even if they were credible, which they are not, that they do not remember receiving the required notices are insufficient to overcome the presumption that they received the required number of copies of the [TILA] notices."). Likewise, the Sixth Circuit's unpublished disposition in Sibby (which reasoned that "Plaintiff's deposition testimony that she only received one copy is insufficient to rebut this presumption," 240 Fed.Appx. at 717) relied on a statement in a case involving the credibility of trial testimony. See id. (citing Williams v. First Gov't Mortg. & Inv. Corp., 225 F.3d 738, 751 (D.C.Cir.2000)). And, regardless, the court follows the Ninth Circuit's reasoning in Balderas, applied at a summary judgment stage in the authorities cited above.
