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Gilbert v. Deutsche Bank Trust Company Americas

United States District Court, E.D. North Carolina, Eastern Division

March 14, 2017

REX T. GILBERT, JR., and DANIELA L. GILBERT, Plaintiffs,
v.
DEUTSCHE BANK TRUST COMPANY AMERICAS, as Trustee for RESIDENTIAL ACCREDIT LOANS, INC., DAVE A. SIMPSON, P.C., Substitute Trustee, RESIDENTIAL FUNDING, LLC, GMAC MORTGAGE, LLC, and OCWEN LOAN SERVICING, LLC, Defendants.

          ORDER

          JAMES C. DEVER, III CHIEF UNITED STATES DISTRICT JUDGE

         The factual background of this case is familiar. See Gilbert v. Residential Funding LLC. 678 F.3d 271, 274-75 (4th Cir. 2012). Defendants Deutsche Bank Trust Company ("Deutsche Bank") and Ocwen Loan Servicing, LLC's ("Ocwen") seek partial summary judgment [D.E. 100], and plaintiffs seek partial summary judgment [D.E. 104]. Plaintiffs also filed a motion in limine regarding the admission of a deposition transcript as evidence [D.E. 90]. As explained below, the court grants defendants' motion for partial summary judgment, denies plaintiffs' motion for partial summary judgment, and denies without prejudice plaintiffs' motion in limine.

         I.

         Summary judgment is appropriate if the moving party demonstrates "that there is no genuine dispute as to any material fact" and the moving party "is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The party seeking summary judgment must initially show an absence of a genuine dispute of material fact or the absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If a moving party meets its burden, the nonmoving party must "come forward with specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quotation and emphasis omitted). A genuine issue for trial exists if there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party. Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 249 (1986). "The mere existence of a scintilla of evidence in support of the plaintiffs position [is] insufficient" Id. at 252; see Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985) ("The nonmoving party, however, cannot create a genuine issue of material fact through mere speculation or the building of one inference upon another."). Only factual disputes that might affect the outcome under substantive law preclude summary judgment. Anderson. 477 U.S. at 248. In reviewing the factual record, the court views the facts in the light most favorable to the nonmoving party and draws reasonable inferences in that party's favor. Matsushita, 475 U.S. at 587-88.

         A.

         On May 13, 2016, Deutsche Bank and Ocwen moved for summary judgment on plaintiffs' first claim for relief, which alleges violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et seq.. and fifth claim for relief, which alleges violations of the North Carolina Debt Collection Act ("NCDCA"), N.C. Gen. Stat. §§ 75-50, et seq, [D.E. 100]. On June 15, 2016, plaintiffs responded in opposition [D.E. 113]. On June 29, 2016, defendants replied [D.E. 116].

         1.

         Plaintiffs claim they are entitled to rescind the loan transaction because Deutsche Bank allegedly violated TTLA's disclosure requirements. Am. Compl. [D.E. 74] ¶¶ 112-23. TILA grants borrowers the right to rescind a mortgage loan "until midnight of the third business day following the consummation of the transaction or the delivery of the [disclosures required by the Act], whichever is later, by notifying the creditor... of his intention to do so." 15 U.S.C. § 1635(a). "This regime grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act's disclosure requirements." Jesinoski v. Countrywide Home Loans. Inc., 135 S.Ct. 790, 792 (2015). The borrower can exercise the conditional right of rescission within "three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first." 15 U.S.C. § 1635(f); see 12 C.F.R. § 226.23(a)(3) ("Regulation Z"); Jesinoski. 135 S.Ct. at 792. Among other things, lenders must disclose "the annual percentage rate, the finance charge, the amount financed, the total of payments, [and] the payment schedule." 12 C.F.R. § 226.23(a)(3) n.48; see generally 15 U.S.C. § 1638(a).

         Plaintiffs allege that Deutsche Bank violated TILA's disclosure requirements by failing to timely deliver to plaintiffs two copies of the notice of the right to rescind that clearly and conspicuously disclosed the date the rescission period expired, and by failing to deliver all "material" disclosures required by TELA and its implementing regulation. Am. Compl. ¶¶ 114-15. Deutsche Bank allegedly violated TILA's disclosure requirements by: (1) failing to clearly and accurately disclose the loan's "annual percentage rate" in violation of 15 U.S.C. § 1638(a)(4) and 12 C.F.R. § 226.18(e); (2) failing to properly disclose the number, amounts, and timing of payments scheduled to repay the obligation in violation of 15 U.S.C. § 1638(a)(6) and 12 C.F.R. § 226.18(g); and (3) failing to clearly and accurately disclose the "total of payments" in violation of 15 U.S.C. § 1638(a)(5) and 12 C.F.R. § 226.18(h). See Am. Compl. ¶ 115.

         Deutsche Bank moves for summary judgment on plaintiffs' TILA claim on two grounds: that plaintiffs fail to identify a TELA violation entitling them to rescission and, that even if plaintiffs could prove a TELA violation, plaintiffs have not alleged or demonstrated that they could tender the loan proceeds should the court order rescission.

         A TELA disclosure violation by itself does not entitle a borrower to rescission. See Powers v. Sims & Levin, 542 F.2d 1216, 1220-22 (4th Cir. 1976); Haas v. Falmouth Fin., LLC, 783 F.Supp.2d 801, 805-08 (E.D. Va. 2011). To obtain rescission, the borrower must show he will be able to tender the borrowed funds back to the lender should the court order rescission. Am. Mortg. Network. Inc. v. Shelton, 486 F.3d 815, 820-22 (4th Cir. 2007); Powers, 542 F.2d at 1220-22; Haas. 783 F.Supp.2d at 806; 15 U.S.C. § 1635(b). "District courts in the Fourth Circuit following Shelton have routinely dismissed plaintiffs' rescission claims, both at the Rule 12(b)(6) stage and at summary judgment, where plaintiffs fail to allege or demonstrate they would be able to meet their tender obligation if rescission were ordered." Haas, 783 F.Supp.2d at 806.[1] Here, plaintiffs have failed to meet their burden on summary judgment to demonstrate at least a genuine issue of material fact as to their ability to meet their tender obligation should the court order rescission.

         In opposition, plaintiffs cite Jesinoski v. Countrywide Home Loans. Inc.. 135 S.Ct. 790 (2015), and argue that they need not demonstrate an ability to tender for their recission claim to survive summary judgment. Plaintiffs, however, "conflate the issue of whether a borrower has exercised her right to rescind with the issue of whether the rescission has, in fact, been completed and the contract voided." Gilbert, 678 F.3d at 277. In Jesinoski, the Court examined the requirements for exercising the right to rescind, holding that to do so the borrower need only notify the lender of his intention to rescind the loan within the conditional three-year rescission period, rather than file a lawsuit within that three-year time. Jesinoski. 135 S.Ct. at 793. As for the ability to tender the loan proceeds, Jesinoski recognizes that a borrower need not tender the proceeds to effectively exercise the right to rescind. See Id. In Jesinoski. however, the Court did not hold that a borrower need not have the ability to tender before a court can order rescission. See Jesinoski v. Countrywide Home Loans. Inc., No. 11-474 (DWF/FLN), 2016 WL 3962865, at *4-5 (D. Minn. July 21, 2016) (unpublished); Brown. 2016 WL 3702974, at *3-4. Thus, Jesinoski did not invalidate Fourth Circuit precedent holding that the ability to tender is a necessary predicate before a court may order rescission. Accordingly, the court grants summary judgment to defendants on plaintiffs' TILA claim.[2]

         2.

         Plaintiffs allege that Ocwen violated the NCDCA by: (1) communicating with plaintiffs after plaintiffs' attorney notified Ocwen that plaintiffs were represented by counsel; (2) falsely representing the character, extent, or amount of debt against a consumer by attempting to collect money from plaintiffs after plaintiffs forwarded the notice of rescission to the noteholder; and (3) falsely representing to be the servicer of plaintiffs' promissory note. See Am. Compl. ¶ 149. Ocwen asserts that it is entitled to summary ...


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