Summary
The Eighth Circuit held that the Petersons' Truth in Lending Act rescission claim was barred because they did not file suit within the three-year period under 15 U.S.C. § 1635(f). The court held, however, that the related statutory-damages claim for failure to rescind was not necessarily barred by the expiration of the rescission claim and was timely under the one-year limitations period in § 1640(e). The court affirmed summary judgment on the rescission claim, vacated summary judgment on the statutory-damages claim, and remanded for further proceedings.
Topics
Practice areas
Questions Presented
- Whether the Petersons' TILA rescission claim was barred because they notified Bank of America of rescission within three years but did not file suit within that period.
- Whether the Petersons' claim for statutory damages based on Bank of America's alleged failure to rescind was necessarily barred by the expiration of the rescission claim.
- Whether the statutory-damages claim was barred by TILA's one-year limitations period.
- Whether genuine disputes of material fact existed concerning delivery of the required TILA disclosures and notices and the Petersons' ability to tender the loan proceeds.
Holdings
- Under 15 U.S.C. § 1635(f), a borrower seeking rescission must file suit within three years of consummation of the transaction; merely notifying the creditor of the rescission within that period is insufficient.
- The expiration of the Petersons' claim for actual rescission did not necessarily defeat their separate claim for statutory damages based on Bank of America's alleged failure to rescind.
- Summary judgment was improper because the Petersons' testimony that they did not receive copies of the required TILA disclosures and notices rebutted the presumption of delivery and created a genuine issue of material fact.
Key quotations
“The failure to rescind when a debtor is entitled to rescission . . . violates the Act.” (746 F.3d at 360)
“§ 1635(f)’s status as a statute of repose means that the right was extinguished after three years, not that the right never existed.” (746 F.3d at 360)
“Taking the evidence in the light most favorable to the Petersons, their testimony rebuts the presumption of delivery and creates a genuine issue of material fact for trial.” (746 F.3d at 361)
Factual background
The Petersons closed on an $840,000 mortgage refinance loan secured by their primary residence on December 13, 2006. Although they signed a Truth in Lending Disclosure Statement and Notices of Right to Cancel, they testified that they did not receive copies of the required disclosures and notices. After falling behind on payments, the Petersons requested rescission in October 2009, alleging TILA disclosure violations, and later pursued rescission and statutory damages in response to Bank of America's action.
Procedural history
Bank of America filed an action seeking declaratory relief concerning the validity and priority of its mortgage lien and its compliance with TILA. The Petersons counterclaimed for rescission, statutory damages, and a declaration that their home was unencumbered. After initially dismissing the counterclaims with leave to amend, the district court granted Bank of America summary judgment, holding that the rescission claim was time-barred under 15 U.S.C. § 1635(f) and that the statutory-damages claim failed on that basis or was barred by § 1640(e). The Eighth Circuit affirmed summary judgment on rescission, vacated it on statutory damages, and remanded.
Remand instructions
The district court must conduct further proceedings on the Petersons' statutory-damages or failure-to-rescind claim, including resolving Bank of America's alternative arguments concerning whether a TILA disclosure violation occurred and whether the Petersons were able to tender back payment of the loan.