The opinion of the court was delivered by: Ricardo M. Urbina, United States District Judge
The plaintiffs bring this action against various mortgage brokers,
mortgage assignees, and settlement agents. The plaintiffs allege
predatory and fraudulent lending tactics in violation of the District of
Columbia Consumer Protection Procedures Act ("CPPA"), D.C. Code §
28-3901 et seq., the District of Columbia Mortgage Lender and Broker Act
("MLBA"), D.C. Code § 26-1101 et seq. (formerly D.C. Code §
26-1001), the Federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601
et seq., TILA's corollary District of Columbia statute, D.C. Code §
28-3301, and the Home Ownership and Equity Protection Act ("HOEPA"),
codified as amendments to numerous sections of TILA. The case is before
the court on the plaintiffs' motion for partial summary judgment,
defendant Altegra Credit Corporation's ("Altegra") motion for summary
judgment, and the plaintiffs' motion to strike the errata sheet and
second deposition of Marci Simmons, defendant Chase Title's ("Chase")
corporate designee. For the reasons that follow, the court denies both
motions for summary judgment and denies as moot the motion to strike.
The plaintiffs are a group of homeowners who refinanced their homes
with defendant First Government Mortgage and Investors Corporation
("First Government") as their loan provider. Corrected Fifth Am. Compl.
("Compl.") ¶ 1. The plaintiffs allege that First Government engaged
in a pattern of targeting low-income homeowners and inducing them to
enter illegal, high-cost mortgage loans. Id. ¶ 3. In addition to
First Mortgage, the defendants relevant to the pending motions are
Altegra, a mortgage assignee, and Chase, a settlement agent. Id. ¶¶
One of the plaintiffs, Mrs. Josephine E. Curtis, age 79, bought her
home with her husband in 1951. Id. ¶ 60. Mr. Curtis passed away in
1991 and Mrs. Curtis passed away at some point after the filing of the
complaint. Id.; Altegra Undisp. Facts ¶ 1. Regina Williams, Mrs.
Curtis' granddaughter, was added to the deed of the house without Mrs.
Curtis' knowledge in 1998. Compl. ¶ 61. On January 29, 1999, Mrs.
Curtis and Ms. Williams entered into a mortgage loan ("Curtis loan") for
$61,500.00 with First Government. Pls.' Undisp. Facts ¶ 1. Chase
acted as First Government's settlement agent for the Curtis loan. Id.
¶ 2. The points and fees calculated for this loan, pursuant to HOEPA,
total $4,413.25, or 7.7% of the total loan amount. Id. ¶¶ 19-20; Pls.'
Ex. 9.*fn1 The loan settlement statement lists various fees associated
with the loan including fees for flood certification, a walk-through
affidavit, and a judgment report fee. Pls.' Ex. 3.
15 U.S.C. § 1602(aa); Lopez, 1998 WL 1537755, at * 5. A mortgage loan
that satisfies these requirements is a HOEPA loan and is therefore
subject to HOEPA's requirements or protections. Id. HOEPA's requirements
include, for example, certain disclosures, prohibition of an increased
rate of interest upon default, prohibition of pre-payment penalty, and
assignee liability for violations of the lender. 15 U.S.C. § 1639,
b) Assignee Liability for HOEPA Loans
TILA protects borrowers from predatory lending tactics by providing a
cause of action against creditors and assignees of creditors who engage
in such tactics. 15 U.S.C. § 1601 et seq. TILA imposes two different
standards of care for assignees. 15 U.S.C. § 1641. Assignee liability
regarding non-HOEPA transactions under TILA is limited to violations that
are "apparent on the face of the disclosure statement."
15 U.S.C. § 1641(a), (e); Bryant v. Mortgage Capital Res. Corp.,
197 F. Supp.2d 1357, n. 22 (N.D.Ga. 2002) (quoting
15 U.S.C. § 1641(a)); In re Murray, 239 B.R. 728, 733 (E.D.Pa.
1999). Congress has provided a definition of "apparent on the face":
For the purposes of this section, a violation is
apparent on the face of the disclosure statement if
— (A) the disclosure can be determined to be
incomplete or inaccurate by a comparison among the
disclosure statement, any itemization of the amount
financed, the note, or any other disclosure of
disbursement; or (B) the disclosure statement does not
use the terms or format required to be used by this
15 U.S.C. § 1641(e)(2) (emphasis added).
In contrast to the "apparent on the face" standard, Congress intended
to subject high cost mortgage (HOEPA loan) assignees to a more expansive
standard of liability than provided pursuant to TILA. Bryant,
197 F. Supp.2d at 1364. The legislative history of HOEPA demonstrates that
Congress enacted HOEPA to force the high cost mortgage market to police
itself. Id. (citing S. Rep. No. 103-169, at 28 (1993), reprinted in
1994 U.S.C.C.A.N. 1881, 1912, and 1993 WL 444316 ("HOEPA Leg. Hist.")).
Accordingly, Congress made assignees subject to "all claims and
defenses, whether under [TILA] or other law, that could be raised against
the original lender." HOEPA Leg. Hist. at *11; see also In re Rodrigues,
278 B.R. 683, 688 (Bankr. D.R.I. 1999); In re Murray, 239 B.R. at 733;
Vandenbroeck, 53 F. Supp.2d at 968. The provision for assignee liability
for HOEPA loans, in all cases except rescission, provides as follows:
Any person who purchases or is otherwise assigned a
mortgage referred to in section 1602(aa) of this title
shall be subject to all claims and defenses with
respect to that mortgage that the consumer could
assert against the creditor of the mortgage, unless
the purchaser or assignee demonstrates, by a
preponderance of the evidence, that a reasonable
person exercising ordinary due diligence, could not
determine, based on the documentation required by this
subchapter, the itemization of the amount financed,
and other disclosure of disbursements that the
mortgage was a mortgage referred to in section
1602(aa) of this title.
15 U.S.C. § 1641(d)(1) (emphasis added).
In sum, HOEPA subjects mortgage assignees to increased liability for
HOEPA loans. 15 U.S.C. § 1641(d)(1). For HOEPA loans, liability is
not limited to violations apparent on the face of loan documents, as
detailed in section 1641(a), but rather liability exists unless the
assignee proves that a reasonable person exercising ordinary due
diligence could not determine, based on the documentation required by
this subchapter, the itemization of the amount financed, and other
disclosure of disbursements that the loan was a HOEPA loan, as detailed
in section 1641(d)(1). 15 U.S.C. § 1641(a), (d)(1).
Courts have interpreted section 1641(d)(1)'s due diligence requirement as
placing the burden on an assignee to prove, by a preponderance of the
evidence, that the assignee could not reasonably determine, could not
determine, or did not know that the loan was a HOEPA loan.*fn2 In re
Rodrigues, 278 B.R. at 689; In re Murray, 239 B.R. at 733; Jackson, 245
B.R. at 33.
While the D.C. Circuit has not defined due diligence in the context of
section 1641(d)(1), it has discussed due diligence in the context of the
statute of limitations for tort liability. Richards v. Mileski,
662 F.2d 65, 71 (D.C. Cir. 1981). Evaluating whether a person acted with
due diligence, the court considered whether the person did "what a
reasonable person would have done in his situation given the same
information." Id. A definition of ordinary due diligence is "that degree
of care which [people] of common prudence generally exercise in their
affairs, in the country and age in which they live." Black's Law
Dictionary (6th ed. 1990) at 457.
In determining how to apply section 1641(d)(1)'s due diligence
requirement, this court compares subsections (a), (d), and (e), defined
supra. 15 U.S.C. § 1641. The comparison demonstrates that ordinary
due diligence must require at least more than a mere review of relevant
loan documents and disbursements. Thus, this court defines ordinary due
diligence in the HOEPA context as requiring (1) a review of the
documentation required by TILA, the itemization of the amount financed,
and other disclosure of disbursements; (2) an analysis of these items;
and (3) whatever further inquiry is objectively reasonable given the
results of the analysis. See Richards, 662 F.2d at 71; In re Rodrigues,
278 B.R. at 689; In re Murray, 239 B.R. at 733; Jackson, 245 B.R. at 33.
a) Defendant Altegra Has Failed to Prove That It Is
Not Liable Pursuant to HOEPA
Altegra argues that the court should grant summary judgment in its
favor for the plaintiffs' HOEPA claims as alleged in count six. Altegra's
Mot. for Summ. J. at 17-19; Compl. Count 6. In count six, the plaintiffs
allege that Altegra, as the assignee of a HOEPA loan, is subject to all
claims and defenses that Mrs. Curtis could claim against the creditor of
the loan, First Government. Compl. ¶¶ 136-37. Despite substantial case
law to the contrary,
Altegra contends that, "to be liable under
HOEPA, the HOEPA status of the loan must be apparent on the face of the
loan documents to a reasonable person exercising due diligence."
Altegra's Mot. for Summ. J. at 17-19 (citing 15 U.S.C. § 1641(d)(1))
(emphasis added). Though Altegra states that section 1641(d)(1) is the
applicable law, Altegra conflates section 1641(d)(1) with the more
assignee-friendly section 1641(a) that requires violations to be apparent
on the face of the loan documents. Id. Altegra also cites to irrelevant
cases that apply section 1641(a) in non-HOEPA situations. Id. The
plaintiffs pointed out this legal error in their opposition. Pls.' Opp'n
In its reply, Altegra concedes that the proper standard for liability
for a HOEPA violation is section 1641(d)(1).*fn4 Altegra's Reply at 7.
Altegra then argues that, as an assignee of the loan, it is not liable
for the plaintiffs' HOEPA claim because a reasonable person exercising
due diligence could not have determined, based on the loan
documentation, that the Curtis loan was a HOEPA loan.*fn5 Id. at 7.
Altegra never defines due diligence, however. Id. In addition, Altegra's
corporate designee, David King, had almost no knowledge of HOEPA and its
requirements. Pls.' Opp'n at 18-19; King Dep. at 59-64.
Given that Altegra's corporate designee had a poor understanding of
HOEPA, Altegra has not convinced the court that it could have conducted
the type of search that "a reasonable person would have done in his
situation given the same information." Richards, 662 F.2d at 71; King
Dep. 59-64. For Altegra to prevail on its motion for summary judgment on
the HOEPA claims, it must demonstrate, by a preponderance of the evidence
and without material facts in dispute, that it could not have reasonably
determined that the mortgage was a loan covered by the HOEPA amendments.
15 U.S.C. § 1641(d)(1); Diamond, 43 F.3d at 1540. To meet the burden
required by this defense at the summary judgment phase, Altegra must
demonstrate with undisputed facts that a person with knowledge of the
HOEPA requirements evaluated and analyzed the loan documents and
disbursements. 15 U.S.C. § 1641(d)(1); Diamond, 43 F.3d at 1540; In
re Rodrigues, 278 B.R. at 689. Because Altegra first defined the standard
incorrectly, has not defined due diligence, and has not presented
compelling and undisputed evidence that it exercised due diligence in
reviewing the Curtis loan for HOEPA violations and status, Altegra has
not met the burden set forth in section 1641(d)(1) to exempt itself from
liability. Richards, 662 F.2d at 71; In re Rodrigues, 278 B.R. at 689.
Consequently, the court cannot grant summary judgment to Altegra on Mrs.
Curtis' HOEPA claim. 15 U.S.C. § 1641(d)(1); Diamond, 43 F.3d at
b) The Points and Fees for the Curtis Loan Do Not, At the Summary
Judgment Phase, Demonstrate That the Curtis Loan Is a HOEPA Loan
The court now considers whether undisputed material facts support a
judgment that the Curtis loan is a HOEPA loan. The plaintiffs seek
summary judgment for count six, arguing that there are four finance
charges incurred for the Curtis loan that First Government and Altegra
failed to include in their points and fees calculations. Pls.' Mot. for
Summ. J. at 7-8. The plaintiffs assert that if these four finance charges
are included in the Curtis loan calculation, the points and fees will be
greater than 8% of the total loan amount and the loan will fall under
protections. Id.; 15 U.S.C. § 1602(aa). The court now
outlines the statutes defining finance charges in the HOEPA context,
explains the HOEPA calculations, and then evaluates the parties'
Finance charges are the cost of consumer credit shown as a dollar
amount. 15 U.S.C. § 1605(a); 12 C.F.R. § 226.4(a). Finance
charges include charges imposed directly or indirectly by the creditor on
the consumer as a condition of the extension of credit. Id. Regulation
Z, 12 C.F.R. § 226.1, et seq., which implements TILA and HOEPA,
defines points and fees as including the following finance charges:
(i) All items required to be disclosed under §
226.4(a)*fn6 and 226.4(b),*fn7 except interest or
the time-price differential;
(ii) All compensation paid to mortgage brokers;
(iii) All items listed in § 226.4(c)(7)*fn8
(other than amounts held for future payment of taxes)
unless the charge is reasonable, the creditor receives
no direct or indirect compensation in connection with
the charge, and the charge is not paid to an affiliate
of the creditor; and
(iv) Premiums or other charges for credit life,
accident, health, or loss-of-income insurance, or
debt-cancellation coverage . . . that provides for
cancellation of all or part of the consumer's
liability in the event of the loss of life, health, or
income or in the case of accident, written in
connection with the credit transaction.
12 C.F.R. § 226.32(b)(1) (footnotes added); Lopez, 1998 WL 1537755,
at *7. Thus, HOEPA points and fees include certain finance charges
imposed by creditors and third parties, fees paid to mortgage brokers,
and real estate fees unless the real estate fees are reasonable and
compensate neither the creditor nor the creditor's affiliate.
12 C.F.R. § 226.32(b)(1). Real estate fees include fees for title
examinations, preparing loan-related documents, credit reports,
inspections, and flood hazard determinations. 12 C.F.R. § 226.4(c)(7).
The determination of what items to include in the points and fees
calculation is critical to evaluating whether the total points and fees
of a loan exceed the HOEPA threshold.
Altegra used the following points and fees in the calculation of the
Altegra's Points and Fees Amount
Underwriting fee to First Government $365.00
Broker fee to Equitable Mortgage $3,418.25
Settlement or closing fee to Chase Title $295.00
Document preparation to First Government $335.00
Total Points and Fees $4,413.25
Pls.' Undisp. Facts ¶¶ 19-20; Pls.' Ex. 9. In contrast, the plaintiffs
allege that the points and fees calculation by Altegra on the Curtis loan
failed to include four finance charges:
Plaintiffs' Additional Points and Fees Amount
Flood certification fee $20.00
"Walk-through affidavit" fee $85.00
Judgment report fee $64.00
Excess interest payment $105.90
Total Additional Points and Fees $274.90
Pls.' Mot. for Summ. J. at 7.
Calculating the HOEPA trigger requires the following calculations:
(1) principal amount of the loan — total points
and fees = total loan amount
(2) total loan amount x .08 = HOEPA trigger
15 U.S.C. § 1602(aa); 12 C.F.R. § 226.32; Official Staff
Commentary, 12 C.F.R. Pt. 226, Supp. I ¶ 32(a)(1)(ii); Lopez, 1998 WL
1537755, at * 7-8. The loan is a HOEPA loan if the total points and fees
than the HOEPA trigger, 8% of the total loan amount.
15 U.S.C. § 1602(aa).
In this case, the parties agree that the principal amount of the loan
is $61,500.00. Pls.' Undisp. Facts ¶¶ 1, 18, 20; Altegra Disp. Facts;
Chase Disp. Fact ¶¶ 1, 18, 20; Pls.' Ex. 3. As demonstrated by the fee
calculation form that Altegra used to evaluate the Curtis loan, Altegra
calculated the total points and fees as $4,413.25 and the total loan
amount as $57,086.75. Id.; Pl's Ex. 9; King Dep. 59-63. Thus, the HOEPA
calculation for the Curtis loan is as follows:
(1) principal amount of the loan, $61,500.00 —
total points and fees, $4,413.25 = total loan amount,
(2) total loan amount, $57,086.75 x .08 = HOEPA trigger,
(3) total points and fees, $4,413.25 are not greater
than HOEPA trigger, $4,566.94
Id.; Lopez, 1998 WL 1537755, at * 7-8. If the points and fees are greater
than 8% of the principal loan amount, then the loan is a HOEPA loan.
15 U.S.C. § 1602(aa)(1)(B)(i). The smallest amount that, once added
to the Altegra points and fees, renders the Curtis loan a HOEPA loan is
$143.00.*fn9 Thus, if the plaintiffs four additional points and fees,
totaling $274.90, were included in the HOEPA calculation, the Curtis loan
would qualify for HOEPA's protections.
i) Flood Certification Fees
The court now examines whether First Government and later Altegra
properly excluded the four charges at issue from the points and fees
calculations that determine whether a loan is a covered by HOEPA.
Regarding the flood certification fee, Mrs. Curtis paid to First
Government $20.00 for a flood hazard determination. Pls.' Mot. for Summ.
J. at 8-9; Pls.' Ex. 3. The plaintiffs argue that the Curtis loan HOEPA
points and fees should include the flood hazard determination fee. Id.
A flood hazard inspection fee paid to assess the value or condition of
the property is not included in the HOEPA points and fees calculation
when the service is performed prior to closing, the fee is reasonable and
bona fide, and when the fee is not paid to the creditor.
15 U.S.C. § 1605(e)(5); 12 C.F.R. § 226.4(c)(7)(iv),
226.32(b)(1). Fees performed prior to closing are excluded because
Congress intended to exclude "charges imposed solely in connection with
the initial decision to grant credit." Official Staff Commentary,
12 C.F.R. Pt. 226, Supp. I ¶ 4(c)(6). Accordingly, if the service is
performed after closing, or if the charge is unreasonable, not bona fide,
or paid to the creditor, then it will be included in the HOEPA points and
fees calculation. Id.
The plaintiffs first argue that because the Curtis loan Settlement
Statement lists the payee of the $20.00 flood certification fee as First
Government, the creditor, the HOEPA points and fees must
charge. Pls.' Mot. for Summ. J. at 8-9; Pls.' Ex. 3. Chase and Altegra
both argue that, though the fee went to First Government, First
Government simply passed the fee directly to the flood certification
company. Altegra's Opp'n at 10-11; Chase Opp'n at 20; Lilienfeld Dep. at
66. Because this material fact is in dispute, the court cannot grant
summary judgment on this issue. Greene, 164 F.3d at 675.
The plaintiffs also provide an alternative argument, based on the fact
that the Standard Flood Hazard Determination form for the Curtis Loan is
dated February 1, 1999, three days after the loan closing. Pls.' Mot. for
Summ. J. at 8-9; Pls.' Ex. 10. The plaintiffs argue that the date on the
form indicates that the certification occurred post-closing. Id. Chase
counters that the determination is merely an invoice for services
previously performed.*fn10 Chase Disp. Facts ¶ 23.
The form includes the flood zone information, whether insurance is
necessary, and the invoice amount. Pls.' Ex. 10. The plaintiffs offer no
evidence that explains the form, or even the general procedures for
obtaining the certification. Without more evidence from the plaintiffs,
the court cannot conclude that the flood certification occurred after the
closing of the loan. Anderson, 477 U.S. at 250-51 (stating that the
summary judgment standard mirrors the standard for a directed verdict).
ii) Walk-Through Affidavit Fee
Similarly, the plaintiffs fail to prevail on their argument that the
Curtis loan points and fees should include the $85.00 walk-through
affidavit fee. The Curtis loan Settlement Statement includes a fee paid
for a "Walk-Through Affidavit." Pls.' Ex. 3. The plaintiffs argue that
the fee was not bona fide because the Settlement Statement lists no
payee, no actual affidavit exists, and seven months passed before the loan
was recorded. Pls.' Mot. for Summ. J. at 9-11. Though the plaintiff's
legal support of this argument is limited, the plaintiffs seem to argue
that the walk-through affidavit charge is a real estate fee that should
not be excluded from the finance charge because it is not reasonable or
bona fide. Pls.' Mot. for Summ. J. at 9-11, endnote 19.
The declaration of Gwen Turner demonstrates a possibility that the
walk-through affidavit fee could be legitimate. Turner Decl. Gwen
Turner, the president of Executive Abstracting, filed loan documents with
the District of Columbia Recorder of Deeds (D.C. Recorder) for Chase for
a fee of $25.00 per document. Turner Decl. ¶¶ 1-4. Ms. Turner stated
that Chase hired her to walk the Curtis loan recording documents through
the D.C. Recorder for filing. Id. ¶¶ 6, 11. Ms. Turner explained that
the initial check from Chase for $45.00 (payable to the District of
Columbia) did not pay for all of the required filing fees, so she had to
pay an additional $80.00 to the District of Columbia on behalf of Chase.
Id. ¶ 10. Ms. Turner also stated that during the time period of the
Curtis loan, the D.C. Recorder took at least six months to record
documents. Id. ¶ 7.
Chase's walk-through affidavit fee of $85.00 is not well-supported and
may not be bona fide. However, the plaintiffs have not presented
undisputed facts that
convince the court that the fee is not bona fide.
12 C.F.R. § 226.32(b)(1); Diamond, 43 F.3d at 1540. Consequently, the
plaintiffs are not entitled to a judgment as a matter of law on this
iii) Excess Interest
The plaintiffs ask the court to include in the HOEPA points and fees
calculation a charge that is "not a classic fee and does not separately
appear on the [Settlement Statement]." The plaintiffs explain this fee as
The charge occurred because First Government funded
Mrs. Curtis' loan and directed Chase Title to conduct
the closing on Mrs. Curtis' loan prematurely on
January 29, 1999, knowing that it would not timely
permit Chase Title to disburse the funds to pay off
her prior mortgage with Nations Credit [a second
mortgage with Nations Bank on the same property].
First Government refused to allow Chase to disburse
the funds to pay off Mrs. Curtis' prior mortgage until
February 17, 1999-fourteen days after the expiration
of the 3-day right to cancel period.
Pls.' Mot. for Summ. J. at 16. Between the closing of the First
Government loan ("loan 2") and the payment of the old Nations Bank loan
("loan 1"), Mrs. Curtis incurred interest on both loans. Id. The
plaintiffs argue that the unnecessary delay between the loan 2 closing and
the loan 1 payment resulted in a fee, totaling $105.90, for 10 days of
extra interest on loan 1. Id. Consequently, Mrs. Curtis "received $105.90
less in cash that she was promised on the [Settlement Statement]. . . ."
The plaintiffs fail to explain why the "extra interest cost" should
include 10 days' worth of interest payments, and why the delay was
unreasonable or unusual. Id. Even the plaintiffs' expert, in her report,
does not include this expense in her list of points and fees for the
Curtis loan. Renuart Report ¶¶ 10, 14. Instead, the expert only
discusses this argument as an afterthought. Id. ¶ 16.
Moreover, despite the court's order that the plaintiffs submit endnotes
providing citations to evidence and legal authorities, the plaintiffs did
not add any citations to legal authorities for this subsection. Order
dated Oct. 15, 2002; Pls.' Mot. for Summ. J. at 16. Before the court's
order for citations, this subsection cited to one regulation,
12 C.F.R. § 226.4(a), which provides the general definition of a
finance charge. Id. The plaintiffs, however, fail to explain how their
novel argument is supported by section 226.4, or any legal authority.
The court is not an advocate, and thus may not fill in the argument
where the plaintiffs' motion fails to do so. Cf. Tom v. Heckler,
779 F.2d 1250, 1259-60 (7th Cir. 1985) (Posner, J. dissenting) (stating
that "the adversarial system is the system we have, and ad hoc
modifications which cast an appellate judge . . . in the role of judge
d'instruction are unlikely to improve the system; they are likely, in
fact, to weaken it"). While the plaintiffs have presented a colorable
argument, they have failed to satisfy the burden required for summary
judgment. Anderson, 477 U.S. at 252.
iv) The Court Denies the Plaintiffs' Motion for a Ruling on Summary
Judgment that the Curtis Loan Qualifies as a HOEPA Loan
The court has ruled that it will not include in the HOEPA points and
fees calculation: the $20.00 flood hazard fee, the $105.90 excess
interest payment, and the $85.00 walk-through affidavit fee. Earlier, the
court calculated that $143.00 is the
smallest amount of fees that would
render the Curtis loan subject to HOEPA. 15 U.S.C. § 1602(aa); 12
C.R.F. § 226.32(b)(1).
Thus, because the $64.00 judgment report fee is too small an amount to
render the Curtis loan a HOEPA loan, the court need not evaluate the
plaintiffs' argument regarding this remaining fee. Because the court
declines, at this summary judgment phase, to conclude that the Curtis
loan falls under the HOEPA protections, the court cannot grant the
plaintiffs' request for remedies pursuant to the alleged HOEPA
violations. Consequently, the court denies the plaintiffs' motion for
partial summary judgment.
C. The Court Denies Defendant Altegra's Motion for Summary
Judgment on the Rescission Claims in Count Five
Altegra moves for summary judgment on count five of the plaintiffs'
complaint. This count asserts assignee liability for rescission of the
plaintiffs' loans pursuant to TILA. For the following reasons, the court
denies summary judgment regarding this count.
1. Legal Standard for Rescission
Section 1635 "governs the rights of consumers entering into credit
transactions in which a security interest is retained in property used as
the consumer's principal dwelling, including the loans protected by
HOEPA." 15 U.S.C. § 1635; Bryant, 197 F. Supp.2d at 1362 n. 13. In
any action subject to rescission, the creditor must deliver to the lender
two copies of the Notice of Right to Cancel form ("Notice Form").
12 C.F.R. § 226.23(b)(1). The notice of the right to rescind must be
on a separate document that identifies the transaction and must clearly
and conspicuously disclose the consumer's right to rescind the
transaction and the details of that right. Id.; Wiggins v. AVCO Fin.
Servs., 62 F. Supp.2d 90, 93-94 (D.D.C. 1999). Under TILA, borrowers can
seek rescission of loans against creditors until the later of (1) three
days after the consummation of the transaction, or (2) once the creditor
has delivered the information, two copies of the Notice Form, and the
material disclosures required by TILA. 15 U.S.C. § 1635, 1639(j). If
the creditor fails to provide two copies of the Notice Form, then the
right to rescind the loan expires three years after the consummation of
the transaction, or once the property is sold, whichever occurs first.
15 U.S.C. § 1635(f). In TILA, Congress enlarged the rescission remedy
to apply against assignees as well as the original lenders.
15 U.S.C. § 1641(c).
Courts have construed TILA liberally in favor of borrowers. Smith v.
Fid. Consumer Discount Co., 898 F.2d 896, 898 (3d Cir. 1990); Wiggins,
62 F. Supp.2d at 94. Accordingly, where a lender has violated TILA
provisions, courts have imposed a standard of strict liability. Griggs v.
Provident Consumer Disc. Co., 680 F.2d 927, 930 (3d Cir. 1982)); In re
Rodrigues, 278 B.R. at 687. "A creditor who fails to comply with TILA in
any respect is liable to the consumer under the statute regardless of the
nature of the violation or the creditor's intent." Smith, 898 F.2d at 898
(citations omitted). The Supreme Court has instructed courts to defer to
the interpretation of TILA provided in 12 C.F.R. § 226, which was
promulgated by the Federal Reserve Board pursuant to expansive authority
granted by Congress. Id. (citing Anderson Bros. Ford v. Valencia,
452 U.S. 205, 219 (1981)).
The borrower's written acknowledgment of receipt of the disclosures or
documents required by TILA creates a
rebuttable presumption of the
delivery of such items. 15 U.S.C. § 1635(c); Williams v. First Gov't
Mortgage & Investors Corp., 974 F. Supp. 17, 21 (D.D.C. 1997). To
rebut this presumption, borrowers must present evidence to the contrary.
Williams v. First Gov't Mortgage & Investors Corp., 225 F.3d 738, 751
(D.C. Cir. 2000) (citing Legille v. Dann, 544 F.2d 1, 6 (D.C. Cir.
1976)). The D.C. Circuit has stated:
[a]s Dean Wigmore has explained, "the peculiar effect
of a presumption `of law' (that is, the real
presumption) is merely to invoke a rule of law
compelling the (trier of fact) to reach a conclusion
in the absence of evidence to the contrary from the
opponent. If the opponent does offer evidence to the
contrary (sufficient to satisfy the judge's
requirement of some evidence), the presumption
disappears as a rule of law, and the case is in the
(factfinder's) hands free from any rule." As more
poetically the explanation has been put,
"(p)resumptions . . . may be looked on as the bats of
the law, flitting in the twilight, but disappearing in
the sunshine of actual facts."
Legille, 544 F.2d at 6 (footnotes omitted). In the TILA context, the
D.C. Circuit criticized the district court's ruling in Williams (though
agreeing with its final decision) for shifting too strict a burden onto a
TILA plaintiff who was attempting to overcome the presumption of delivery
of the two copies of the Notice Form. Williams, 225 F.3d at 751.
Count five of the plaintiffs' complaint states that the assignees are
liable for rescission of the First Government loans and statutory
damages, including attorney's fees, pursuant to 15 U.S.C. § 1640,
1641(a). Compl. ¶¶ 133-35. Defendant Altegra moves for summary judgment
on this count. Altegra's Mot. for Summ. J. at 12. Altegra argues that the
undisputed facts demonstrate that Mrs. Curtis received the required two
copies of the Notice Form. Id. at 12-14. Altegra also argues that even if
Mrs. Curtis received only one copy of the form, substantial compliance
with TILA is sufficient.*fn11 Id. at 14-16.
Altegra contends that providing one copy of the Notice Form
demonstrates "substantial compliance" with TILA, and therefore is
sufficient. Altegra's Mot. for Summ. J. at 14-16. This argument ignores
the circuit and Supreme Court case law discussed, supra, favoring strict
compliance with TILA. Id.; e.g., Smith, 898 F.2d at 898; Griggs, 680 F.2d
at 930. This case-law also favors a liberal construction of TILA.
Accordingly, the court will not grant summary judgment on count five
based on Altegra's "substantial compliance" theory.
Altegra also avers that Mrs. Curtis received two copies of the Notice
Form and signed an acknowledgment that she received these two copies.
Altegra's Mot. for Summ. J. at 13; Altegra Exs. 15-17. Altegra further
contends that the signed acknowledgment creates a rebuttable and strong
presumption of delivery of two copies of the Notice Form. Id. at 13, 14.
In contrast to Altegra's argument, the case-law demonstrates that a
TILA plaintiff attempting to overcome the presumption of delivery of two
copies of the Notice Form faces a low burden. Williams, 225 F.3d at 751.
Accordingly, the court determines that Ms. Williams' testimony is
sufficient to overcome the
presumption of delivery. Id.; Williams Dep. at
100-02. Ms. Williams testified that neither she nor her grandmother read
the documents they received at the closing of the Curtis loan. Williams
Dep. at 100-02, 207-09. Once they returned to Mrs. Curtis' home after the
closing, Mrs. Curtis placed the documents from the closing in her
lockbox. Id. Mrs. Curtis saved all of her personal documents. Id.
Therefore, had she received two copies of the Notice Form, both would
have been in her lockbox. Id. at 207-09. By presenting Ms. Williams'
testimony, the plaintiffs have rebutted the presumption of delivery and
presented more than a "scintilla of evidence" in support of their
position. Anderson, 477 U.S. at 252.
Accordingly, as the material facts regarding the delivery of two copies
of the Notice Form are in dispute, the court must deny summary judgment
and submit the claims in count five to a jury. Celotex, 477 U.S. at 322.
D. The Court Denies Defendant Altegra's Motion for Summary
Judgment on the CPPA Claim
Altegra moves for summary judgment on the plaintiffs' CPPA claim, count
seven. Altegra's Mot. For Summ. J. at 20. Altegra argues that there is no
legal basis for derivative liability for CPPA violations. Id. Altegra
claims that because it "played no role whatsoever in First Government's
loans with Plaintiffs" it is not liable for the plaintiffs' CPPA claims.
Id. Altegra assumes that the plaintiffs' count seven asserts derivative,
not direct, liability against Altegra. Id.
The plaintiffs, however, argue that Altegra is directly liable for CPPA
violations because it had a direct role in First Government's loan
transaction with Mrs. Curtis. Pls.' Opp'n at 33-34; Pls.' Exs. P, Q, C,
F. The complaint supports the plaintiffs' characterization of their
claims as direct, not derivative: ". . . Defendant Assignees, through
their actions in promoting, underwriting and ultimately funding the
Plaintiffs' loans with First Government, violated the CPPA. . . ."
Compl. ¶ 139. Because material facts are in dispute, the court denies
its motion for summary judgment on count seven. Celotex, 477 U.S. at
E. The Court Denies as Moot the Plaintiffs' Motion to Strike
Finally, the court turns to the plaintiffs' motion to strike. After her
first deposition, Marci Simmons, Chase's corporate designee, submitted an
errata sheet, making substantive changes to her first deposition. The
plaintiffs then deposed Ms. Simmons a second time, to ask her about her
changed testimony. The plaintiffs move to strike the errata sheet and
second deposition of Ms. Simmons only for the purpose of summary
judgment, but not for trial. Pls.' Reply at 6; Pls. Mot. to Strike.
Because the court has not relied on the changed testimony of Ms. Simmons
as provided in her errata sheet and second deposition, the plaintiffs'
motion to strike no longer presents a live controversy. Accordingly, the
court denies as moot the motion to strike. McBryde v. Comm. to Review
Circuit Council Conduct & Disability Orders of the Jud. Conf. of the
U.S., 264 F.3d 52, 55 (D.C. Cir 2001). Though the court refrains from
ruling on this motion, the court clarifies that, at trial, any party may
ask Ms. Simmons about her pre-errata-sheet testimony and her subsequent
contradictory errata sheet and testimony.
For all these reasons, the court denies the plaintiffs' motion for
partial summary judgment, defendant Altegra's motion for summary
judgment, and the plaintiffs'
motion to strike. An order directing the
parties in a manner consistent with this Memorandum Opinion is separately
and contemporaneously issued this __4th___ day of November 2002.
DENYING THE PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT;
DENYING DEFENDANT ALTEGRA'S MOTION FOR SUMMARY JUDGMENT;
DENYING AS MOOT THE PLAINTIFFS' MOTION TO STRIKE
For the reasons stated in this court's Memorandum Opinion separately and
contemporaneously issued this __4th___ day of November 2002, it is
ORDERED that the plaintiffs' motion for partial summary judgment is
DENIED; and it is
FURTHER ORDERED that defendant Altegra's motion for summary judgment is
DENIED; and it is
ORDERED that the plaintiffs' motion to strike is DENIED as moot.