Timothy Barnes v. Chase Home Finance, LLC , 934 F.3d 901 ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TIMOTHY BARNES, No. 18-35616
Plaintiff-Appellant,
D.C. No.
v. 3:11-cv-00142-
PK
CHASE HOME FINANCE, LLC, a
Delaware corporation; CHASE BANK
USA, N.A., a subsidiary of JP OPINION
Morgan Chase & Co., a Delaware
corporation; IBM LENDER BUSINESS
PROCESS SERVICES, INC., a Delaware
corporation; FEDERAL NATIONAL
MORTGAGE ASSOCIATION,
Defendants-Appellees.
Appeal from the United States District Court
for the District of Oregon
Michael W. Mosman, District Judge, Presiding
Argued and Submitted July 9, 2019
Seattle, Washington
Filed August 14, 2019
2 BARNES V. CHASE HOME FINANCE
Before: Paul J. Watford and Eric D. Miller, Circuit Judges,
and Barbara Jacobs Rothstein, * District Judge.
Opinion by Judge Rothstein
SUMMARY **
Truth in Lending Act
The panel affirmed the district court’s grant of summary
judgment in favor of the defendants in an action brought
under the Truth in Lending Act.
The panel held that, on remand following a prior appeal,
the district court properly considered defendants’ new
argument that plaintiff had no right of rescission under TILA
because his loan was a residential mortgage transaction
under 15 U.S.C. § 1635(e)(1). The panel held that the
argument was not waived because a defendant need not raise
every possible argument in a motion for summary judgment
and may make a different argument on remand if a grant of
summary judgment in its favor is reversed on appeal. In
addition, neither the law of the case nor the mandate in the
prior appeal barred the district court from addressing
defendants’ new argument.
*
The Honorable Barbara Jacobs Rothstein, United States District
Judge for the Western District of Washington, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
BARNES V. CHASE HOME FINANCE 3
The panel affirmed the district court’s conclusion that
plaintiff’s loan was a residential mortgage transaction to
which the right of rescission under TILA does not apply. A
residential mortgage transaction is defined as “a transaction
in which a mortgage . . . is created or retained against the
consumer’s dwelling to finance the acquisition or initial
construction of such dwelling.” Plaintiff previously had
quitclaimed his interest in the property at issue to his then-
wife, and he obtained the mortgage loan and took title to the
property in compliance with a divorce judgment. The panel
held that the statutory definition of a residential mortgage
transaction includes both an initial acquisition and a
reacquisition of a property. Assuming without deciding that
plaintiff gained an interest in the property by operation of
state law upon the filing of the marital dissolution petition,
the panel held that he did not “acquire” this interest for
purposes of TILA’s residential mortgage transaction
provision. The panel rejected plaintiff’s arguments that
(1) the language used in the loan documents showed that he
already owned an interest in the property before he took out
the loan, and (2) he took out the mortgage to comply with
the divorce judgment, and not to finance his acquisition of
the property.
COUNSEL
Elizabeth S. Weinstein (argued), Yarmuth Wilsdon PLLC,
Seattle, Washington, for Plaintiff-Appellant.
Kevin Hisashi Kono (argued) and Kaley L. Fendall, Davis
Wright Tremaine LLP, Portland, Oregon; Frederick B.
Burnside, Davis Wright Tremaine LLP, Seattle,
Washington; for Defendants-Appellees Chase Home
Finance LLC and Chase Bank USA N.A.
4 BARNES V. CHASE HOME FINANCE
Lance E. Olsen (argued), McCarthy Holthus LLP, Seattle,
Washington; John M. Thomas, McCarthy Holthus LLP,
Portland, Oregon, for Defendants-Appellees IBM Lender
Business Process Services Inc., and Federal National
Mortgage Association.
OPINION
ROTHSTEIN, Senior District Judge:
Timothy Barnes appeals the district court’s grant of
summary judgment in favor of defendants in his action under
the Truth in Lending Act (“TILA”), seeking rescission of a
mortgage as well as damages and declaratory and injunctive
relief. In a prior appeal, we held that Barnes gave proper,
timely notice of rescission under TILA, and we vacated the
district court’s judgment and remanded for further
proceedings. Barnes v. Chase Home Fin., LLC, 701 F.
App’x 673, 674–75 (9th Cir. 2017) (unpublished
memorandum disposition). On remand, the district court
granted summary judgment on a different ground,
concluding that Barnes had no right of rescission under
TILA because his loan was a residential mortgage
transaction under 15 U.S.C. § 1635(e)(1).
We conclude that the district court properly considered
defendants’ new argument on remand and properly granted
summary judgment because Barnes obtained the mortgage
in order to reacquire a residential property in which his prior
ownership interest had been extinguished; thus, the right of
rescission did not apply. We therefore affirm the district
court’s judgment.
BARNES V. CHASE HOME FINANCE 5
FACTUAL BACKGROUND
Timothy Barnes and his now ex-wife obtained title to the
property in question in 1990. In 1997, the wife transferred
title to the property to Barnes by quitclaim deed. In 2003,
Barnes quitclaimed the property back to his wife. She then
encumbered the property with a series of deeds of trust,
listing her as the sole borrower.
The couple divorced in 2007. The divorce judgment,
dated September 12, 2007, provided for a money judgment
of $100,000.00 to be entered in favor of the wife and against
Barnes. The divorce judgment further provided as follows:
The Family Residence Husband is
awarded the real property located at . . .
Greenwood Road . . . free of all right, title
and interest of Wife thereto, and subject to
the encumbrance of record owing thereon
which Husband shall pay, indemnify and
hold Wife harmless therefrom. Husband
shall immediately refinance the mortgage
owing on said property in order to remove
Wife’s name from said financial obligation.
Wife shall cooperate in signing any
documents necessary in order to accomplish
this purpose. Title to said property shall not
transfer until the money judgment provided
in paragraph 5.11 is paid in full and Wife
shall be required to submit an executed
Bargain and Sale Deed to any escrow which
Husband establishes for the payment of said
judgment.
On November 15, 2007, Barnes obtained the loan at
issue, signing a balloon note with defendant Chase Bank
6 BARNES V. CHASE HOME FINANCE
USA, N.A. (“CBUSA”) for $378,250.00. On the same date,
he executed a deed of trust securing the note on the property.
According to a statement of First American Title Insurance
Company of Oregon, Barnes used $254,438.92 of the loan
funds to pay off his ex-wife’s outstanding loan balance, and
he paid $100,000.00 to her to satisfy the money judgment
provided for in the divorce judgment. The ex-wife conveyed
title to the property to Barnes via a Statutory Special
Warranty Deed, signed on November 16 and recorded on
November 20, 2007. Barnes married his current spouse in
September 2008, and they reside on the property.
PROCEDURAL HISTORY
Barnes, appearing pro se, filed suit against Chase Home
Finance, LLC (“CHF”); CBUSA; IBM Lender Business
Process Services, Inc. (“LBPS”); and Federal National
Mortgage Association (“Fannie Mae”), seeking rescission of
the November 2007 mortgage loan and other relief. The
district court dismissed Barnes’s claim for rescission as
time-barred, and it granted summary judgment on his claims
for declaratory and injunctive relief and damages. We
vacated the district court’s judgment and remanded, holding
that Barnes’s letter to CHF, a loan servicer, gave proper,
timely notice of rescission to his creditor, CBUSA, within
three years of the loan transaction under 15 U.S.C. § 1635(a)
and (f).
On remand, the district court granted summary judgment
in favor of defendants, holding that Barnes had no statutory
right under TILA to rescind the 2007 mortgage, and no
statutory right of disclosure of any such right of rescission,
because the loan was secured by Barnes’s residence and thus
was a residential mortgage transaction. The district court
concluded that, although Barnes had a partial interest in the
property from 1990 to 1997 and was the sole owner from
BARNES V. CHASE HOME FINANCE 7
1997 to 2003, his interest in the property was fully
extinguished in 2003 when he conveyed the entirety of his
interest to his wife via quitclaim deed. The district court
further found that, “pursuant to his obligations under the
2007 Dissolution of Marriage, Barnes entered into the 2007
Balloon Note loan transaction specifically in order to acquire
ownership interest in the property (for the second time).”
“The 2007 Balloon Note was secured by the property . . . ,
and the property was thereafter Barnes’ place of residence
. . . . The necessary implication is that the 2007 Balloon
Note was a residential mortgage transaction as to which
TILA provides no statutory right of rescission.” The district
court held that, under the plain language of 15 U.S.C.
§ 1602(x), in which the word “construction,” but not the
word “acquisition,” is modified by the term “initial,”
Barnes’s prior ownership interest in the property did not
preclude characterization of the 2007 loan as a residential
mortgage transaction. The district court concluded that the
Official Staff Interpretations to Regulation Z, 12 C.F.R. Pt.
226, Supp. I, Subpt. A § 226.2(a)(24)–(5)(i) & (ii), was not
to the contrary because it applied only to a situation in which
a borrower increases an existing ownership interest using
loan proceeds. See 12 C.F.R. Pt. 226, Supp. I, Subpt. A
§ 226.2(a)(24)–(5)(i) (the term residential mortgage
transaction “does not include a transaction involving a
consumer’s principal dwelling if the consumer had
previously purchased and acquired some interest to the
dwelling, even though the consumer had not acquired full
legal title”). The district court rejected Barnes’s arguments
that, pursuant to the September 2007 divorce judgment, he
enjoyed some degree of interest in the property prior to
entering into the 2007 Balloon Note; that the 2007 Balloon
Note was not a residential mortgage transaction because the
loan documents refer to the transaction as a refinancing and
refer to Barnes as the titleholder of the property; and that the
8 BARNES V. CHASE HOME FINANCE
Chase defendants were estopped from denying that he
enjoyed a statutory right of rescission because they provided
him with notice of his right to rescind.
DISCUSSION
Standard of Review
“We review the grant of summary judgment de novo,
viewing the evidence and drawing all reasonable inferences
in the light most favorable to the non-moving party.”
Edwards v. Wells Fargo & Co., 606 F.3d 555, 557 (9th Cir.
2010). “Summary judgment is proper if the pleadings and
other evidence before the court ‘show that there is no
genuine issue as to any material fact and that the movant is
entitled to judgment as a matter of law.’” Id. (quoting Fed.
R. Civ. P. 56).
Scope of District Court’s Authority on Remand
Barnes argues that the issue whether his loan was a
residential mortgage transaction, to which the right of
rescission did not apply, was not properly before the district
court on remand because defendants waived the issue by
failing to raise it until after the prior appeal, and because
defendants’ argument was barred by law of the case and this
court’s mandate in the prior appeal. We disagree. The issue
was not waived as a defendant need not raise every possible
argument in a motion for summary judgment and may make
a different argument on remand if a grant of summary
judgment in its favor is reversed on appeal. See Fed. R. Civ.
P. 56(a) (providing that a party may move for partial
summary judgment); Biel v. St. James Sch., 911 F.3d 603,
611 n.6 (9th Cir. 2019) (reversing grant of summary
judgment to defendant on the basis of the ministerial
exception to employment laws, including the Americans
BARNES V. CHASE HOME FINANCE 9
with Disabilities Act, and noting that, on remand, defendant
could make a different argument).
Further, neither law of the case nor the mandate on
appeal barred the district court from addressing defendants’
residential mortgage transaction argument. See Rocky Mtn.
Farmers Union v. Corey, 913 F.3d 940, 951 (9th Cir. 2019)
(law of the case doctrine); Edgerly v. City & Cty. of S.F.,
713 F.3d 976, 985 (9th Cir. 2013) (rule of mandate). In
Barnes’s prior appeal, we held that Barnes’s letter to CHF
provided sufficient notice to CBUSA that he was exercising
his right to rescind, and the district court therefore erred in
dismissing Barnes’s claims for rescission and failure to
effect rescission on the ground of improper notice. Barnes,
701 F. App’x at 674–75. In so holding, we did not rule that
Barnes had an otherwise valid right to rescind. As the
district court concluded on remand, it was not law of the
case, under our decision in the prior appeal, that the remedy
of rescission necessarily remained available to Barnes as a
matter of law, and we “neither expressly nor impliedly found
that Barnes had a right of rescission to exercise in the first
instance.” Rather, both the district court’s prior analysis and
this court’s analysis “were premised on the assumption that
Barnes enjoyed such a right of rescission, and it remain[ed]
an open legal question whether that assumption was accurate
under the applicable circumstances.”
Grant of Summary Judgment
The parties agree TILA provides that the right of
rescission does not apply to a “residential mortgage
transaction.” 15 U.S.C. § 1635(e)(1); 12 C.F.R.
§ 226.23(f)(1); see Merritt v. Countrywide Fin. Corp.,
759 F.3d 1023, 1029 n.7 (9th Cir. 2014); see also Dunn v.
Bank of Am., N.A., 844 F.3d 1002, 1005 (8th Cir. 2017)
(applying § 1635(e)(1)). What the parties dispute is whether
10 BARNES V. CHASE HOME FINANCE
Barnes’s mortgage transaction is a residential mortgage as to
which there is no right of rescission, or whether Barnes had
a prior interest in the property that made the transaction a
refinance as to which a right of rescission was available. A
“residential mortgage transaction” is defined as “a
transaction in which a mortgage, deed of trust, purchase
money security interest arising under an installment sales
contract, or equivalent consensual security interest is created
or retained against the consumer’s dwelling to finance the
acquisition or initial construction of such dwelling.”
15 U.S.C. § 1602(x).
A. The District Court Properly Construed the
Statutory and Regulatory Text to Include in the
Definition of a Residential Mortgage Transaction
a Transaction in Which a Consumer Reacquires
a Property.
The district court did not improperly construe TILA’s
right of rescission against Barnes in ruling that § 1602(x)’s
definition of a residential mortgage transaction includes both
an initial acquisition and a reacquisition of a property. As
the district court concluded, the statutory and regulatory text
is unambiguous. See Comcast of Sacramento I, LLC v.
Sacramento Metro. Cable Television Comm’n, 923 F.3d
1163, 1171 (9th Cir. 2019) (inquiry into meaning of
unambiguous statutory text is limited to the text itself). In
§ 1602(x), the word “initial” modifies only the word
“construction.” 15 U.S.C. § 1602(x) (defining residential
mortgage transaction as transaction in which mortgage is
created “to finance the acquisition or initial construction of
such dwelling”). Thus, under the plain language of the
statute, a residential mortgage transaction is one in which the
mortgage is created to finance either (1) the initial
construction of the dwelling or (2) any acquisition or
BARNES V. CHASE HOME FINANCE 11
reacquisition of the dwelling. See In re Bestrom, 114 F.3d
741, 744–46 (8th Cir. 1997) (holding that TILA right of
rescission did not apply where purchaser reacquired property
after foreclosure sale).
The district court also correctly concluded that the
language of the Official Staff Interpretations to Regulation
Z—providing that a residential mortgage transaction does
not include a transaction where a borrower had previously
acquired an interest in a property—unambiguously refers to
a situation in which the borrower increases an existing
ownership interest using loan proceeds, rather than a
situation in which the borrower reacquires a property in
which he had given up all ownership interest. 12 C.F.R. Pt.
226, Supp. I, Subpt. A § 226.2(a)(24)–(5)(i) (the term
residential mortgage transaction “does not include a
transaction involving a consumer’s principal dwelling if the
consumer had previously purchased and acquired some
interest to the dwelling, even though the consumer had not
acquired full legal title”). As the district court reasoned, the
examples provided in the Official Staff Interpretation
support this interpretation. See 12 C.F.R. Pt. 226, Supp. I,
Subpt. A § 226.2(a)(24)–(5)(ii) (there is not a residential
mortgage transaction when the borrower finances a balloon
payment due under a land sale contract or when an extension
of credit is made to a joint owner to buy out another joint
owner’s interest).
Accordingly, the Official Staff Interpretation does not
contradict the conclusion that a borrower who obtains a
mortgage to reacquire a residential property in which he has
retained no interest is conducting a residential mortgage
transaction to which the TILA right of rescission does not
apply. The “refinance” ordered by Barnes’s divorce
judgment was not the kind of mortgage addressed by the
12 BARNES V. CHASE HOME FINANCE
regulation—a loan taken out by someone who already owns
the property—rather, it was a “refinance” to pay off Barnes’s
ex-wife’s outstanding mortgage so as to make it possible for
him to acquire the property in his own right.
B. The District Court Correctly Concluded That
Barnes Reacquired the Property in 2007 Because
Barnes Did Not Previously Purchase and Acquire
an Interest in the Property.
Barnes argues that the 2003 quitclaim deed does not
establish his subsequent lack of any ownership interest in the
property because, once in divorce court, the property took on
communal attributes. While Oregon is a separate property
state in which “a spouse may hold property solely in his or
her own name,” Nay v. Dep’t of Human Servs., 385 P.3d
1001, 1011 (Or. 2016) (citing Or. Const., Art. XV, § 5),
Barnes contends that in an Oregon marital dissolution
proceeding, marital assets are defined as property obtained
during the marriage by either spouse, and “there is a
rebuttable presumption that both parties contributed equally
to the acquisition of those assets,” id. at 1012 (citing Or. Rev.
Stat. § 107.105(1)(f)). Oregon law further provides as
follows: “Subsequent to the filing of a petition for . . .
dissolution of marriage . . . , the rights of the parties in the
marital assets shall be considered a species of co-ownership,
and a transfer of marital assets under a judgment of
dissolution of marriage . . . shall be considered a partitioning
of jointly owned property.” Or. Rev. Stat.
§ 107.105(1)(f)(E); see Matter of Marriage of Johnson,
380 P.3d 983, 993 (Or. Ct. App. 2016) (spouses ought to be
entitled to approve or disapprove disposition of marital
assets held as “a species of co-ownership”). Thus, according
to Barnes, upon the filing of the petition for the dissolution
of the marriage of Barnes and his ex-wife, at some time prior
BARNES V. CHASE HOME FINANCE 13
to September 2007, Barnes acquired a “species of co-
ownership” in the property, a marital asset that he had
quitclaimed to his then-wife in 2003.
Assuming without deciding that this is correct, and
Barnes gained an interest in the property by operation of
Oregon law upon the filing of the marital dissolution
petition, we nevertheless conclude that Barnes did not
“acquire” this interest for purposes of TILA’s “residential
mortgage transaction” provision. See 15 U.S.C. § 1602(x)
(defining residential mortgage transaction as transaction in
which mortgage is created “to finance the acquisition or
initial construction of such dwelling”). The Official Staff
Interpretations recognize that some types of prior interests
may change the substance of an acquisition to something
more akin to a refinance, but that exception applies only
where the prior interest was “previously purchased and
acquired” before the transaction at issue. 12 C.F.R. Pt. 226,
Supp. I, Subpt. A 226.2(a)924)–(5)(i) (emphasis added).
Barnes does not dispute that he did not “purchase” any
interest that might have arisen by operation of Oregon
dissolution proceedings.
Barnes also argues that the language used in the loan
documents shows that he already owned an interest in the
property before he took out the loan in November 2007. He
cites the deed of trust, in which he convenanted that he was
“lawfully seised” of the property. He also cites the loan
application and closing instructions, in which CBUSA
characterized the loan as a “refinance” and referred to
Barnes as “Titleholder.” As the district court concluded,
however, the lender’s characterization of the transaction is
not determinative; the loan was not a refinance where the
borrower changed from the ex-wife to Barnes, and Barnes
did not acquire title until November 16, 2007, the day after
14 BARNES V. CHASE HOME FINANCE
he signed the loan. See Slenk v. Transworld Sys., Inc., 236
F.3d 1072, 1075 (9th Cir. 2001) (looking to substance over
form in classifying a loan for purposes of the Fair Debt
Collection Practices Act). Further, as defendants argue, their
provision of a notice of a three-day right of rescission did not
create the three-year right of rescission on which Barnes
seeks to rely. See 12 C.F.R. Pt. 226, Supp. I, Subpt. A
§ 226.3-(3)(a)(1) (“the fact that disclosures are made . . . is
not controlling on the question of whether the transaction
was exempt”).
C. The District Court Correctly Concluded That
Barnes Took out the Mortgage to Finance his
Reacquisition of the Property.
Barnes argues that the purpose of the loan was not to
finance his acquisition of the property under § 1602(x), but
rather to comply with the divorce judgment, which ordered
him to pay $100,000.00 to his ex-wife to pay off her
outstanding loan balance of $254,438.92. But most
importantly, by means of these same payments he also
obtained title to the property. Our analysis turns on the
objective nature of the transaction, not Barnes’s subjective
intent in entering into it. As defendants point out, the
divorce judgment awarded Barnes the property conditioned
on his payment of the property division judgment and his ex-
wife’s outstanding loan balance, and he obtained the loan in
order to carry out those conditions. See 12 C.F.R. Pt. 226,
Supp. I, Subpt. A § 226.2(a)(24)–(6) (addressing multiple-
purpose transactions).
BARNES V. CHASE HOME FINANCE 15
CONCLUSION
We affirm the district court’s grant of summary
judgment in favor of defendants.
AFFIRMED.