Khalsa v. U.S. Bank National Association

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT March 13, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
MUKHTIAR S. KHALSA,
Plaintiff - Appellant,
v. No. 16-2208
(D.C. No. 1:15-CV-01010-WJ-KBM)
U.S. BANK NATIONAL ASSOCIATION, (D. N.M.)
as Trustee for C-Bass 2007-SP1 Trust,
Mortgage Loan Asset-Backed Certificates,
Series 2007-SP1; BANK OF AMERICA,
N.A.; OCWEN LOAN SERVICING, LLC,
Defendants - Appellees.
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ORDER AND JUDGMENT*
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Before McHUGH, BALDOCK, and MORITZ, Circuit Judges.
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This diversity case involves Mukhtiar S. Khalsa’s untimely attempt to rescind a
loan agreement. In 2005, Khalsa obtained a $166,500 home loan from New Century
Mortgage Corporation. The loan was evidenced by a promissory note and secured by a
mortgage on Khalsa’s real property in Espanola, New Mexico. Bank of America later
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
acquired the loan, before its ultimate acquisition by U.S. Bank. Ocwen Loan Servicing,
LLC, is the loan’s most recent servicer. Khalsa defaulted on the loan in 2009.
In May 2015, Khalsa notified U.S. Bank, Ocwen, and Bank of America that he
was rescinding the loan under 15 U.S.C. § 1635. That statute prescribes the conditions
required to rescind “any consumer credit transaction . . . in which a security interest . . . is
or will be retained or acquired in . . . the principal dwelling of the person to whom credit
is extended.” 15 U.S.C. § 1635(a). The rescission right lasts “until midnight of the third
business day following” the later of either (i) the transaction’s consummation or (ii) the
creditor’s delivery of necessary rescission information, forms, and disclosures. Id. But
even if the mandated deliveries are not made, the rescission right generally expires three
years after the transaction’s consummation or upon the property’s sale, whichever occurs
first. Id. § 1635(f).
None of the parties responded to Khalsa’s rescission notice. And in October 2015,
U.S. Bank filed a foreclosure action in state court.
The following month, Khalsa filed a pro se complaint in federal district court. He
sought a declaratory judgment that his mortgage and promissory note were terminated
and that he was entitled to restitution of his loan payments under 15 U.S.C. § 1640(a)
(prescribing damages for “any creditor who fails to comply with . . . any requirement
under section 1635”). The district court granted the defendants’ motion to dismiss,
concluding that Khalsa’s rescission demand was untimely and that nothing required the
defendants to respond to his demand.
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“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). Reviewing the
district court’s dismissal de novo, see Dutcher v. Matheson, 840 F.3d 1183, 1196
(10th Cir. 2016), and construing Khalsa’s filings liberally, see James v. Wadas, 724 F.3d
1312, 1315 (10th Cir. 2013), we affirm.
Khalsa’s attempt to rescind came nearly a decade too late if measured from the
loan’s origination and nearly seven years too late if measured from any failure by the
defendants to deliver rescission information, forms, and disclosures. See 15 U.S.C.
§ 1635(a), (f). Nevertheless, Khalsa contends he timely provided notice because
Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015) allows perpetual
rescission so long as the borrower provides “written notice to the lender that he intends to
rescind.” Aplt. Opening Br. at 6. But Khalsa misstates Jesinoski’s holding. There, the
Supreme Court merely held that § 1635 requires only “written notice [of rescission]
within three years after the transaction is consummated” and not a “suit for rescission”
within that timeframe. Jesinoski, 135 S. Ct. at 792. Indeed, the Court observed that the
rescission right “does not last forever,” id., and that it extends only “up to three years
after the transaction is consummated,” id. at 791.
Khalsa also asserts that the defendants’ failure to respond to his untimely notice
equitably estopped them from contesting rescission. But we have no indication that
Congress, in enacting the Truth in Lending Act, of which § 1635 is a part, “codifie[d]
rescission in equity.” Id. at 793. And, even so, without “a duty to speak,” the equitable
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doctrine of estoppel by silence doesn’t apply. Cont’l Potash, Inc. v. Freeport-McMoran,
Inc., 858 P.2d 66, 77 (N.M. 1993). Khalsa identifies no such duty.
Finally, we note that because the district court had a proper basis for dismissal, it
did not abuse its discretion in denying reconsideration. See Butler v. Kempthorne,
532 F.3d 1108, 1110 (10th Cir. 2008) (indicating that reconsideration motions are
reviewed only for an abuse of discretion).
Affirmed.
Entered for the Court
Nancy L. Moritz
Circuit Judge
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