Deutsche Bank National Trust Co. v. Gardner

J-A24033-15
2015 PA Super 219DEUTSCHE BANK NATIONAL TRUST : IN THE SUPERIOR COURT OF
COMPANY, AS TRUSTEE FOR THE : PENNSYLVANIA
REGISTERED HOLDERS OF :
AMERIQUEST MORTGAGE SECURITIES, :
INC., ASSET-BACKED PASS THROUGH :
CERTIFICATES, SERIES 2005-R2, :
:
Appellant :
:
v. :
:
MICHAEL S. GARDNER, :
:
Appellee : No. 3421 EDA 2014
Appeal from the Judgment Entered September 23, 2014
in the Court of Common Pleas of Philadelphia County,
Civil Division at No(s): January Term 2008 No. 03467
BEFORE: PANELLA, WECHT, and STRASSBURGER,* JJ.
OPINION BY STRASSBURGER, J.: FILED OCTOBER 14, 2015
Deutsche Bank National Trust Company, as Trustee for the Registered
Holders of Ameriquest Mortgage Securities, Inc., Asset-Backed Pass Through
Certificates, Series 2005-R2 (Deutsche Bank), appeals from the judgment
entered in favor of Michael S. Gardner in this mortgage foreclosure action.
We vacate the judgment and the judgment order in equity upon which it was
based and remand with instructions.
The trial court offered the following summary of the case.
Gardner lives in a residence he owns at 9887 Verree Road,
Philadelphia, PA. In June 2003, he signed a mortgage on his
home and borrowed $140,000 from Ameriquest. In January
2005, Gardner and Ameriquest refinanced in the amount of
$185,400, adding $45,400 to the loan. A second mortgage was
* Retired Senior Judge assigned to the Superior Court.
J-A24033-15
signed. At closing Ameriquest gave Gardner a federal H-8 Form
to advise Gardner of his rescission rights.
At the early stages of the economic downturn in October
2007 and facing economic pressure, Gardner applied to rescind
the refinance agreement and stopped repaying the loan. He
learned he had not been given correct disclosure of his rescission
rights, and this had taken place at a time when Ameriquest’s
mortgage practices were coming under national scrutiny.
Hundreds of actions had been filed against Ameriquest under the
[Truth in Lending Act (TILA)], and Gardner added his own
complaint in the U.S. Court for the Eastern District of
Pennsylvania. Gardner’s action to enforce his rescission rights
for the refinance loan was transferred and consolidated with an
ongoing TILA class action against Ameriquest in the U.S. Court
for the Northern District of Illinois. When this class action
settled, Gardner waived his direct TILA claims against
Ameriquest and kept the right to defend himself against
mortgage foreclosure. Gardner also preserved his right to assert
an affirmative defense based on inadequate notice.
***
On January 12, 2008, Deutsche Bank, trustee for
Ameriquest, filed this mortgage foreclosure action against []
Gardner. This case was in limbo for five years until the federal
class action settled.
A bench trial took place on April 14, 2014. Gardner
represented himself pro se. Findings of fact and conclusions of
law were entered on April 28, 2014. Among the points: 1)
Deutsche Bank had standing as an Ameriquest trustee to bring
this mortgage foreclosure action…; 2) Ameriquest did not comply
with the TILA requirements, and therefore, Gardner’s affirmative
defense was valid and prevented foreclosure; 3) Gardner was
entitled to rescind his refinance loan, but only up to the $45,400
which was added during the refinance, and so was not permitted
to rescind the original $140,000 loan; and 4) Gardner’s home
remains mortgaged to Deutsche Bank under terms of the first
mortgage in the amount of $140,000.
Trial Court Opinion, 3/26/2015, at 1-3.
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Deutsche Bank timely filed a post-trial motion. By order of September
5, 2014, the trial court denied the motion without prejudice for Deutsche
Bank to seek in an in personam action recovery of the $45,400 Gardner
received pursuant the refinance agreement.1 Judgment was entered on
September 23, 2014, and Deutsche Bank timely filed a notice of appeal.
Both Deutsche Bank and the trial court complied with Pa.R.A.P. 1925.
Deutsche Bank presents this Court with the following questions:
A. Whether the trial court committed an error of law in
holding that Gardner’s right to rescind his 2005 loan refinance
transaction with Deutsche Bank’s predecessor in interest
pursuant to [TILA] was extended from three days to three years
because, at closing, Gardner received the incorrect model
Federal Reserve Board form notice of that right to rescind,
notwithstanding that the form delivered to Gardner “clearly and
conspicuously” informed him of his right to rescind the refinance
transaction at issue?
B. Whether the trial court committed an error of law or
abused its discretion in structuring its Judgment Order in Equity
to permit Gardner to rescind his 2005 loan refinance transaction
where it (1) failed to require Gardner to tender back to Deutsche
Bank all funds received by Gardner or expended on his behalf
following the rescission, as required by TILA, and (2) refused to
condition Gardner’s ability to rescind on his first tendering to
Deutsche Bank the funds necessary to make it whole, given the
evidence that Gardner has no ability to repay Deutsche Bank?
Deutsche Bank’s Brief at 2-3 (trial court answers omitted).
1
The trial court initially denied the post-trial motion by order of September
3, 2014. However, its order of September 5th vacated the earlier order and
added the caveat about recovering the additional money in another action.
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“In reviewing a decision of a court after a non-jury trial, we will
reverse the trial court only if its findings are predicated on an error of law or
are unsupported by competent evidence in the record.” Boehm v.
Riversource Life Ins. Co., 117 A.3d 308, 321 (Pa. Super. 2015) (quoting
Wallace v. Pastore, 742 A.2d 1090, 1092 (Pa. Super. 1999)).
In construing the federal statutes and regulations at issue in this case,
we bear in mind that “[w]e are not bound by decisions of the federal courts,
but we may rely on them for persuasive authority.” EMC Mortgage, LLC v.
Biddle, 114 A.3d 1057, 1064 n.6 (Pa. Super. 2015). Furthermore,
“whenever possible, Pennsylvania courts follow the Third Circuit [courts] so
that litigants do not improperly walk across the street to achieve a different
result in federal court than would be obtained in state court.” Parr v. Ford
Motor Co., 109 A.3d 682, 693 n.8 (Pa. Super. 2014) (en banc) (internal
citations and quotation marks omitted).
We begin with an overview of TILA.
Congress enacted TILA in 1968 to promote the informed
use of credit. To achieve this goal, TILA sought to assure a
meaningful disclosure of credit terms so that the consumer will
be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit. A
consumer who does not receive the requisite disclosures
regarding a loan secured by his principal dwelling may rescind
the loan agreement.
Consumers have an absolute right to rescind for three
business days after closing on the loan. To exercise this no
questions asked right of rescission, the obligor on the mortgage
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note must simply notify the creditor of his intention to do so,
consistent with the applicable regulations. No court filing is
necessary to effectuate this right.
If the lender fails to make the requisite disclosures before
the loan commences, the three-day restriction on the right of
rescission does not begin to run. A consumer who does not
receive the requisite disclosures has a right to rescind that lasts
until three days after the disclosures are received. That right of
rescission is not perpetual, however, even if the consumer never
receives all of the requisite disclosures. The right expire[s] three
years after the date of consummation of the transaction or upon
the sale of the property, whichever occurs first.
Sherzer v. Homestar Mortgage Servs., 707 F.3d 255, 255-56 (3d Cir.
2013) (internal citations and quotation marks omitted).
The Board of Governors of the Federal Reserve System created the H-
8, a model form for general usage by lenders to satisfy the notice provision
of TILA. Porter v. Mid-Penn Consumer Discount Co., 961 F.2d 1066,
1067 (3d Cir. 1992). However, it is not necessary that any particular form is
used because “the law does not require an ideal notice of rescission rights,
just a clear, accurate, and conspicuous one.” Id. at 1076.
There are exceptions to the right to rescind. The portion of the Code
of Federal Regulations implementing TILA, known as Regulation Z, provides,
in relevant part, as follows:
The right to rescind does not apply to… [a] refinancing or
consolidation by the same creditor of an extension of credit
already secured by the consumer’s principal dwelling. The right
of rescission shall apply, however, to the extent the new amount
financed exceeds the unpaid principal balance, any earned
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unpaid finance charge on the existing debt, and amounts
attributed solely to the costs of the refinancing or consolidation.
12 C.F.R. § 226.23(f)(2). In other words, with a TILA violation in the
context of a refinance loan, “a borrower may rescind the ‘new money’
portion… but not the ‘old money’ portion” of the loan. Porter, 961 F.2d at
1074. “Because rescission rights in ‘refinancing’ situations differ from those
applicable in new-loan situations, the Board promulgated, in addition to the
H-8, a model rescission form H-9 for partially exempt ‘refinancings.’” Id.These differences in rescission rights are demonstrated by the
comparison of the H-8 and H-9 model forms. The H-8 model form provides,
inter alia, as follows:
You are entering into a transaction that will result in a
[mortgage/lien/security interest] [on/in] your home. …
If you cancel the transaction, the [mortgage/lien/security
interest] is also cancelled. Within 20 calendar days after we
receive your notice, we must take the steps necessary to reflect
the fact that the [mortgage/lien/security interest] [on/in] your
home has been cancelled, and we must return to you any money
or property you have given to us or to anyone else in connection
with this transaction.
You may keep any money or property we have given you until
we have done the things mentioned above, but you must then
offer to return the money or property. …
12 C.F.R. Pt. 226, App. H (emphasis added). In contrast, the H-9 model
form includes the following language:
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You are entering into a new transaction to increase the
amount of credit previously provided to you. Your home is
the security for this new transaction. …
If you cancel this new transaction, it will not affect any
amount that you presently owe. Your home is the security
for that amount. Within 20 calendar days after we receive
your notice of cancellation of this new transaction, we must take
the steps necessary to reflect the fact that your home does not
secure the increase of credit. We must also return any money
you have given to us or anyone else in connection with this new
transaction.
You may keep any money we have given you in this new
transaction until we have done the things mentioned above,
but you must then offer to return the money….
Id. (emphasis added).
Deutsche Bank’s first claim of error presents us with the question of
whether the disclosures in the H-8 form adequately inform a borrower of his
or her rescission rights in the context of a refinance loan with the same
lender. “Under both TILA itself and Regulation Z, the test is whether the H-8
that [the lender] provided constituted a clear notice of [the borrower’s] right
to rescind the new-money portion of the loan.” Porter, 961 F.2d at 1076.
In Porter, as in the instant case, the lender provided the H-8, rather
than the H-9, model form for a refinance loan. The Third Circuit held that
there were two plausible readings of the H-8 notice in the refinancing
context. On the one hand, “[o]ne could read the notice as saying that if [the
borrower] elected to rescind, the new money portion would be rescinded and
the old loan document (and mortgage) would remain in effect.” Id. at 1077.
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Thus, upon rescission only “the new security interest would be voided,” and
the borrower need return only “the new money,” “leaving the parties where
they were before this latest transaction.” Id.However, one could also read the H-8 notice as indicating that the
borrower could “rescind the whole new security interest, covering both old
and new money.” Id. Under this interpretation, the borrower upon
rescission “would have to return both old and new money, and both old and
new security interests would be satisfied.” Id. Thus, because a refinance
borrower “may want to rescind the new-money portion of the loan but may
not have the funds readily accessible to pay back the old loan immediately,”
the unclear H-8 notice could dissuade him or her from exercising his or her
right to rescind. Id. at 1077-78.
Because “both readings are sensible, yet they have quite different
legal implications,” the Third Circuit held that “the H-8 did not provide Porter
with a clear notice of what her right to rescind entailed.” Id. at 1077. The
court further stated: “More generally, we hold that a lender violates TILA by
providing the H-8 notice when the borrower’s right to rescind is limited by
the ‘refinancing’ exception….” Id.The trial court in the instant case was persuaded by the reasoning in
Porter, and held that the H-8 notice supplied by Deutsche Bank’s
predecessor did not inform Gardner clearly that his “existing first mortgage
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is unaffected by timely rescission of a second mortgage.” Trial Court
Opinion, 3/26/2015, at 8. Because the disclosures were inadequate, the
trial court held that Gardner had three years to exercise his rescission rights.
Id. (citing 15 U.S.C. § 1635(f)(i)(1)(B)). As the refinance agreement was
made in January 2005, and Gardner filed his rescission notice in October
2007, the trial court determined that Gardner timely exercised his right to
rescind the refinance loan. Id.We agree with the Third Circuit’s reasoning and legal conclusions
stated in Porter: the ambiguity created by the language of the H-8 notice in
the context of a refinance loan constitutes a violation of TILA, extending the
duration of the borrower’s rescission rights from three days to three years.
Although Deutsche Bank correctly notes that other federal circuit courts have
reached the opposite conclusion,2 we find the Third Circuit’s analysis more
persuasive. Accordingly, the trial court did not err in determining that
Gardner’s right to rescind the 2005 refinance mortgage was extended to
three years. Deutsche Bank’s first issue entitles it to no relief.
2
See Deutsche Bank’s Brief at 27-30 (discussing Watkins v. SunTrust
Mortgage, Inc., 663 F.3d 232 (4th Cir. 2011) (“Model Form H–8 includes
all of the information required by TILA and Regulation Z to advise borrowers
of the right to rescind a consumer credit transaction, including a refinancing
transaction[.])”; Santos-Rodriguez v. Doral Mortg. Corp., 485 F.3d 12(1st Cir. 2007) (same); Mills v. EquiCredit Corp., 172 F. App'x 652 (6th
Cir. 2006); Veale v. Citibank, F.S.B., 85 F.3d 577 (11th Cir. 1996)
(same)).
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With its second issue, Deutsche Bank argues that, even if Gardner’s
rescission rights were extended based upon a TILA violation, the trial court
erred in permitting him to rescind the 2005 refinance agreement without
tendering back the $45,400 that Gardner received in cash when the 2005
loan closed.3 Deutsche Bank’s Brief at 35. We agree.
When a party seeks the equitable “remedy of rescission, part and
parcel of the award of that remedy is returning the parties, to the extent
possible, to the status quo ante.” In re Fowler, 425 B.R. 157, 204 n.65
(Bankr. E.D. Pa. 2010) (citing Baker v. Cambridge Chase, Inc., 725 A.2d
757, 766 (Pa. Super. 1999) (“It is well known that the purpose of equitable
rescission is to return the parties as nearly as possible to their original
positions where warranted by the circumstances of the transaction.”)).
“[R]escission traditionally required either that the rescinding party return
what he received before a rescission could be effected (rescission at law), or
else that a court affirmatively decree rescission (rescission in equity).”
Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 793 (2015).
3
Deutsche Bank also claims that the trial court should have ordered Gardner
to tender $26,702.55 paid “to third parties in the course of servicing the
Mortgage.” Deutsche Bank’s Brief at 35, 37. However, Deutsche Bank does
not explain why the unwinding of the refinance transaction, and
reinstatement of the original mortgage, requires tender of taxes and
insurance which it would have paid under the original 2003 loan. The
rescission process is not a vehicle by which Deutsche Bank may recoup
those funds.
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However, TILA “alters the traditional process for unwinding such a
unilaterally rescinded transaction[.]” Id. Regulation Z provides the
following rescission procedure.
(d) Effects of rescission.
(1) When a consumer rescinds a transaction, the security
interest giving rise to the right of rescission becomes void
and the consumer shall not be liable for any amount,
including any finance charge.
(2) Within 20 calendar days after receipt of a notice of
rescission, the creditor shall return any money or property
that has been given to anyone in connection with the
transaction and shall take any action necessary to reflect
the termination of the security interest.
(3) If the creditor has delivered any money or property,
the consumer may retain possession until the creditor has
met its obligation under paragraph (d)(2) of this section.
When the creditor has complied with that paragraph, the
consumer shall tender the money or property to the
creditor or, where the latter would be impracticable or
inequitable, tender its reasonable value. At the
consumer’s option, tender of property may be made at the
location of the property or at the consumer’s residence.
Tender of money must be made at the creditor’s
designated place of business. If the creditor does not take
possession of the money or property within 20 calendar
days after the consumer’s tender, the consumer may keep
it without further obligation.
(4) The procedures outlined in paragraphs (d)(2) and (3)
of this section may be modified by court order.
12 C.F.R. § 226.23(d).
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Thus, the default procedure once notice of rescission has been honored
by the lender or validated by a court,4 is for the lender to take steps
necessary to reflect termination of the security interest and to return any
property or money given by the borrower before the borrower’s duty to
tender loan proceeds back to the lender is triggered. Subsection (d)(4)
empowers the court to alter or reorder the procedure of the rescission.
“Pursuant to [TILA], courts have the discretion to condition rescission
on tender by the borrower of the property he has received from the lender.
[C]ourts have denied rescission where the borrowers were unable to tender
payment of the loan amount.”5 Jobe v. Argent Mortgage Co., LLC, 373 F.
4
“The [consumer’s rescission] notice itself is merely procedural, serving as a
non-judicial method by which a party indicates his or her intent to disaffirm
the contract.” Bertram v. Beneficial Consumer Disc. Co., 286 F. Supp.
2d 453, 459 (M.D. Pa. 2003). “Until the creditor honors the notice, or a
court certifies its validity, it is without legal effect, and serves only to
preserve the consumer’s ability to pursue the remedies provided under the
statute.” Id.5
The Seventh Circuit has taken an even stronger position:
Tender is inherently part of rescission, not an occasional effect of
it. For this reason, … rescission is often unavailable to
consumers because they are unable to return unpaid principal as
a result of decreased property value, poor housing market or any
number of reasons. Accordingly, … a borrower’s inability to
satisfy his tender obligations may make rescission, even if based
on a TILA violation, impossible. Ultimately, rescission is
fundamentally meant to unwind the entire transaction, not
merely change the amount of the loan. If the [lender’s] security
interest remains intact and the loan continues to exist or if
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App’x 260, 262 (3d Cir. 2010) (internal citations and quotation marks
omitted) (citing American Mortgage Network, Inc. v. Shelton, 486 F.3d
815, 819 (4th Cir. 2007); Yamamoto v. Bank of New York, 329 F.3d
1167, 1173 (9th Cir. 2003); Williams v. Homestake Mortgage Co., 968
F.2d 1137, 1140 (11th Cir. 1992)). This majority view is designed “to
prevent … an unduly harsh result to the creditor or a windfall to the
consumer.” In re Sterten, 352 B.R. 380, 385 (Bankr. E.D. Pa. 2006). “[A]
court may abuse its discretion in not conditioning rescission on tender where
the TILA violations are not egregious and the equities otherwise favor the
creditor….” WMC Mortgage LLC v. Baker, No. CIV.A. 10-3118, 2012 WL
628003, at *15 (E.D. Pa. Feb. 28, 2012) (citation omitted).
Third Circuit courts have held repeatedly that a debtor’s inability to
tender the funds delivered by the lender rendered inappropriate termination
of the lender’s security interest in effectuating rescission. See, e.g., Jobe,
373 F. App’x at 262 (“Here, plaintiffs testified that they are unable to repay
the loan advanced to them, and they have not made any payments for more
than four years. Accordingly, the District Court properly found that… they
would not be able to rescind the mortgage obligation because they are
repayment is impossible, then rescission, by any definition, has
not taken place….
Iroanyah v. Bank of Am., 753 F.3d 686, 692 (7th Cir. 2014) (citations
omitted).
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unable to return the money defendant advanced to them in reliance on their
performance under the contract.”); Sterten, 352 B.R. at 387-88 (“I find the
concept of permitting a consumer a reasonable time frame to repay the
creditor while the creditor retains the security interest it acquired in the
rescinded transaction to be a balanced, equitable approach.”); In re Cruz,
441 B.R. 23, 36 (Bankr. E.D. Pa. 2004) (“[T]he Court’s Order will provide
that [the lender] shall retain its security interest until the [borrower]
completes payment of the ‘tender’ sum; in other words, the rescission shall
be effective only upon completion of the tender.”); In re Apaydin, 201 B.R.
716, 724 (Bankr. E.D. Pa. 1996) (“[T]he Court will, at least to some extent,
condition the avoidance of [the lender’s] security interest on the return of its
money by the [borrowers].”); Bookhart v. Mid-Penn Consumer Disc. Co.,
559 F. Supp. 208, 212 (E.D. Pa. 1983) (“The rescission and return of any
monies paid to [the lender] is thus conditioned upon [the borrower’s] return
of the remaining loan proceeds. In this way, the parties will be most nearly
returned to their respective pre-transaction positions.”).
Even when trial courts conclude that satisfaction of the borrower’s
tender obligation need not precede rescission and the resulting termination
of the lender’s security interest, the courts still have required the borrower
to pay the tender in some form as part of its declaration of rescission, unless
there was proof of an attempt to cheat the borrower. See, e.g., In re
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Gisondi, 487 B.R. 423, 434 (Bankr. E.D. Pa. 2013) (“[T]his Court finds that
the [borrower’s] admitted inability to tender the Loan’s proceeds is not
necessarily fatal to her rescission claim. … If [the court determines that
there was a TILA violation warranting rescission], this Court will then
consider how the [borrower] may comply with her tender obligation.);
Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295(D. Del. 1990) (terminating security interest but requiring the borrower to
pay the tender obligations in monthly installments).
In contrast to the above cases, the trial court in the instant case
ordered that (1) “equitable rescission applies to a sum of $45,400,” which is
the new money provided by Deutsche Bank’s predecessor pursuant to the
2005 refinance loan; (2) Deutsche Bank’s security interest created by the
2005 loan is rescinded, but it “retains a security interest by mortgage on the
property in the amount of $140,000” per the original 2003 loan; (3) Gardner
is to repay the $140,000 according to the terms of the 2003 mortgage, with
interest beginning to accrue from the date of judgment at the rate set forth
in the 2003 mortgage instrument. Findings of Fact and Conclusions of Law,
4/28/2014, at 3-4 (incorporated by reference in Judgment Order in Equity,
4/28/2014). The trial court instructed Deutsche Bank to establish a new
monthly payment schedule to effectuate the order. Judgment Order in
Equity, 4/28/2014, at 2.
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Notably absent from the trial court’s order is any provision for
Gardner’s tender of the new money portion of the rescinded loan. Instead,
the trial court provided that Deutsche Bank may file an in personam action
against Gardner to recover the $45,400. Order, 9/5/2014.
The trial court cites two Third Circuit district court cases from the
1980s as precedent for its decision to absolve Gardner of his duty to tender,
at any point, the 2005 loan proceeds as part of the rescission of that loan
agreement. See Trial Court Opinion, 3/26/2015, at 10 (citing Gill v. Mid–
Penn Consumer Discount Co., 671 F.Supp. 1021, 1026 (E.D.Pa. 1987),
aff’d mem., 853 F.2d 917 (3d Cir. 1988), and In re Melvin, 75 B.R. 952,
960 (Bankr. E.D.Pa. 1987)6). “This line of cases may be conceptualized as
manifesting the court’s exercise of its discretion to modify the statutory
rescission procedure in order to impose a further sanction on the creditor
due to the equities in the particular case.” Sterten, 352 B.R. at 385.
However, those cases relieving the borrower of his or her tender
obligation, resulting in a forfeiture by the lender, are limited to “situations
where creditors have tried to deceive or cheat the consumer.” In re
Williams, 291 B.R. 636, 655 (Bankr. E.D. Pa. 2003) (quoting Michel v.
Beneficial Consumer Discount Co., 140 B.R. 92, 101 (Bankr. E.D. Pa.
6
In reaching its conclusion, the Melvin court relied heavily upon Tucker v.
Mid–Penn Consumer Discount Co., 74 B.R. 923 (E.D.Pa. 1987), which is
mentioned infra.
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1992)) (declining to hold that the borrower “should be relieved of her ‘tender
obligation’” under TILA even though it adopted the minority view that
termination of the lender’s security interest could not be conditioned upon
tender). As one district court in the Third Circuit explained:
There is some precedent for the proposition that because [TILA]
requires the obligor to tender the proceeds only after the
creditor appropriately reacts to the rescission by returning the
property given and satisfying any security taken within twenty
days, the recalcitrance of a creditor to accept a valid rescission
obviates the obligor’s requirement to tender and leaves the
obligor with both a right to recover any payments made and a
vesting of the proceeds of the transaction in himself without an
obligation to repay it. See Gill [and] Tucker[, supra].
However, in the majority of prior cases the courts have either
explicitly held that an obligor must tender or offer to tender the
proceeds of the consumer transaction before finding a forfeiture;
or the particular circumstances of the case indicated that the
consumer had tendered the proceeds in those cases where a
forfeiture was found. Although mindful that the statutory
language contemplates a tender by the debtor after the creditor
has performed his duties, several courts that have expressly
addressed whether or not a tender by the consumer is required
before finding a forfeiture of the proceeds of a transaction by the
creditor, have found tender to be required to insure compliance
with the congressional purpose of restoring the parties to the
status quo.
Mayfield v. Vanguard Sav. & Loan Ass’n, 710 F. Supp. 143, 147 (E.D.
Pa. 1989) (some citations omitted).
Indeed, in Mayfield, a case with a similar factual basis as the instant
case, the court held as follows:
In this case, [the borrower] does not allege, nor is there
evidence of record that establishes, that [the borrower] tendered
the loan proceeds. Moreover, while I find from the
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uncontradicted evidence of record that [the lender’s] conduct
was questionable in that it was extremely careless in complying
with the TILA statutory requirements and charged plaintiff, who
was in a desperate credit situation, excessive settlement charges
and an unconscionable interest rate [(20%)] far above the
prevailing market rate thereby placing her home in jeopardy,
there is no real evidence of record that defendant tried to
deceive or cheat [the borrower]. … In the absence of evidence
of fraud or deceit by [the lender] and of a tender of the proceeds
by [the borrower], I conclude that [the borrower] has a
continuing duty to return the proceeds of the loans.
Id. at 147-48. The court went on to allow the borrower to repay her tender
obligation in monthly installments. Id. at 149.
Here, Gardner proved that Deutsche Bank’s predecessor violated TILA
by providing the wrong model form. The record also shows that the trial
court was troubled by the fact that Gardner was paying “interest at 11
percent in an era of 4 percent interest….” N.T., 4/14/2014, at 90-91. See
also id. at 92 (“I have questions about the whole rescission aspect of this.
Because that loan rescission, there is something to it, in an era of cheap
interest, that he wanted to withdraw the loan at 11 percent and somehow
was unable to do so.”). However, Gardner offered no admissible evidence
that Deutsche Bank or any of its predecessors was guilty of fraud or deceit.7
We hold that, with this absence of any proof of an intent by Deutsche
Bank or any of its predecessors to deceive or cheat Gardner, the trial court
7
Gardner offered multiple documents printed from the Internet as evidence
in an effort to prove wrongdoing by Ameriquest and some individuals whose
relationship with Deutsche Bank is unclear, but the trial court excluded them
as hearsay. See, e.g., N.T., 4/14/2014, at 159-60.
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abused its discretion in ruling that rescission was appropriate, and in
ordering the termination of Deutsche Bank’s security interest obtained in the
2005 refinance transaction, without also requiring Gardner to fulfill his
tender obligation.
Accordingly, we vacate the September 23, 2014 judgment and the
April 28, 2014 judgment order in equity and remand the case for further
proceedings consistent with this opinion. Specifically, the trial court upon
remand must calculate the amount of Gardner’s tender obligation and order
Gardner to satisfy that tender obligation either by paying that amount to
Deutsche Bank in a lump sum or by satisfying it over time. Upon full
consideration of the case law discussed above, the trial court also must
determine whether termination of Deutsche Bank’s 2005 security interest
prior to Gardner’s full tender is equitable under the circumstances of this
case.
Judgment vacated. Case remanded with instructions. Jurisdiction
relinquished.
Judge Panella did not participate in the consideration or decision in this
case.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/14/2015
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