2010 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-8-2010

Jennifer St. Hill v. Tribeca Lending Corp

Precedential or Non-Precedential: Non-Precedential

Docket No. 09-2214

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Recommended Citation

"Jennifer St. Hill v. Tribeca Lending Corp" (2010). 2010 Decisions. Paper 138.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_______________

No. 09-2214, 09-2215 & 09-2367

_______________

JENNIFER ST. HILL,

Appellant (No. 09-2214)

v.

TRIBECA LENDING CORPORATION;

LASALLE BANK NATIONAL ASSOCIATION;

LITTON LOAN SERVICING; FINANCIAL &

CONSULTING STRATEGIES, INC.

LASALLE BANK NATIONAL,

Appellant (No. 09-2215)

TRIBECA LENDING CORPORATION,

Appellant (No. 09-2367)

_______________

On Appeal from the United States District Court

For the Eastern District of Pennsylvania

(D.C. Civil Action No. 2-07-cv-05300)

District Judge: Honorable Juan R. Sanchez

_______________

Submitted Under Third Circuit LAR 34.1(a)

November 15, 2010

_______________

Before: AMBRO, FISHER, and GARTH, Circuit Judges

(Opinion filed: December 8, 2010)

_______________

OPINION

_______________

AMBRO, Circuit Judge
2

Debtor Jennifer St. Hill appeals from the District Court’s decision after trial that 

neither the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., nor the 

Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. 

§ 201-1 et seq., entitles her to rescind her mortgage in favor of Tribeca Lending 

Corporation (“Tribeca”). St. Hill also appeals the District Court’s order denying her 

claims for money damages against Financial & Consulting Strategies, Inc. (“FCS”), 

under Pennsylvania’s Credit Services Act (“CSA”), 73 P.S. § 2181, et seq., and Loan 

Broker Trade Practice Regulations (“LBTPR”), 37 Pa. Code § 305.1. She appeals as well

the District Court’s rejection of her fraud-related claims under the UTPCPL. Tribeca 

cross-appeals the District Court’s ruling that it violated the TILA by failing to disclose 

the fees that St. Hill paid her mortgage broker. For the reasons that follow, we affirm the 

District Court’s rejection of rescission, though for a different reason.

1

 

I. Background

St. Hill obtained a home mortgage loan from Tribeca for $1.3 million that she now 

seeks to rescind. In 2004, she experienced financial difficulty in connection with her debt 

collection business, and filed for Chapter 7 bankruptcy. In 2006, St. Hill decided to 

refinance her home mortgage to pay her trustee in bankruptcy to satisfy the creditors of 

her business. To that end, a friend referred St. Hill to Francis Kilson, who provided 

general financial advice but was not a mortgage broker. Kilson then introduced St. Hill 

to David Diamond, who worked for FCS as a mortgage broker. Diamond arranged the 

 

1

 The other parties affected are LaSalle Bank National Association (current holder of the 

mortgage) and Litton Loan Servicing (the servicer for LaSalle). 
3

loan with Tribeca. At the outset, St. Hill agreed with Kilson to a charge of $13,500 for 

his services, but the payment was not to come out of the loan proceeds. St. Hill also 

entered into a brokerage contract with Diamond, in which she agreed to pay him $13,000. 

In the course of the transaction (and prior to closing), Tribeca’s loan officer, Adam 

Turkewicz, told Diamond and St. Hill that Diamond would have to waive his fees in 

order to proceed with the particular type of loan that was arranged for St. Hill. The 

District Court found that Turkewicz told both Diamond and St. Hill that Diamond would 

have to pursue his fees outside the settlement papers. St. Hill paid Diamond $6,500 a few 

days after settlement and $6,500 or $7,000 (the amount is disputed) over the course of the 

year after settlement. 

Fourteen months after closing the loan, St. Hill attempted to rescind it on the 

ground that there were disclosure violations. After a two-day bench trial, the District 

Court determined that St. Hill was not entitled to rescind the loan. It also concluded that 

the TILA did not require disclosure of Kilson’s fees because he was not a mortgage 

broker. However, because the TILA requires disclosure of all finance charges, which are 

defined by the statute’s implementing regulation (Regulation Z) as any “fees charged by 

a mortgage broker,” the Court found that Tribeca had violated the TILA by failing to 

disclose Diamond’s broker fees. Nonetheless, it concluded that St. Hill could not recover 

damages because the one-year limitations period for recovery had elapsed. The District 

Court also rejected St. Hill’s claims under the UTPCPL.2 

 

2 Prior to trial, the District Court granted partial summary judgment in favor of FCS on 

St. Hill’s CSA and LBTPR claims. 
4

II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 28 U.S.C. § 1331, the TILA, 15 U.S.C. 

§ 1640(e), and the Real Estate Settlement Practices Act, 12 U.S.C. § 2614. It also 

exercised supplemental jurisdiction over St. Hill’s state law claims under 28 U.S.C. 

§ 1367(a). We have jurisdiction over a final order from the District Court under 28 

U.S.C. § 1291. 

“On the appeal of a bench trial, we review a district court’s findings of fact for 

clear error and its conclusions of law de novo.” McCutcheon v. Am. Servicing Co., 560 

F.3d 143, 147 (3d Cir. 2009). 

III. Discussion

A. St. Hill’s rescission claims 

St. Hill argues that she has a right to rescind her loan under both the TILA and the 

UTPCPL’s Door-to-Door Sales Act provision, 73 P.S. § 201-7. As bases for rescission, 

she claims that Tribeca under-disclosed the financing charges in connection with 

Diamond’s and Kilson’s fees and made other disclosure violations in connection with the 

adjustable interest rate and the Notice of Right to Cancel.3 The District Court held that 

 

3

Though we do not reach the issue (as we conclude the TILA does not apply), we 

agree with the District Court that, even if the TILA were applicable, Kilson’s fees are not 

finance charges subject to disclosure. Kilson is not a mortgage broker subject to the 

TILA; he is simply a “third party” for its purposes. Per Regulation Z, the TILA requires 

disclosure of third-party fees only if the lender “requires the use of a third party as a 

condition of or an incident to the extension of credit, even if the consumer can choose the 

third party; or [the lender] retains a portion of the third-party charge, to the extent the 

portion is retained.” 12 C.F.R. § 226.4(a)(1) (emphasis added). In this context, we make 

no further reference to St. Hill’s arguments concerning Kilson.
5

St. Hill was not entitled to rescind the loan because she had received the requisite 

disclosures, with the exception of Diamond’s fees. As for the latter, the failure to 

disclose Diamond’s fees violated the TILA. However, no remedy existed, as St. Hill 

filed her claim too late. 

We agree with the District Court that neither the TILA nor the UTPCPL supports 

St. Hill’s arguments for rescission, but for a different reason. We believe that neither 

statute applies to the transaction here because St. Hill’s loan was principally for business, 

not consumer, purposes. Therefore, we do not reach the question of whether St. Hill 

would be entitled to rescind if either statute applied. 

The TILA and the UTPCPL (including the Pennsylvania Door-to-Door Act) apply 

only to consumer credit transactions. Under the TILA, consumer credit means credit 

“offered or extended” to a consumer “primarily for personal, family, or household 

purposes.” 15 U.S.C. § 1602(h); see 12 C.F.R. § 226.2(12). Similarly, the UTPCPL is 

limited to the same transactions. 23 P.S. § 201-9.2(a). The TILA does not apply to 

“[c]redit transactions involving extensions of credit primarily for business, commercial, 

or agricultural purposes.” 15 U.S.C. § 1603(1). 

In this regard, whether we reach the merits of St. Hill’s claims depends on the 

loan’s primary purpose. Was it is personal or commercial? Our inquiry goes to the 

“transaction as a whole.” See Gombosi v. Carteret Mortg. Corp., 894 F. Supp. 176, 

 

By contrast, as a mortgage broker, the “[s]pecial rule” on “mortgage broker fees” 

applied to Diamond and FCS. Id. § 226.4(a)(3). It requires that any “[f]ees charged by a 

mortgage broker . . . are finance charges even if the creditor does not require the 

consumer to use a mortgage broker and even if the creditor does not retain any portion of 

the charge.” Id. 
6

181 (E.D. Pa. 1995). Even if a transaction has some personal purpose, the TILA does not 

necessarily apply. Quinn v. A.I. Credit Corp., 615 F. Supp. 151, 154 (E.D. Pa. 1985). 

Moreover, several courts have agreed that simply because the loan is secured by a family 

home does not mean that the loan was primarily personal. See, e.g., Sherrill v. Verde 

Capital Corp., 719 F.2d 364, 367 (5th Cir. 1983); Bokros v. Assocs. Fin., Inc., 607 F.

Supp. 869, 872 (N.D. Ill. 1984); In re DiPietro, 135 B.R. 773, 777 (Bankr. E.D. Pa.

1992).

To prevail on a TILA claim, St. Hill had the burden of showing that the Act

applied to her case.4 See Katz v. Carte Blanche Corp., 496 F.2d 747, 751 (3d Cir. 1974). 

We do not believe that she proved at trial that the primary purpose of her loan was 

sufficiently consumer-oriented to put it within the ambit of the TILA.

The record shows that, though St. Hill’s home served as collateral, the purpose of 

the loan was to pay her business creditors. Prior to the refinancing, St. Hill used her 

home as collateral for her business debts. When her business ran into trouble, she had to 

file for personal bankruptcy to protect her home. She testified that “the sole reason for . . 

. getting the refi[nancing] was because the house had increased in value and [she] wanted 

 

4

She claims that Tribeca waived the argument that the TILA does not apply because it

both “admitted” this in its answer and failed to raise the claim until a post-trial 

submission. We disagree. To the former, we are not bound by a party’s admissions 

“concerning questions of law.” Mintz v. Am. Gen. Fin. Servs., 434 F.3d 222, 228 (3d Cir. 

2006). To the latter, “[t]he purpose of requiring the defendant to plead available 

affirmative defenses in his answer is to avoid surprise and undue prejudice by providing 

the plaintiff with notice and the opportunity to demonstrate why the affirmative defense 

should not succeed.” In re Sterten, 546 F.3d 278, 285 (3d Cir. 2008) (quoting Robinson 

v. Johnson, 313 F.3d 128, 134-35 (3d Cir. 2002)). We do not believe that disagreement 

over this threshold issue could possibly shock St. Hill, a person skilled in debt collection 

matters. 
7

to pay off the trustee and . . . the creditors. There was no other reason . . . .” App. 949-

50 (emphases added). In light of this evidence, the District Court found that St. Hill 

needed the loan “for the trustee to satisfy her business creditors during a Chapter 7 

bankruptcy.” For St. Hill, the likely alternative to refinancing was the seizure of her 

home as an asset in bankruptcy. In short, her business debts were the but-for cause of the 

loan. 

St. Hill points out that only 29% of the loan went directly to her creditors. The 

rest of the principal went to settlement charges, the satisfaction of a pre-existing 

mortgage, taxes and liens, and the trustee’s fees and commission. However, we do not 

believe that these other payments indicate the loan’s primary purpose. The District Court 

in Gombosi encountered a similar situation. There, as here, the Gombosi family had 

refinanced their home and a portion of the proceeds were used to pay off business loans. 

It was clear to the Court that the Gombosis did not refinance to obtain a lower interest 

rate or lower monthly payments. Also, the satisfaction of the prior mortgage was a

necessary condition of the second loan. With respect to fees and taxes, the Court stated

that “[s]ince these costs would have been incurred whatever the purpose of the loan, we 

find that they do not carry any weight in the determination of the primary purpose of this 

transaction.” 894 F. Supp. at 181. It concluded that

[a]ll these facts indicate that the refinancing of an existing residential 

mortgage and the making of tax payments were not the primary purpose of 

the . . . loan. Rather, the primary purpose of the . . . loan was to acquire the 

remaining proceeds after the satisfaction of all the conditions of obtaining 

the loan. Thus, we find that the disposition of those remaining proceeds

must weigh heavily in determining the primary purpose of the . . . loan.
8

Id. (emphasis added).

In our case, refinancing was obviously not the primary purpose of the $1.3 million

Tribeca loan, as it resulted in a higher interest rate and higher monthly payments (as in 

Gombosi). Also, the $738,634.59 payment to satisfy the existing mortgage was an 

express condition of the Tribeca loan—again, not the primary purpose. Finally, the 

settlement charges, taxes, fees, and commission would have been paid regardless of the 

loan’s purpose or the nature of the bankruptcy debts. Thus, as in Gombosi, we are 

persuaded that the destination of the remaining proceeds is the most relevant 

consideration in the designation of the loan as consumer or commercial. 

Turning to our facts, after satisfying the pre-existing mortgage ($738,634.59), the 

bankruptcy trustee’s fees and commission ($137,500), settlement charges ($75,558.29),

and other taxes and liens against the home (about $40,000), the remaining balance of

$377,533.43 was paid directly to St. Hill’s creditors. Though she quibbles that the record 

does not conclusively show her creditors were business and not consumer, the testimony 

noted above convinces us they were the former. In the circumstances before us, that St. 

Hill could only apply 29% of the principal directly toward her commercial liabilities does 

not detract from our conclusion that the loan’s primary purpose was commercial. 

Therefore, we conclude that the TILA does not apply to St. Hill’s loan as a matter of law.

We likewise reject that the Pennsylvania Door-to-Door Act applies to the 

transaction in this case. As noted above, we do not believe this loan is within the ambit 

of the UTPCPL because it is not a consumer loan. Even if it were, we also note an 

additional reason why this transaction is not covered by the Door-to-Door Act. 
9

The Door-to-Door Act protects the consumer at home from solicitation or other 

inappropriate pressure to assume debt. Here, neither Diamond nor Tribeca solicited St. 

Hill in her home, personally or by telephone. The only contact with the home was the 

closing, which was held there. But as the District Court found, the closing was at St. 

Hill’s home office, for her convenience, as it was her principal place of business. 

Therefore, we conclude that the loan was not entered into as the result of or in connection 

with in-person contact or a call on St. Hill at her home. We will not stretch the statute to 

apply to this case. 

Claims against FCS under the CSA and the LBTPR

St. Hill also argues that the District Court erred in granting summary judgment to 

FCS on St. Hill’s CSA and LBTPR claims for misrepresenting the terms of the loan. We 

disagree. 

We exercise plenary review over the District Court’s grant of summary judgment, 

viewing “the underlying facts and all reasonable inferences therefrom in the light most 

favorable to the party opposing the motion.” McGreevy v. Stroup, 413 F.3d 359, 363 (3d 

Cir. 2005). 

As noted by the District Court, the CSA does not apply to FCS. It covers “credit 

services organizations.” 73 P.S. § 2183. They do not, however, include “[a]ny person 

organized, chartered or holding a license or authorization certificate to make loans or 

extensions of credit pursuant to the laws of the Commonwealth or the United States who 

is subject to regulation and supervision by an official or agency of the Commonwealth or 
10

the United States.” Id. § 2182. FCS is a mortgage broker licensed by the 

Commonwealth and regulated by the Pennsylvania Department of Banking. 

The LBTPR covers “[l]oan broker[s].” 37 Pa. Code § 305.2. Excluded from that 

definition is any “person, copartnership, association or corporation expressly regulated by 

a regulatory body or officer of this Commonwealth or of the United States, such as State 

and nationally chartered banks, savings and loan associations and their regulated 

subsidiaries.” Id. As FCS is regulated in a manner contemplated by this exclusion, the 

LBTPR also does not apply to it.

Because neither the CSA nor the LBTPR applies to this case, FCS was entitled to 

judgment as a matter of law. See also Parker v. Long Beach Mortg. Co., 534 F. Supp. 2d 

528, 537-38 (E.D. Pa. 2008) (holding licensed mortgage brokers are not covered by either 

the CSA or the LBTPR).

Fraud and the UTPCPL 

St. Hill also appeals the District Court’s denial of her fraud claims brought under 

the UTPCPL against Tribeca and FCS. As noted above, the UTPCPL does not apply to 

non-consumer transactions. Thus, we do not address these claims. 

* * * * *

For the reasons discussed above, though our reasoning differs in part, we affirm 

the District Court’s judgments.