We agree with Upland that its pre-suit offer to rescind the loans rendered Plaintiffs’ claim
for rescission moot. Thus, Plaintiffs lack standing to sue and we do not have jurisdiction to hear
the case. See U.S. Const. Art. III, § 2; United States v. Balint, 201 F.3d 928, 936 (7th Cir. 2000)
(recognizing that “a case is moot if there is no possible relief which the court could order that
would benefit the party seeking it”). The relief that Plaintiffs sought and was available to them!
was fulfilled by Upland’s agreement to rescind the loans. Plaintiffs’ arguments that Upland’s
offer to rescind was defective does not alter this result.

Although it is true that upon a notice of rescission TILA generally requires that the
creditor perform first and unilaterally by returning monies and releasing its security interest, see
15 U.S.C. § 1635(b), there is no absolute prohibition against conditioning rescissions on some
act by the borrower. For example, a court may exercise its equitable discretion under the last
sentence of § 1635(b) to condition rescission upon some affirmative act of the debtor. See AFS
Fin., Inc. y. Burdette, 105 F. Supp. 2d 881, 881-82 (N.D. Ill. 2000) (noting that court may
require, as condition of rescission, that borrowers tender amounts previously advanced); Rowland
vy, Magna Millikin Bank of Decatur, N.A., 812 F. Supp. 875, 880-81 (C.D. Ill. 1992)
(conditioning return of money paid to bank on consumer tendering reasonable value of new
windows installed under contract); see also Williams v. Homestake Mortgage Co., 968 F.2d
1137, 1142 (11th Cir. 1992); Fed. Dep. Ins. Corp. v. Hughes Dev. Co., 938 F.2d 889, 890 (8th
Cir. 1991). Furthermore, we question whether the release that Upland sought can even be

considered a “condition of rescission” in the TILA sense of the term. Upland simply sought an

' As discussed below, Plaintiffs’ other claims for relief in the form of statutory damages
and attorney fees are time barred.



CONCLUSION

i Plaintiffs lack standing to sue for rescission at this time and their claims for statutory

damages are time barred. We therefore grant Upland’s motion to dismiss with prejudice. (R. 9-

1.)
ENTERED:
Judge Ruben Castillo

United States District Court

Dated: November 21, 2002



LEGAL STANDARDS

In considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), which
challenges this Court’s subject matter jurisdiction, and under Rule 12(b)(6), which asserts a
failure to state a claim on which relief may be granted, we must accept the complaint’s
well-pleaded factual allegations as true and draw reasonable inferences from those allegations in
the plaintiff's favor. Transit Express, Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001).
Dismissal is appropriate only if it appears beyond a doubt that the plaintiff can prove no set of
facts in support of the claim that would entitle the plaintiff to relief. Kennedy v. Nat’l Juvenile
Det. Ass’n., 187 F.3d 690, 695 (7th Cir. 1999); Cortez ex rel. Cortez v. Calumet Pub. Sch. Dist. #
132, No. 01 C 8201, 2002 WL 31177378, *1 (N.D. Ill. Sept. 30, 2002). Furthermore, when a
defendant challenges subject matter jurisdiction under Rule 12(b)(1), we may properly look
beyond the complaint and consider any evidence submitted on the issue. Meridian Rail Prods.
Corp. v. Amsted Indus., Inc., No. 02 C 3708, 2002 WL 31103479, *2 (N.D. Ill. Sept. 18, 2002).

ANALYSIS

First, Upland claims that Plaintiffs lack standing to sue because its offer to rescind the
loans effectively vitiated any litigable dispute, and thus divested this Court of subject matter
jurisdiction. See Rand v. Monsanto Co., 926 F.2d 596, 597-98 (7th Cir. 1991); Greisz v.
Household Bank (Ill), N.A., 176 F.3d 1012, 1015 (7th Cir. 1999). Plaintiffs argue that Upland’s
offer to rescind is defective because: (1) Upland failed to terminate its security interest in the
loans as required by Regulation Z, 12 C.F.R. § 226.23(d)(2); and (2) Upland is prohibited from
requiring Plaintiffs to sign a release from liability as a condition of rescission. (R. 13, Pl.’s Resp.

at 9-12.)



assurance from Plaintiffs that Upland would not be hailed into court after satisfying their
demands by rescinding the loans. Such releases are routine and proper in the course of
settlements and offers of judgment, and merely serve to protect a defendant's interest in finality
after satisfying a plaintiff's demands. Oswald v. McGarr, 620 F.2d 1190, 1198 (7th Cir. 1980)
(stating that “[a} settlement offer is a compromise and may include a release of claims not before
the court.”); Jn re Brand Name Prescription Drugs, No. 94 C 897, 1996 WL 167347, at *2 (N.D.
Ill. Apr. 4, 1996) (noting that settlement provisions requiring releases of all claims related to

dispute are “reasonable and customary”).

Plaintiffs further argue that Upland’s rescission was defective because it was not
consummated within the 20-day period provided under the Act, and therefore Plaintiffs have
standing to sue for rescission. 15 U.S.C. § 1635(b). But standing is determined from the date of
the filing of the complaint. Lujan v. Defenders of Wildlife, 504 U.S. 555, 587 n.4 (1992).
Plaintiffs filed their lawsuit before the expiration of the 20-day filing period, so they had no
knowledge as to whether Upland would agree to rescind or whether Upland’s performance would
be defective. Moreover, according to the Official Staff Commentary to Regulation Z, 12 C.F.R.
Pt, 226, Supp. I, cited by Plaintiffs in their brief, Upland was not required to fully perform within
the 20-day period. The Staff Commentary explains that “[t]he 20-day period for the creditor’s
action [to terminate the security interest] refers to the time within which the creditor must begin
the process. It does not require all necessary steps to have been completed within that time.” 12
C.F.R. Pt. 226, Supp. I. Upland initiated the rescission process on July 8, 2002, well within
twenty days of Plaintiffs’ June 26 notice of rescission, when it informed Plaintiffs that it would

rescind the loans. Upland followed up this letter with an itemized accounting of the rescission



i»

.

Minute Order Firm (06/97

CZ)

United States District Court, Northern District of Illinois

of Assigned Judge i Sitting Judge if Other
or Magistrate Judge Ruben Castillo than Assigned Judge
| PIS NUMBER 02 C4777 DATE 11/21/2002
CASE Kristen Personius, et al. vs. Homeamerican Credit, Inc.
TITLE
[in the following box (a) indicate the party filing the motion, e.g, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented]
DOCKET ENTRY:
qd) Oo Filed motion of [ use listing in “Motion” box above.]
(2) i} Brief in support of motion due
(3) ia Answer brief to motion due . Reply to answer brief due. :
(4) oO Ruling/Hearing on set for at
(5) a Status hearing[held/continued to] (set for/re-set for] on set for at
(6) Oo Pretrial conference[held/continued to] [set for/re-set for] on set for at .
() 0 Trial[set for/re-set for] on at
(8) 0 [Bench/Jury trial] [Hearing] held/continued to at
(9) oO This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) CLocal Rule 41.1 CIFRCP41(a\(1) COFRCP41(a)(2).
(0) ES [Otherdocketentry} Enter Memorandum Opinion and Order. Defendant’s motion to dismiss [9-1]
\ is granted. This case is hereby dismissed with prejudice.

dl) @ [For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required. a

Notices mailed by judge's staff. WrAth aN

bes od 2002
Notified counsel by telephone. date docketed

oY | Docketing to mail notices,
av | Mail AO 450 form.
Copy to judge/magistrate judge.

4YN09 L9laLSIa*s:
Mu379 a

RO ions LEH Wd 12 AON ZO
: OT OR aaa ——



amounts. Under TILA Upland was not required to completely perform its rescission within
twenty days. Thus, Plaintiffs’ argument that Upland’s allegedly defective rescission provides
standing to sue fails.

Upland next moves to dismiss as time barred Plaintiffs’ claims for statutory damages and
attorney fees. Actions for statutory damages must be brought within one year from the date of
the violation, 15 U.S.C. § 1640(e). “A credit transaction is consummated for the purposes of
TILA when the consumer becomes contractually obligated on a credit transaction.” Mount v.
LaSalle Bank Lake View, 886 F. Supp. 650, 651 (N.D. Ill. 1995). In this case Plaintiffs became
contractually obligated on the closing date of their mortgages, all of which occurred more than
one year before this lawsuit. Thus, Plaintiffs’ claims for statutory damages are time barred.’ As
for attorney fees, Plaintiffs are entitled to collect them only “in the case of any successful action
to enforce” TILA. See 15 U.S.C. § 1640(a)(3). Plaintiffs persisted with this lawsuit even after
Upland agreed to rescind the loans. We hope that this decision was not driven by a desire to
recoup attorney fees or exact an additional monetary settlement from the defendant. Such
maneuvering is improper and we will not reward such tactics by entertaining a claim for attorney
fees. As demonstrated above, Plaintiffs cannot maintain a successful action with respect to their

claims for rescission and statutory damages, and accordingly have no basis for attorney fees.

2 In their response Plaintiffs argue that they may claim statutory damages for Upland’s
failure to properly rescind the loans. Even the most liberal reading of Plaintiffs’ complaint does
not support this allegation; there simply is no mention in the complaint that Upland failed to
rescind the loans. Nor could there be since, as noted above, Plaintiffs did not wait for Upland’s
20-day rescission period to expire before bringing this lawsuit. Thus, we decline to read a count
for statutory damages for failure to rescind into Plaintiffs’ complaint.

6



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

DOCKETED

KRISTEN PERSONIUS, MAX E.
NOV 2 2 2002

PERSONIUS, GEORGE KINIMONTH,
NOREEN CORCORAN, and RUTH

WOODSIDE, No. 02 C 4777

Plaintiffs, Judge Ruben Castillo
v.

HOMEAMERICAN CREDIT, INC,,
d/b/a UPLAND MORTGAGE,

wee we SS SS rr SH

Defendant.
MEMORANDUM OPINION AND ORDER

Plaintiffs filed suit against Defendant Homeamerican Credit, Inc., d/b/a Upland Mortgage
(“Upland”), for alleged violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq.
(“TILA”), and Federal Reserve Board Regulation Z, 12 C.F.R. § 226 (“Regulation Z”). Presently
before the Court is Upland’s motion to dismiss Plaintiffs’ complaint pursuant to Federal Rules of
Civil Procedure 12(b)(1) and 12(b)(6). For the reasons set out in this opinion, we grant Upland’s
motion. (R. 9-1.)

RELEVANT FACTS

Each of the plaintitfs executed residential loans with Upland: (1) Max and Kristen
Personius in July 2000; (2) George Kinimonth and Noreen Corcoran in April 2001; and (3) Ruth
Woodside in November 1999. (R. 1, Compl. f 8, 24, 37.) On June 26, 2002, Plaintiffs’ counsel
sent Upland a letter requesting rescission of the three loans due to alleged noncompliance with
TILA. (R. 9, Def.’s Mem, Ex. A, June 26 letter.) Upland’s counsel responded on July 1, 2002,

requesting an explanation of the alleged TILA breaches. (/d., Ex. B, July 1 letter.) On July 2,



2002, Plaintiffs’ counsel faxed a letter detailing the alleged irregularities in each loan transaction
that entitled Plaintiffs to rescind the loans. (/d., Ex. C, July 2 letter.) Specifically, Plaintiffs
alleged various violations of TILA including mis-dating loan documents and failing to provide
copies of TILA disclosures at closing. (/d.) On July 3 Plaintiffs filed the instant one-count
complaint, raising the same claims as those identified in its July 2 letter to Upland. (R. 1, Compl.
49] 49-54.) Plaintiffs seek rescission of the loans, statutory damages, attorney fees and any other
relief the Court deems appropriate. (/d. at 9.) On July 8, prior to receiving Plaintiffs’ complaint,
Upland responded to the notice of rescission by agreeing to rescind the three loan transactions.
{R. 9, Def.’s Mem, Ex. D, July 8 letter.) Upland informed Plaintiffs that it had “initiated the
process necessary to rescind the [loans],” and would be sending a letter “containing an itemized
statement of the rescission amount” and a closing date. (/d.) On July 18, 2002, Upland sent a
letter containing each Plaintiff's rescission amounts and requesting a closing date. (/d., Ex. E,
July 18 letter.) On August 9 Upland sent Plaintiffs releases to be executed in conjunction with
the loan rescissions, (/d., Ex. F, Aug, 9 letter.) The releases sought a full discharge of Plaintiffs’
TILA claims against Upland pending the rescission of the loans. Plaintiffs refused to sign the
releases and voluntarily dismiss the complaint, maintaining that it was their right to seek
statutory damages and attorney fees separately from and in addition to the rescission of the loans.
On September 9, 2002, Upland filed the present motion to dismiss pursuant to Rules 12(b)(1) and
12(b)(6) of the Federal Rules of Civil Procedure. Upland claims that Plaintiffs lack standing to
sue, given Upland’s earlier offer to rescind the loans, and that Plaintiffs’ claims for statutory

damages and attorney fees are time barred.