home was the security interest for the mortgage, and, therefore, the security interest was
sufficiently disclosed. IndyMac points out that the Mortgage specifically states:

THIS MORTGAGE (“Security Instrument”) is given on MARCH 2, 2001. The
mortgagor is RONALD E. VADEN, AN UNMARRIED MAN, whose address is
107 Sharon Lane, North Aurora, IL 60542 (“Borrower”), This Security
Instrument is given to Universal Financial Group, Inc... . Borrower owes Lender
the principal sum of ONE HUNDRED FORTY-TWO THOUSAND EIGHT
HUNDRED AND 00/100 Dollars (U.S. $ 142,800.00)... . This Security
Instrument secures to Lender: (a) the repayment of the debt evidenced by the
Note, with interest, and all renewals, extensions and modifications of the Note; (b)
the payment of all other sums, with interest, advanced under paragraph 7 to
protect the security of this Security Instrument; and (c) the performance of
Borrower’s covenants and agreements under this Security Instrument and the
Note, For this purpose, Borrower does hereby mortgage, grant and convey to the
Lender, the following described property located in Kane County, Illinois: . . .
which has the address of 107 Sharon Lane, North Aurora, Illinois 60542
(“Property Address”)...

Compl. Ex. B. Universal points out that on the Federal Truth-in-Lending Disclosure Statement
itself, Vaden’s address appears under his name at the top of the document. Universal contends
that “[nJo reasonable person could read this TILA Statement and understand that a security
interest would be taken in any other property.” Universal’s Resp. at 4.

However, Vaden need not show that he did not know what security interest Universal
took in order to prevail on his motion for summary judgment. Under the TILA the facial error
alone is enough to create civil liability:

It is not sufficient to attempt to comply with the spirit of TILA in order to avoid

liability. Rather, strict compliance with the required disclosures and terminology

is required. Many violations of TILA involve technical violations without

egregious conduct of any kind on the part of the creditor. However, Congress did

not intend that creditors should escape liability for merely technical violations.

Smith v. No. 2 Galesburg Crown Finance Corp., 615 F.2d 407, 416 (7" Cir. 1980) (citations

omitted). A borrower can recover the statutory penalty for a technical violation without showing


decided on summary judgment. Both Vaden and Universal’s motions for summary judgment as
to the claim regarding the notice of the right to rescind are denied.

The Court also denies IndyMac’s motion for summary judgment on this claim. As
discussed earlier, IndyMac cannot avoid liability on the ground that it is an assignee because the
erroneous statement included in the original notice form was apparent on the face of the
document. Furthermore, IndyMac cannot avoid a rescission on the ground that it is an assignee
and not the original creditor who committed the TILA violation. “Any consumer who has the
right to rescind a transaction under section 1635 [of the TILA] may rescind the transaction
against any assignee of the obligation.” 15 U.S.C. § 1641(c).

Conclusion

For the reasons stated above, the Court grants plaintiff's motion for summary judgment
[docket # 29-1] as to liability on his claim regarding disclosure of the security interest but
otherwise denies the motion. The Court denies both defendants’ motions for summary judgment
[docket #s 27-1, 32-1]. The case is set for a status hearing on September 25, 2003, at 9:30 a.m.

for the purpose of setting a trial date and discussing the possibility of settlement.

MATTHEW F, KENNELUY
United States District Judge

Date: September 16, 2003



“~ cTM

subchapter.” 15 U.S.C. § 1635(a). If, however, the creditor fails to deliver the rescission forms,
or fails to provide the required material disclosures, the right to rescind extends for three years
after the transaction’s consummation. Fairbanks Capital Corp. v. Jenkins, 225 F. Supp. 24 910,
913 (ND. Ill. 2002) (citing 15 U.S.C. § 1635(f) and 12 C.F.R. § 226.23(a)(3)); 12 CFR. §
226.23(a)(3).

In sum, Universal’s failure to disclose Vaden’s security interest only extended his right to
rescind if the security interest was a material disclosure. It was not. The TILA defines “material
disclosures” as the

disclosure. . . of the annual percentage rate, the method of determining the

finance charge and the balance upon which a finance charge will be imposed, the

amount of the finance charge, the amount to be financed, the total of payments,

the number and amount of payments, the due dates or periods of payments

scheduled to repay the indebtedness, and the disclosures required by section

1639(a) of this title.

15 U.S.C. § 1602(u); see also 12 C.F.R. § 226.23(a)(3) fn.48. In other words, a security interest
is not classified as a material disclosure. See Diehl v. ACRI Co., No. 92-1224, 1993 WL 818766,
at *5 (C.D. Ill. Dec. 3, 1993); see also Rowland v. Magna Millikin Bank of Decatur, N.A., 812 F.
Supp. 875, 880 (C.D. Ill. 1992). Therefore, Universal’s failure properly to disclose the security
interest did not extend Vaden’s rescission period.

2. Claim regarding the failure to deliver notice of the right to rescind

Vaden raises a second ground for why he should be allowed to rescind the mortgage. He
claims that he did not receive proper notice of his right to rescind and that under 15 U.S.C. §

1635(f) he has three years from March 2, 2001, the date of the mortgage closing, to rescind.

Universal admits that the original notice of the right to rescind that it provided to Vaden was for


that he has been deceived by the statutory violation. Brown v. Marquette Savings and Loan
Assoc., 686 F.2d 608, 614 (7" Cir. 1982). Vaden has provided the Federal Truth-in-Lending
Disclosure Statement to show that Universal committed a technical violation of the TILA;
defendants do not provide anything indicating a genuine issue of fact remains. Because Vaden
has proven a violation of the TILA, he is entitled to summary judgment as to liability on the
claim.

IndyMac argues that as an assignee, it should not be held liable for Universal’s violation.
Under the TILA, any suit

which may be brought against a creditor may be maintained against any assignee

of such creditor only if the violation for which such action or proceeding is

brought is apparent on the face of the disclosure statement, except where the

assignment was involuntary. For the purpose of this section, a violation apparent

on the face of the disclosure statement includes, but is not limited to (1) a

disclosure which can be determined to be incomplete or inaccurate from the face

of the disclosure statement or other documents assigned, or (2) a disclosure which

does not use the terms required to be used by this subchapter.

15 U.S.C. § 1641(a). By looking at the Federal Truth-in-Lending Disclosure Statement signed by
Vaden, it is readily apparent that the security interest was not properly disclosed. Therefore,
under § 1641(a)(1), IndyMac is also liable for the error.

However, our determination that defendants are liable for failing to properly disclose the
security interest does not entitle Vaden to rescind his mortgage. Not all TILA disclosure
violations extend the period for the obligor to rescind a loan. Under the TILA, the obligor has up
to three days to rescind the transaction after the later of either: (1) “the consummation of the

transaction,” or (2) “the delivery of the information and rescission forms required under this

section together with a statement containing the material disclosures required under this



The Seventh Circuit recognizes that presentation of evidence of proper mailing creates a
rebuttable presumption of delivery. See Godfrey v. United States, 997 F.2d 335, 338 (7" Cir.
1993). In Godfrey, the court considered whether the government owed the plaintiffs interest on a
tax refund check that the government said was mailed but the plaintiffs said was never received.
The court held that “[t]o invoke the presumption of delivery, the government could either present
evidence of actual mailing such as an affidavit from the employee who mailed the check, or
present proof of procedures followed in the regular course of operations which give rise to a
strong inference that the check was properly addressed and mailed.” Jd. at 338. Universal has
provided the declaration of Edwin Gausselin, Universal’s former president, stating that “[o]n
April 3, 2001 ..., I sent a letter to Mr. Vaden at 107 Sharon Lane, North Aurora, Illinois 60542,
enclosing two copies of an H-8 type Notice of Right to Cancel.” Gausselin Decl. 4 23. Vaden
testified at his deposition that 107 Sharon Lane was his address in April 2001 and that he was not
experiencing any problems with mail delivery at the time. Gausselin’s declaration creates a
rebuttable presumption of delivery under the Godfrey standard.

However, Vaden has attempted to rebut this presumption by presenting his deposition
testimony that he never received the April 3, 2001, letter or the two copies of the corrected notice
of the right to rescind. Vaden Dep. at 29-30. “When a plaintiff unequivocally denies receipt of
the letter, there is a genuine issue of a material fact.” Jones v. Citibank, 844 F. Supp. 437, 442
(N.D. Ill. 1994) (citing In re Longardner & Assocs., 855 F.2d 455, 459 (7TM Cir. 1988)). The
“denial of receipt alone does not rebut the presumption, but merely creates a question of fact.”
Longardner, 855 F.2d at 459 (citation omitted). In short, a genuine issue of fact exists as to

whether the proper notice of the right to rescind was delivered. Accordingly, this issue cannot be


ot —~
“Minute Order Form (06/97) oo fe

United States District Court, Northern District of Iinois

Name of Assigned Judge Matthew F. Kennelly Sitting Judge If Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 02 C 1150 DATE 9/16/2003
CASE Vaden vs. Indymac Bank, et al
TITLE

Ln the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

of the motion being presented]

ay

MOTION:

DOCKET ENTRY:

qd) oO Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion due

(3) im} Answer brief to motion due___. Reply to answer briefdue___.

(4) 0 Ruling/Hearingon___—_sesetfor_ saat,

(5) | Status hearing set for 9/25/2003 at 9:30 A.M..

(6) a Pretrial conference[held/continued to] {set for/re-set for]on__—setfor_—sat_—

(7) oO Trial{set for/re-set for]on__— at

(8) Qo {Bench/Jury trial] [Hearing] held/continued toa

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) Local Rule 41.1 OOFRCP41(a)\(1) OFRCP4I(a)(2).

(0) off [Other docket entry] | Enter memorandum opinion and order. The Court grants plaintiffs motion

for summary judgment (29-1) as to liability on his claim regarding disclosure of the security interest but
otherwise denies the motion. The Court denies both defendants’ motions for summary judgment (27-1,32-

1).

a (For further detail see order attached to the original minute order.]

No notices required, advised in open court.

No notices required, number of notices

Notices mailed by judge’s staff.
*
Notified counsel by telephone. SEP ah )

goa

Docketing (o mail notices.

Mail AO 450 form. dockering fet

Copy to judge/magistrate judge.

date maited notice
courtroom

TP deputy’s
initials

Daie/time received in
central Clerk's Office nating deputy intas



roa oTM

existing borrowers, which Vaden was not, and stated, “If you cancel this new transaction, it will
not affect any amount that you presently owe.” Universal’s Facts {J 14, 20-21. But, defendants
argue, Universal corrected its error within 60 days of discovering the problem, absolving
itself-and IndyMac-of liability for the original mistake. Under 15 U.S.C. § 1640(b), the creditor
is not liable for a TILA violation if it corrects the error within 60 days of discovering the problem
and “notifies the person concerned of the error and makes whatever adjustments in the
appropriate account are necessary.” 15 U.S.C. § 1640(b). Universal has provided an affidavit in
which its then-president Edwin Gausselin states that when he learned of the error, he mailed
Vaden two copies of the proper notice form on April 3, 2001, along with a letter extending the
period in which Vaden could rescind the transaction to three days from the date of receipt of the
proper notice. Gausselin Decl. {{ 19-24. Vaden, however, has provided deposition testimony in
which he states that he never received the proper notice. Vaden Dep. at 29.

The TILA requires creditors to “clearly and conspicuously disclose” to the obligor his
right to rescind. 15 U.S.C. § 1635(a). To do so, “a creditor shall deliver two copies of the notice
of the right to rescind to each consumer entitled to rescind.” 12 C.F.R. § 226.23(b)(1) (emphasis
added). If the creditor fails to comply with the requirements of 15 U.S.C. § 1635, it is liable for
damages under § 1640(a). The obligor also has three years from the date of the closing to rescind
the transaction if the required notice of the right to rescind is not delivered. 12 C.F.R. §
226.23(a)(3). For Universal to prevail on its motion for summary judgment, it must show that no
reasonable trier of fact could find that proper notice never reached Vaden; Vaden can prevail on
his motion for summary judgment only if he can show that no reasonable trier of fact could find

that he received proper notice. Neither party can meet its burden.



two copies of the proper Notice of Right to Cancel form and giving Vaden until April 10, 2001,
to exercise his right to cancel. Jd. {{] 23-24.

Vaden testified at his deposition that he never received the proper Notice of Right to
Cancel forms. Vaden Dep. at 29-30. He confirmed that he lived at 107 Sharon Lane in April of
2001 and was not experiencing problems with receiving mail at the time. Jd. at 28-29, 31.

Analysis

Summary judgment is proper when “the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a
matter of law.” Fed. R. Civ. P. 56(c). The Court evaluates admissible evidence in the record in
the light most favorable to the nonmoving party. Bennett v. Roberts, 295 F.3d 687, 694 (7" Cir.
2002). The Court’s “function is not to weigh the evidence but merely to determine if ‘there is a
genuine issue for trial.”” Jd. at 694 (citation omitted).

1 Claim regarding the failure to disclose the security interest

TILA requires the creditor to disclose the item in which it has acquired a security interest.
15 U.S.C. § 1638(a)(9). On its face, the Federal Truth-in-Lending Disclosure Statement signed
by Vaden, Compl. Ex. D, contains an error: where the address of Vaden’s home should be listed
under the heading “SECURITY INTEREST,” only a “2” has been typed. “TILA mandates that
lenders disclose, in statements to consumers, property subject to security interests by ‘item or
type.” Szumny v. American General Finance, 246 F.3d 1065, 1069 (7" Cir. 2001) (quoting 15
USS.C. § 1638(a)(9)). Universal clearly failed to do so on this form.

Both defendants argue that the other documents signed by Vaden made clear that his


for summary judgment as to the second claim, finding there is a genuine issue of material fact as
to whether proper notice of the right to rescind was ever delivered to Vaden.
Factual Background

On March 2, 2001, Vaden refinanced his mortgage and obtained a $142,800 adjustable
rate mortgage loan from Universal. Frank Mahar, a representative of Universal, came to Vaden’s
home and got his signature on five documents. One of the documents, called the “Federal Truth-
in-Lending Disclosure Statement,” did not list Vaden’s home under the heading “SECURITY
INTEREST: You are giving a security interest in: ...” Rather than listing Vaden’s home
address, the number “2” was typed next to a checked-off box. See Compl. Ex. D. The loan was
later assigned by Universal to IndyMac Bank. On Jan. 27, 2002, Vaden, through his attorneys,
sent Universal a letter rescinding the loan. Pl.’s Motion Ex. H.

Universal admits that the notice of the right to rescind provided to Vaden on March 2,
2001, improperly stated that the loan could not be rescinded as to amounts presently owed.
Universal’s Resp. to Pl.’s Facts 9. But Universal and IndyMac state that Universal corrected
the error within 60 days of discovering it, relieving them of civil liability under 15 U.S.C. §
1640(b). See Universal’s Mot. at 7. Universal’s former president, Edwin Gausselin, submitted a
declaration explaining that “[flor unknown reasons, the software operator that generated the
Notice of Right to Cancel for Mr. Vaden’s loan closing package chose” the wrong notice form.
Gausselin Decl. 13. While reviewing Universal’s records as part of the company’s Compliance
Review Program around March 15, 2001, Gausselin realized that about 300 customers had
received the wrong Notice of Right to Cancel documents. Jd. {{[ 16-22. Gausselin states that on

April 3, 2001, he sent a letter to Vaden at 107 Sharon Lane, North Aurora, IL 60542, enclosing


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RONALD VADEN,
Plaintiff,
Case No. 02 C 1150

Vv.

INDYMAC BANK, F-.S.B, and
UNIVERSAL FINANCIAL GROUP, INC.,

weeveervererverv ww

Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

Plaintiff Ronald Vaden sued defendants Universal Financial Group, Inc., and IndyMac
Bank, F.S.B., for violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 ez seq.
Specifically, Vaden alleges that (1) the Federal Truth-in-Lending Disclosure Statement that he
signed to refinance his mortgage violated 15 U.S.C. § 1638(a)(9) and 12 C.F.R. § 226.18(m) by
not properly disclosing the security interest Universal acquired in his home; and (2) Universal did
not provide him with proper notice of his right to rescind the transaction as required by 15 U.S.C.
§ 1635(a). Compl. {J 10-11. Vaden filed a motion for summary judgment on both claims,
seeking rescission of the mortgage and damages. Universal, the original creditor, and IndyMac,
the assignee which now holds the mortgage, have filed cross motions for summary judgment on
the claim regarding notice of the right to rescind. For the reasons stated below, the Court grants
Vaden’s motion for summary judgment on the first claim but concludes that this particular

violation does not entitle Vaden to rescind the transaction. The Court denies all parties’ motions