Opinion ID: 2820142
Heading Depth: 3
Heading Rank: 2

Heading: Refinance Transaction

Text: In 2007, the Sanderses attempted to refinance their home with their then-current lender, CityWide Home Loans. CityWide was apparently satisfied with the Sanderses’ initial credit reports, but during underwriting it discovered twelve new accounts on those reports that adversely affected the Sanderses’ credit scores and caused CityWide to refuse to close the refinancing. As it turns out, MACU’s predecessor in interest, the Salt Lake City Credit Union (SLCCU), erroneously placed the new accounts on the reports. When confronted, SLCCU apologized for the erroneous reporting, promised to correct it, and offered the Sanderses a no-cost refinance, which they accepted. They consummated that transaction in July 2007, obtaining a loan of approximately $283,000 that was secured by a deed of trust on their house. The transaction was subject to TILA’s rescission right, and at closing, SLCCU presented the Sanderses with four copies of a notice of their right to rescind (Right to Cancel). Scott Sanders signed one copy in the box indicating he had received two copies of the notice. Lisa Sanders did the same. SLCCU retained those signed copies and allowed the Sanderses to take the two unsigned copies with them. SLCCU also required the Sanderses to sign a post-dated “Statement of Non-Rescission” indicating that the three-day rescission period had passed and that they had not exercised their rescission right. Aplt. App. at 158. -3- C. Attempt to Rescind, Foreclosure, First District Court and Circuit Court Decisions After going into default on the loan, unsuccessfully trying to renegotiate it with MACU, and apparently facing foreclosure, the Sanderses sought to rescind the loan transaction. They filed the underlying action on March 2, 2010, asserting they were exercising their right to rescind and would tender to MACU possession and title to their house upon MACU’s release of the security interest, consistent with 15 U.S.C. § 1635(b) and 12 C.F.R. § 226.23(d)(2). As relevant to their TILA claim, the Sanderses alleged that MACU (in the form of SLCCU) failed to clearly and conspicuously disclose their rescission right by failing to provide each of them with two copies of the Right to Cancel and by having them sign the Statement of Non-Rescission. They claimed their request for rescission nearly three years after closing was therefore timely and should be honored under 15 U.S.C. § 1635(b). They also sought actual and statutory damages and attorney fees. MACU foreclosed on the property and purchased it at the foreclosure sale on March 23, 2010. On April 20, 2010, the Sanderses signed their copies of the Right to Cancel in the box indicating they wished to rescind their transaction and sent those copies to MACU. In December 2010, the district court dismissed the rescission claim, explaining the Sanderses had not pled an ability to repay the loan principal. The court dismissed their TILA damages claims, which it construed as arising from the alleged TILA violations at closing, because they were filed after the applicable one-year statute of -4- limitations contained in 15 U.S.C. § 1640(e). In July 2012, this court reversed the dismissal of the Sanderses’ rescission claim, holding that TILA does not require a consumer to plead an ability to repay to state a claim upon which relief can be granted. Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138, 1143 (10th Cir. 2012). The panel noted that the Sanderses did not appeal the dismissal of their TILA damages claim as time-barred. Id. at 1141 n.1.2 Meanwhile, after the March 2010 foreclosure and up until January 2012, the Sanderses continued to live in their house, and MACU charged them no rent. But then MACU began eviction proceedings against the Sanderses. Fearful of being held liable for treble damages and attorney’s fees if they continued to occupy their house, the Sanderses moved out the next month. MACU sold the house in April 2012. D. Second District Court Decision After our remand in the first appeal, the parties filed cross-motions for summary judgment on the TILA rescission claim.3 The Sanderses also moved to strike the declaration of Cathy Smoyer, MACU’s Senior Vice-President and Chief 2 The panel also reversed the dismissal of the Sanderses’ Equal Credit Opportunity Act claim and affirmed the dismissal of their Fair Credit Reporting Act claim. Sanders, 689 F.3d at 1146-47. 3 After the remand, the Sanderses apparently pursued only their TILA rescission claim. See Memorandum And Brief of Borrower’s Tender Obligation Where Lender Has Forcibly Taken Possession Of The Property at 1, Sanders v. Mountain Am. Credit Union, No. 2:10cv00183 (D. Utah Apr. 1, 2013) (Sanderses’ brief after remand stating that “[t]he remaining issue in the Sanders’ [sic] case is as follows: What becomes of the borrower’s tender obligation when the creditor disposes of the collateral during the rescission lawsuit destroying the borrowers’ ability to restore the creditor to the status quo ante?”). -5- Risk Officer. The district court granted MACU’s motion and denied both of the Sanderses’ motions. It reasoned that MACU substantially complied with TILA’s requirement to provide two copies of the Right to Cancel to each consumer when it presented four copies to the Sanderses and retained two, observing the Sanderses had cited no law stating such a procedure violated TILA. The court also ruled that TILA did not prohibit the use of the post-dated Statement of Non-Rescission. It also concluded that even if allowing each of the Sanderses to retain only one copy of the Right to Cancel or using the Statement of Non-Rescission amounted to a technical TILA violation, the Sanderses sustained no prejudice or damage. For these reasons, the court determined that the TILA rescission period did not extend to three years and their rescission request was time-barred. Alternatively, the district court assumed that the rescission period was extended to three years, reordered the TILA rescission process as a matter of equity, and effectively denied rescission based on a finding that the Sanderses failed to show they could repay MACU. The court also held that, because the Sanderses failed in the first appeal to challenge the dismissal of their damages claims on limitations grounds, the law of the case barred them from seeking damages based on MACU’s failure to honor their request for rescission. The court concluded that, in any event, the Sanderses would not be entitled to damages arising from MACU’s failure to honor their rescission request because they were entitled to only a three-day rescission period, the equities favored reordering the rescission process, and MACU’s actions did not violate TILA. -6-