Court Opinion

ID: 3064241
Source: CourtListenerOpinion
Date Created: 2015-10-14 22:12:55.139772+00
Date Added: 2024-06-11T11:41:22.071510
License: Public Domain

J-A24033-15
                              2015 PA Super 219

DEUTSCHE 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.

                                     -7-
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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

                                     -8-
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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)).

                                      -9-
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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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J-A24033-15

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 10/14/2015

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