David Merritt v. Countrywide Financial Corporat
2014 U.S. App. LEXIS 13532
| 9th Cir. | 2014Background
- In March 2006 the Merritts obtained an adjustable-rate mortgage and a HELOC from Countrywide; they allege material disclosure failures (blank TILA forms, missing APR/finance-charge items) and misleading statements about payments and rates.
- Plaintiffs allege Countrywide steered an appraiser who produced an inflated appraisal and maintained practices favoring inflated appraisals; closing was rushed and the plaintiffs did not receive full loan documents until 2009 after paying ~$200,000.
- In February 2009 the Merritts sent a TILA rescission notice; Countrywide offered an unaffordable modification and did not honor rescission. Plaintiffs sued pro se in March 2009 and later amended; the district court dismissed all claims with prejudice under Rule 12(b)(6).
- The district court dismissed the TILA rescission claim for failure to allege tender/ability to tender the HELOC and dismissed RESPA §8 claims as time-barred by the one-year statute of limitations.
- The Ninth Circuit (majority) reversed dismissal of the TILA rescission claim (holding plaintiffs need not plead ability to tender at the pleading stage) and vacated the RESPA §8 dismissal, holding the RESPA one-year limitations period is subject to equitable tolling and remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a TILA §1635 rescission complaint must plead tender or ability to tender | Merritts: pleading rescission without alleging tender or ability to tender is permissible; tender is a later step | Countrywide: rescission should be dismissed unless complaint alleges tender/ability to tender | Court: Plaintiffs need not plead tender or ability to tender at the complaint stage; tender may be required later on a case-by-case basis (e.g., at summary judgment) per Yamamoto reasoning |
| Whether RESPA §8 claims are time-barred by 1-year statute | Merritts: limitations should be tolled until they actually received disclosures in 2009 and discovered the violations | Countrywide: limitations run from closing; claims are filed ~3 years too late | Court: RESPA §2614 is not jurisdictional and is presumptively subject to equitable tolling; remand to determine date of discovery/reasonable opportunity to discover |
| Whether third-party "markups" (excess charges for third-party services) violate RESPA §8(b) | Merritts: markups charged to them for copying/insurance were unearned and actionable | Countrywide: §8(b) prohibits kickbacks, not price differentials for services actually performed | Court: Circuit split exists; question raises complex statutory/administrative issues of first impression in Ninth Circuit — decline to decide on appeal and remand for district court consideration |
| Whether an inflated appraisal can be a "thing of value" under RESPA §8(a) | Merritts: referral to appraiser in exchange for an inflated appraisal constitutes a thing of value / kickback | Countrywide: disputes timeline and factual allegations; argues plaintiffs were not charged for the appraisal | Court: Whether an inflated appraisal is a "thing of value" is not decided on appeal; factual development required and claim survives the pleading phase subject to amendment on remand |
Key Cases Cited
- Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003) (district court may condition rescission on tender after evidentiary development; case-by-case equitable balancing)
- King v. California, 784 F.2d 910 (9th Cir. 1986) (TILA limitations period subject to equitable tolling until discovery or reasonable opportunity to discover violation)
- Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549 (9th Cir. 2010) (RESPA §8(b) prohibits payment where no service is performed; does not by its terms prohibit excessive charges for services actually performed)
- Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d 49 (2d Cir. 2004) (third-party markups actionable under RESPA §8(b); deferred to HUD interpretation)
- Irwin v. Department of Veterans Affairs, 498 U.S. 89 (1990) (time requirements in private suits are customarily subject to equitable tolling)
- Bowles v. Russell, 551 U.S. 205 (2007) (distinguishes jurisdictional rules from nonjurisdictional claim-processing rules; equitable tolling unavailable for truly jurisdictional requirements)