2014 IL App (1st) 120982
Ill. App. Ct.2014Background
- Financial Freedom (plaintiff) filed foreclosure on a reverse mortgage covering property owned in a land trust (Standard Bank as trustee) after borrower Mary Jane Muraida died.
- The June 9, 2009 note was a reverse/home equity conversion mortgage; both Muraida and Standard Bank (as trustee) signed the note, but the mortgage contained an exculpatory clause disclaiming any personal liability of Standard Bank.
- Standard Bank filed a counterclaim alleging TILA violations by the lender (failure to provide required disclosures) and sought rescission, statutory damages, return of proceeds, and fees; it alleged it sent a rescission notice on June 2, 2011.
- Financial Freedom moved to dismiss Standard Bank’s counterclaim under combined 2-615/2-619 motion; the circuit court dismissed the counterclaim with prejudice; this appeal followed.
- The appellate court reviewed de novo, focused on whether Standard Bank—given the exculpatory clause and its role as trustee/land trust—could be an "obligor" under TILA and thus seek rescission.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a land trust/trustee is an "obligor" with TILA rescission rights | Financial Freedom: counterclaim fails; Standard Bank is not a consumer/obligor and had no right to rescind | Standard Bank: as signatory/owner it may rescind; transaction is a consumer credit transaction secured by principal dwelling | Held: Standard Bank is not an obligor because it disclaimed personal liability via exculpatory clause; thus no rescission right |
| Timeliness of rescission | Financial Freedom: implicit challenge—no right to rescind regardless of timing | Standard Bank: rescission suit was filed within 3-year TILA tolling period because required disclosures were not given | Held: Timeliness irrelevant—no right to rescind because not an obligor, so rescission impossible under any facts pleaded |
| Contractual right to rescind under loan documents | Financial Freedom: Standard Bank was not party with rescission rights; exculpatory clause defeats obligation | Standard Bank: asserts contractual basis to rescind as owner/trustee | Held: Exculpatory clause eliminated personal obligations; contract does not create rescission right for Standard Bank |
| Statutory damages under TILA §1640 | Financial Freedom: Standard Bank forfeited damages argument by not raising it on appeal (and alternatively barred by limitations) | Standard Bank: sought statutory damages for disclosure and rescission-response violations | Held: Argument forfeited on appeal; damages claim not considered (and possibly time-barred) |
Key Cases Cited
- Barash v. Gale Employees Credit Union, 659 F.2d 765 (7th Cir. 1981) (guarantor with substantive obligations can be an obligor for TILA remedies)
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (U.S. 1998) (TILA rescission applies where consumer-credit transactions are secured by principal dwelling and disclosures are deficient)
- Gunthorp v. Golan, 184 Ill. 2d 432 (Ill. 1998) (appellate court may affirm on any basis in the record)
- Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112 (Ill. 1993) (distinguishing 2-615 and 2-619 motions to dismiss)
- Canel v. Topinka, 212 Ill. 2d 311 (Ill. 2004) (standard for 2-615 motion: accept well-pleaded facts and view in claimant’s favor)
- Anderson v. Vanden Dorpel, 172 Ill. 2d 399 (Ill. 1996) (conclusory allegations insufficient to survive a 2-615 dismissal)