Gilbert v. Residential Funding LLC
2012 U.S. App. LEXIS 9114
| 4th Cir. | 2012Background
- Gilberts refinanced their mortgage on May 5, 2006, executing a deed of trust; multiple entities became holders/servicers through a chain (First National Arizona → First National Bank of Nevada → Residential Funding LLC → Deutsche Bank Trust Co. Americas as trustee for Residential Accredit Loans); they defaulted in 2008 and a foreclosure action ensued with Simpson as substitute trustee; in 2009 the Gilberts sent an April 5, 2009 TILA rescission notice to GMAC alleging violations and seeking rescission; GMAC responded April 14, 2009 denying rescission; Hyde County Clerk foreclosure order granted June 17, 2009; North Carolina courts later questioned Deutsche’s ownership/holder status and improper affidavits; the district court dismissed the federal claims, and the Gilberts appealed, with remand proceedings following state court reversals locating Deutsche’s authority as to enforcement; this Fourth Circuit review involves TILA, usury, NCUDTPA, and rescission-related issues, along with res judicata effects and Rule 59(e).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Effect of TILA rescission timing | Gilberts status that they exercised rescission by April 5, 2009. | Appellees argued rescission must be suit-filed within three years. | Rescission exercised by written notice within three years; no suit filing requirement imposed by statute/regulation. |
| Applicability of §1641(c) to assignees | Rescission liability applies against assignees as well as creditors. | Rescission claims should be limited to creditors, not assignees. | Section 1641(c) permits rescission against assignees; district court erred. |
| TILA damages statute of limitations scope | Damages claims timely if related to rescission process; some disclosures occurred in 2006. | Disclosures occurred in 2006; one-year period barred. | Ago for most damages; rescission-related denial timely; some damages time-barred. |
| Usury claim ripeness and pleading | Payments allegedly included usurious interest and hidden charges; claim ripe. | Usury claim not properly pleaded or ripe. | Usury claim pled with elements supported; remand appropriate to address NC exemptions. |
| NCUDTPA and assignment of claims; res judicata impact on allonge endorsements | Unassigned NCUDTPA claims may proceed; some assigned claims barred by res judicata. | Assigned claims barred; res judicata applies. | Unassigned NCUDTPA claims may proceed; res judicata no longer bars after state court reversal. |
Key Cases Cited
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (U.S. 1998) (statutory interpretation of §1635(f) and rescission rights not to be conflated with foreclosure validity)
- Shelton, 486 F.3d 815 (4th Cir. 2007) (unilateral cancellation does not automatically void a loan contract; rescission enforcement separate from mere notice)
- In re Simpson, 711 S.E.2d 165 (N.C. Ct. App. 2011) (state appellate reversal on Deutsche's ownership/authority to foreclose; impacts res judicata)
- Large v. Conseco Fin. Servicing Corp., 292 F.3d 49 (1st Cir. 2002) (interprets timing and effectiveness of rescission notices under Regulation Z)
- Yamamoto v. Bank of N.Y., 329 F.3d 1167 (9th Cir. 2003) (note on interpretation of rescission timing and remedies (distinguishing from plain-notice requirements))
- Swindell v. Fed. Nat'l Mortg. Ass'n, 330 N.C. 153 (1991) (elements of usury under North Carolina law and corrupt intent)