Sheedy v. Deutsche Bank National Trust Co.
2015 U.S. App. LEXIS 15460
1st Cir.2015Background
- In 2004 Sheedy refinanced her Lexington, MA home with Washington Mutual (WAMU), executing an $810,000 adjustable-rate Note and mortgage; initial payments were interest-only under an addendum.
- WAMU failed in 2008; Chase acquired assets and assigned the mortgage to Deutsche Bank (as trustee for a securitized trust); Chase continued servicing.
- Sheedy defaulted after the first payment adjustment in 2009, filed Chapter 13 in June 2010, and proposed a plan asserting lender-liability claims (including TILA rescission, Mass. Gen. Laws ch. 93A, and fraud) and challenging the secured claim.
- In April 2011 Sheedy filed an adversary complaint; secured creditors moved for summary judgment. The bankruptcy and district courts granted summary judgment for the creditors.
- Courts held TILA rescission/time-based claims were time-barred, Chapter 93A claims untimely and procedurally deficient (no written demand and lacking specificity), fraud claims insufficiently pleaded, and rescission in recoupment unavailable under Massachusetts law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| TILA rescission statute of limitations | Sheedy: TILA disclosures were deficient (husband didn’t receive disclosures); rescission still available despite delay | Secured creditors: §1635(f) bars rescission more than 3 years after consummation | Held: TILA rescission claim time-barred under §1635(f) |
| TILA recoupment defense | Sheedy: even if statute bars suit, rescission can be asserted defensively in recoupment | Defendants: Congress barred rescission after 3 years; recoupment cannot revive statutory rescission right | Held: Recoupment cannot overcome §1635(f); no defensive right to rescind after 3 years (Beach controlling) |
| Chapter 93A timeliness & demand | Sheedy: ch. 93A claim based on same disclosures/misrepresentations; plan demand suffices | Defendants: ch. 93A requires 30‑day written demand and 4‑year limitations; claim accrued in 2004 | Held: ch. 93A claims time‑barred (4‑year period) and plan did not satisfy pre‑suit demand requirement |
| Rescission in recoupment under Massachusetts law | Sheedy: May not control or ch.93A allows rescission in recoupment | Defendants: Massachusetts common law and May preclude rescission as a form of recoupment | Held: Rescission in recoupment is unavailable under MA law (May); ch.93A cannot be used to evade this rule |
| Fraud / misrepresentation sufficiency | Sheedy: discrepancies in Truth‑in‑Lending and Note misled her into the loan | Defendants: allegations lack particularity, reliance, causation, and material harm; Sheedy was sophisticated | Held: Fraud claims inadequately pleaded and unreasonable reliance not shown |
| Standing to challenge assignment / secured claim | Sheedy: Deutsche Bank’s assignment into securitized trust violated PSA, so it lacks standing | Defendants: assignment challenges would render assignment voidable, not void; Sheedy lacks standing to defeat the secured claim | Held: Sheedy lacks standing to void assignment; secured creditors had standing to foreclose; objection to fees was waived |
Key Cases Cited
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) (§1635(f) bars federal right to rescind after 3 years; recoupment cannot revive rescission)
- Latson v. Plaza Home Mortg., Inc., 708 F.3d 324 (1st Cir. 2013) (chapter 93A four‑year limitations and binding effect of written loan terms)
- May v. SunTrust Mort., Inc., 7 N.E.3d 1036 (Mass. 2014) (Massachusetts common law: rescission is not available as a form of recoupment)
- Culhane v. Aurora Loan Servs., 708 F.3d 282 (1st Cir. 2013) (challenge to mortgage assignments ordinarily renders them voidable, not void)
- Bolduc v. Beal Bank, SSB, 167 F.3d 667 (1st Cir. 1999) (recoupment described as defensive offset against claims arising from the same transaction)