Smith-Pena v. Wells Fargo Bank, N.A. (In re Smith-Pena)
484 B.R. 512
Bankr. D. Mass.2013Background
- Debtor and husband Wesley Pena own the Lake Drive property as tenants by the entirety.
- In 2006 they refinanced with New Century Mortgage; Wesley signed the Note (Debtor did not sign).
- The same date they signed a Mortgage securing the Note; the Mortgage defines the Borrower as both Debtor and Wesley and includes a cosigner provision.
- Adjustable Rate Riders were signed, amending the Mortgage/Note; Riders do not create additional obligations.
- Debtor filed for Chapter 13 bankruptcy in 2011; Wells Fargo filed a Claim with an Assignment of Deed of Trust; Debtor filed an adversary proceeding seeking rescission under the MCCCDA and damages.
- Issue presented: whether Debtor is an “obligor” under the MCCCDA and thus entitled to rescission/damages; Wells Fargo argues Debtor is not an obligor because she did not sign the Note.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Debtor an obligor under the MCCCDA? | Debtor argues ‘obligor’ includes those with ownership in the dwelling subject to the security interest. | Wells Fargo contends obligor must be someone who signed the Note; Debtor did not sign. | Debtor is not an obligor under the MCCCDA. |
| Do Massachusetts regulations extend rescission rights to non-obligors? | Regulations define ‘consumer’ broadly; Debtor as mortgagor has rescission rights. | Regulations exceed the statute by creating rights for non-obligors, thus invalid as applied. | Regulations exceed the statutory grant; non-obligors lack rescission rights. |
| Does TILA/Regulation Z provide rescission rights to Debtor as mortgagor? | Regulation Z permits rescission based on consumer status analogous to the Debtor’s dwelling-interest. | TILA’s obligor concept aligns with signed-obligation; Debtor lacks obligor status. | TILA/Regulation Z does not provide rescission rights to Debtor as she did not incur an obligation. |
| Is Wells Fargo liable for rescission/damages to Debtor under MCCCDA if Debtor is not an obligor? | If Debtor is a consumer with dwelling interest, she could rescind and obtain damages. | Without obligor status, there is no liability under the MCCCDA for Debtor. | Wells Fargo has no liability; Debtor fails to state a claim. |
Key Cases Cited
- Apgar v. Homeside Lending, Inc. (In re Apgar), 291 B.R. 665 (Bankr.E.D.Pa.2003) (supports rescission rights for a party not signing the note)
- Ferreira v. Mortgage Electronic Registration Sys., Inc., 794 F.Supp.2d 297 (D.Mass.2011) (treats obligor as the person to whom credit is extended (noteholder))
- In re Laudani, 401 B.R. 9 (Bankr.D.Mass.2009) (regulatory exemptions and rescission framework cited for context)
- Massachusetts Hosp. Ass’n, Inc. v. Dept. of Med. Sec., 412 Mass. 340 (Mass. 1992) (invalidates regulations that exceed statutory authority)
- Smith v. Comm’r of Transitional Assistance, 431 Mass. 638 (Mass. 2000) (statutory interpretation and deference principles for regulations)
- In re Stanley, 315 B.R. 602 (Bankr.D.Kan.2004) (regulation enforceability when contrary to statute)
- Board of Governors of Fed. Reserve Sys. v. Dimension Fin. Corp., 474 U.S. 361 (U.S. 1986) (regulatory authority bounded by statutory language)
- Giza v. Amcap Mortgage, Inc. (In re Giza), 428 B.R. 266 (Bankr.D.Mass.2010) (context for TILA/MCCCDA interplay)