380 F. Supp. 3d 429
M.D. Penn.2018Background
- In 2007 the Gerbers executed a refinance promissory note and mortgage secured by Pennsylvania real property; the note was indorsed in blank and the mortgage was later assigned through a series of transfers and securitization, now held by U.S. Bank as trustee.
- U.S. Bank sued in 2017 for mortgage foreclosure alleging long-term payment default; it attached the note and mortgage to its complaint.
- The Gerbers answered, asserted 22 affirmative defenses, and brought two declaratory-judgment counterclaims: (1) that the loan was unilaterally modified (rendering it unenforceable) when securitized; and (2) that they validly rescinded the loan under TILA and seek enforcement of that rescission.
- U.S. Bank moved to dismiss both counterclaims under Rule 12(b)(6) and to strike multiple affirmative defenses under Rule 12(f).
- The court considered the loan documents (properly before it) and applied Pennsylvania substantive law because jurisdiction was diversity-based.
Issues
| Issue | Plaintiff's Argument (U.S. Bank) | Defendant's Argument (Gerbers) | Held |
|---|---|---|---|
| Whether sale/securitization of the loan unilaterally modified the loan terms | Transfer/securitization does not modify the contractual terms; the loan and mortgage expressly permit transfer | Securitization converted the loan into a commercial instrument that altered or eliminated borrower rights and thus unilaterally modified the contract | Dismissed: pleadings fail to plausibly identify any actual contractual term changed by transfer; transfer is not a modification when contract permits it |
| Whether securitization paid the note in full so obligation is extinguished | Securitization does not extinguish borrower's repayment obligation as a matter of law | Securitization resulted in the note being "paid in full," so the debt is phantom | Dismissed: courts uniformly reject the theory that securitization alone renders a note unenforceable |
| Whether the Gerbers timely enforced a TILA rescission notice (statute of limitations) | A limitations period applies to a declaratory action to enforce a stalled rescission; U.S. Bank says one-year period applies | Gerbers say written notice of rescission (per Jesinoski) is sufficient and no separate short limitations period governs enforcement suit | Dismissed with prejudice: court borrows 15 U.S.C. § 1640(e)'s one-year limitations period for actions to enforce a stalled rescission and finds Gerbers’ claim time-barred |
| Whether various asserted affirmative defenses give fair notice (Rule 12(f)) | Many defenses are legally insufficient, conclusory, or improper (e.g., reservation to assert defenses later, spoliation framed as affirmative defense) | Gerbers contend defenses give fair notice and relate logically to the foreclosure dispute | Granted in part and denied in part: court strikes certain conclusory or improper defenses (Defenses 8, 16–22) but leaves other fact-based defenses (6–14) intact for now |
Key Cases Cited
- Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir.) (pleading standard and fair notice)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (distinguishing well‑pleaded facts from legal conclusions)
- Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015) (rescission effective upon written notice within three years)
- Sherzer v. Homestar Mortgage Servs., 707 F.3d 255 (3d Cir.) (statute of limitations constrains enforcement suits after notice of rescission)
- JP Morgan Chase Bank, N.A. v. Murray, 63 A.3d 1258 (Pa. Super. Ct.) (treating note as negotiable instrument)
- Credit Suisse Sec. (USA) LLC v. Simmonds, 566 U.S. 221 (2012) (policy basis for statutes of limitations)
- Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538 (1974) (limitations policy rationale)
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (1998) (rescission may be raised as a defense in foreclosure)