Wilson Iroanyah v. Bank of America, N.A.
753 F.3d 686
7th Cir.2014Background
- Borrowers Wilson and Joan Iroanyah closed two mortgage loans in 2006; alleged TILA disclosure defects (missing explicit payment frequency wording and disputed number of right-to-cancel notices).
- Borrowers defaulted in 2008; they sent rescission notices; lenders (TBW, later assignees Bank of New York Mellon and Bank of America) had mixed responses and one offered rescission conditioned on tender.
- Borrowers sued under TILA seeking rescission, statutory damages, and fees; summary judgment motions resulted in partial wins for borrowers on disclosure violations and on defendants’ failure to timely respond to rescission notices, but statutory damages for disclosure violations were time-barred.
- District court exercised discretion to modify rescission procedures: required borrowers to tender amounts before release of security interests, reduced tender for certain damages/fees, denied borrowers’ proposed 26‑year interest‑free installment plan, and set a 90‑day tender period.
- Borrowers failed to tender within 90 days; district court entered judgment for defendants on rescission claims and awarded reduced attorneys’ fees; borrowers appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court may condition rescission on borrower tender | Iroanyah: rescission is automatic once right is established and cannot be conditioned on repayment; at minimum borrowers entitled to reduction of principal by interest/fees even if cannot tender | Banks: rescission is equitable, involves mutual obligations; courts may modify procedure and require tender before voiding security | Court: Affirmed that rescission is equitable and courts may condition rescission on tender; inability to tender can make rescission impossible |
| Whether district court abused discretion by rejecting 26‑year interest‑free installment plan | Iroanyah: installment relief permissible and court should allow long installment plan | Banks: proposed plan would be inequitable and reform loan into unfair zero‑interest windfall | Court: Affirmed rejection as abuse of discretion; plan would be inequitable and unfair to assignees |
| Whether 90‑day tender period was an abuse of discretion | Iroanyah: 90 days unworkable; sought six months | Banks: 30 days sufficient; sought prompt tender | Court: 90 days within broad discretion; reasonable balancing of parties’ positions |
| Whether fee award was improperly reduced for limited success and hourly rate | Iroanyah: should not reduce lodestar; lead counsel entitled to $500/hr based on comparisons | Banks: reduction appropriate given limited success; rate too high | Court: Affirms 50% lodestar reduction for limited success and reduced hourly rate as within discretion |
Key Cases Cited
- Andrews v. Chevy Chase Bank, 545 F.3d 570 (7th Cir.) (rescission is an ongoing equitable process requiring mutual obligations)
- Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir.) (rescission under §1635(b) involves sequential steps and courts may modify procedures)
- Marr v. Bank of America, N.A., 662 F.3d 963 (7th Cir.) (borrower inability to tender often precludes rescission)
- American Mortg. Network, Inc. v. Shelton, 486 F.3d 815 (4th Cir.) (courts may require immediate tender; inability to tender can defeat rescission)
- Large v. Conseco Fin. Serv. Co., 292 F.3d 49 (1st Cir.) (tender requirement can bar rescission when borrower cannot return principal)
- FDIC v. Hughes, 938 F.2d 889 (8th Cir.) (tender obligations are integral to rescission)
- Handy v. Anchor Mortg. Corp., 464 F.3d 760 (7th Cir.) (rescission must unwind the entire transaction to be effective)
- Hensley v. Eckerhart, 461 U.S. 424 (U.S.) (fee awards must be reasonable in relation to success obtained)
- Sottoriva v. Claps, 617 F.3d 971 (7th Cir.) (fee reductions appropriate where success is limited)
- Pickett v. Sheridan Health Care Ctr., 664 F.3d 632 (7th Cir.) (appellate deference to district courts on fee determinations)