The opinion of the court was delivered by: William W. Caldwell United States District Judge
Plaintiffs, Gary and Najwa Gianduso, refinanced the mortgage on their home by obtaining a loan from First Franklin Financial Corporation. The defendants are U.S. Bank National Association Trustee for First Franklin Mortgage Loan Trust, Mortgage Pass-Through Certificates, Series 2005-FF10 (U.S. Bank) and First Franklin. First Franklin assigned the loan and mortgage to U.S. Bank. Plaintiffs allege that First Franklin violated the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq., in making the loan. They seek statutory damages for the violations as well as rescission of the loan and cancellation of the security interest represented by the mortgage. Plaintiffs filed the action in state court, and Defendants removed it here on the basis of our federal-question jurisdiction.
We are considering Defendants' motion for summary judgment. Defendants argue that Plaintiffs are not entitled to rescission when they admit they cannot tender to U.S. Bank the amount of the loan. Defendants also argue that the damage claims are barred by the one-year statute of limitations for bringing TILA claims.
We will evaluate the motion under the well established standard. See Lawrence v. City of Philadelphia, 527 F.3d 299, 310 (3d Cir. 2008). In doing so, we agree with Defendants and will grant their motion.
The background is essentially undisputed. We take it for the most part from Defendants' statement of material facts (doc. 25-4). Plaintiffs had a mortgage of about $189,000 on their Drums, Pennsylvania, residence from a company called Waterfield. In the spring or summer of 2005, they were looking to refinance that mortgage. They did so by securing a loan from First Franklin in the amount of $224,200. The other mortgage was paid off, leaving Plaintiffs with about $21,403.
The First Franklin closing documents were not all signed on the same date. Some were signed on or about July 23, 2005, and others up to August 5 or 8, 2005. This is the basis of Plaintiffs' TILA claim for damages, that certain disclosures required under the act were not made at the time the loan transaction was accomplished. Plaintiffs also invoked their right to rescind in a letter to U.S. Bank, dated July 18, 2006, asserting as a basis the failure to make the timely and accurate disclosures TILA required.
After the loan closed, Plaintiffs made their mortgage payments until February 2007, when they stopped because they no longer had the ability to do so. Plaintiffs have not escrowed any mortgage payments nor have they paid any real estate taxes on the property since 2007. They both say they cannot repay the $224,200 principal amount on the loan.
On July 20, 2007, U.S. Bank started a foreclosure action against Plaintiffs in state court. On September 6, 2007, the Giandusos filed an answer with new matter. In part, the new matter asserted as a defense that First Franklin had violated TILA by failing to make correct and timely disclosures, thereby entitling the Giandusos to damages under TILA that offset any claims by U.S. Bank and to rescission of the loan agreement. (Doc. 25-3, CM/ECF p. 30).*fn1 Plaintiffs also started this action in state court by filing a writ of summons on or about July 16, 2009, and then their complaint on September 4, 2009.
A. Plaintiffs Are Not Entitled to Rescission on the Loan Because They Cannot Return the Loan Proceeds as Their Part of Any Rescission Of the Loan Agreement
For a financial transaction covered by TILA, the "obligor" (the borrower) has the right of rescission. The borrower may rescind for three days after the transaction is executed or after proper disclosure documents have been sent to the borrower, whichever is later. 15 U.S.C. § 1635(a). The borrower may also rescind for up to three years if the required notice or material disclosures were not been delivered. 12 C.F.R. § 226.23(a)(3).
Section 1635(b) sets forth the procedures to be followed when the obligor exercises the right of rescission. In pertinent part, after rescission, the lender has twenty days "to return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction." Id. After the lender has fulfilled these obligations, "the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the ...