IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
August 8, 2011
JOSE TELLADO AND :: MARIA TELLADO,
INDYMAC MORTGAGE SERVICES, A DIVISION OF ONEWEST BANK, FSB, DEFENDANT.
The opinion of the court was delivered by: Tucker, J.
July ___, 2011
After a bench trial in this matter on November 8, 2010, and pursuant to Fed. R. Civ. P. 52(a), the Court makes the following Findings of Fact:
1. This is an action for damages in connection with the mortgage refinancing services received by Plaintiffs, Jose and Maria Tellado, for their residential real property located at 519 Morris Street, Philadelphia, Pennsylvania (the "Property").
2. Plaintiffs, who are husband and wife, are also low-income senior citizens who speak primarily Spanish.
3. On or around June 2007, Plaintiff Jose Tellado heard a Spanish-language radio advertisement for mortgage refinance services. Plaintiff Mr. Tellado called the telephone number provided in the advertisement and reached a man named Carlos Enrique, and the two conversed exclusively in Spanish.
4. Mr. Enrique assisted Plaintiff Jose Tellado with the submission of a loan application. Mr. Enrique also arranged for a closing agent to visit the Tellado home with the loan documents.
5. On July 3, 2007, Mr. Philip Bloom, a closing agent and notary, came to the Property with the loan documents. Mr. Bloom acted as a representative of Indymac Bank, F.S.B., and had been provided instructions on how to conduct the loan closing. Plaintiffs received a copy of these instructions.
6. Plaintiffs saw the final loan terms for the first time in their home at closing.
7. The loan transaction, from the initial contact with Mr. Enrique until the loan closing, was conducted in Spanish.
8. The loan documents provided at the loan closing, including the Note, the Mortgage, and the Notice of Right to Cancel, were provided in English.
9. One of the loan documents received by the Plaintiffs was a Notice of Right to Cancel, a model form mandated by the Truth in Lending Regulation Z, referenced in section 226.23 of title 12 of the Code of Federal Regulations, Appendix H.
10. Plaintiffs' daughter, Marcelina Fuster, was present at the closing, at the suggestion of Mr. Enrique, to act as an interpreter. She assisted in translating the closing agent's verbal instructions, as well as his explanations of the loan documents, from English to Spanish for the Plaintiffs. Ms. Fuster did not have the opportunity to read, nor to translate the loan documents themselves.
11. Plaintiffs are unable to read English and did not understand the contents of the documents that they were signing at closing. At the time of the closing, Plaintiffs had the intention of entering into a fixed rate mortgage. Plaintiffs were unaware that the first ten years of payments under the loan would not be applied to the principal, that the loan had an adjustable rate, or that the loan documents contained falsified information concerning their monthly income.
12. In connection with the July 3, 2007 transaction, Plaintiffs purchased the mortgage refinancing services for a price in excess of $25. The original lender in this transaction was Indymac Bank, F.S.B.
13. Subsequently, on July 11, 2008, Indymac Bank, F.S.B. went into receivership, and the Federal Deposit Insurance Corporation (FDIC) was appointed its receiver. As a result, certain assets and liabilities of Indymac Bank, F.S.B., including the Plaintiffs' mortgage loan, were transferred to Indymac Federal Bank, F.S.B., for which the FDIC served as conservator.
14. Under a Master Purchase Agreement (the "MPA") dated March 18, 2009, Defendant OneWest Bank, FSB ("OneWest Bank"), acquired the Plaintiffs' loan, formerly held by Indymac Bank, F.S.B., from the FDIC.
15. In the MPA, Defendant agreed to assume certain liabilities associated with loans acquired from the FDIC. In Section 4.02 of the MPA, there are enumerated certain liabilities that the Defendant did not assume, however, such excluded liabilities are unclear, as Schedule 4.02(a) referenced in the MPA detailing excluded liabilities was not provided to the Court.
16. On August 5, 2009, Plaintiffs sent a Notice of Cancellation to Indymac Mortgage Services, a division of Defendant OneWest Bank, alerting the entity of Plaintiffs' intention to file suit if a favorable response was not received within ten (10) days.
17. OneWest Bank failed to provide any response to the Notice of Cancellation within (10) ten days after receiving such notice. OneWest Bank responded to Plaintiffs in a letter dated October 15, 2009, denying Plaintiffs' request to rescind the mortgage loan transaction.
18. After commencing this action on August 24, 2009, Plaintiffs began escrowing their monthly payments.
19. Plaintiffs ceased escrowing payments upon receipt from OneWest Bank of a Notice of Intention to Foreclose. Plaintiffs continued to make monthly payments to prevent foreclosure on the Property during the pendency of this action.
20. As of November 8, 2010, the bench trial date in this matter, Plaintiffs were up to date on their payment obligations under the loan at issue.
Determination that the mortgage seek:
a) submission to OneWest Bank of on their home is 73 P.S. § 201-7(g).
a notice of cancellation, as void following their required under Plaintiffs Determination that, of their intent to collect the proceeds
b) by failing to honor the Notice of the loan within ten (10) of Cancellation and inform business forfeited the right to any further payment. days as required under 73 P.S. § 201-7 (g), OneWest Bank has
c) If the mortgage damages based on the amount of refunded payments they would have is not cancelled, Plaintiffs seek in the alternative triple received, and the Defendant had security instrument that would have been terminated if
i) Triple damages taken the appropriate steps based on the amount of payments made to cancel the loan as follows: to date, at least $30,043.36, P.S. § 201-9.2(a). for a total of $90,130.08, pursuant to 73 by Plaintiffs Actual damages OneWest failed to in the
against Plaintiff's home, in the amount of $115,000.00, pursuant to terminate, and which amount of the security instrument that OneWest retains as a lien 73 P.S. § 201-9.2(a).
Conclusions of Law
A. Plaintiffs Asserted a Valid Claim for Damages Arising From OneWest's Failure to Cancel the Mortgage Transaction
1. A Federal Law Preempts only State Law Directly in Conflict with the Scope of Such Federal Law
a) Generally, the law Clause, dictates that of preemption, which federal law preempts has state law its roots in the Supremacy shown intent to create federal regulation in a particular field so pervasive as when Congress has to leave no room Pursuant to 12 C.F.R for state § 545.2, The supplementation. "plenary and exclusive power . . . to regulate
b) Office of Thrift Supervision (OTS) has the Federal savings associations, as set forth in section 5(a) of the all aspects of the operations Owners Loan] Act. This exercise of [Home of any state law purporting to address the Office's authority is preemptive the subject of the operations of a of The OTS, Federal savings however, association." commercial laws which
c) makes only incidentally affect the an exception for, inter alia lending operations of , state contract and Federal savings regulation. 12 C.F.R. § associations 560.2(c)(1). or are otherwise consistent with the purpose of
d) While the the Third Circuit has not yet ruled on the preemptive Trade between the Practices Home Owners Loan Act ("HOLA") and the Southern District of New York held that the New York Consumer Fraud relationship and Consumer Protection Law, 73 the Pennsylvania Unfair P.S. §201-7 ("UTPCPL"), lending relationships without creating any conflict with the federal Statute is not directly aimed at lenders, and has only an incidental impact on objectives identified in 12 C.F.R. § 560.2. Binetti v. Wash. Mut. Bank, 446 217 (S.D.N.Y. 2006). F. In Binetti, Supp. 2d the Southern District of New York pointed to a December 24, Statute 1996, OTS opinion which concluded that the is the type New York Consumer Fraud that undergird commercial transactions"
e) of commercial law designed to "establish the OTS the basic norms not intend to preempt. Id. at 219. that has indicated it does
f) A state law is distinguishable from that generally dictates the underpinnings of fair trade practices courts have consistently held a state law to be preempted by HOLA and that is directly aimed at lenders, which
g) The Court, finding Binetti acts. Binetti v. Wash Mut. Bank at 220 (citing 1999 OTS LEXIS similar federal instructive, holds that the Pennsylvania Unfair Trade 4). See Practices and Consumer Protection Law ("UTPCPL") governs the customs and practices surrounding commercial transactions generally, and thus is not preempted by HOLA.
h) Similarly, the UTPCPL is not preempted by the Truth in Lending Act.
I) The Truth in Lending Act preempts state law only where the state law is in conflict. Jamal v. WMC Mortg. Corp., 2005 U.S. Dist. LEXIS 5076 (E.D. Pa. Mar. 28, 2005).
j) As noted in Jamal, "the TILA provides in relevant part at 15 U.S.C. § 1610(a)(1), 'Except as provided in subsection (e) of this section [relating credit and charge card application and solicitation disclosures], this part and parts B and C of this subchapter do not annul, alter, or affect the laws of any State relating to the disclosure of information in connection with credit transactions, except to the extent that those laws are inconsistent with the provisions of this subchapter and then only to the extent of the inconsistency. .'"
k) The Court in Jamal further notes that, "[s]imilarly, Regulation Z, 12 C.F.R. § 226.28(a) states in pertinent part:
'Inconsistent disclosure requirements. (1) Except as provided in paragraph (d) of this section [relating to special rule for credit and charge cards], state law requirements that are inconsistent with the requirements contained in chapter 1 (General Provisions), chapter 2 (Credit Transactions), or chapter 3 (Credit Advertising) of the act and the implementing provisions of this regulation are preempted to the extent of the inconsistency. .'"
l) The Truth in Lending Act, which focuses on consumer credit disclosures, is not preempted by the UTPCPL, a state law only which generally governs commercial transactions, and is not aimed at federal consumer credit practices.
2. Plaintiffs have a valid claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-7 (UTPCPL) against OneWest Bank.
a) The loan transaction which Plaintiffs entered into on July 3, 2007 governed by the door-to-door sales provisions of the UTPCPL. is § .
§ 201-7, the right to cancel is afforded 73 P.S.
"to any consumer who goods or services with a value of $25 or more 201-7
b) Under 73 P.S. agrees to purchase 'as a result of or in connection with' contact between the seller and the consumer at the
c) At trial, the consumer's
Court determined that OneWest Bank qualifies as a home." Burke v. Yingling, 446 Pa. Super. 16, 21 (1995).
the definition of
d) In this case, the service provided, the UTPCPL. mortgage refinancing, had a value of well over
twenty-five dollars ($25).
e) Additionally, such services were contracted as a result of contacts between the Plaintiffs and OneWest Bank at Plaintiffs' residence, including a telephone call placed by Mr. Tellado from his home, and the loan closing which occurred at the residence. Thus, as in Fowler v. Rauso, 425 B.R. 1657 (Bankr. E.D. Pa. 2010), the contacts made at the residence of the consumers result in this transaction falling within the scope of 73 P.S. § .
the door-to-door sales provision of the UTPCPL,
at the time of the sale
or contract the buyer shall be provided with a notice of
in the same language as
in English. 73 P.S. § 201-7(b).
that principally used in the oral sales
and also The buyer shall also the contract or sale by providing the seller with
be informed in the notice to cancel that he may avoid
cancellation within three business P.S. § 201-7(b).
days after the
a written notice
date of the transaction. 73
IndyMac Bank, F.S.B., the original mortgagee, did not provide in Spanish, the F.S.B. provide
language of the sales did IndyMac Bank,
additional notifications of the
near the signature line of the Note
right to cancel within three
or Mortgage, as required
h) Thus, IndyMac by the UTPCPL. 73 P.S. § 201-7(b).
proper notice of Plaintiffs' right to
Bank F.S.B., a division of OneWest Bank, failed to provide
i) Further, the door-to-door sales notice cancel the transaction under the UTPCPL.
are not preempted by HOLA because they only incidentally affect the
to cancel requirements of the UTPCPL
lending operations of OneWest and are consistent with the purpose of the
j) The Court finds that "[t]he HOLA.
targeted directly at banking or lending." Poskin v. TD
UTPCPL is a law of general applicability, and not
Supp. 2d Pa. 2009).
Banknorth, N.A., 687 F.
While the Third Circuit has
at hand, courts within the Ninth
not issued a ruling directly addressing the issue
In Reyes v. Premier Home Funding, Inc., 640
Circuit have provided some guidance.
2009), the Court considered HOLA's preemption of the California
F. Supp. 2d. 1147 (N.D.Cal.
Translation Law (CTA), agreement be provided in the language in which
which requires that a translation of a contract or
was Court held that the
the contract or agreement
it did not require any specific statements, information or other
CTA was not preempted by HOLA
content to be 1155 (emphasis added).
disclosed and because it only affects lending
. Id. at
Reyes, as Ninth Circuit cases which called for
well as the case at issue, is
federal preemption of state
distinguishable from several other
n) Where the state regulation in question regards specific processing, regulations.
servicing, or disclosure policies or concerns the substantive
Mortg., Inc., 2010 WL 1659369 of the loan, preemption has been deemed
necessary. See Parcray v. Shea
HOLA preempts Cal. Civ. Code § 2923.5 because
(E.D. Cal. Apr. 23, 2010)(concluding that
and servicing of [the
plaintiff]'s mortgage"); Odinma v. Aurora Loan Servs.,
LLC, 2009 WL 2160579 (N.D. Cal. July 17, 2009); Silvas v. E*Trade
it "concerns the processing
2010 WL 1199886 (N.D. Cal. Mar. 23, 2010); Murillo v. Aurora
Corp., 421 F. Supp. law preempts an "entire
2d 1315 (S.D. Cal., 2006) (concluding that where federal
of federal law amounts to
a state's provision of
regulation of the affected area and
remedies for a violation
is thus preempted).
of state As in Reyes, the Court finds that notice of right to cancel in this matter was incidental to the larger mortgage refinancing transaction, and thus is not preempted by HOLA or TILA, as discussed above.
B. Plaintiffs Fulfilled their Burden of Proof and are Entitled to Damages under the PA UPTCPL
The cancellation period provided for until buyer has been informed of his right to cancel and
in 73 P.S. § 201-7(e) shall not begin to run
required copies of the "Notice
has been provided with the
under the UTPCPL, the cancellation period provided for
never received the proper notification of their right to cancel
not begun to run at the time Plaintiffs sent a Notice of Cancellation to Defendant on
in 73 P.S. § 201-7(e) had
Because August 5, 2009.
no valid notice of cancellation was issued to Plaintiffs, Plaintiffs' Notice of 3.
Cancellation was 201-7(g).
sent within the required time constraints pursuant to 73 P.S. §
4. Relief granted to Plaintiffs shall be as follows:
73 P.S. § 201-7(g) not required to show actual losses for remedies to be triggered
contract, cancel and Defendant OneWest Bank shall refund all payments
return any negotiable instrument executed by the
made under the
necessary or appropriate to Plaintiffs in connection with
terminate promptly any security interest the mortgage refinancing, and take any action
created Under 73
mortgage refinancing transaction. 73
§ 201-9.2(a), the Court may, in its discretion, award up to
P.S. § 201-7(g).
statutorily defined], but not less than one
the actual damages sustained [due
to "deceptive practices",
dollars ($100). The
Court may provide such additional relief as
the acts in question do not rise to the
it deems necessary or proper.
required under 73 P.S.
§ 201-9.2(a), the Court declines to award
An appropriate order follows.
level of unlawful deceptive
damages permissible under this
BY THE COURT:
Petrese B. Tucker
Hon. Petrese B. Tucker, U.S.D.J.
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