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LEXSEE 2004 U.S. DIST. CT. MOTIONS 921284
View U.S. District Court Opinion
View Original Source Image of This Document
JOSEPHINE JAMES VERSUS NEW CENTURY MORTGAGE CORP.,
et al.
CIVIL ACTION No. 04-194 SECTION: I/4
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT
OF LOUISIANA, NEW ORLEANS DIVISION
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS
113011
August 4, 2006
Motion for Summary Judgment
VIEW OTHER AVAILABLE CONTENT RELATED TO THIS DOCUMENT: U.S. District
Court: Motion(s); Pleading(s)
COUNSEL: [*1] NEW ORLEANS LEGAL ASSISTANCE, An Office of Southeast Louisiana
Legal Services Corp., David L. Koen (T.A.), LSBA # 27536, New Orleans, LA, Attorneys for
Plaintiff.
TITLE: MEMORANDUM IN OPPOSITION TO MOTIONS FOR SUMMARY OR PARTIAL SUMMARY JUDGMENT; JURY DEMANDED
TEXT: Five of the six defendants have filed motions for summary judgment under Fed. R. Civ. P.
56(b) to dismiss what they characterize as all of the claims against them arising out of a predatory
lending transaction between Plaintiff, Josephine James, and Defendant New Century Mortgage
Corporation ("New Century"). As set forth more fully below, the motions are meritless and should
be denied. Additionally, four of the five moving defendants have not sought to dismiss all of the
claims against them.
Defendants essentially seek - but are not entitled to - summary judgment on four sets of claims,
for the following reasons:
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
1. Ignoring that Ms. James was provided with the right to rescind the transaction, New Century,
The Provident Bank ("Provident"), and Deutsche Bank National Trust Company Americas
("Deutsche Bank") seek to wriggle out of their obligation to cancel the mortgage and loan by contending that the property secured [*2] by the loan was not Ms. James' "principal dwelling"; therefore, they belatedly - and incorrectly - contend, she was not entitled to rescind the loan pursuant to
the Truth in Lending Act ("TILA") n1 or the Home Ownership and Equity Protection Act of 1994
("HOEPA"). n2
n1 15 U.S.C. § 1601, et seq.
n2 15 U.S.C. §§ 1602(aa), 1639.
2. Although Provident and Deutsche Bank assert that they were effectively unaware that New
Century had violated TILA or made a loan subject to HOEPA, there was ample evidence to put
them on notice that this had occurred.
3. PCFS Mortgage Resources ("PCFS") avers, without competent evidence, that it is not liable
to Ms. James under the Real Estate Settlement Procedures Act. n3
n3 12 U.S.C. § 2605(e).
4. Aurora [*3] Financial Services, Inc. ("Aurora"), the loan broker, erroneously argues that Ms.
James' claims under the Louisiana Unfair Trade Practices and Consumer Protection Law n4 have
been perempted - all the violations thereunder continued into or occurred well within the statutory
period.
n4 La. R.S. 15:1401, et seq.
I. BACKGROUND AND PROCEDURAL HISTORY
Plaintiff, Josephine James, is an elderly, African-American homeowner with a fourth-grade education and limited reading ability. Ex. 1, attached hereto, at p. 10, 1.22 - p.23, 1.6; id. at p.139,
ll.5-12. In July 2000, at the age of 61, she finally purchased the first and only home she has ever
owned, a double at 1640-1642 North Claiborne Avenue in New Orleans, for $ 12,000.00. Id. at p.
16, ll.5-6; Ex. 2, attached hereto, at 2; Act of Sale, attached hereto as Ex. 3. n5 She obtained the
home in a fiercely determined effort to make sure there would be a permanent roof over her troubled family's head. Ex. 2 at 2.
n5 Ms. James had formerly rented the 1640 side of the home and would later return to the
1642 side. Ex. 2.
[*4]
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
When Ms. James purchased the home, she lived next door, at 1644 North Claiborne. But just
across the alley, at 1640-1642, her maternal spirit continued to infuse the household. Until Hurricane Katrina and its aftermath severely damaged her home, she consistently provided shelter for her
family. Ex. 2 at 4; Ex. 1 at p.97, ll.9-13. Ms. James kept her mother, Josephine Dussuau, at 1642
North Claiborne Avenue. Ex. 2 at 3. Ms. Dussuau was afflicted with heart trouble, arthritis, glaucoma, and her sole source of income was a monthly social security check. Id. Ms. James similarly
took care of her even more troubled son, Hubert Ratcliff. Mr. Ratcliff has never been able to read or
write and has had problems with nerves and hypertension. Id. at 1. At the time of events pertinent to
this lawsuit, Mr. Ratcliff received a monthly Social Security check with his mother named as payee.
Ex. 4. Mr. Ratcliff lived on the 1640 side of the home until 2001, when he was hit in the head with a
hammer and spent several months in the hospital. Ex. 2 at 2. Mr. Ratcliff later moved in with his
mother at 1644 North Claiborne. Id. Ms. James had long cared for Mr. Ratcliff's daughter, Brandy
Ratcliff. [*5] Id. at 2. Brandy lived with Ms. James at 1644, and she was granted permanent custody of her granddaughter in 2002. Id. at 2, Ex. B. After Mr. Ratcliff moved out of 1640, Ms. James
allowed her nephew, Brian Atkins, to live on that side of the double. Id. at 2. Later, Ms. James herself would move into the 1642 side while her other granddaughter Rachel Robertson lived at 1640.
Id. at 3.
By January 2003, Yet Ms. James was on the verge of owning the family home. She owed less
than $ 4,000.00 on her previous home. Ex. 3; HUD-1 Settlement Statement, attached hereto as Ex.
5, at line 104. Although her income at the time was limited to $ 762 from a monthly social security
check, Social Security payment statement, attached hereto as Ex. 6, Ms. James had managed to pay
steadily for the home and was approximately one year away from owning the home free and clear.
Ex. 3; Ex. 5. According to an appraisal at the time, the home was worth $ 68,000. n6 Ex. 7 at 4.
n6 Given the $ 64,000 in equity Ms. James had in her home and her status as a poor, uneducated, elderly African-American woman in New Orleans, however, it was, perhaps, only a
matter of time before she appeared in the cross-hairs of predatory lenders. See HUD-Treasury
Task Force on Predatory Lending, Curbing Predatory Home Mortgage Lending: A Joint Report (June 2000), 4 (observing that "minorities, women, and the elderly bear the brunt of abusive mortgage lending practices, particularly in predominantly minority or low income
neighborhoods . . ."). In New Orleans, African-American borrowers are more than three times
as likely to have a subprime loan than Caucasian borrowers. See Bradford, "Risk or Race?
Racial Disparities and the Subprime Refinance Market (2002) (ranking New Orleans as 19th
nationwide among 154 urban communities in subprime lending disparities between African
Americans and Caucasians).
[*6]
By October 2002, predatory lenders, perhaps predictably, began to pick up Ms. James' scent. As
a result of Hurricane Isidore, Ms. James' house suffered severe roof damage. Ex. 1 at p.98, 1.23 p.99, 1.3. Ms. James received funds from the Federal Emergency Management Agency to make the
repairs. Id. at p.98, 1.11 - p.99, 1.3.
Enter Defendant Ralph Williams, a self-styled minister without a church, Ex. 8 at p. 22, ll.1-2,
and home repair contractor, id. at pp.33-35. Williams testified in his deposition that he was trained
in his work by God and "by watching other people," not by actually performing any work himself.
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
Id. at 36-38. On or about October 30, 2002, Ms. James entered into a contract with Williams, operating as R.E.W. Housing Repairing, to do the roof and ceiling work, as well as incidental repairs
inside the house. Ex. 9. The total cost of the work under said contract was $ 6,000, of which Ms.
James paid $ 5,600. Id. at p. 102, 1.18.
In November 2002, Williams offered to help her secure a second grant for her home. Williams
told Ms. James that the grant would cover the $ 400 balance on his contract, pay for the additional
repairs that were needed but not [*7] covered by the existing contract, and that she could use the
rest of the grant to purchase another property cheaply that Williams would fix up for Plaintiff to rent
out. Ex. 1 at p.105, ll.5-7, p.122, 1.7 - 123, 1.1. This proposal was attractive to Ms. James, who was
on a fixed income and already struggling to make ends meet. Id. at p.122, 1.24 - p.123, 1.1; Ex. 6.
Mr. Williams subsequently introduced a representative of Defendant Aurora Financial Services,
Inc. ("Aurora"), Lawanda Terrell, to Ms. James and told Ms. James that Ms. Terrell "would be the
lady to help me get the grant." Ex. 1 at p.124, ll.15-21. Ms. Terrell called Ms. James and told her
that Mr. Williams had told her that Ms. James was interested in obtaining a grant. Aff. at 3. Ms.
James told Ms. Terrell that she lived at 1644 North Claiborne and paid rent in the amount of $
350.00 per month there. Ex. 2 at 2.
Ms. James provided other evidence to New Century that she lived at 1644 North Claiborne. Her
social security payment statements and those she received on behalf of Brandy and Hubert Ratcliff,
all of which may be found in the lender's file, listed her address as 1644 North Claiborne. Exs. 4, 6,
10. A bank [*8] account statement in the lender's file also lists the 1644 address. Ex. 11. Multiple
credit reports listed "1644 N Claiborne Ave" as her possible address. Ex. 12 at 1; Ex. 13 at 1; see
also Schedule A to Good Faith Estimate of Settlement Charges, attached hereto as Ex. 14 (reflecting
review of credit report by January 16, 2003).
Mr. Williams and Ms. Terrell visited Ms. James the next day at 1644 North Claiborne just next
door to the home she owned at 1640-42 North Claiborne. Ex. 2 at 3. With Mr. Williams present,
Ms. James told Ms. Terrell that she "thanked God for Mr. Williams helping me to get a grant to fix
the house and get whatever that I need just like that." Ex. 2 at p.125, ll.21-24. Ms. Terrell took information from Ms. James but never disabused her of the notion that what Aurora intended to obtain
for Ms. James was not a grant but, rather, a loan. Ex. 2 at 3.
Aurora had just begun, however, to run Ms. James through the gauntlet of predatory lending
practices. As discussed below, they failed to give her both a written contract and Disclosure as required by the Louisiana Unfair Trade Practices and Consumer Protection Law.
Moreover, a "Good Faith Estimate" prepared by [*9] Aurora the month before the transaction
and contained in True Title's loan closing file stretches the bounds of that term, to say the least. The
Good Faith Estimate listed the total loan amount as $ 40,000 and the monthly payments as $ 336.34.
Ex. 15. When the transaction was consummated, the amounts had ballooned to $ 45,000 and $
378.06, respectively. Truth in Lending Disclosure Statement, attached hereto as Ex. 16.
Relatedly to the increase in the interest rate, the Good Faith Estimate made a cryptic reference to
a $ 450.00 fee, apparently the 1% "yield spread premium" Aurora would be paid to obtain a loan for
Ms. James at a rate .5% above the "par" rate that the original lender in this transaction, New Century Mortgage Corporation ("New Century"), would have been willing to offer the loan at to Ms.
James directly. See id.; New Century Loan Pre-qualification Form, attached hereto as Ex. 17 (describing par rate as 8.99% and placing the number "1" in parentheses next to the rate Ms. James ac-
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
tually received, 9,49%). See also Pierce v. NovaStar Mortg., Inc., 422 F. Supp.2d 1230, 1232 (W.D.
Wash. 2006) (defining yield spread premium).
The "Good Faith Estimate" [*10] also listed the mortgage broker fee as "3.000%+$." Ex. 15.
The figure to the very right of that column, however, shows the $ 450.00 charge mentioned above
along with a figure of $ 1,650.00 further to the right. Id. While "3.000%+$" is a technically accurate
description of the loan origination fee, the $ 2,100 total mortgage broker fee is 5.25% of the loan
principal to be exact. At least two courts have found that the origination fee on a loan is usually 1%.
Bjustrom v. Trust One Mortgage Corp. (9th Cir. 2003) 322 F.3d 1201, 1203; Pierce, 422 F.
Supp.2d at 1232. But even the exorbitant 5.25% mortgage broker fee was not enough for Aurora, as
explained below.
The "Good Faith Estimate" also listed the estimated closing costs as $ 3,025.00. Ex. 15. By
January 22, 2003, these costs had more than doubled, to $ 7,339.29. Ex. 5 at line 1400.
As a result of Williams' and Aurora's fraudulent misrepresentations and omissions, Ms. James
entered into a disastrous, exorbitantly priced transaction with New Century to refinance her nearly-paid-off loan. The new loan increased the amount of the indebtedness secured by her home more
than ten-fold, to $ 45,000, [*11] and the term of her payments to 30 years. Note, attached as Ex.
18; Mortgage, attached as Ex. 19. Thus, Ms. James would be expected to make payments on the
loan until she was 91. On an income limited to $ 762 in Social Security benefits, the loan required
Ms. James to make monthly payments of $ 378.06, in excess of her ability to pay.
The transaction was consummated on or about January 22, 2003, at night, at Ms. James' home.
Ex. 1 at p.66, 1.4. The deal included a $ 45,000.00 note, a mortgage securing the note with her
home at 1640-1642 North Claiborne, and a Notice of Right to Cancel entitling her to rescind the
transaction, Exs. 18, 19, 20. n7
n7 Although the mortgage contains two signatures as witnesses to the signature of Ms.
James, no witnesses were present. One of the signatories, Robin Pollet, a secretary for the
closing agent, True Title, Inc., as much as admitted that she was not present at Ms. James'
home to witness her signature on the mortgage. Deposition of Robin Pollet, attached hereto as
Ex. 21 at p.21, ll.5-8. Consistent with these statements, a copy of a document identified as a
Mortgage attached as Exhibit 3 to Aurora's/New Century's motion for partial summary judgment shows that the notary notarized only Ms. James' signature on the mortgage on the final
page. The witnesses' signatures were added later, out of Ms. James' sight. See Ex. 1 at p.21,
ll.7-20. True Title President Timothy Hand testified that it was his company's policy not to
perform a closing outside its office if the borrower did not produce her own witnesses. Deposition of Timothy F. Hand, attached hereto as Ex. 22 at p.150, 1.25 - p.151, 1.15). Yet he
identified the both witness signatures on the mortgage as those of his employees. Id. at p.152,
1.21 - p.153,1.2.; id. at p. 154, ll.9-14 (identifying Pollet's signature).
[*12]
In the face of all the evidence, cited above, that Ms. James lived at 1644 North Claiborne Avenue, New Century continued to treat the 1640-1642 property as Ms. James' principal residence. See
Uniform Document Proof Sheet, attached hereto as Ex. 23. Indeed, as explained in detail below, in
connection with the mortgage and loan, New Century even contractually provided her the same
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right to cancel the transaction as she had under the Truth in Lending Act anyway. n8 New Century
had her sign a Notice of Right to Cancel, contractually granting her the right to rescind the loan up
to three years after the transaction, as discussed below. Moreover, New Century withheld the distribution of the proceeds of the loan for three days, as required to be able to afford the borrower the
right to rescind within this time. Ex. 21 at pp.48-50.
n8 Ms. James may have signed a Notice of Right to Cancel dated January 22, 2003, but
was not given any copies as required under TILA until three weeks after the loan closed. Ex.
1 at p. 139, ll.5-24.
[*13]
Providing Ms. James with the right to cancel the loan may have been the only saving grace of
this entire sordid transaction. The list of insults perpetrated on Ms. James recounted thus far merely
scratches the surface. As required under the Act, she was not left with a copy of the Truth in Lending Disclosure Statement containing disclosures of the finance charge, amount financed, and annual
percentage rate ("APR"). Ex. 1 at p.139, ll.5-24. n9
n9 New Century denies that Ms. James was not given two copies of the Notice of Right to
Cancel. Answer to Fourth Amended Complaint at P 28.
The Truth in Lending Disclosure Statement that was provided, however, underdisclosed the finance charge and annual percentage rate on the loan, making the loan seem cheaper than it actually
was. Moreover, the "points and fees" on the loan exceeded 8% of the "total loan amount," as those
terms are defined by the Home Ownership and Equity Protection Act ("HOEPA"). As explained
below, this meant Ms. James had been saddled with a high-cost [*14] loan under HOEPA, subjecting the lender and assignees to liability for certain requirements and restrictions, to which the
lender failed to adhere.
Not that Aurora and New Century were unaware of just how much they believed HOEPA would
let them squeeze from Ms. James' miserable income. The HUD-1 Settlement Statement shows,
oddly, that the origination fee was not 1% or a round dollar figure, as is typically the case, see, e.g.,
Hirsch v. BankAmerica Corp., 328 F.3d 1306, 1307 (11th Cir.2003) ($ 1,000 origination fee) but,
rather, exactly 5.507% of the loan principal, or $ 2,478.00. How Aurora and New Century arrived at
this distinct figure is almost fully transparent. The loan origination fee, added to all the other points
and fees by New Century's own calculations, equals exactly 7.99% of the total loan amount,
one-one hundredth of a percentage point below the line that would turn this into a high-cost loan
under HOEPA. Section 32 Truth-in-Lending Worksheet, attached hereto as Ex. 24.
Where Ms. James had waited 61 years to obtain the American dream of home ownership, it had
taken fewer than three more to flip it into a nightmare. The loan was quickly assigned to [*15]
Provident on January 30, 2003, Ex. 25, and, predictably, Ms. James fell behind on her payments. On
December 9, 2003, Ms. James, through her counsel, rescinded the transaction by sending a rescission notice to New Century. Ex. 26. n10
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n10 Ms. James subsequently sent rescission notices to Provident, Ex. 27, and Deutsche
Bank, Ex. 28. None of the lenders has honored the rescission.
On January 22, 2004, under the looming threat of foreclosure, Ms. James filed this suit, seeking,
inter alia, rescission of her predatory loan. Complaint. On August 3, 2004, New Century's assignee,
The Provident Bank ("Provident"), filed a foreclosure petition in Orleans Parish Civil District Court.
Ex. 29. On August 9, 2004, that court ordered the property constructively seized. Id. On September
1, 2004, however, the sale was stopped. Ex. 30.
The loan was subsequently assigned to Deutsche Bank National Trust Company Americas
("Deutsche Bank"). Ex. 31. Counsel for Provident has repeatedly asserted, as early as June 2005,
that [*16] Deutsche Bank had been assigned the loan as of that date. The assignment was not executed, however, until March 3, 2006. Id.
Ms. James and her granddaughter Brandy now live in a trailer park in Baton Rouge. Ex. 1 at p.
97, 1.18 - p.98, 1.5. Her mother and son live in Texas. Id. at p.103, ll.11-14. A grant of the relief
Plaintiff seeks in this lawsuit will help return them home.
II. STANDARD OF REVIEW
Summary judgment is only appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," demonstrate there is no genuine
issue as to any material fact. Fed. R. Civ. P. 56(c); see Piazza's Seafood World v. Bob Odom, 448
F.3d 744, 751 (5th Cir. 2006). In a summary judgment motion, the court will review the facts in a
light most favorable to the non-moving party. Miciotto v. CNA Ins. Co., No. Civ.A.02-1485, U.S.
Dist. LEXIS 5859, at *4-5 (E.D. La. Apr. 6, 2004). "All reasonable inferences from facts adduced
by the movant are to be considered in favor of the non-moving party. Hall v. Diamond M. Co., 732
F.2d 1246, 1249 (5th Cir.1984). A summary judgment should [*17] only be granted if the moving
party is entitled to judgment as a matter of law. Am. Home Assurance Co. v. United Space Alliance,
LLC, 378 F.3d 482, 486 (5th Cir.2004). Where "it is very clear that all material facts are before the
reviewing court," the Court also may, sua sponte, grant summary judgment to the non-moving party. See, e.g. E.C. Ernst, Inc. v. Gen. Motors Corp., 537 F.2d 105, 109 (5th Cir. 1976).
III. ARGUMENT
A. Introduction
Five of the six defendants have filed motions for summary judgment. Four of the five, however,
have not sought summary judgment on all claims against them.
New Century seeks summary judgment on only one set of claims against it: for rescission under
TILA and HOEPA. New Century does not seek summary judgment on either Ms. James'
non-rescission claims for statutory and actual damages under TILA n11 or the claim against it arising from the fraud of the sole non-moving Defendant, Ralph Williams, and Aurora. See Fifth
Amended Complaint at PP 56-58.
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n11 15 U.S.C. § 1640 by its terms provides for statutory and actual damages for violations
of TILA disclosure requirements without regard to whether a loan is secured by the consumer's principal dwelling.
[*18]
Provident and Deutsche Bank seek summary judgment only on claims against them under TILA
and HOEPA. These defendants, too, do not seek to dismiss claims against them arising from the
fraud of Mr. Williams and Aurora.
PCFS Mortgage Resources, the servicer of the loan, seeks summary judgment on the only claim
against it, under the Real Estate Settlement Procedures Act ("RESPA").
Aurora seeks summary judgment only of claims under the Louisiana Unfair Trade Practices and
Consumer Protection Law ("LUTPA"). Aurora does not seek summary judgment on Ms. James'
fraud claims.
B. Summary judgment on Ms. James' rescission claims under TILA and HOEPA should
be denied - there are genuine issues of material fact as to whether the property secured by the
mortgage was Ms. James' principal dwelling; and, in any event, the lender contractually and
equitably extended to her the right to rescind the transaction.
Under the remedial scheme that jealously guards the rights of consumers under TILA and
HOEPA, summary judgment should be denied. Ms. James was entitled to rescind the loan on at
least three grounds. First, contrary to the moving defendants' claims, Ms. James' family home secured by the [*19] loan was her "principal dwelling" as that term is defined under TILA and
HOEPA. Second, the transaction granted Ms. James a contractual right to rescind the loan. Third,
the lender defendants should be equitably estopped from asserting that the family home was not Ms.
James' principal dwelling.
1. Defendants' motions to dismiss Ms. James' rescission claims should be viewed in the
light of the purpose of TILA and HOEPA - to vigorously protect the consumer's right to be
fully informed of the true terms of the credit transaction she has entered into.
The purpose of TILA is "to assure a meaningful disclosure of credit terms so that the consumer
will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing. . .
practices." 15 U.S.C. § 1601(a). TILA "reflects a transition in congressional policy from a philosophy of 'Let the buyer beware' to one of 'Let the seller disclose.' By erecting a barrier between the
seller and the prospective purchaser in the form of hard facts, Congress expressly sought 'to . . .
avoid the uninformed use [*20] of credit.'" Fairley v. Turan-Foley Imports., Inc., 65 F.3d 475, 479
(5th Cir. 1995) (quoting Mourning v. Family Publications Serv. Inc., 411 U.S. 356, 377, 93 S. Ct.
1652, 1664, 36 L. Ed.2d 318 (1973)).
The Fifth Circuit requires creditors to strictly comply with the disclosure mandates of TILA and
Regulation Z, 12 C.F.R. § 226, the Federal Reserve Board's comprehensive set of lending rules.
Edwards v. Your Credit Inc., 148 F.3d 427, 432 (5th Cir. 1998) (citing cases). There is no requirement that a consumer suffer actual injuries before s/he may rescind a loan under TILA. Id. at 441
(quoting Fairley, 65 F.3d at 480; Williams v. Public Fin. Corp., 598 F.2d 349, 356 (5th Cir.1979)).
"It is now well-settled that an objective standard is used in determining violations of TILA. It is not
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
necessary that the plaintiff-consumer actually have been deceived in order for there to be a violation." Smith v. Chapman, 614 F.2d 968, 971 (5th Cir. 1980) (citing McGowan v. King, Inc., 569
F.2d 845, 849 (5th Cir. 1978). Rather, "the remedial scheme of TILA is designed [*21] to deter
generally illegalities which are only rarely uncovered and punished." Edwards, 148 F.3d at 432
(quoting Fairley, 65 F.3d at 480; Williams, 598 F.2d at 356 (internal quotations omitted)). In other
words, "technical violations of the TILA are sufficient to impose liability . . ." Reynolds v. D & N
Bank, 792 F. Supp. 1035, 1038 (E.D. Mich.1992) (citing Mars v. Spartanburg Chrysler Plymouth,
Inc., 713 F.2d 65, 67 (4th Cir.1983)). "Consistent with its purpose, the statute is meant to be construed liberally in favor of the consumer." Fairley, 65 F.3d at 479-80 (emphasis added) (citing Cody v. Community Loan Corp, 606 F.2d 499, 505 (5th Cir. 1979), cert. denied, 446 U.S. 988, 100 S.
Ct. 2973, 64 L. Ed.2d 846 (1980)).
To zealously protect the rights of the vulnerable consumer in a credit transaction such as this,
TILA requires the creditor to provide the consumer with certain disclosures that are clear, conspicuous, and accurate. 15 U.S.C. §§ 1631, 1635(a). Central among these is the Truth in Lending [*22]
Disclosure Statement, which contains key terms of a credit transaction, including the finance
charge, amount financed, and annual percentage rate ("APR") of the loan. See, e.g., Edwards, 148
F.3d at 432. TILA also requires that the borrower be provided with two clear and conspicuous copies of her notice of right to cancel the loan even after entering into it. 15 U.S.C. § 1635(a); Reg. Z
§§ 226.5(b), 226.23(b).
In keeping with TILA's muscular remedial scheme, lenders that fail to meet the exacting disclosure requirements may be liable for rescission of the loan transaction. 15 U.S.C. § 1635(a), (f). The
original creditor as well as any assignee is subject to the rescission right. 15 U.S.C. § 1641(c); e.g.,
Pulphus v. Sullivan, 2003 WL 1964333 (N.D. Ill. Apr. 25, 2003). When a consumer rescinds a loan
transaction, as Ms. James has done here, the security interest automatically becomes void. 15 U.S.C.
§ 1635(b); Reg. Z 9 §§ 226.23(d)(1). The promissory note also is voided, as it, too, is part of the
loan transaction. Arnold v. W.D.L. Investments, Inc., 703 F.2d 848, 853 (5th Cir. 1983). [*23]
In addition to rendering a lender liable for rescission for the failure to make the proper disclosures, TILA also leads to liability for damages for a creditor's disclosure violations in the first place.
For any and all disclosure violations, the consumer is entitled to damages of up to $ 2,000.00. 15
U.S.C. § 1640(a)(2)(A)(iii). To further deter misinformation by creditors, TILA also provides for
actual damages, costs and attorney's fees for the successful vindication of a consumer's rights under
the statute." n12 15 U.S.C. §§ 1640(a)(1), (3).
n12 At the current time, New Orleans Legal Assistance (an office of Southeast Louisiana
Legal Services, Inc.) is prohibited by federal law governing organizations funded by the Legal Services Corp. from claiming, collecting or receiving attorney fees.
In 1994, Congress strengthened the protections of TILA by amending it with HOEPA. The legislation was designed to protect people who were the targets of 'reverse redlining, [*24] ' a practice that involves targeting those who are denied traditional means of credit with high interest, high
cost loans." Cathy Lesser Mansfield, the Road to Subprime "Hel" n13 Was Paved with Good Congressional Intentions: Usury Deregulation and the Subprime Home Equity Market, 51 S.C. L. Rev.
473, 562 (2000). "HOEPA. . . requires creditors to make disclosures in connection with certain
mortgages, known as 'high-cost' loans." Dayton v. State, 157 Ohio App.3d 736, 740 (2004) (citing
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Pub.L. No. 103-325, Title I, Sections 151-158, 108 Stat. 2190 (1994) (amending Sections
1601-1602, 1604, 1610, 1639-1641, and 1648, Title 15, U.S.Code). If the total "points and fees"
exceed 8% of the "total loan amount" as those terms are statutorily defined, HOEPA triggers certain
requirements of and restrictions on the lendek, 15 U.S.C. § 1602(aa)(1)(B); Reg. Z §
226.32(a)(1)(ii), as discussed further below.
n13 An acronym for home equity lending.
Ms. James [*25] seeks rescission of the loan and damages based on a number of violations of
TILA and HOEPA. Under TILA, Ms. James alleges four discrete violations: that she failed to receive an accurate disclosure of the finance charge, amount financed, and APR of the loan as well as
two copies of the Notice of Right to Cancel as required by the Act. Under HOEPA, Ms. James alleges three violations: that she was not given the statutorily-required notice that, inter alia, informed
her, "You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan"; the loan to Plaintiff was based on the collateral in her home, without regard
to her repayment ability, and was part of a pattern or practice of such lending; and the loan included
a prohibited prepayment penalty. Ms. James now seeks to vindicate the failure to honor her rights to
be properly informed of the terms of the transaction.
2. Summary judgment on Ms. James' rescission claims should be denied as there is a genuine issue of material fact as to whether the family home at 1640-42 North Claiborne constituted Ms. James' principal dwelling under TILA and HOEPA.
Defendants' motions for partial [*26] summary judgment on Plaintiff's TILA and HOEPA rescission claims should be denied because there is a genuine question of material fact as to whether
her home at 1640-42 North Claiborne was her "principal dwelling" at the time of the transaction.
The moving defendants' formalistic reading of this provision is inconsistent with the expansive approach repeatedly taken by the Fifth Circuit in interpreting TILA and HOEPA, and serves to undermine the protections these statutes were intended to provide. See Fairley, 65 F.3d 475 at 482
(TILA is to be "construed liberally in favor of consumers" in order to effectuate its purpose); Davis
v. Werne, 673 F.2d 866, 869 (5th Cir. 1982) (same).
In support of their motion, the moving defendants assert that the 1640-42 residence is not Ms.
James' "principal dwelling" for purposes of HOEPA because "she resided at 1644 N. Claiborne
Ave." (PCFS, et al. Mot. Summ. J., Memo in Support at 8); (Aurora, et al. Mot. Summ. J., Memo in
Support at 4.) To support this conclusion, the moving defendants point out that a person can have
only one principal dwelling at a time. (PCFS, et al. Mot. Summ. J., Memo in Support [*27] at 9)
(citing 15 U.S.C. § 1635(a); Capital Quest LLC v. Morales, 1997 WL 531311 (S.D. N.Y. Aug. 27,
1997)); (Aurora, et al. Mot. Summ. J., Memo in Support at 4) (citing, inter alia, Official Staff
Commentary § 226.23(a)(1)(3) ("A vacation or other second home would not be a principal dwelling") (emphasis added)). Yet nowhere do the lender defendants adequately explain why her leased
property, the 1644 residence, qualifies as her "principal dwelling" as opposed to the 1640-42 residence. Indeed, this determination is genuine question of material fact.
Apparently relying on an inappropriately narrow reading of the "principal dwelling" requirement, both Provident and Deutsche Bank cite only one case specifically addressing whether the
borrower's loan was secured by her principal dwelling. In that case, Capital Quest LLC v. Morales,
Page 11
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
the plaintiff-lender sought a declaratory judgment absolving its potential liability under TILA. No.
96 Civ. 9135, 1997 WL 531311 (S.D. N.Y. Aug. 27, 1997). The court found for the plaintiff on the
basis of several key facts not present in our case: the defendant knowingly misrepresented [*28]
that the property in question was, in fact, her principal dwelling, n14 the plaintiff had been unable to
reach defendant at that address, the defendant never had a telephone listing at that address, and the
defendant was unreachable at that address. Id. at * 1.
n14 Any attempt by Defendants to characterize Ms. James as having misrepresented facts
on preprinted documents that she signed must fail. She testified that she requested that the
notary leave the loan documents for her to read before signing them because she was incapable of reading them quickly, but the notary refused to do so. Ex. 1 at p.50, 1.18 - p.51, 1.6.; id.
at p. 139, ll.5-15.
In this case, unlike in Capital Quest, a jury could reasonably find that Plaintiff's 1640-42 residence qualifies as her "principal dwelling" and that her 1644 residence is a temporary, secondary-residence under the consumer-friendly provisions of TILA and HOEPA. Since approximately
1988: Plaintiff and several family members under her care have lived at various [*29] times at
1640-42 North Claiborne. Plaintiff; her mother, Josephine Dussuau; her son, Hubert Ratcliff; Hubert's girlfriend, Nicole Turner; her granddaughters, Brandy Ratcliff and Rachel Robertson; and her
nephew, Brian Atkins. Plaintiff regards the 1640-42 residence as the "family house," see Ex. 2, and
elected to purchase the property on July 12, 2000, to effectuate that purpose, even though she was
temporarily living next door at the 1644 residence. To this date, this is the only real property that
Plaintiff has ever owned.
Moreover, given Ms. James' knowledge that her elderly mother was disabled and that her sole
source of income was from a monthly social security check, Ex. 2 at 3, Ms. James had a duty to
provide her with housing. La. Civ. Code art. 229. To meet these demands, Plaintiff unselfishly remained at the 1644 residence with her son and granddaughter while continuing to make mortgage
payments on the family residence. Nevertheless, although Plaintiff physically resided at the 1644
residence, the 1640-42 residence should be considered her principal dwelling since this was the only
real property under her name, and because she used this property only to provide for her [*30]
mother and other extended family.
Accordingly, at minimum, for purposes of TILA and HOEPA rescission purposes, this property
should be considered her principal dwelling, as this is the only property with which Ms. James
could have secured a loan. An outcome that strips TILA's and HOEPA's protections from an unsophisticated consumer who wishes to use her home only to shelter her family would clearly be in
conflict with the statute's purpose; such a result could not have been intended by Congress. For
these reasons, the issue of whether Ms. James' family home at 1640-42 North Claiborne qualifies as
her "principal dwelling" under TILA and HOEPA is a genuine question of material fact for determination at trial.
2. This Court should, in the alternative, give full effect to the contractual rescission rights
extended by New Century to Ms. James.
By the time the transaction between New Century and Ms. James concluded on the night of
January 22, 2003, the lender had agreed to contractually bind itself through a series of interlocking
Page 12
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
documents - a loan in the amount of $ 45,000, a mortgage securing that loan with Ms. James' home
at 1640-1642 North Claiborne, and a Notice of Right to [*31] Cancel expressly granting Ms.
James the right to rescind the transaction, i.e., the loan and the mortgage. The Notice of Right to
Cancel extends its terms and obligations to the parties and gains its meaning by specifically incorporating and referring to the transaction. Read in tandem with the note and mortgage, the Notice of
Right to Cancel constitutes cause for entering into the transaction. This could scarcely be more
clear: The Notice states, in pertinent part:
You are entering into a transaction that will result in a security interest in your home.
You have a legal right under federal law to cancel this transaction, without cost, within
three business days from whichever of the following events occurs last:
***
2. the date you received your Truth in Lending disclosures[.]
The Notice, carrying the same date of the transaction, was signed by Ms. James. Ex. 20.
As explained in detail below, New Century failed to provide Ms. James with accurate Truth in
Lending disclosures. Therefore, her right to rescind the transaction was extended by up to three
years after consummation. See 15 U.S.C. § 1635(f). Accordingly, as Ms. James executed [*32] the
Notice of Right to Cancel in tandem with the note and mortgage, the notice provided Ms. James
with a contractual right to rescind this loan. To wit:
Louisiana courts will look at each contract provision "in light of the other provisions so that
each is given the meaning suggested by the contract as a whole." Highlands Underwriters Ins. Co.
v. Foley, 96-1018 (La. App. 1 Cir. 3/27/97) 691 So. 2d 1336, 1340 (citing La. Civ. Code art. 2047).
Courts will focus on the "plain, ordinary, and popular sense of the language" in the contract unless
the language has a "technical meaning." La. Civ. Code art. 2047; Ledbetter v. Concord General
Corp., 95-0809 (La. 1/6/96), 665 So. 2d 1166, 1169, amended, 95-0809 (La.4/18/96), 671 So. 2d
915. "Each provision in a contract must be interpreted in light of the other provisions so that each is
given the meaning suggested by the contract as a whole." Highlands, 691 So. 2d at 1340 (citing
EppsCity of Baton Rouge, 604 So. 2d 1336, 1349 (La. Ct. App. 1992)). "In cases in which the contract is ambiguous, the agreement shall be construed according to the intent of the parties. [*33] "
Kuswa & Associates, Inc. v. Thibaut Construction Co., Inc., 463 So. 2d 1264, 1266 (La. 1985) (citing La. Civ. Code art. 2045). "Intent is an issue of fact which is to be inferred from all of the surrounding circumstances." Id. "A doubtful provision must be interpreted in light of the nature of the
contract, equity, usages, the conduct of the parties before and after the formation of the contract,
and of other contracts of a like nature between the same parties." La. Civ. Code. art. 2053.
Louisiana courts have consistently held that if there are multiple, separate documents that relate
to the same transaction, then all documents are considered part of the whole contract. See, g.&., In
re Williams, 330 B.R. 534, 537 (M.D. La. 2005); Allen v. Burnett, 530 So. 2d 1294, 1301 (La. Ct.
App. 1988) ("trial court correctly concluded that the penalty provision in the $ 125,000 note clearly
and unambiguously applied to both notes Burnett executed") (emphasis added). In Williams, a
Truth in Lending Act case, the court considered the "the combined promissory note,
truth-in-lending disclosure and security agreement" to find that [*34] a security interest was provided in a specified movable property and a mortgage on the debtor's home. 330 B.R. at 537 (em-
Page 13
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
phasis added). Likewise, the note, Notice of Right to Cancel, and mortgage encompasses the combined contractual relationship between Ms. James and New Century.
The Fifth Circuit has similarly held that "under general principles of contract law, separate
agreements executed contemporaneously by the same parties, for the same purposes, and as part of
the same transaction, are to be construed together." Personal Security & Safety Systems Inc. v.
Motorola. Inc., 297 F.3d 388, 393 (5th Cir. 2002) (citing Neal v. Hardee's Food Systems, Inc., 918
F.2d 34, 37 (5th Cir. 1990); Richard Plantation Co., v. Justiss-Mears Oil Co., Inc., 671 F.2d 154,
156; Restatement 2d Contracts § 202(2)). To determine the intent of the parties when there are multiple, separate documents, "all must be construed together." Id. Safer v. Nelson Fin. Group Inc., 422
F.3d 289 (5th Cir. 2005). "[I]t is well-settled law that several writings executed by the same parties
substantially at the same time and relating to [*35] the same subject-matter may be read together
as forming parts of one transaction." (citing, inter alia, Bailey v. Railroad Co., 84 U.S. 96, 108, 21
L. Ed. 611 (1872); Richland Plantation Co. v. Justiss-Mears Oil Co., Inc., 671 F.2d 154, 156 (5th
Cir. 1982)).
Even assuming, arguendo, that Plaintiff would otherwise not have had a right to rescind this
transaction, New Century, by providing Ms. James with a Notices of Right to Cancel, opted to accord her the right to rescind pursuant to "federal law," i.e., 15 U.S.C. § 1635. Having made such
rights a term of the parties' contract, New Century (and its assignees) were bound thereto. This argument is merely applies the familiar principle that parties are bound to the contractual terms to
which they agree. See In re Gray, 49 B.R. 540, 543-44 (Bankr. E.D. Va. 1985) (as Federal Trade
Commission "holder in due course" language was included in parties' contract, provisions of same
are enforceable against the lender, even if transaction would otherwise not be subject to that language); Mack Financial Corp. v. Crossley, 550 A.2d 303, 305-06 (Conn. 1988) [*36] (retail installment act applies to transaction to which it was not otherwise applicable because it was incorporated into parties' contract); First Northwestern Nat'l Bank v. Crouch, 287 N.W. 2d 151, 152-53
(Iowa 1980) (Uniform Consumer Credit Code provisions are applicable to contract in which they
are referenced even if they would not otherwise be applicable); Farmers State Bank v. Haflich. 699
P.2d 553, 556 (Kan. App. 1985) (incorporation of consumer protection laws into contract renders
those laws applicable even where they might otherwise not be); Bank of Barron v. Gieseke, 485
N.W. 2d 426, 432 (Wis. 1992) (parties may contract for application of consumer protection laws
where such laws might not otherwise be applicable).
In sum, all the agreements - the note, the mortgage, and the notice that gave Ms. James the right
to cancel them - were interdependent, and the clear terms all portions of the entire contract must be
given effect. Operating within her contractual, transactional rights, Ms. James was provided a right
to cancel. She has done so. Summary judgment should be denied.
3. The lenders cannot have it both ways - after [*37] representing to Ms. James that
she would have a right to cancel and consistently proceeding as if the loan were secured by
Ms. James' principal dwelling despite ample evidence to the contrary, they cannot be heard to
argue now that she may not rescind the loan.
The old adage that "no man may take advantage of his own wrong" is particularly applicable in
this case. See Glus v. Brooklyn Eastern Dist. Terminal, 359 U.S. 231, 222-23, 79 S. Ct. 760, 3 L.
Ed.2d 770 (1959). When New Century made this loan to Ms. James, its loan file was bubbling with
indications that Ms. James lived at 1644 North Claiborne. As demonstrated above, Ms. James submitted to New Century, through Aurora, identification card information as well as social security
Page 14
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
payment statements all showing that she lived at that address. Thus, there is ample evidence that
New Century chose to ignore that Ms. James lived and even paid rent at 1644 North Claiborne. After all, adding the $ 350 as a monthly rental expense to the consideration of whether to extend Ms.
James credit would have constituted, shall we say, a mild inconvenience - particularly when Ms.
James' income, aside from the meager sums she received [*38] as a payee for her son and granddaughter, was limited to $ 762.00 per month.
As detailed above, there is abundant evidence in the record that the lender defendants were
aware that Ms. James lived at 1644 North Claiborne; New Century knew it; proceeded with the
transaction as if 1640-42 North Claiborne was her principal residence anyway; and, accordingly,
extended to Ms. James the right to cancel the loan as an integral part of that transaction. Ms. James,
in fact, relied on the representation that she had a notice of right to cancel and has exercised this
right. In addition, she forewent a variety of other options The lenders now have attempted their own
rescission - of Ms. James' right to cancel. In short, this Court should not permit the lender defendants to strip Ms. James' rights at the last moment, as the record is brimming with evidence creating a
genuine issue of material fact that Ms. James's right to rescind the transaction should be honored on
grounds of equitable estoppel.
The fountainhead case outlining the principles of equitable estoppel is Glus, a case arising under
the Federal Employers' Liability Act (FELA). FELA has a three-year limitations period. In Glus
[*39] , the defendant-employer told the injured plaintiff-employee that he had a seven-year period
to file suit based upon his injuries. Finding for the plaintiff, Justice Black wrote:
"To decide the case we need look no further than the maxim that no man may take advantage of his own wrong ... The principle is that where one party has by his representations or his conduct induced the other party to a transaction to give him an advantage
which it would be against equity and good conscience for him to assert, he would not in
a court of justice be permitted to avail himself of that advantage."
Id. at 232-34; 79 S. Ct. at 762 (internal citations and quotations omitted).
Likewise, in the Fifth Circuit, equitable estoppel is defined as '"the effect of the voluntary conduct of a party whereby he is precluded from asserting rights against another who has justifiably
relied upon such conduct and changed his position so that he will suffer injury if the former is allowed to repudiate the conduct.'" Kiper v. Novartis Crop Prot., Inc., 209 F. Supp.2d 628, 637 (the
Fifth Circuit in Taita Chemical Company, Ltd. v. Westlake Styrene Corp., 246 F.3d 377, 389 (5th
Cir. 2001) [*40] has adopted the rule established by the Louisiana Supreme Court); La. Civ. Code
art. 1967. Such conduct may take the form of acts, admissions, representations, or silence. Id. Thus,
Ms. James must only show: 1) a representation on behalf of the defendant, 2) justifiable reliance
thereon, and 3) a change in position resulting to her detriment. Id.
Where the requirements of the doctrine are met, a lender may be estopped from raising TILA's
statutory requirements as a defense to rescission of a credit transaction. See In re Skwozinski, No.
00-10187, 2001 WL 1756709 (Bankr. D. N.H. 2001); see also Williams v. FNBC Acceptance Corp.,
419 So. 2d 1363 (Ala. 1982).
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
Skwozinki held the defendant-lenders were estopped from denying plaintiffs the right to rescind
under TILA although the loan was not secured by their principle dwelling. 2001 WL 1756709, at *8.
There, the defendant required the plaintiff's to secure their home and business as collateral for a
loan. Id. at * 1. The defendant advised the plaintiffs that the equity in their home was not alone sufficient to support the loan, and made statements implying that both the mortgages [*41] would be
afforded the protections of TILA. Id. at *7. On these grounds, the court found the plaintiffs' reliance
reasonable and, therefore, honored their right to rescind the transactions. Id. at *8.
Similarly, in Williams, the court applied the doctrine of equitable estoppel to preclude the defendant-lender from being the "fortuitous beneficiary" of a mortgage fraudulently secured on plaintiff's home without her knowledge, thereby undermining her ability to exercise her right to cancel
the transaction. 419 So. 2d at 1369. In that case, the plaintiff conveyed her home to a third party
through a defective warranty deed. Id. at 1364. The third party later secured a mortgage on the
property through the defendants by forging the plaintiff's signature on the loan documents. Id. A
year later, the defendants proceeded to foreclose on the property, at which time the plaintiff became
aware of the mortgage and sought to exercise her right to rescind. Id. at 1365. The defendants did
not deny potential violations of TILA, but asserted that the plaintiff was not entitled to claim the
protections of the statute as she was not a party [*42] to the transaction. Id. at 1368. Nevertheless,
the court permitted the plaintiff to rescind the loan on grounds of estoppel. Id. at 1369. To this end,
the court noted that:
"[r]eliance may be present in a negative sense; that is, where, as here, [defendant], as an
affirmative requisite to its extension of credit, included [plaintiff] as its obligor, though
unknown to her, the law will infer her reliance upon a continuing course of conduct
consistent with [defendant's] original position. In other words, reliance may consist in
following a given course of action; or it may be in the failure to pursue a given course
of action."
Id. Further, the court added, "[i]f the doctrine of equitable estoppel had not heretofore come into
being, surely, the facts before us would compel its creation and application." Id.
This case is analogous to both Skwozinski and Williams. As in these cases, the first prong of
equitable estoppel is satisfied by virtue of the fact that the defendant lenders represented in numerous ways that the credit transaction was subject to the rescission provisions of TILA: (1) New Century provided [*43] her with a Notice of Right to Cancel and even demanded that she sign it; (2)
New Century withheld the loan proceeds for three days, as would be required in a rescindable
transaction; and (3) in the face of abundant evidence that the defendant lenders knew she lived at
the 1644 residence, they never informed her before her rescission that this fact nullified her rescission right. Thus, beginning from the time of the transaction and continuing through her rescission of
the loan, the defendant lenders consistently represented that she had a continuing right to cancel
under TILA for up to three years.
The second prong of equitable estoppel is also met in this case. As in Williams, the fact that
Plaintiff may not have been aware of her rescission right under TILA at the time of the transaction
is not fatal to her claim of reliance. Plaintiff justifiably relied on the lenders' continuing representation that she had a right to rescind the transaction as the lenders gave her no reason to believe oth-
Page 16
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
erwise. Indeed, it was particularly justifiable for Plaintiff to believe she had a right to rescind the
transaction in the face of (1) the extension to her of the Notice of Right to Cancel; [*44] (2) the
withholding of the loan proceeds for three days; (3) the lender defendants' continuing conduct consistent with the position that she had a right to cancel; and (4) abundant evidence that the defendant
lenders knew she lived at the 1644 residence but never informed her before her rescission that this
fact nullified her rescission right. Under these circumstances, a reasonable person, considering all of
these circumstances, would believe that she was entitled to TILA's right to rescind. Plaintiff's proper
exercise of her continuing right to rescind since learning of New Century's erroneous disclosures
further illustrates her reliance on the defendant lenders' representations and conduct.
Lastly, the lender's representations and Plaintiff's reliance thereon have detrimentally changed
her position. Plaintiff was left with a high-cost predatory loan that has diminished her cash flow and
consumed the equity in the only real property under her name. Moreover, she has changed her position to her detriment by operating under the continuing belief, created by New Century and perpetuated by the assignees, that she would be entitled to rescind the loan. Facing the threat of foreclosure, [*45] Ms. James, in fact, rescinded the loan, expected the lender to obey that rescission,
immediately relieved herself of the obligation to make further payments and, in fact, ceased making
further payments. Ex. 26; see 15 U.S.C. § 1635(b); Reg. Z § 226.23(d)(1). Ms. James thereby exposed herself to the consequences of not paying on her obligation, including but not limited to foreclosure. Additionally, Ms. James forewent other reasonable alternatives for saving her home, such
as attempting to renegotiate the loan, filing a Chapter 13 bankruptcy, or even selling the property.
Now that she has rescinded the loan, the defendant lenders must be estopped from pulling the rug
out from under her.
The moving defendants should not be permitted to bestow upon themselves a windfall by considering the 1640-42 residence as Ms. James' principle dwelling for purposes of extending her credit, and the 1644 residence as her principal dwelling for purposes of denying her right to rescind under TILA and HOEPA. The lender defendants initially represented that Ms. James was entitled to
the protections of TILA and HOEPA and should be estopped from subsequently denying Plaintiff
[*46] these rights. As there is, at minimum, a genuine issue of material fact as to whether the requirements of equitable estoppel have been met in this case, the moving defendants' motions for
summary judgment on this issue should be denied.
C. Provident and Deutsche Bank are strictly liable for Ms. James' rescission claims under
TILA and HOEPA, and, furthermore, the violations were apparent on the face of the documents.
As an initial matter, Provident and Deutsche Bank, the loan's assignees, have failed to move for
summary judgment on the contention by Plaintiff that they are strictly liable for rescission, regardless of whether the violations were apparent on the face of the document. 15 U.S.C. § 1641(c).
However, Provident's and Deutsche Bank's other contentions - that they may not be held liable at all
under TILA and HOEPA for statutory, actual and/or enhanced damages - also are not worthy of
summary judgment.
Provident and Deutsche Bank conclusorily contend that they are not liable as assignees for the
transgressions of New Century as there is no evidence that the violations were apparent on the face
of the disclosure statement. The first problem with [*47] the assignees' argument is that they conflate 15 U.S.C. § 1641(a) and § 1641(e). Only the latter applies to real-estate-secured loans. Under
15 U.S.C. § 1641(a), assignee liability is determined by examining assigned documents. Under 15
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
U.S.C. § 1641(e), however, assignee liability is more broadly analyzed by determining whether "the
disclosure can be determined to be incomplete or inaccurate by a comparison among the disclosure
statement, any itemization of the amount financed, the note, or any other disclosure of disbursement." 15 U.S.C. § 1641(e)(2) (emphasis added). Accordingly, assignees cannot shield themselves
from liability by failing to obtain these documents.
The first disclosure that can be determined to be inaccurate by a comparison of such documents
is the finance charge on the Truth in Lending Disclosure Statement. When a foreclosure has been
filed, as here, a consumer need only show that the finance charge was underdisclosed by more than
$ 100.00 to hold a lender liable for damages. 15 U.S.C. § 1605(f)(1)(A); Reg. [*48] Z §
226.18(d)(1)(i); Holman v. Rock Fin. Corp., 2000 U.S. Dist. LEXIS 5015 (W.D. Mich. Apr. 11,
2000), rev'd on other grounds sub. nom. Inge v. Rock Fin. Corp., 281 F.3d 613 (6th Cir. 2002). The
finance charge is defined, in pertinent part as "the sum of all charges, payable directly or indirectly
by the person to whom credit is extended, and imposed directly or indirectly by the creditor as an
incident to the extension of credit." 15 U.S.C. § 1605(a); Bynum v. Equitable Mortg. Group, No.
Civ.99 CV2266, 2005 WL 818619, at *9-10 (D.D.C. April 7, 2005). It is expressed on the Truth in
Lending Disclosure Statement as "the cost of consumer credit as a dollar amount." See Reg. Z §
226.4(a). This charge "constitutes the cost . . . to the consumer for making the loan, including interest over the life of the loan and up-front charges." Bynum 2005 WL 818619, at *9; § 226.4(a).
Here, the finance charge disclosed was $ 94,487.10. Ex. 16. The note, Ex. 18, and itemization of
the finance charge purportedly signed by Ms. James on January 22, 2003, received from New Century and attached hereto as Ex. [*49] 32, states the interest rate of the loan, 9.49%, from which
the total interest may be calculated, as well as the other components of the disclosed finance charge.
Accordingly, the components of the finance charge were disclosed as follows:
Interest
Loan origination fee
Lender Processing Fee
Lender Flood Determination Fee
Lender Underwriting Fee
Tax Service Fee
Prepaid Interest
Settlement or Closing Fee
Total
$ 91,101.60
2,478.00
264.80
11.20
300.00
73.00
58.50
200.00
$ 98,487.10
Exs. 16, 18, 33. A look at the pertinent documents shows that the $ 100 threshold is met easily.
First, for several reasons, the $ 635.00 charged for filing fees should have been disclosed as a
finance charge - and the assignees were capable of determining that from the appropriate documents. Certain security interest charges, "if itemized and disclosed," may be excluded from the finance charge. Reg. Z § 226.5(e). These security interest charges include "[t]axes and fees prescribed
by law . . . for determining the existence of or for perfecting, releasing, or satisfying a security interest," but only if they "actually are or will be paid to public officials. [*50] " See § 226.4(e)(1)
(emphasis added). The disclosure requirement is reiterated in § 226.18(o). These disclosures must
not only be made, however, but be made "clearly and conspicuously," 15 U.S.C. § 1632(a); §
226.17(a)(1). Inconsistent information is not clear under TILA. See Shroder v. Suburban Coastal
Corp., 729 F.2d 1371 (11th Cir. 1984) (conflicting information regarding the prepayment penalty in
the loan note and TIL disclosure rendered it confusing and violates the Act). Here, the Truth in
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
Lending Disclosure Statement listed filing fees as $ 300.00. Ex. 16. The HUD-1 Settlement Statement, however, listed the filing fees, including fees for cancellation of Ms. James' previous mortgage, recording fees and transaction taxes, as $ 635.00 (Ex. 5 at lines 1113, 1201, 1204). Accordingly, $ 635 counts as an undisclosed finance charge.
Alternatively, portions of the charge of $ 85.00 for the cancellation of the mortgage and $
225.00 for the recording of the mortgage should have been disclosed as a finance charge. The assignees were capable of determining that the finance charge was improperly underdisclosed here by
examining the appropriate [*51] disclosures of disbursement. A disbursement showing the amount
actually paid to the Recorder of Mortgages for cancellation of Ms. James' previous mortgage, included in Ms. James' True Title closing file, was $ 24.00. Ex. 33; Ex. 21 at p.136, 1.23 - 137, 1.1.
Accordingly, the assignees could have determined from a comparison of the two disclosures of disbursement - the HUD-1 and the Cancellation of Mortgage - that $ 61.00 of this total should have
been disclosed in the finance charge.
Similarly, a portion of the $ 225.00 fee for recording the mortgage should have been disclosed
as a finance charge. The assignees were capable of determining that the finance charge was improperly underdisclosed by examining disclosures of disbursement revealing that only $ 65.00 was
paid for recording the mortgage and filing it in the Orleans Parish Notarial Archives. First, the first
page of the mortgage clearly discloses that $ 25.00 was paid to the Recorder of Mortgages for recording the mortgage. Ex. 19. Additionally, the fact that the mortgage as recorded was 21 pages
means that $ 40.00 was paid to the Notarial Archives for filing the mortgage in that office. See certified copy of Parish of [*52] Orleans Notarial Archives fee schedule, attached hereto as Ex. 34
(filing charges total $ 10.00 for the first 10 pages and $ 10 for each additional five page increment).
Accordingly, the assignees could have determined from a comparison of these disclosures of disbursement that only $ 65.00 could be excluded from the finance charge; thus, the assignees could
have also determined that $ 160.00 of this total should have been included in the finance charge but
was not.
Additionally, the assignees could have determined by examining the HUD-1 Settlement Statement, Ex. 5, as well as the Tentative Quote from Fair Insurance, produced as part of Ms. James'
True Title closing file and attached hereto as Ex. 35, that the $ 65.00 charge for an insurance application was improperly excluded from the finance charge. As charges for insurance applications are
not specifically excluded from being counted as part of the finance charge and, furthermore, as exclusions from the finance charge are to be narrowly construed, the $ 65.00 insurance application fee
should have been included in the finance charge. See, e.g., Buford v. Am. Fin. Co., 333 F. Supp.
1243, 1247 (N.D. Ga. 1971). Accordingly, [*53] the assignees could have determined from the
above-mentioned disbursement statements that the finance charge was underdisclosed by the lender's failure to include the $ 65.00 insurance application fee in the finance charge.
The total underdisclosure of the finance charge that the assignees could have determined from
an examination of the relevant documents, then, equals at least anywhere from $ 286.00 to $ 700.00.
Both totals are well over the $ 100.00 tolerance afforded to lenders for the underdisclosure of the
finance charge where a foreclosure has been filed. Accordingly, summary judgment is not appropriate on the assignees' claims that they are not liable for statutory and actual damages under TILA.
Assuming that the assignees were capable of determining that the finance charge was underdisclosed by $ 700.00, i.e., that the finance charge should have been disclosed as $ 95,187.10, this
means that the assignees also were capable of determining from the relevant documents that the
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
APR was underdisclosed on the Truth in Lending Disclosure Statement by more than the applicable
tolerance level of .125%. See 15 U.S.C. § 1606(c); Reg. Z § 226.22(a). [*54]
The APR is calculated based on the relationship between the finance charge and amount financed. Rohner, The Law of Truth in Lending P 4.01[2][c][i] (1984). The next step, then, is to determine the proper total amount financed. Assuming a finance charge underdisclosure of $ 700.00,
this creates an overdisclosure of the amount financed on the Truth in Lending Disclosure Statement
by $ 700.00. The amount financed is overdisclosed because, under TILA, these categories are mutually exclusive. See 15 U.S.C. § 1638(a)(5); Reg. Z, § 226.18(b), (d). Thus, while the amount financed disclosed on the Truth in Lending Disclosure Statement was $ 41,614.50, Ex. 16, it should
have been disclosed as $ 40,914.50. As the assignees could have determined by examination of the
appropriate documents that the finance charge should have been disclosed as $ 95,187.10 and the
amount financed $ 40,914.50, the assignees could have determined that the APR should have been
disclosed as 10.622%. (calculation performed using National Consumer Law Center, Truth in
Lending, Companion CD-ROM (5th ed. 2003)). As the APR disclosed on the Truth in Lending Disclosure Statement [*55] was 10.416%, Ex. 16, the underdisclosure exceeds the 125% tolerance.
Accordingly, summary judgment is not appropriate on the assignees' claims that they are not liable
for non-rescission damages under TILA for the underdisclosure of the APR.
D. Ms. James received a high-cost loan under HOEPA, and, accordingly, Provident's and
Deutsche Bank's motion should be denied to the extent they seek to escape liability under the
Act.
For many of the same reasons in the previous section, as well as others herein, summary judgment should be denied on the assignees' claims that they are not liable for non-rescission damages
under HOEPA under 15 U.S.C. § 1641(d)(1). The assignees conclusorily and incorrectly argue that
the loan was not subject to HOEPA, apparently based on the contention that the points and fees do
not exceed 8% of the total loan amount.
As noted above, if the total "points and fees" exceed 8% of the "total loan amount," as those
terms are statutorily defined, HOEPA triggers certain requirements of and restrictions on the lender,
15 U.S.C. § 1602(aa)(1)(B); Reg. Z § 226.32(a)(1)(ii). First, to determine the total points and [*56]
fees, we may begin by referring to New Century's own HOEPA worksheet, Ex. 24. In this case,
points and fees are calculated by totaling the prepaid finance charge (subtracting, however, per diem
interest) as well as all compensation paid to mortgage brokers. See Reg. Z §§ 226.32; 226.4. New
Century has included $ 3,385.50 as the prepaid finance charge. Exs. 24, 32. As demonstrated above,
however, New Century has failed to include at least $ 286.00 in prepaid finance charges, an amount
which, thus, also constitutes points and fees under HOEPA. See Reg. Z §§ 226.32; 226.4.
Moreover, $ 461.70, in addition, should have counted as HOEPA points and fees as compensation to the mortgage broker, Aurora. See § 226.32(b)(ii). Aurora was paid more than just the $
2,478.00 disclosed on the HUD-1 and included in the finance charge. It was, in fact, paid a total of $
2,939.70, True Title check dated January 28, 2003, payable to the order of Aurora, attached hereto
as Ex. 36, or an excess of $ 461.70. Part of this upcharge was a $ 450.00 yield spread premium. Ex.
5 at line 1305. As this $ 450.00 charge constitutes compensation to the mortgage broker, it counts as
a point and fee under [*57] HOEPA. See In re Webster, 300 B.R. 787, 801 (W.D. Okla. 2003).
The remainder of this $ 461.70 charge to Aurora was for $ 11.70. Although unclear exactly why
Aurora was paid this amount, n15 it is, conversely, quite clear where this amount came from. Rather
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
than retaining $ 58.50 in per diem interest, as reflected in the disclosed finance charge on the Truth
in Lending Disclosure Statement and the HUD-1 at line 901, Ex. 5, New Century retained only $
46.80 in per diem interest, Lender's Disbursement Order, attached hereto at Ex. 37. Rather than refunding this amount to the indigent Ms. James, True Title paid it to Aurora. Ex. 36. Accordingly, as
this $ 11.70 charge constituted broker's compensation, it should be included as a point and fee.
n15 Counsel for Aurora and New Century, is, however, a director of True Title. Ex. 22 at
p.22, ll.2-10.
Furthermore, the $ 250.00 fee paid to True Title for allegedly performing a title examination
should be counted as a HOEPA point and fee. Title examination [*58] fees may be excluded as
finance charges and, thus, do not constitute and HOEPA points and fees, only if they are bona fide
and reasonable. Reg. Z §§ 226.4(c)(7); 226.32(b)(1)(iii). Closing agent True Title's secretary Pollet
testified that a document or report indicating that a title exam was performed is typically kept in the
borrower's loan closing file. Ex. 21 at pp.81-82. She testified that there was no such document or
report in Ms. James' closing file. Id. at p.82, ll.1-2. True Title President Timothy Hand testified that
he did not see any such document that indicated who performed any title exam, other than a check
paid to his brother, True Title director Patrick Hand, III. Ex. 22 atp. 46, ll.6-13; id., at p. 47,1.19 -p.
48, 1.7. Accordingly, the $ 250 charged for a title examination was neither bona fide nor reasonable
and thus constitutes a point and fee.
Adding the points and fees - $ 3,385.50 in acknowledged prepaid finance charges; the $ 450.00
yield spread premium; the mystery $ 11.70 charge to the broker, Aurora; and the $ 250.00 title examination fee - leads to a total of $ 4,097.20.
The next step, then, is to determine the denominator of the points and fees [*59] test, the "total
loan amount." The formula for calculating the total loan amount is set out in Commentary §
226.32(a)(1)(ii). n16 First, we take the amount financed, $ 40,914.50 and subtract from that the $
250.00 title examination fee, leaving a total loan amount of $ 40,664.50. The points and fees, $
4,097.20, thus constitute 10.1% of the total loan amount, well above the 8% figure necessary to
qualify this as a HOEPA loan. Accordingly, summary judgment must be denied on the assignees'
claims based on the assertion that this is not a HOEPA loan.
n16 Commentary § 226.32(a)(1)(ii) provides, in pertinent part:
For purposes of the "points and fees" test, the total loan amount is calculated by
taking the amount financed, as determined according to § 226.18(b), and deducting any cost listed in § 226.32(b)(1)(iii) and § 226.32(b)(1)(iv) that is both included as points and fees under § 226.32(b)(1) and financed by the creditor.
E. PCFS's motion for summary judgment on the claim that it never received [*60] Ms.
James' "qualified written request" should be denied as it has failed to offer any competent
evidence to the contrary.
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
On December 23, 2003, Plaintiff mailed to Defendant PCFS a "qualified written request"
("QWR") seeking to acquire an accounting, information to which she was fully entitled under
RESPA, 12 U.S.C. § 2605(e). The letter was addressed to 4221 International Parkway, Suite 15,
Atlanta, GA 30354. Ex. 38. By failing to respond within 20 days to Plaintiff's qualified written request, violated RESPA.
PCFS argues that its actual address was note Suite 15, but, rather, Suite 150, and, accordingly,
that the QWR was never received. PCFS makes a big deal out of a "0." Solely on the basis of an affidavit lacking any personal knowledge of whether PCFS actually received the qualified written request, PCFS argues for summary judgment on Ms. James' claim. The affidavit, of Christopher Wyatt, PCFS's Assistant Vice President, states, "Based upon my review of the applicable records, PCFS
Mortgage Resources did not receive, nor has ever received, a qualified written request or letter from
Josephine James that is the subject of this litigation. [*61] " Affidavit of Chris Wyatt in Support
of Defendants' Motion for Summary Judgment at P 3. Nowhere does Mr. Wyatt's affidavit state that
he had personal knowledge of the procedures governing receipt of mail by PCFS at Suite 150, let
alone qualified written requests. Accordingly, summary judgment is improper on this claim. See
Fed. R. Civ. P. 56(e); United States v. Wilson, 322 F.3d 353, 362 (5th Cir.2003).
F. Ms. James' claims under LUTPA against the loan broker are not perempted as the violations are continuing and have not perempted suit either or suit was filed within one year of
the violations.
Ms. James was the victim of serial LUTPA violations, none of which are perempted because
they were continuing violations and/or occurred within the one-year peremptive period. First, Aurora, through its employee Lawanda Terrell, repeatedly created the impression that she would help
Plaintiff make good on Mr. Williams' fraudulent promise to help her obtain a grant. Terrell perpetuated this fraud by suppressing the truth that it was a loan, not a grant, she would help Ms. James
obtain; and Ms. James' mistaken belief was never corrected by Aurora up to and including [*62]
the time of the filing of the suit. Second, Aurora, as the loan broker, has failed to give Ms. James
either the loan brokerage contract or Notice as required by Louisiana law. These violation occurred
within the one-year peremptive period and/or are continuing and thus are not perempted. Third, Ms.
James filed suit no later than one year after the third LUTPA violation - Aurora's charge to Ms.
James of an outrageously high loan broker fee.
As an initial matter, Aurora mistakenly asserts that suit was not filed until January 26, 2004 and,
thus, that any LUTPA violations occurring prior to January 26, 2003, are perempted. In fact, under
the well-established authority of the Fifth Circuit and this Court, suit was filed January 22, 2004.
Ms. James filed her complaint in forma pauperis ("IFP") on January 22, 2004. Rec. Doc. 1. The IFP
motion was not granted until January 26, 2004, Rec. Doc. 2, and the Complaint was not formally
entered until that date, Rec. Doc. 3. However, it is the date the complaint was actually tendered to
the Clerk of Court, not the date the pleading was formally entered, that determines when the suit is
actually filed for limitations purposes. Hernandez v. Aldridge, 902 F.2d 386, 388 (5th Cir. 1990).
[*63] As in Hernandez, Ms. James "had no control over the clerk's delay." Id; see also, e.g., Anderson v. City of New Orleans, No. Civ.A. 03-3010, 2004 WL 877098, at *3 (E.D. La. Apr. 15,
2004). Accordingly, as long as the LUTPA violations occurred within one year of January 22, 2004,
as they all did, they are not perempted. See La. R.S. 1409(E).
First, Aurora and Ralph Williams tandem-teamed Ms. James with a series of misrepresentations
and omissions that they would help her obtain a grant, not a loan. Aurora, through Terrell, perpetu-
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
ated the misimpression that Ms. James was receiving a grant, not a loan. Aurora never corrected
these misrepresentations. Accordingly, the peremption period never commenced to run, or, put another way, began to run each day Aurora failed to correct the omission. See Tubos de Acero de
Mexico, S.A. v. Am. International Investment Corp., 292 F.3d 471, 481 (5th Cir.2002) (citing Capitol House Preservation Co. v. Perryman Consultants, Inc., 725 So.2d 523 (La. Ct. App. 1998)) (defendant successful applicants for riverboat gaming licenses engaged in a continuing tort by allegedly failing to disclose fraudulent [*64] and misleading material information submitted to the Gaming Enforcement Division, in violation of the continuing statutory duty to disclose violations of the
Riverboat Act, and thus the LUTPA peremptive period began to run anew each day the successful
applicants continued to withhold information). Accordingly, the LUTPA claim arising from Aurora's fraud by omission has not been perempted. Aurora's summary judgment motion as to this claim
should be denied.
Each and every case discussed by Aurora in its summary judgment motion with respect to the
LUTPA claim is inapposite here. These cases either define whether prescription or peremption applies, Keubler v. Martin, 610 So. 2d 270, 271 (La. Ct. App. 1992), or allege acts constituting violations that began and ended on a discrete date, Reed v. St. Charles General Hospital, 2001-1148 (La.
App. 4 Cir. 3/27/02), 815 So. 2d 319; Warner v. Carimi Law Firm, 98-613 (La. App. 5 Cir.
12/16/98), 725 So. 2d 592, 598; Morris v. Sears, Roebuck & Co., 765 So. 2d 419 (La. Ct. App.
2000). Unlike in those cases, Ms. James' LUTPA claim against Aurora here concerns a violation
that continued [*65] up to and through the time of the filing of the suit.
Second, Aurora has failed to this day to provide Ms. James with (1) a written contract in conformity with the requirements of La. R.S. 51:1913 as well as (2) the "Disclosure Required by Louisiana Law" set forth in La. R.S. 51:1914, both of which failures are unfair practices under La. R.S.
51:1405(A). See La. R.S. 51:1915(A). Accordingly, summary judgment is improper on these claims
as they have not been perempted.
La. R.S. 51:1913 provides, "Every loan brokerage contract shall be in writing and signed by all
contracting parties. A copy of the contract shall be given to the prospective borrower at the time he
signs the contract." Two different "brokerage contracts" have been produced by Defendants. The
first, attached hereto as Ex. 39, and as Exhibit 1 to Aurora's memorandum in support of its motion,
is not signed by Aurora. The second also is not signed by Aurora and does not even constitute an
enforceable contract as it expired by its own terms. Ex. 40. Moreover, Aurora has not even alleged
that either "contract" was given to Ms. James at the time she signed them.
Furthermore, Aurora violated La. R.S. 51:1914 by failing [*66] to give Ms. James the "Disclosure Required by Louisiana Law" ("Disclosure"). Even assuming, arguendo, that the two
"agreements" constitute Aurora's attempt to give a disclosure statement, the content of these
"agreements" is woefully inadequate when compared to the requirements set forth in the pertinent
parts of the statute. n17
n17 51:1914. Required disclosure statement status of the trust account."
At least seven days prior to the time any person signs a contract for the services
of a loan broker, or the time of the receipt of any consideration by the loan broker, whichever occurs first, the broker must provide to the party with whom he
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
contracts a written document, the cover sheet of which is entitled in at least ten
point bold face capital letters "DISCLOSURE REQUIRED BY LOUISIANA
LAW". Under this title shall appear the statement in at least ten point type that
"The state of Louisiana has not reviewed and does not approve, or disapprove
any loan brokerage contract. The information contained in this disclosure has not
been verified by the state. If you have any questions see an attorney before you
sign a contract agreement." Nothing except the title and required statement shall
appear on the cover sheet. The disclosure document shall contain the following
information:
***
(2) The names, addresses, and titles of the broker's officers, directors, trustees, general partners, general managers, principal executives, and any other persons charged with responsibility for the broker's business activities; and all the
broker's employees located in Louisiana.
***
(5) One of the following statements, whichever is appropriate:
(a) "As required by Louisiana law, this loan broker has secured a bond by
, a surety authorized to do business in this state. A certified copy of this bond is
filed with the state treasurer. Before signing a contract with this loan broker, you
should check with the surety company to determine the bond's current status," or
(b) "As required by Louisiana law, this loan broker has established a trust
account (number of account) with (name/address of bank or savings institution).
Before signing a contract with this loan broker you should check with the bank or
savings institution to determine the current
[*67]
Neither of these "contracts" contains the cover sheet required by the preamble of La. R.S.
51:1914 or the information required in subsections (2) or (5). The failure to provide the Disclosure
called for in the statute continues to date. Thus, this claim has not been perempted.
Even to the extent Aurora may argue that the violation occurred on the precise date it was required to provide the Disclosure, Ms. James' claim still is not perempted. La. R.S. 51:1914 requires
the Disclosure to be given "[a]t least seven days prior to the time any person signs a contract for the
services of a loan broker, or the time of the receipt of any consideration by the loan broker, whichever occurs first." Clearly, Ms. James has never received the contract required by La. R.S. 51:1913.
Accordingly, Aurora may argue that the violation occurred, at the latest, seven days prior to the receipt of any consideration by the loan broker. A check payable to Aurora for services allegedly provided in connection with this transaction was issued by the closing agent, True Title, Inc., on January 28, 2003, and negotiated on January 30, 2003. Ex. 36. Accordingly, giving Aurora the benefit of
the doubt, the broker [*68] was required to provide Ms. James with the Disclosure on January 21,
2003. Accordingly, a LUTPA violation would have occurred, at the earliest, on January 22, 2003.
Page 24
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
Suit was filed January 22, 2004, within one year of the violation. Therefore, Ms. James' LUTPA
Disclosure claim is not perempted.
Third, Ms. James' LUTPA claim - that she was charged an unconscionable loan origination fee
of $ 2,478 (representing 5.507% of the loan), in addition to a $ 450 yield spread premium as compensation for arranging a loan to her at an interest rate that was higher than what New Century
would have charged if she had secured the same loan directly from New Century - also has not
perempted. As reflected on the HUD-1 Settlement Statement issued in connection with the loan,
lines 801 and 1305, Ms. James was charged for both of these fees, at the earliest, on January 22,
2003, the date of the transaction. Ex. 5. As suit was filed January 22, 2004, within one year of the
violation, again, Ms. James' LUTPA claim based on the charge of these fees, is not perempted. Accordingly, Aurora's summary judgment motion on this claim should be denied.
IV. CONCLUSION
For the foregoing reasons, Ms. James [*69] requests that this Court deny the moving defendants' motions for summary and partial summary judgment in their entirety and, where appropriate,
that the Court grant summary judgment in Plaintiff's favor.
Respectfully submitted,
NEW ORLEANS LEGAL ASSISTANCE
An Office of Southeast Louisiana Legal Services Corp.
BY:
/s/ [Signature]
David L. Koen (T.A.), LSBA # 27536
1010 Common Street, Suite 1400A
New Orleans, LA 70112
Phone: (504) 529-1000, ext. 231
Fax: (504) 529-1009
Attorneys for Plaintiff
CERTIFICATE OF SERVICE
I hereby certify that the foregoing Memorandum has been served on counsel of record for Defendants by facsimile, depositing same in the U.S. mails, first class postage prepaid, and/or hand
delivery this 1st day of August, 2006.
/s/ [Signature]
Attorney for Plaintiff
STATEMENT OF CONTESTED AND UNCONTESTED MATERIAL FACTS IN OPPOSITION TO DEFENDANTS' STATEMENTS OF UNCONTESTED MATERIAL FACTS
IN SUPPORT OF MOTIONS FOR SUMMARY AND PARTIAL SUMMARY JUDGMENT
Pursuant to Local Rule 56.1 and Rule 56 of the Federal Rules of Civil Procedure, Plaintiff, Josephine James, submits the following Statement of Contested and Uncontested Material [*70]
Facts in response to the statements of uncontested material facts in support of the motions for (partial) summary judgment by five of the six defendants herein:
Page 25
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
I. Statement of Contested Material Facts in Opposition to Defendants' Statements of Uncontested Material Facts in Support of Motion for Partial Summary Judgment of Defendants
Aurora Financial Services, Inc., and New Century Mortgage Corporation.
1. Exhibit 3 may be a true and correct copy of an apparent early form of the original of the Mortgage at issue in this case. However, it lacks the signatures of witnesses on page 15 of 15 contained
in the Mortgage actually recorded. Exhibit 6 constitutes the first two pages of a larger document.
2. There are two different Mortgage Loan Origination Agreements dated December 10, 2002, one
bearing the signature of Ms. James, which she did not read before signing, the other bearing a signature that may be that of Ms. James.
3. Plaintiff was defrauded into signing a Mortgage on January 22, 2003. Accordingly, although the
document titled Mortgage identifies a property thereon at 1640-1642 N. Claiborne Avenue, New
Orleans, Louisiana 70116, this property cannot have [*71] been considered mortgaged. Plaintiff
was defrauded into entering into the loan at issue, and thus the loan has never covered the property
at 1640-1642 N. Claiborne Avenue. n1
n1 These statements are made without prejudice to Ms. James' right to rescind the Mortgage and loan at issue to the extent these portions of the transaction are found to be valid, or
to seek an Order from this Court honoring her right to rescind.
4. Plaintiff signed a Uniform Residential Loan Application dated January 22, 2003, but did not
know what she was signing. Ex. 1 attached to Memorandum in Opposition to Motions for Summary
or Partial Summary Judgment at p. 27, ll. 19-22; in addition, there is a signature on an undated
Uniform Residential Loan Application referencing 1640-1642 N. Claiborne Avenue.
5. Plaintiff signed a Federal Truth in Lending Disclosure Statement for New Century Mortgage
Corporation dated January 22, 2003, but did not read it before signing. Id. at p.52, ll.6-7.
6. Although Plaintiff has lived [*72] at relevant times at 1644 N. Claiborne Avenue, for the purpose of determining the location of her principal dwelling under the Truth in Lending Act and the
Home Ownership and Equity Protection Act of 1994, Plaintiff constructively resided at all relevant
times at 1640-1642 N. Claiborne Avenue.
7. Uncontested.
8. Uncontested.
9. All alleged acts of Unfair Trade Practices occurred in whole or in part no earlier than January 22,
2003.
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2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
II. Statement of Contested Material Facts in Opposition to Defendants' Statements of Uncontested Material Facts in Support of Motion for Summary or Partial Summary Judgment of
Defendants The Provident Bank, Deutsche Bank National Trust Company Americas, and
PCFS Mortgage Resources.
1. Exhibit 2 contains a true and correct copy of the Mortgage at issue recorded in this case, except
that several of the pages are misordered and a number of stray markings are included. Exhibit 6 is
an excerpt of the Deposition of Josephine James.
2. There are two different Mortgage Loan Origination Agreements dated December 10, 2002, one
bearing the signature of Ms. James, which she did not read before signing (PCFS, et al. Mot. Summ.
[*73] J., Memo in Support at Ex. 1), the other bearing a signature that may be that of Ms. James.
3. Plaintiff was defrauded into signing a Mortgage on January 22, 2003. Accordingly, although the
document titled Mortgage identifies a property thereon at 1640-1642 N. Claiborne Avenue, New
Orleans, Louisiana 70116, this property cannot have been considered mortgaged. Plaintiff was defrauded into entering into the loan at issue, and thus the loan has never covered the property at
1640-1642 N. Claiborne Avenue. n2
n2 These statements are made without prejudice to Ms. James' right to rescind the Mortgage and loan at issue to the extent these portions of the transaction are found to be valid, or
to seek an Order from this Court honoring her right to rescind.
4. Plaintiff signed a Uniform Residential Loan Application dated January 22, 2003, but did not
know what she was signing. Ex. 1 attached to Memorandum in Opposition to Motions for Summary
or Partial Summary Judgment at p. 27, ll. 19-22; in addition, there is [*74] a signature on an undated Uniform Residential Loan Application referencing 1640-1642 N. Claiborne Avenue.
5. Plaintiff signed a Federal Truth in Lending Disclosure Statement for New Century Mortgage
Corporation dated January 22, 2003, but did not read it before signing. Id. at p.52, ll.6-7.
6. Although Plaintiff has lived at relevant times at 1644 N. Claiborne Avenue, for the purpose of
determining the location of her principal dwelling under the Truth in Lending Act and the Home
Ownership and Equity Protection Act of 1994, Plaintiff constructively resided at all relevant times
at 1640-1642 N. Claiborne Avenue.
7. Uncontested.
8. Plaintiff's counsel did not "attempt" to send to PCFS Mortgage Resources the qualified written
request at issue. He did send it to PCFS. The request was not misaddressed - although it is uncontested that the qualified written request listed PCFS's address as including Suite 15, at least the remainder of the address is correct.
Page 27
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
9. Contested. The evidence in support is incompetent to support this fact for purposes of deciding
this issue by summary judgment.
Respectfully submitted,
NEW ORLEANS LEGAL ASSISTANCE
An Office [*75] of Southeast Louisiana Legal Services Corp.
BY:
/s/ [Signature]
David L. Koen (T.A.), LSBA # 27536
1010 Common Street, Suite 1400A
New Orleans, LA 70112
Phone: (504) 529-1000, ext. 231
Fax: (504) 529-1009
Attorneys for Plaintiff
CERTIFICATE OF SERVICE
I hereby certify that the foregoing Statement has been served on counsel of record for Defendants by facsimile, depositing same in the U.S. mails, first class postage prepaid, and/or hand delivery this 1st day of August, 2006.
/s/ [Signature]
Attorney for Plaintiff
NOTICE OF MANUAL ATTACHMENT
ATTACHMENTS TO DOCUMENT NO. 122
DESCRIPTION: Exhibits to Memo in Opposition to Motions for Summary or
Partial Summary Judgment
FILED BY: plaintiff Josephine James
FILE DATE: August 4, 2006
ARE LOCATED IN THE CLERK'S OFFICE.
AMENDED SUPPLEMENTAL MEMORANDUM IN OPPOSITION TO MOTIONS FOR
PARTIAL SUMMARY JUDGMENT
Three of the six defendants have filed motions for partial summary judgment under Fed. R. Civ.
P. 56(b) to dismiss, inter alia, Ms. James' claims under the Truth in Lending Act ("TILA"), 15
U.S.C. § 1601 [*76] , et seq., and the Home Ownership and Equity Protection Act of 1994
("HOEPA"), 15 U.S.C. §§ 1602(aa) and 1639. These defendants argue - incorrectly - that because
Page 28
2004 U.S. Dist. Ct. Motions 921284; 2006 U.S. Dist. Ct. Motions LEXIS 113011, *
Ms. James' loan was not secured by her "principal dwelling," the she could not rescind the loan under either statute and that the transaction was not subject to the requirements of HOEPA.
In their reply memorandum, defendants The Provident Bank and Deutsche Bank National Trust
of the Americas specifically fail to address Plaintiff's arguments that Ms. James' loan is, indeed,
subject to rescission and that HOEPA applies because the lender, New Century Mortgage Corporation, (1) contractually granted her the right to rescind the loan and (2) are estopped from arguing
that Ms. James may not rescind the loan under TILA or that HOEPA is inapplicable.
Respectfully submitted,
NEW ORLEANS LEGAL ASSISTANCE
An Office of Southeast Louisiana Legal Services Corp.
BY:
/s/ David L. Koen
David L. Koen (T.A.), LSBA # 27536
1010 Common Street, Suite 1400A
New Orleans, LA 70112
Phone: (504) 529-1000, ext. 231
Fax: (504) 529-1009
Attorneys for Plaintiff
CERTIFICATE OF [*77]
SERVICE
I hereby certify that the foregoing Memorandum has been served on counsel of record for Defendants by facsimile and by depositing same in the U.S. mails, first class postage prepaid, this 9th
day of August, 2006.
/s/ David L. Koen
Attorney for Plaintiff