9TH CIRCUIT: TILA RESCISSION REVIVED AND RETURN TO NORMAL RULES OF PROCEDURE

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“so long as the plaintiff alleges facts to support a theory that is not facially implausible, the court’s skepticism is best reserved for later stages of the proceedings when the plaintiff’s case can be rejected on evidentiary grounds.” In re Gilead Sciences Securities Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008).”

9th circuit opinion upholding TILA recission 01022012

EDITOR’S COMMENT: The Balderas Opinion is a New Year’s present for all those attorney and litigants who complain that the Judges are not following the law. The 9th Circuit sets them straight, and returns to the requirements of the Truth in Lending Act (TILA), rescission and the proper time to raise presumptions and introduce evidence. It corroborates my prediction that TILA is making a come-back and that it the perfectly de signed hook for Judges to hang their hat on to escape the consequences of all their previous bad decisions in which they accepted oral assurances from counsel for foreclosers at a point in the proceedings where there was no evidence being considered.

Those analysts who are downplaying the TILA AND FORENSIC LOAN ANALYSIS are making a mistake. In the final analysis, for all matters concerning the security instrument (mortgage or deed of trust) and for many relating to the note, rescission and tender, the specific wording of the TILA statutes is going to be the focal point of litigation and the ability of the borrower to recapture payments, attorney fees and even pursue damages.

The case should be read in its entirety. The recitations of the facts pled by the borrower will come as familiar patterns known to many borrowers, complete with putting the borrower under siege until they signed the papers.

NOTABLE QUOTES FROM BALDERAS V COUNTRYWIDE 10-55064 9TH CIRCUIT

Three days later, on the evening of Monday, September 25, 2006, Cazakov showed up at their home with a notary public and loan documents also written in English. He told them that Countrywide “demanded” their signatures “that night” and he couldn’t and wouldn’t leave without getting them. The Balderases protested and asked to arrange the loan signing when their English-literate daughter could attend. But Caza- kov said that Countrywide had instructed him to stay until he got the signatures, and he “engaged in a series of actions designed to intimidate, harass, and pressure [the Balderases] into signing the loan documents.” After six hours of unrelent- ing pressure by Cazakov and several unsuccessful attempts to read the paperwork, the Balderases capitulated and signed the documents just after midnight.

Under the “borrower’s remorse” provision, consumers can rescind a loan up to three business days after the loan transaction. See 15 U.S.C. §1635(a). But this right is extended up to three years “[i]f the required notice or material disclosures are not delivered.” 12 C.F.R. § 226.23(a)(3); see also 15 U.S.C. § 1635(f).

Balderases claim that Cazakov falsely promised not to submit their paperwork to Countrywide “for a few days” in case they decided “not to proceed with the loan after their daughter had reviewed the contents.” And, when the Balderases tried to exercise their right to rescind, Cazakov and Countrywide told them, incor- rectly, that it was too late,

the district court relied on Exhibit 14 to the complaint. Exhibit 14 is the rejection letter Countrywide sent in response to the Balderases’ written rescission demand. The Balderases attached the letter to their complaint, an important object les- son as to why it’s unwise to use a complaint as an ersatz doc- ument production. Attached to the rejection letter is a properly completed Notice of Right to Cancel bearing the Balderases’ signatures. Immediately above the signatures is a statement to the effect that the borrower “acknowledge[s] receipt of two copies of NOTICE of RIGHT TO CANCEL.” Countrywide’s rejection letter points out that the Balderases acknowledged they had received proper notice, which meant the period to rescind was only three days.

The acknowledgment created a rebuttable presumption that the required disclosures were delivered to the borrowers. See 15 U.S.C. § 1635(c). This presumption will no doubt be very valuable to Countrywide when the trier of fact is called on to decide whether the Balderases did or did not get proper TILA notice. But evidentiary presumptions “are inappropriate for evaluation at the pleadings stage.” 5B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 (Supp. 2011). The Balderases allege in their complaint that they did not, in fact, get a properly pre- pared notice. If they testify to that effect at trial, the trier of fact could believe them, despite their signed statement to the contrary.

momentary delivery defies both the purposes of the TILA and common sense. The revered second edition of Web- ster’s New International Dictionary defines “deliver” as “to give or transfer” and “to yield possession or control of.” Web- ster’s New International Dictionary 693 (2d ed. 1939). We interpret “deliver” to mean that the consumer must be allowed to keep the notice. When you have pizza delivered, you don’t sign for it and let the deliveryman take it back to the restau- rant. And when a newspaper boy delivers a paper, he doesn’t show you the headlines and then return it to the printer.

Delivery under the TILA requires a permanent physical transfer from one party to another. The Balderases claim that
BALDERAS v. COUNTRYWIDE BANK    21515
didn’t happen here. Instead, they were given documents to sign and those documents were then taken away. All they were left with were incomplete documents that didn’t tell them how long they had before they could renege on the loans. That missing information turned out to be critical when the Balderases told Countrywide they wanted out and were falsely told it was too late.

even if it turns out that the Balderases were left two copies of the completed form, as per Exhibit 14 of the com- plaint, Countrywide may well have an additional problem: The form purports to have been signed on Monday, Septem- ber 25, and notifies the borrower that they have until Septem- ber 28 to rescind. The Balderases, however, claim that the actual signing of the loan documents occurred after midnight, which would mean the loan transaction wasn’t consummated until Tuesday the 26th. According to this narrative, the rescis- sion period extended until Friday the 29th. See 15 U.S.C. § 1635(a).

“so long as the plaintiff alleges facts to support a theory that is not facially implausible, the court’s skepticism is best reserved for later stages of the pro- ceedings when the plaintiff’s case can be rejected on evidentiary grounds.” In re Gilead Sciences Securities Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008).

A complaint containing allegations that, if proven, present a winning case is not sub- ject to dismissal under 12(b)(6), no matter how unlikely such winning outcome may appear to the district court.

Tags: bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
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