7/18/2019 Equitable Tolling Apply in TILA Rescission Cases

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Does Equitable Tolling apply in TILA

rescission cases?

Posted by Vondran Real Estate Litigation+ on March 1, 2015 · Leave a Coent 

Truth in Lending essentials – Can the three year right to rescind your mortgage

loan be equitably tolled?

Introduction

!r"th in lending la# is heating "$ once again% &e have tal'ed ()R *ER -."st search o"r blog

/or $roo/ abo"t (ederal !r"th in Lending ct -!L3 and ho# in any cases this is the ost $o#er/"l #ea$on a hoeo#ner or borro#er has #hen dealing #ith sec"riti4ed loan tr"sts and

other creditors% !hings are heating "$ once again given the recent decision in  Jesinoski v.Countywide Home Loans -a case dealing #ith a borro#er trying to rescind their ortgage loan

#ith an' o/ erica% 6oes e7"itable tolling a$$ly to !L ortgage loan rescission cases8

!his blog ta'es a loo' at this /ascinating legal iss"e%

Three year extended right to rescind your mortgage loan

s disc"ssed in the Beach v. Ocwen and Jesinoski 9nited tates "$ree Co"rt decisions belo#,

there is nothing to indicate that the 9nited tates "$ree Co"rt has any intention o/ a$$lying

e7"itable tolling to the !L loan rescission case to e:tend rescission right o"t beyond threeyears -eaning, the rights #ill need to be e:ec"ted #ithin the three year $eriod to be sa/e /ro a

stat"te o/ liitations attac'% ;o#ever, this blog disc"sses the conce$t o/ #hether there is ever achance that this #ill be the la#, and that e7"itable tolling in a !L case ay one day be the la#%

What is Equitable Tolling?

good case /ro the Cali/ornia "$ree Co"rt #hich disc"sses e7"itable tolling doctrine is McDonald v. Antelope Valley Cmty. Coll. Dist ., <5 Cal% <th ==, >>?100, 1>< P%@d 102A, 10@1?@2

-200=% !his case lays o"t soe good lang"age /or real estate /oreclos"re $ractitioners to

consider in a !L loan rescission case -in trying to deterine #hether it co"ld be arg"ed, in

good /aith, to e:tend, reverse or odi/y e:isting case la# in regard to #hen the e:tended threeyear right to rescind the ortgage loan endsB

!he e7"itable tolling o/ stat"tes o/ liitations is a udicially created! nonstatutory doctrine% t

is designed to $revent "n."st and technical /or/eit"res o/ the right to a trial on the erits #henthe $"r$ose o/ the stat"te o/ liitationstiely notice to the de/endant o/ the $lainti//Ds clais

 has been satis/ied% &here a$$licable, the doctrine #ill s"s$end or e:tend a stat"te o/ 

liitations as necessary to ens"re /"ndaental $racticality and /airness% !ho"gh the doctrine

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o$erates inde$endently o/ the lang"age o/ the Code o/ Civil Proced"re and other codi/ied so"rces

o/ stat"tes o/ liitations its legitimacy is unquestioned" &e have described it as a creat"re o/ 

the ."diciaryDs inherent $o#er to /or"late r"les o/ $roced"re #here ustice demands  it%roadly s$ea'ing, the doctrine a$$lies F#Ghen an in."red $erson has several legal reedies

and, reasonably and in good /aith, $"rs"es one% 3 !h"s, it ay a$$ly #here one action stands to

lessen the har that is the s"b.ect o/ a $otential second actionH #here adinistrative reedies"st be e:ha"sted be/ore a second action can $roceedH or #here a /irst action, ebar'ed "$on in

good /aith, is /o"nd to be de/ective /or soe reason% ts a$$lication in s"ch circ"stances serves

the need $or harmony and the a%oidance o$ chaos in the administration o$ ustice"3 !ollingeases the $ress"re on $arties conc"rrently to see' redress in t#o se$arate /or"s #ith the

attendant danger o/ con/licting decisions on the sae iss"e% y alleviating the /ear o/ clai

/or/eit"re, it a//ords grievants the o$$ort"nity to $"rs"e in/oral reedies, a $rocess #e have

re$eatedly enco"raged% !he tolling doctrine does so #itho"t co$roising de/endantsDsigni/icant interest in being $ro$tly a$$rised o/ clais against the in order that they ay

gather and $reserve evidence3 beca"se that notice interest is satis/ied by the /iling o/ the /irst

 $roceeding that gives rise to tolling% Lastly, tolling bene/its the co"rt syste by red"cing the

costs associated #ith a d"$licative /iling re7"ireent, in any instances rendering later co"rt $roceedings either easier and chea$er to resolve or #holly "nnecessary%3

)ther Cali/ornia co"rts have chied inB

!he doctrine o$ $raudulent concealment! #hich is udicially created! limits the typical

statute o$ limitations% F!Ghe de/endantDs $raud in concealing a cause o$ action against him

tolls the applicable statute o$ limitationsI%in artic"lating the doctrine, the co"rts have had as

their $"r$ose to disar a de/endant #ho, by his o#n deception! has caused a claim to become

stale and a plainti$$ dilatory% ee  Reents o! "niv. o! Cali!o#nia v. $upe#io# Cou#t , 20 Cal% <th

50>, 5@@, >JA P%2d =0=, =22 -1>>>%

n  $aeho#n v. %nle, 1<1 Cal% $$% <th <52, <A0?A1, <A Cal% R$tr% @d 1@1, 1@5 -200A theCali/ornia Co"rt o/ $$eals heldB

E7"itable tolling halts the r"nning o/ the liitations $eriod so long as the $lainti// "ses

reasonable care and diligence in atte$ting to learn the /acts that #o"ld disclose the de/endantDs

/ra"d or other iscond"ct%3 -< &right K Miller, (ederal Practice and Proced"re -@d ed% 2002

Coenceent o/ ction, 105A, $% 255% !he doctrine /oc"ses $riarily on the plainti!!&se:c"sable ignorance o/ the liitations $eriod% FCitation%G FtG is not available to avoid the

conse7"ences o/ oneDs o#n negligence%3 To establish that equitable tolling applies, a plaintiff 

must prove the following elements: fraudulent conduct by the defendant resulting in

concealment of the operative facts, failure of the plaintiff to discover the operative facts that 

are the basis of its cause of action within the limitations period, and due diligence by the

 plaintiff until discovery of those facts%3 o as a threshold iss"e in any ty$e o/ legal case !L or other#ise, #here any $arty #ants to rely on this legal doctrine, /acts to ."sti/y the i$osition

#o"ld need to be e:$lored to see i/ an honest and reasonable arg"ent can be ade%

&each %" 'c#en – is TILA () *"+"C" (,-).$/ an 0A&+'L*TE1 limit on the

time$rames to rescind under TILA? .+tatute o$ 2epose/

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!his is one o/ the ain tr"th in lending cases that disc"sses #hen the right to rescind a ortgage

loan "nder !L ends% !his case dealt #ith another borro#er challenge see'ing to rescind their 

ortgage loan over three years a/ter the cons"ation o/ the loan, and the Co"rt did not go /or it% !his case #as relied on by any other co"rts to deny any atte$ts to rescind a ortgage

 beyond three years /ro the date the loan #as cons"ated3 -#hich has been held to be a

atter o/ state by state la#%

 Beach v. Ocwen 'ed. Bank , 52@ 9%% <10, <1>, 11= % Ct% 1<0=, 1<1@, 1<0 L% Ed% 2d 5AA -1>>=heldB

ection 1A@5-/, ho#ever, ta'es "s beyond any 7"estion #hether it liits ore than the tie /or 

 bringing a s"it, by governing the li/e o/ the "nderlying right as #ell% !he s"bsection says nothingin ters o/ bringing an action b"t instead $rovides that the 0right o$ rescission 3under the Act4

shall expire1 at the end o$ the time period % t tal's not o/ a s"itDs coenceent b"t o/ a

right5s duration! #hich it addresses in ters so straight/or#ard as to render any liitation on

the tie /or see'ing a reedy s"$er/l"o"s% !here is no reason, then, even to resort to the canons

o/ constr"ction that #e "se to resolve do"bt/"l cases, s"ch as the r"le that the creation o/ a rightin the sae stat"te that $rovides a liitation is soe evidence that the right #as eant to be

liited, not ."st the reedyII#e res$ect CongressDs ani/est intent by concl"ding that the ct $erits no $ederal right to rescind! de$ensi%ely or other#ise! a$ter the -6year period o$ 7

(,-).$/ has run% ccordingly, #e a//ir the ."dgent o/ the "$ree Co"rt o/ (lorida%

n short, the "$ree Co"rt sho#ed no intent to lengthen the stat"tory $eriod beyond three

years, and the recent Jesinoski decision did not overr"le each v% )c#en -#hile also citing thecase in its decision% o these decisions #o"ld a$$ear to a'e it di//ic"lt to bring an e7"itable

tolling clai in a !L loan rescission case% "t thats not the end o/ the disc"ssion%

+ome cases that might suggest a right to equitably toll () *"+"C" (,-).$/

!hese cases need to be considered care/"lly, and yo" #ill $robably #ant a s'illed attorney to

loo' into these ty$es o/ e7"itable tolling clais% ttorney in ost states are norally $eritted

to arg"e /or good /aith changes, odi/ications, and reversal to e:isting case la#% -n Cali/orniasee ethical r"le @?200% &hen there are $eo$le dying o/ cancer, have /aily hoes e7"i$$ed #ith

6 ra$s and rails, and other elderly $ersons soc'ed a#ay into $redatory negative

aorti4ation o$tion ar loans, all tools available to the /oreclos"re de/ense co"nsel to advocateon behal/ o/ the client sho"ld be e:$lored% Please do not rely on these decisions as o"r 

inter$retation ay not be acc"rate% !hese are si$ly $resented as soe things to thin' abo"t i/ yo" are re$resenting a borro#er o/ a ban'%

A" Rodenhurst v. Bank of Am.! 88- 9" +upp" :d ;;,! ;<-6<= .D" >a#" :((/

!his case notedB

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n its entirety, 15 9%%C% 1A@5-/ $rovidesB

n obligorDs right o/ rescission shall e:$ire three years a/ter the date o/ cons"ation o/ the

transaction or "$on the sale o/ the $ro$erty, #hichever occ"rs /irst, not#ithstanding the /act thatthe in/oration and /ors re7"ired "nder this section or any other disclos"res re7"ired "nder this

 $art have not been delivered to the obligor, e:ce$t that i/ -1 any agency e$o#ered to en/orce

the $rovisions o/ this s"bcha$ter instit"tes a $roceeding to en/orce the $rovisions o/ this section#ithin three years a/ter the date o/ cons"ation o/ the transaction, -2 s"ch agency /inds a

violation o/ this section, and -@ the obligorDs right to rescind is based in #hole or in $art on any

atter involved in s"ch $roceeding, then the obligorDs right o/ rescission shall e:$ire three yearsa/ter the date o/ cons"ation o/ the transaction or "$on the earlier sale o/ the $ro$erty, or "$on

the e:$iration o/ one year /ollo#ing the concl"sion o/ the $roceeding, or any ."dicial revie# or 

 $eriod /or ."dicial revie# thereo/, #hichever is later%

15 9%%C% 1A@5-/H see also 12 C%(%R% 22A%2@-a-@ -F!Ghe right to rescind shall e:$ire @

years a/ter cons"ation, "$on trans/er o/ all o/ the cons"erDs interest in the $ro$erty, or "$on

sale o/ the $ro$erty, #hichever occ"rs /irst%3% @lainti$$s here executed the applicable loan

documents on arch :-! :8! but sought rescission on ay :! :( ore than three years

a/ter the cons"ation o/ the transaction% FectionG 1A@5-/ is a statute o$ repose! de$rivingthe co"rts o/ s"b.ect atter ."risdiction #hen a 1A@5 clai is bro"ght o"tside the three?year 

liitation $eriod% ee  Miuel v. Count#y 'undin Co#p.( @0> (%@d 11A1, 11A< ->th Cir%2002%ccordingly, beca"se Plainti//sD right to rescind e:$ired be/ore Plainti//s sent rescission re7"ests

or /iled the instant Co$laint, Plainti//sD rescission clai "nder !L is "ntiely%3

!his analysis a$$eared to end the clai, b"t the Co"rt arched on #ith itDs analysisB or are the allegations here sufficient to satisfy equitable tolling.  !he (irst ended

Co$laint $leads no /acts indicating 6e/endant o/ prevented !laintiffs from discovering the

alleged T"#A violations or caused !laintiffs to allow the filing deadline to pass % $ee( e..(O&Donnell v. Venco# )nc.( <AA (%@d 110<, 1112 ->th Cir%200A -E7"itable tolling is generally

a$$lied in sit"ations #here the claiant has actively $"rs"ed his ."dicial reedies by /iling a

de/ective $leading d"ring the stat"tory $eriod, or where the complainant has been induced or tricked by his adversary$s misconduct into allowing the filing deadline to pass.3 -citation and7"otation ar's oittedH see also A#aki v. One *est Bank '$B( Civ% o% 10N0010@ OMQC,

2010 &L 5A25>A>, at ANJ -6%;a#aiDi e$t% =, 2010%

 B. %ones v. &a'on (ortgage, "nc.! <; 9" +upp" ;=:! ;=)6=, .E"D" Ba" (<<8/ aff$d,

(,( 9"-d : .=th Cir" (<<;/ and aff$d, )-8 9"-d -: .=th Cir" (<<;/

n this case, the Co"rt heldBSenerally, stat"tes o/ liitations and stat"tes o/ re$ose are not s"b.ect to e7"itable tolling%

-ty$ically, stat"tes o/ re$ose are not s"b.ect to tolling%  But see +#eyhound Co#p. v. Mt. Hood $taes )nc.( <@J 9%% @22, @@J n% 21, >= %Ct% 2@J0, 2@J= n% 21, 5J L%Ed%2d 2@> -1>J= .statute

o$ repose may be subect to equitable tollingH id.  at @@=, >= %Ct% at 2@J> -C%O%"rger,conc"rringH Ame#ican ,ipe and Const#uction Co. v. "tah( <1< 9%% 5@=, 55=, >< %Ct% J5A, JA=,

@= L%Ed%2d J1@ -1>J<H Bu#nett v. -ew o#k Cent#al R.R. Co.( @=0 9%% <2<, <2J n% 2, =5 %Ct%

1050, 105< n% 2, 1@ L%Ed%2d ><1 -1>A5% C!. /in v. Cali!o#nia( J=< (%2d >10, >15 ->th Cir%1>=A-$inding the TILA5s one year limitation on damages subect to equitable tolling ce#t.

denied( <=< 9%% =02, 10= %Ct% <J, >= L%Ed%2d 11 -1>=J% The )ourt of Appeals for this circuit 

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has not decided whether the rescission period provided in * +-/f0 is a statute of limitation or 

as a statute of repose% ;o#ever, no atter #hich characteri4ation is ascribed to  *+-/f0, this

action is barred unless the limitation period was tolled.  (or the reasons #hich /ollo#, Oonescannot $revail on his tolling theory% !he doctrine o/ e7"itable tolling is a$$lied s$aringly% Oones

relies on t#o o/ the several $ossible gro"nds /or e7"itable tolling% (irst, Oones alleges $raudulent

concealment, claiing that he has been induced or triced by his ad%ersary5s misconductinto allo#ing the $iling deadline to pass"3 )d. -citing +lus v. B#ooklyn %aste#n Dist. 0e#minal(

@5> 9%% 2@1, J> %Ct% JA0, @ L%Ed%2d JJ0 -1>5>% econd, ones asserts that equitable

estoppel applies here beca"se he has actively $"rs"ed his ."dicial reedies by /iling a de/ective $leading d"ring the stat"tory $eriod3%  )#win( <>= 9%% at >A, 111 %Ct% at <5= -citing Bu#nett v.

 -ew o#k Cent#al R.R. Co.( @=0 9%% <2<, =5 %Ct% 1050, 1@ L%Ed%2d ><1 -1>A5% !hese general

 $rinci$les, ho#ever, "st be considered in the conte:t o/ e7"ityDs basic r"le that 3o4ne #ho

$ails to act diligently cannot in%oe equitable principles to excuse that lac o$ diligence %3 Baldwin County *elcome Cente# v. B#own( <AA 9%% 1<J, 155, 10< %Ct% 1J2@, 1J2JN2=, =0

L%Ed%2d 1>A -1>=<% !his $rinci$le /inds e:$ression in the tolling theories on #hich Oones relies%

s e:$lained belo#, Oones has not acted diligently and /or that reason and others, his clai o/ 

tolling "st /ail%3!he Co"rt then #ent on to disc"ss the /ra"d"lent concealent $rongB

09raudulent Concealment

!o invo'e the doctrine o/ /ra"d"lent concealent as a gro"nds /or e7"itable tolling, a $lainti// 

"st deonstrate thatB -1 the pa#ty pleadin the statute o/ liitations !#audulently concealed 

/acts that are the basis o/ the $lainti//Ds clai, and -2 the $lainti// /ailed to discover those /acts#ithin the stat"tory $eriod, des$ite -@ the e:ercise o/ d"e diligence% 3 $upe#ma#ket o! Ma#linton )nc. v. Meadow +old Dai#ies( )nc.( J1 (%@d 11>, 122 -<th Cir%1>>5 -citing *ein1e#e# v. Retail 

C#edit Co.( <>= (%2d 552, 555 -<th Cir%1>J< -e$hasis added% Oones clai o/ /ra"d"lent

concealent is based on the /ail"re o/ Lenders and the ro'er to o#n "$ to their i$ro$er 'ic'bac' arrangeent% !h"s, this clai o/ /ra"d"lent concealent /ails si$ly beca"se neither 

a:on nor !C, the $arties $leading the bar o/ the stat"te, /ra"d"lently concealed /acts that #ere

the basis /or Oones !L clais%3

gain, the /acts o/ these cases sho"ld be closely revie#ed and yo"r case /acts need to be a$$liedto see i/ there is any credible arg"ent to be ade%

Contact a mortgage lending real estate la# $irm be$ore taing any action in

regard to TILA loan rescission

!hese cases a'e clear that it a$$ears there is roo /or good /aith disc"ssion in this area #hen!L rights are concerned% Clearly the la# as it stands s"$$orts the $osition that there is no

e7"itable tolling in regard to a three year e:ercising o/ /ederal loan rescission rights% "t 'ee$ inind la#yers and litigants are allo#ed to arg"e /or good /aith e:tension, odi/ication, or 

reversal o/ e:isting la#% / not e$arate b"t E7"al #o"ld still be the la#% ;o#ever, it a$$ears it#o"ld ta'e a case #ith "ni7"e /acts to be able to assert e7"itable tolling% a s"re #e #ill see

soe challenges #here the a$$ro$riate /act $atterns s"$$orts a$$lication o/ this e7"itable legal

doctrine designed to $revent in."stice% &e are handling !L rescission and reco"$ent clais/or Plainti//Ds and 6e/endants in state, /ederal, and ban'r"$tcy Co"rt adversary $roceedings% Call

"s at -=JJ 2JA?50=< to disc"ss yo"r case #ith tr"th in lending legal co"nsel%