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Koga v. Eastern Savings Bank, Fsb

United States District Court, Ninth Circuit

January 10, 2014

WENDELL TATSUMI KOGA, individually, as attorney in fact for Ichiyo Eko Koga, and as trustee of the William Tsugio Koga and Ichiyo Eko Koga Revocable Living Trust, dated February 4, 1991, Plaintiff,
v.
EASTERN SAVINGS BANK, FSB, Defendant. EASTERN SAVINGS BANK, FSB, Third-Party Plaintiff,
v.
WILLIAM J. VROOM; ALII FINANCIAL CORPORATION; PRIORITY ONE DEBT RELIEF SERVICES, LLC; JANICE M. K. GANITANO; and SONIA M. EVANS, Third-Party Defendants.

ORDER GRANTING WITH CONDITIONS PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO THE TILA RESCISSION CLAIM

DERRICK K. WATSON, District Judge.

INTRODUCTION

Before the Court is Plaintiff Wendell Tatsumi Koga's ("Wendell Koga"), individually, as attorney in fact for Ichiyo Eko Koga ("Ms. Koga"), and as trustee of the William Tsugio Koga and Ichiyo Eko Koga Revocable Living Trust (collectively, "Plaintiff"), Motion for Partial Summary Judgment as to the Truth in Lending Act ("TILA") Rescission Claim. Defendant Eastern Savings Bank, FSB ("ESB") opposed the Motion. A hearing was held on December 6, 2013. After careful consideration of the supporting and opposing memoranda, the accompanying documentation, and the relevant legal authority, the Motion is hereby GRANTED as to Plaintiff's rescission claim under Count I, although Plaintiff must tender $189, 837.87 to ESB as a precondition of the rescission.

BACKGROUND

The facts leading to this dispute were previously discussed by the Court in its Order Granting in Part and Denying in Part Defendant Eastern Savings Bank, FSB's Motion for Summary Judgment as to Counts I-V of Plaintiff's First Amended Complaint and can be referenced there. Dkt. No. 146, 2013 WL 4482426 (D. Haw. August 19, 2013) ("August 19 Order").

As a result of the Court's August 19 Order, Plaintiff's only surviving claims are the rescission portion of the TILA claim ("rescission claim")(Count I) and the claim challenging Ms. Koga's competence to enter into the loan agreement with ESB (Count VI). Plaintiff now moves for summary judgment as to the rescission claim.

STANDARD OF REVIEW

A party is entitled to summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "A fact is material' when, under the governing substantive law, it could affect the outcome of the case. A genuine issue' of material fact arises if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Thrifty Oil Co. v. Bank of Am. Nat'l Trust & Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

When evaluating a motion for summary judgment, the court must construe all evidence and reasonable inferences drawn therefrom in the light most favorable to the nonmoving party. See T.W. Elec. Serv., Inc. v. P. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir. 1987). Thus, the moving party has the burden of persuading the court as to the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. If the moving party satisfies its burden, the nonmoving party must set forth "significant probative evidence'" in support of its position. T.W. Elec. Serv., 809 F.2d at 630 (quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 290 (1968)). "A party asserting that a fact cannot be or is genuinely disputed must support the assertion, " and can do so by either "citing to particular parts of materials in the record" or by "showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed.R.Civ.P. 56(c)(1).

DISCUSSION

This Court analyzes (1) whether Plaintiff (regardless of any equitable conditions the court may impose on rescission) has a right to rescind the loan; and (2) if Plaintiff has a right to rescind, what equitable conditions should be placed on that rescission. The Court addresses these two issues in turn and concludes that while Plaintiff has a right to rescind, an equitable condition of that rescission requires Plaintiff to first tender to ESB $189, 837.87.

I. Plaintiff's Right to Rescind

Under 15 U.S.C. § 1635(a), a borrower has a right to rescind a consumer credit transaction that provides for a security interest in any property used as the borrower's principal dwelling. The borrower has "until midnight of the third business day following consummation of the transaction or the delivery of the information and rescission forms" to exercise that right. Id. However, when a lender fails to disclose to a borrower his or her right to rescind, or fails to provide material disclosures, the duration of the borrower's right to rescind extends for three years from the date the transaction was consummated. 12 C.F.R. § 226.23(a)(3); Jackson v. Grant, 890 F.2d 118, 120 (9th Cir. 1989). TILA defines "material disclosures" as disclosures of the annual percentage rate, the method of determining the finance charge and the balance upon which a finance charge will be imposed, the amount of the finance charge, the amount to be financed, the total of all payments, the number and amount of payments, the due dates or periods of payments scheduled to repay the indebtedness, and the disclosures required by Section 1639(a). 15 U.S.C. § 1602(u).

Even a purely technical violation of TILA's disclosure provisions, such as the failure to provide a borrower with two copies of the notice that include the correct date that the rescission period expires, extends the duration of the right to rescind for three years. See Semar v. Platte Valley Fed. Sav. & Loan Ass'n, 791 F.2d 699, 703-05 (9th Cir. 1986). TILA requires that loan documents state specifically the last date on which a borrower may rescind the loan agreement without penalty. Id. at 701; 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(b). If, as here, the lending institution fails to provide the Notice of a Right to Rescind or Notice of Right to Cancel altogether, the borrower may rescind the loan within three years after it was consummated. Semar, 791 F.2d at 701-702; see 12 C.F.R. § 226.23(a)(3) ("If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation, upon transfer of all ...


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