Case Law Newsletter

Noonan and Lieberman keeps you current on litigation news with its regular Case Law Update focusing on important and emerging trends in federal and state case law. Case Law Update is edited by attorney James V. Noonan.

Sign up for the list

The newsletter is sent out monthly.

Archive

January 2008

Strict compliance with Tax Code excused in late redemption of sold taxes

Attached is In Re Application of County Treasurer (Hawkeye Investment v. Lanz) 1-06-3387 (Dec. 28, 2007) which is notable for the court’s refusal to strictly apply the Tax Code in an attempt by a homeowner to redeem after the period to redeem expired. It also holds that Section 22-45 of the Tax Code, which Tax buyers routinely invoke to limit a parties ability to attack a tax deed, is implicated only where a tax deed has already been issued. It applies only where the movant is trying to vacate a tax deed. It doesn’t apply merely where the period of redemption expires or where the order granting a tax deed has been entered.

Failure to advise insurer of foreclosure constituted “increase in hazard” allowing insurer to disallow coverage.

A recent opinion from Tennessee that has generated some concern in the servicing industry. In US Bank, N.A. v. Tennessee Farmers Mutual Ins. Co., No. W2006-02536-COA-R3-CV (Tenn. Ct. App. Dec. 21, 2007) the bank initiated foreclosure proceedings but did not notify the insurance company. Before the foreclosure process was complete, the house was destroyed by a fire. The bank notified the insurance company of the loss and the insurer denied and cancelled coverage. The insurance company asserted that the foreclosure proceedings constituted an increase in hazard of which the bank was required to notify the insurance company. The policy required the Bank to “notify [the insurer] of any change in ownership or occupancy or any increase in hazard of which [the Bank] has knowledge.” The court found that that the initiation of foreclosure proceedings constituted an “increase in hazard”. The court also found that the Bank had a duty under Tennessee insurance law to notify the insurer of the commencement of foreclosure proceedings, as this was an “increase of hazard.” The court reversed summary judgment for the Bank and concluded that the insurer was right in denying and cancelling coverage.

Getting around that tricky problem of proving that borrowers received two copies of the notice of the right to rescind required under TILA made a bit easier.

Two recent district court cases are noteworthy for their treatment of the proof required to defend a TILA claim seeking rescission for failure to provide the required number of copies of the right to cancel; one disposing of the claim on summary judgment and the other on a motion to dismiss. In the first case, Parker v. Long Beach Mortg. Co. Slip Copy, Civil Action No. 06-2002 (E.D.Pa., January 02, 2008), the District Court for the Eastern District of Pennsylvania held that the borrower’s testimony that disclosures were not provided, without more, was insufficient to rebut the presumption that disclosure occurred where there is written acknowledgment of receipt. Relying on McCarthy v. Option One Mortgage Corp., 362 F.3d 1008, 1011 (7th Cir.2004) (finding mere assertion of non-receipt insufficient to rebut written evidence that disclosures were provided) and Gaona v. Town & Country Credit, 324 F.3d 1050, 1054 (8th Cir.2003) (finding allegations that disclosures were not provided insufficient to rebut presumption) the court found the borrowers claims that they do not remember receiving the required notices as insufficient to overcome the presumption that they received the required number of copies of the Truth-in-Lending notices.

In Reck v. Town & Country Credit Corp. Civil No. 07-3756 ADM/JSM (D.Minn., January 03 2008) a Minnesota District Court held that the borrowers could not even state a claim under TILA without first alleging facts to overcome the presumption of delivery. The court held that the borrower’s signed acknowledgment created a presumption of receipt and that the plaintiff has not alleged any basis to overcome that presumption. Presumably the forms were attached to the complaint which entitled the creditor to argue persuasively that it had evidence the borrower received and signed the notice of the right to cancel.

Lender fails in bringing Yamamoto motion by not establishing evidence that the borrower could not tender the loan proceeds in the event of rescission.

In Williams v. Saxon Mortg. Co. 06-0799-WS-B (S.D.Ala., January 02, 2008) the lender unsuccessfully and prematurely invoked the Ninth Circuit’s ruling in Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir.2003) to obtain judgment against a borrower. In moving for summary judgment on a TILA rescission claim, the lender asked the court to enter judgment because it was “doubtful” that the borrower had the ability to tender the loan proceeds in the event the court ordered rescission. The court held that the lender’s request that the Court order the borrower to produce “definitive evidence” of their ability to tender the necessary rescission amounts improperly shifts the lenders burden on summary judgment to the non-movant to produce evidence of that fact. The court chided the lender for not exploring in discovery whether the borrower had the means to tender. The court said it will not in effect “conduct discovery” for the lender by requiring the borrower to produce evidence of their ability to pay, when such information could and should have been elicited during the discovery process. The court also found that evidence produced by the borrower showed that he could pay the full balance of the loan within a reasonable time period if rescission were ordered. It joined two other courts who recently have denied judgments to lenders on the theory that the borrower’s cannot demonstrate their ability to tender. See, Jones v. Rees-Max, LLC, 514 F. Supp .2d 1139 (D.Minn.2007) and Johnson v. Chase Manhattan Bank, USA N.A., 2007 WL 2033833, (E.D.Pa. 2007).