Fuller v. Deutsche Bank National Trust Co.

Citation: 642 F.3d 240Docket: No. 10-1642

Court: Court of Appeals for the First Circuit; April 21, 2011; Federal Appellate Court

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David and Betsy Fuller purchased land in Tyngsboro, Massachusetts, in 1991, and refinanced their mortgage in 2003 with a $256,500 loan from Encore Credit Corp. The loan closed on August 12, 2003, but was scheduled for August 11. The mortgage was later assigned to Deutsche Bank National Trust Co. The Fullers defaulted on payments, leading Deutsche Bank to initiate foreclosure proceedings in 2008, which the Fullers contested by filing a Chapter 13 bankruptcy petition. On April 11, 2008, they sought rescission of the mortgage in bankruptcy court, alleging that Encore failed to provide proper closing and rescission dates, as well as required 'high cost home mortgage loan' disclosures. They also claimed damages under Chapter 93A of the Massachusetts General Laws due to Deutsche Bank's non-compliance with their rescission request. The bankruptcy court granted Deutsche Bank summary judgment on October 6, 2009, which was affirmed by the district court after the Fullers' motion for reconsideration was denied. The Fullers then appealed, asserting inadequate notice of their rescission rights under the Massachusetts Consumer Credit Cost Disclosure Act, which mirrors the federal Truth in Lending Act (TILA). They argued that, despite the four-year statute of limitations, rescission is possible after foreclosure if proper notice was not provided. They pointed out discrepancies in the disclosure forms, which inaccurately stated the loan closing date and failed to specify the rescission expiration date.

The Fullers provided an unsigned 'Notice of Right to Cancel' disclosure form from their mortgage closing, which stated they had the legal right to cancel the transaction within three business days following specific events related to their mortgage. Deutsche Bank submitted signed copies of the same forms with three notable differences: the Fullers had signed and dated them August 12, 2003; the transaction date was altered from August 11 to August 12; and a rescission date of August 15 was handwritten. While the Fullers acknowledged signing the forms, they contested the timing and authorship of the handwritten changes, asserting they would not have signed without initialing those changes. The bankruptcy court determined it unnecessary to resolve the factual discrepancies, noting that either party's account would imply significant misrepresentation regarding the mortgage transaction. Citing Melfi v. WMC Mortgage Corp., the court emphasized that under the Truth in Lending Act (TILA), technical deficiencies are irrelevant if adequate notice of rescission rights is provided, which the Fullers received. They argued that Massachusetts courts might not adopt the Melfi interpretation of TILA for the state credit statute; however, the Massachusetts statute was closely modeled after TILA and aimed to align with its requirements, as affirmed by the Supreme Judicial Court.

Massachusetts courts align with federal court interpretations when state statutes closely follow federal statutes, as established in cases like Lynch and Packaging Industries Group. In Mayo v. Key Financial Services, the court indicated that federal decisions are relevant for interpreting the Massachusetts credit statute, which is modeled after the Truth in Lending Act (TILA). Massachusetts courts apply a liberal construction to consumer protection statutes, aiming to protect consumers while not allowing rescission for non-harmful technical defects. The Fullers sought certification to the Supreme Judicial Court after losing in bankruptcy, but their request was denied, as certification is typically not granted for cases grounded in unique factual scenarios.

The Fullers claimed they did not receive required disclosures for a "High Cost Home Mortgage Loan." Although the Massachusetts regulations mandate a specific warning on the loan application, it was only provided separately at closing. Deutsche Bank argued for an exception allowing deferred warnings, but did not prove that it was unaware of the loan's status at the application stage. The Fullers did not act within the three-day rescission period after receiving the disclosure, waiting almost five years instead. Their claim for damages under chapter 93A of the Massachusetts General Laws related to Deutsche Bank's failure to rescind the mortgage was also rejected, as there was no valid right to rescind. The court affirmed the dismissal of the Fullers’ claims, noting the timeliness of their request for rescission was conceded by Deutsche Bank, thereby not addressing the limitations argument further.