Statute of Limitations – Rescission

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7^th Circuit Court of Appeals

Case Name: James Fendon v. Bank of America, N.A.

Case No.: 17-1718

Officials: WOOD, Chief Judge, and EASTERBROOK and HAMILTON, Circuit Judges.

Focus: Statute of Limitations – Rescission

In 2007 James Fendon borrowed money from Bank of America; the loan was secured by a mortgage on his home. A borrower may rescind such a transaction for any reason within three days and for some reasons within three years. See 15 U.S.C. §1635 (part of the Truth in Lending Act); Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015). Fendon alleges that he notified the Bank on August 15, 2008; April 16, 2009; and June 17, 2010, that he was rescinding the loan, and that the Bank ignored the first two notices and rejected the third. In 2011 the Bank filed a foreclosure action in state court, and on March 23, 2016, a state court entered a final judgment confirming the foreclosure sale. That same day Fendon filed this suit under the Act seeking rescission and any other available relief. By the time Fendon began this suit it was too late to un‐ wind the transaction, because the property securing the loan had been sold. Federal district courts lack authority to revise the judgments of state courts. See Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983).

Instead it relies on a different affirmative defense: the statute of limitations. The Bank maintains, and the district judge held, that the suit is untimely under 15 U.S.C. §1640. See 2017 U.S. Dist. LEXIS 33236 at *11–13 (N.D. Ill. Mar. 8, 2017). Section 1640(a)(1) authorizes awards of damages for violations of the Act, including §1635. The first sentence of §1640(e) then sets a one‐year period of limitations for any claim under §1640 as a whole. The second and later sentences of §1640(e) provide some exceptions, but none of those applies.

Fendon insists that no statutory time limit applies to claims for rescission. He notes, as the Supreme Court held in Jesinoski, that §1635(f) gives a borrower three years to notify the creditor of an election to rescind when the creditor failed to provide information required by the Act. Fendon’s notices all came within three years of the date he signed the note and mortgage. Section 1635 does not specify a time limit for suit if the creditor fails to acknowledge or implement a proper rescission. This means, Fendon tells us, that there is no federal statute of limitations for claims based on §1635. Yet §1640 expressly provides otherwise for damages actions. Section 1640(a) authorizes money damages for violations of §1635, and §1640(e) sets a one‐year period of limitations for suits under §1640(a).

Affirmed

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.