Bank of New York Mellon (hereinafter referred to as “BNYM”), had brought an application for summary judgment against the Kahn defendants in a foreclosure legal action. BNYM sought to have the Kahn’s Answer and Counterclaims dismissed. The Kahn’s cross-moved for partial summary judgment. They claimed, in their counterclaim, there was a violation of the Truth in Lending Act.
Mortgage Loan Assigned
The Kahns, after initially purchasing their home, refinanced their mortgage with Countrywide Home Loans. Countrywide Home Loans assigned the mortgage to BNYM. BNYM had initiated the proceeding to foreclose on the Kahns’ home. The Kahns had submitted an Amended Answer. In their Amended Answer they sought to assert a rescission claim. This rescission counterclaim alleged a violation of the Truth in Lending Law by Countrywide Home Loans. They claimed that Countrywide had understated the finance charges by more than $35 in the required Mortgage Financial Disclosure Statement. They claim this was a material misrepresentation in the mortgage disclosure statement. BNYM argued the rescission claim was not presented in a timely manner. They claimed the Amended Answer was served more than three years after the time of closing and therefore in violation of the statute of limitations with regard to the legal theory of rescission.
Relation Back Doctrine Doesn’t Toll the Statute of Limitations
Judge Anil Singh ruled the relation back doctrine alleged by the Kahns did not apply in deciding whether a claim to rescind a transaction was timely made. Judge Singh also noted when rescinding a transaction the timing of the rescission notice is based on when the creditor receives the notice. In this case, Judge Singh held the notice to rescind the matter was received more than three years after the transaction took place and therefore was beyond the statute of limitations for rescinding the transaction. Therefore Judge Singh held the Kahns could not assert the right to rescind this transaction in their counterclaim in the pending foreclosure proceeding. Summary judgment by BNYM was granted and the Kahns partial summary judgment was denied.
Conclusion
The Kahns in this case created a very innovative defense to the foreclosure proceeding. Their defense basically stated there had been a violation of the Truth in Lending Law, albeit a very small violation, involving $35 by Countrywide Home Loans at the time of the refinance. Therefore because of this violation they were rescinding the entire transaction. The court in this case held there was a three year statute of limitations with regard to rescinding a transaction of this type. Therefore the Kahns had to provide Countrywide Home Loans notice with the rescission within three years from the date of the closing. In this case, the Kahns provided Countrywide Home Loans notice of the rescission as part of a counterclaim alleged more than three years after the date of closing. Judge Singh held the Kahn’s argument that their counterclaim, submitted in the foreclosure lawsuit, should be considered to be related back to the time of the closing.
I like the argument. If I was the judge, I would have upheld it!