Laseter v. Climateguard Design & Installation, LLC

931 F.Supp.2d 862

Wendell J. LASETER, Jr. and Cassandra M. Laseter, Plaintiffs,

v.CLIMATEGUARD DESIGN & INSTALLATION, LLC and Admirals Bank, formerly known as Domestic Bank, Defendants.

No. 12 CV 3719.

United States District Court,

N.D. Illinois,

Eastern Division.

March 14, 2013.

Daniel A. Edelman, Cathleen M. Combs, James O. Latturner, Thomas Everett Soule, Edelman, Combs, Latturner & Goodwin, LLC, Chicago, IL, for Plaintiffs.

Robert Michael Knabe, Attorney at Law, Gregory Abbott Bedell, Chicago, IL, Ian Brenson, Law Offices of Ian Brenson, La Grange, IL, for Defendants.

MEMORANDUM OPINION and ORDER

YOUNG B. KIM, United States Magistrate Judge.

Wendell and Cassandra Laseter entered into a contract with ClimateGuard Design & Installation, LLC (“ClimateGuard”) to purchase a new roof for their house, and took out a mortgage from Admirals Bank (“Admirals”) to finance the project. Two years later the roof began to leak, requiring thousands of dollars' worth of repair. The Laseters brought this suit against Climateguard and Admirals seeking rescission of the mortgage under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1635, alleging that the defendants omitted material disclosures from the Truth In Lending Disclosure Statement they included in the financing documents. The suit includes a second count for breach of contract under state law. Currently before the court is Admirals's motion to dismiss the Laseter's TILA claim either for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), or alternatively, under Rule 12(b)(6) for failure to state a claim.¹ For the following reasons, the motion is denied:

Facts

The Laseters allege the following facts, which, for purposes of the current motion to dismiss—whether for lack of jurisdiction or for failure to state a claim—this court accepts as true. See Independent Trust Corp. v. Stewart Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir.2012); see also Lagen v. United Cont'l Holdings, Inc., 920 F.Supp.2d 912, 914, 12 CV 4056, 2013 WL 375213, at *2 (N.D.Ill. Jan. 31, 2013). On August 14, 2009, ClimateGuard representatives visited the Laseters' home and sold them a new roof. (R. 1, Compl. ¶ 10.) That same day, the Laseters signed a “sales/retail installment contract,” which included a section labeled “Disclosures Required by Federal Law.” (Id. ¶ 11 & Ex. A.) Those disclosures included only “estimates” of key terms, like the annual percentage rate, total of payments, and number of payments. (Id. ¶ 12 & Ex. A.) After the Laseters signed the sales contract, ClimateGuard—which had a prior arrangement with Admirals (then d/b/a Domestic Bank) for the referral of clients—arranged for the Laseters to take out a mortgage from Admirals to pay for the new roof. (Id. ¶¶ 13–14.) Two weeks after the Laseters signed the sales contract, they signed the loan documents. (Id. ¶ 15 & Exs. C–E.)

Among the documents the Laseters received or signed in connection with the mortgage, Admirals provided them with a Truth–In–Lending Disclosure Statement. (Id. ¶ 15 & Ex. C.) In the top third of that document are boxes setting forth the annual percentage rate (“APR”), finance charge, amount financed, total of payments, and a payment schedule conveying the number and amount of payments and the date on which the first payments are due. (Id. Ex. C.) Those boxes do not disclose the interval or schedule of the payments. (Id. ¶ 16 & Ex. C.) On a separate page, however, Admirals provided a schedule setting forth the number and amount of payments, and stating that those payments are due “monthly.” (Id. Ex. C.)

Two years after ClimateGuard installed the Laseter's new roof, it began to leak. (Id. ¶ 17.) When the Laseters complained to ClimateGuard about the leaky roof, it refused to remedy the problem, saying it was no longer in the roofing business. (Id. ¶¶ 19–20.) The Laseters estimate that repairing the roof will cost them in the range of $6,900 to $9,950. (Id. ¶ 21.) They now invoke what they assert is their right to rescind the mortgage under TILA, alleging that the payment schedule was improperly disclosed and that the process of requiring them to sign financing documents two weeks after they signed a binding sales contract is “confusing and obfuscatory.” (Id. ¶ 26.) The Laseters also seek damages stemming from ClimateGuard's alleged breach of contract. (Id. ¶ 33.)

Analysis

In the current motion to dismiss count one of the complaint, Admirals argues that the Laseters' claim for rescission under TILA is untimely and therefore must be dismissed either for lack of subject matter jurisdiction or for failure to state a claim. TILA gives a consumer three days following the consummation of a loan to rescind the agreement, unless the lender does not deliver required material disclosures, in which case the right to rescind extends to three years. 15 U.S.C. § 1635(a), (f); 12 C.F.R. § 1026.23(a). The Laseters gave notice of their intent to rescind the agreement on April 18, 2012, less than three years after they entered into the loan agreement. (R. 1, Compl. Exs. C & H.) Admirals argues that the Laseters are not entitled to the three-year rescission period, and that therefore their notice is untimely and their federal claim time barred. Admirals argues that the Truth–In–Lending Disclosure Statement attached to the Laseters' complaint is clear on its face and that there is nothing objectively confusing about entering into a sales contract two weeks before signing the financing documents to fund the work described in the sales contract. (R. 19, Mot. at 5–6.) In response, the Laseters defend their invocation of the three-year rescission period, arguing that the disclosure statement failed to properly disclose the loan's payment schedule and that separating the execution of the sales contract from the execution of the loan documents by two weeks is a practice that is likely to confuse the ordinary consumer. (R. 22, Resp. at 8–12.)

This court must begin its analysis of the motion by addressing the jurisdictional question. Admirals has not cited any cases to support its argument that this court lacks subject matter jurisdiction to review a claim brought under TILA where the notice of rescission is untimely. The Supreme Court has interpreted TILA's three-year rescission period as a statute of repose, see Beach v. Ocwen Fed. Bank, 523 U.S. 410, 419, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998), meaning that it “ ‘serves as an unyielding and absolute barrier to a cause of action, regardless of whether that cause has accrued,’ ” see McCann v. Hy–Vee, Inc., 663 F.3d 926, 930 (7th Cir.2011) (quoting Klein v. DePuy, Inc., 506 F.3d 553, 557 (7th Cir.2007)). Although some circuits have characterized TILA's three-year limitation on the right of rescission as being jurisdictional, see, e.g., Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir.2002), the Seventh Circuit has made clear that in its view, “there is nothing jurisdictional about § 1635(f)'s period of repose,” Doss v. Clearwater Title Co., 551 F.3d 634, 639 (7th Cir.2008). Instead,the three-year limitation serves as “merely a precondition to a substantive right of relief.” Doss, 551 F.3d at 639. The Laseters interpreted Admirals's motion to dismiss as asserting that this court lacks jurisdiction over their TILA claim because it believes the claim to be meritless. But as they point out, “[j]urisdiction ... is not defeated ... by the possibility that the averments might fail to state a cause of action on which petitioners could actually recover. For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.” See Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946). Because Admirals has not shown that this court lacks jurisdiction to review the Laseters' TILA claim, this court will view the current motion through the lens of Rule 12(b)(6).

Admirals's substantive argument is that TILA's statute of repose bars the Laseters' TILA claim because the Laseters failed to meet the precondition to their claim by filing a timely notice of rescission. A statute of repose is an affirmative defense, and “[c]omplaints need not anticipate or attempt to defuse potential defenses.” See Doe v. Smith, 429 F.3d 706, 709 (7th Cir.2005). But dismissal under Rule 12(b)(6) is appropriate where a complaint “sets out all of the elements of an affirmative defense,” see Independent Trust Corp., 665 F.3d at 935, such as where “the facts pleaded in the complaint establish that a claim is time barred,” Logan v. Wilkins, 644 F.3d 577, 582 (7th Cir.2011). Although technically, where allegations “show that there is an airtight defense” based on a limitations period, dismissal should be sought through a motion for judgment on the pleadings under Rule 12(c), but “this comes to the same thing as a dismissal under Rule 12(b)(6),” and the Seventh Circuit has used the two rules “interchangeably.” See Richards v. Mitcheff, 696 F.3d 635, 637–38 (7th Cir.2012).

Whether the Laseters are bound by the three-day or three-year rescission period—and thus whether their TILA claim is time-barred—turns on the adequacy of the disclosures Admirals provided them when the loan was signed. See15 U.S.C. § 1635(a), (f); 12 C.F.R. § 1026.23. TILA was designed to benefit consumers by helping them “to compare more readily the various credit terms available to [them] and avoid the uninformed use of credit.” 15 U.S.C. § 1601(a); see also Handy v. Anchor Mortg. Corp., 464 F.3d 760, 762 (7th Cir.2006). In support of that goal, the regulations implementing TILA mandate that for each transaction involving a mortgage security, the creditor must disclose, among other things, the amount financed, the finance charge, the APR, the variable rate, the total of payments, and the payment schedule. See12 C.F.R. § 1026.18. The sufficiency of a creditor's disclosures is an objective question, se...