Mavis Hartman v. Brian Smith

United States Court of Appeals
For the Eighth Circuit
___________________________

No. 12-1947
___________________________

Mavis Hartman, Roger Hartman,
and Maul Lee Hartman

lllllllllllllllllllll Plaintiffs - Appellants

v.

Brian J. Smith, Jennifer Smith,
and Prime Security Bank

lllllllllllllllllllll Defendants - Appellees

Midwest Equity Consultants, Inc., a Minnesota
corporation, and Midwest Equity Consultants,
Inc., an Illinois Corporation

lllllllllllllllllllll Defendants
___________________________

No. 12-2012
___________________________

Mavis Hartman, Roger Hartman,
and Maul Lee Hartman

lllllllllllllllllllll Plaintiffs - Appellees

v.

Prime Security Bank

lllllllllllllllllllll Defendant - Appellant
 Brian J. Smith, Jennifer Smith,
Midwest Equity Consultants, Inc.,
a Minnesota corporation, and
Midwest Equity Consultants, Inc.,
an Illinois Corporation

lllllllllllllllllllll Defendants
____________

Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________

Submitted: February 13, 2013
Filed: August 19, 2013
____________

Before SMITH, MELLOY, and BENTON, Circuit Judges.
____________

SMITH, Circuit Judge.

Roger and Mavis Hartman, a married couple, (collectively, "the Hartmans")
and their daughter, Maul Lee Hartman, (collectively, "the plaintiffs") filed suit
seeking damages and rescission under TILA and asserting various state law claims
against persons and entities involved in transactions related to the financing of an
addition to a house on their property. The district court granted summary judgment
to defendants on the TILA rescission claim, dismissed several other claims, and then
held a jury trial on the rest. The jury found for the defendants on all remaining claims,
and the court entered judgment in favor of the defendants. The plaintiffs now appeal,
arguing that the district court erred in granting summary judgment and in dismissing
various claims before trial. Defendant Prime Security Bank ("Prime") cross-appeals,
arguing that the court erred in finding that the plaintiffs' notice was sufficient to

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exercise the TILA statutory right of rescission. We reverse on the notice issue, but
otherwise affirm the judgment of the district court.

I. Background
The Hartmans jointly owned an unimproved property located in Carver County,
Minnesota. The city of Victoria issued the Hartmans a permit to build a structure on
the property for non-residential use. Roger Hartman built a single-family dwelling on
the property and moved into the home. Several years later, on June 23, 2006, the
Hartmans filed a plat with the county that identified the property as Block 1, Lot 2 of
the Hartman Addition Plat 3. The Hartmans recorded the property in the real estate
records exclusively in the name of Mavis Hartman. On August 3, 2006, Mavis signed
and delivered a quitclaim deed for the property to Maul Lee Hartman, and filed the
quitclaim deed with the Carver County Office of the Registrar of Titles. Roger did not
sign the quitclaim deed.

Roger began construction of an addition to the house on the property. By
January 2007, Roger determined that he needed more money to complete the
construction. Roger was unable to obtain financing from traditional lenders, so he
contacted Brian Smith of Midwest Equity Consultants, Inc. ("Midwest"), a
corporation in the business of obtaining loans for financially distressed clients. Brian
Smith and his wife, Jennifer Smith, (collectively, "the Smiths") and the plaintiffs
together entered into an unconventional real estate financing arrangement. On
February 21, 2007, three transactions occurred. First, the plaintiffs executed and
delivered a warranty deed transferring the property to the Smiths in fee simple.
Second, the Smiths obtained a loan from Anchor Bank for $280,000 and placed a
mortgage on the property for the same amount. Finally, the Smiths loaned $280,000
to the plaintiffs and then entered into a contract for deed with them, agreeing to
reconvey the property to Mavis and Maul Lee upon repayment of the $280,000. The
contract for deed specified that the Smiths reserved the right to place a mortgage on

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the property in an amount up to the remaining balance of the purchase price, and
Mavis and Maul Lee agreed to execute any such mortgage.

By August 2007, Roger determined that he needed more money to complete
construction. On August 1, 2007, four more transactions occurred. First, the Smiths
and the plaintiffs amended the contract for deed to increase the principal amount to
$495,500. Second, Brian obtained a new loan from Prime in the amount of $495,500.
As the plaintiffs had agreed under the original contract for deed, they joined the
Smiths in placing a mortgage on the property with Prime for $495,000. The Smiths
satisfied the $280,000 mortgage with Anchor Bank. Third, the Smiths and the
plaintiffs assigned all of their respective interests in the contract for deed and the
underlying property to Prime. Fourth, the Smiths signed a $495,500 promissory note
to Prime.

More transactions occurred on November 13, 2007. First, the Smiths, Mavis,
and Maul Lee amended the contract for deed to $664,000. And, second, the Smiths
modified their note and mortgage with Prime to $664,000. The plaintiffs again joined
in the modified mortgage.

Roger completed construction on the home in late 2007. But Mavis and Maul
Lee failed to make scheduled payments toward the contract for deed with the Smiths,
and on June 26, 2008, the Smiths served a statutory notice of cancellation of the
contract for deed. On August 15, 2008, the plaintiffs sent a letter to the Smiths and
to Prime, stating that they cancelled and rescinded any and all transactions occurring
on February 21, August 1, and November 13, 2007. Prime replied that it could not
rescind because it had no transactions with the plaintiffs. On August 25, 2008, the 60-
day cancellation period for the contract of deed expired without the plaintiffs taking
action to reinstate the contract for deed or seeking judicial relief to enjoin its
cancellation. The Smiths ceased making mortgage payments to Prime, and Prime
commenced foreclosure proceedings on November 25, 2008. On February 10, 2009,

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the property was sold at a sheriff's sale. The six-month redemption period expired on
August 9, 2009.

On June 24, 2009, the plaintiffs filed a 13-count complaint naming as
defendants the Smiths; Midwest Equity Consultants, Inc., a Minnesota corporation;
Midwest Equity Consultants, Inc., an Illinois corporation; and Prime. Under count
one, plaintiffs sought a declaratory judgment that the warranty deed transferring fee
title to the Smiths and the corresponding contract for deed between the Smiths and
the plaintiffs constituted an equitable mortgage. Under count two, the plaintiffs
sought damages and rescission of all transactions with all of the defendants pursuant
to the Truth in Lending Act (TILA), as amended by the Home Ownership Equity
Protection Act, 15 U.S.C. § 1602 et seq. Under counts eleven and twelve, the
plaintiffs alleged state-law claims under Minnesota Statutes Annotated § 58.18. Prime
filed an answer in which it pleaded affirmative defenses based on various statutes of
limitation and the doctrine of laches. The Smiths also filed an answer stating various
affirmative defenses and counterclaiming for unjust enrichment. The Smiths
thereafter failed to make further filings with the court or to respond to requests for
discovery. Neither of the Midwest Equity Consultants corporations filed an answer,
and on October 14, 2009, the court entered default judgment against them.

The plaintiffs and Prime filed cross-motions for summary judgment. In its
summary-judgment memorandum, Prime argued that the plaintiffs' right to rescind
under TILA is barred by statute because the plaintiffs' action was not commenced
until July 2009 and the property had already been sold at the sheriff's sale on
February 10, 2009. See 15 U.S.C. § 1635(f). The plaintiffs filed a response
memorandum, and then Prime submitted its reply. In that reply, Prime argued that

[I]n August of 2006 Plaintiff Mavis Hartman, the fee owner of the
Subject Property, transferred ownership of the Subject Property by a quit
claim deed to her daughter Maul Lee Hartman, who owned and occupied
her own townhome at all times relevant to these proceedings. . . . .

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 At the time of the February 2007 title transfer to the Smiths, Maul
Lee was the sole owner of the Subject Property. After the contract for
deed back from the Smiths, she had an undivided one-half interest as a
co-vendee with her mother. It is Plaintiffs' contention that the February
2007 Smith transaction was an equitable mortgage and not a transfer of
title. (Complaint, Count I) Under Plaintiff's theory of the case, Maul Lee
Hartman remained the sole owner subject to the Smith equitable
mortgage and the Prime Security Bank mortgage which she executed.
Alternatively, Maul Lee Hartman owned an undivided one-half interest
as a co-vendee under the contract for deed. In either event she was
neither obligated on the promissory notes given by the Smiths to Prime
Security nor is she considered a consumer under 12 C.F.R. [§]
226.2(a)(11) since she did not grant a lien on her principal dwelling.
Prime Security's mortgage against Maul Lee Hartman's interest in the
property is not subject to rescission.

Thus, Prime argued that Maul Lee had no rescission rights because the property was
not her primary residence.

The district court held a hearing on the cross-motions for summary judgment.
Thereafter, the court issued an order granting summary judgment to the plaintiffs on
count one, finding that the transactions with the Smiths were an equitable mortgage.
As for the plaintiffs' TILA rescission claim, the court found that

neither Roger Hartman nor Mavis Hartman held an ownership interest
in the Subject Property at the time of the transactions at issue here. They
placed fee title to the Subject Property in Mavis Hartman's name on June
23, 2006, and Mavis Hartman transferred that ownership interest to
Maul Lee Hartman by a quitclaim deed on August 3, 2006. Moreover,
by treating the February 2007 transaction as an equitable mortgage,
Maul Lee remained the sole owner of the Subject Property after
November 13, 2007, subject to the Smith equitable mortgage and the
Prime mortgage. Therefore, at all material times in this case, Maul Lee
Hartman was the sole owner of the Subject Property. As a result,

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 Plaintiffs Roger Hartman and Mavis Hartman could never rescind
because they did not have the requisite ownership. Further, because the
Subject Property was not Maul Lee Hartman's principal dwelling at the
time of these transactions, she also did not have a right of rescission
under the TILA. Accordingly, Defendants are entitled to summary
judgment on Plaintiffs' TILA rescission claim and Plaintiffs' motion is
correspondingly denied.

Hartman v. Smith, Civil No. 09-01618 MJD/RLE, 2010 WL 3735724, at *9 (D. Minn.
Sept. 17, 2010).

The plaintiffs and Prime each submitted a letter request to file a motion for
reconsideration. The plaintiffs' letter request argued for the first time that the
Minnesota homestead law may apply to void Mavis's quitclaim conveyance of the
property to Maul Lee. The court granted each party's request to file a motion for
reconsideration. The plaintiffs and Prime each filed motions along with supporting
memoranda. The plaintiffs argued that the quitclaim deed was an attempt to convey
a homestead interest under the Minnesota homestead law but that such a conveyance
is void without the signatures of both spouses, see Minn. Stat. Ann. § 507.02, and
Roger did not sign the quitclaim deed. Prime's memorandum argued that the plaintiffs
were attempting to make improper use of the Minnesota homestead law "as a sword
for the purpose[] of creating a TILA revocation right rather than [as] a shield to defeat
a claim by Roger's daughter that she owns the property." Further, Prime's
memorandum argued that Roger was estopped from asserting the protection of
Minnesota's homestead law because he consented with full knowledge to Mavis's
quitclaim conveyance of the property to Maul Lee. The plaintiffs filed a response
memorandum in which they further argued the homestead issue. The court found that
Roger consented to the transaction with full knowledge and that the Hartmans were
estopped to claim that Roger or Mavis has any interest in the property. The court thus
denied both motions for reconsideration.

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 Thereafter, the court sent a letter to the parties requesting written responses to
six questions. Two of those questions were as follows:

Judge Davis's September 17, 2010 Order states that "at all material times
in this case, Maul Lee Hartman was the sole owner of the Subject
Property. As a result, Plaintiffs Roger Hartman and Mavis Hartman
could never rescind because they did not have the requisite ownership."
In light of this ruling, what standing do Mavis and Roger Hartman have
if they had no right to the Subject Property?

***
Do Plaintiffs have any specific authority, other than that listed in their
submitted jury instructions, that assignment for collateral purposes
would make Prime Security Bank an assignee under TILA?

The parties submitted written responses, and the court held a telephone conference
on the issues. In an order dated March 6, 2012, the court found that the Hartmans
were no longer parties in interest to the litigation based on the fact that they had no
ownership interest in the property subsequent to the quitclaim deed of the property
to Maul Lee. Consequently, the court dismissed the Hartmans as parties to the case.
In the same order, the court found that Prime is not an assignee for purposes of the
plaintiffs' TILA damages claim. Therefore, in a subsequent order dated March 9,
2012, the court dismissed the TILA damages claim against Prime. A jury trial was
held on several remaining claims. Based on the jury's verdict, the district court
entered judgment in favor of the defendants on all remaining claims.

II. Discussion
On appeal, the plaintiffs argue that the district court erred in granting summary
judgment to Prime on their TILA rescission claim, in dismissing their TILA damages
claim and their state law claims against Prime under Minnesota Statutes Annotated
§ 58.18, and in dismissing the Hartmans as plaintiffs. Prime cross-appeals, arguing

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that the court erred in finding that the plaintiffs' notice was sufficient to exercise the
TILA statutory right of rescission.

A. Exercise of the TILA Right of Rescission
The plaintiffs argue that the district court erred in granting summary judgment
to Prime on the TILA rescission claim. On cross-appeal, Prime argues that the court
correctly granted its motion for summary judgment, but it argues that the court erred
in finding that the plaintiffs' notice was sufficient to exercise the right of rescission
under 15 U.S.C. § 1635. Prime contends that the plaintiffs no longer have the right
to seek rescission of the transactions because the plaintiffs failed to file their suit for
rescission prior to the foreclosure sale on February 10, 2009.

We review de novo a district court's grant of a motion for
summary judgment. J.E. Jones Constr. Co. v. Chubb & Sons, Inc., 486
F.3d 337, 340 (8th Cir. 2007). "Summary judgment is appropriate when,
viewing the facts in the light most favorable to the non-movant, there are
no genuine issues of material fact and the movant is entitled to judgment
as a matter of law." Id.

Sipe v. Workhorse Custom Chassis, LLC, 572 F.3d 525, 528 (8th Cir. 2009).

Under TILA,

in the case of any consumer credit transaction . . . in which a security
interest . . . is or will be retained or acquired in any property which is
used as the principal dwelling of the person to whom credit is extended,
the obligor shall have the right to rescind the transaction until . . . the
delivery of the information and rescission forms required under this
section together with a statement containing the material disclosures
required under this subchapter, . . . by notifying the creditor, in
accordance with regulations of the Board, of his intention to do so.

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15 U.S.C. § 1635(a) (1995); see also Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411
(1998) ("[W]hen a loan made in a consumer credit transaction is secured by the
borrower's principal dwelling, the borrower may rescind the loan agreement if the
lender fails to deliver certain forms or to disclose important terms accurately.").1 "An
obligor's right of rescission shall expire three years after the date of consummation
of the transaction or upon the sale of the property, whichever occurs first . . . ." 15
U.S.C. § 1635(f). Furthermore, the implementing Regulation Z provides, in pertinent
part:

To exercise the right to rescind, the consumer shall notify the creditor
of the rescission by mail, telegram or other means of written
communication. Notice is considered given when mailed, when filed for
telegraphic transmission or, if sent by other means, when delivered to
the creditor's designated place of business.

12 C.F.R. § 226.23(a)(2).

The district court "disagree[d] with Prime's assumption that a plaintiff must file
a lawsuit in order to exercise their right of rescission." Hartman, 2010 WL 3735724,
at *8. Furthermore, the court found that the "[p]laintiffs' August 2008 Rescission
Letter was within the three-year rescission period and well before the February 2009
foreclosure sale." Id. Consequently, the court ruled that the "[p]laintiffs' claim is not
barred by section 1635(f)." Id.

The plaintiffs argue that this court's opinion in Rand Corp. v. Yer Song Moua,
559 F.3d 842 (8th Cir. 2009), requires that we affirm the district court's ruling on this
issue. In Rand, borrowers facing foreclosure sent a letter notifying the lender that they

1
Paragraph 154 of the plaintiffs' complaint alleges that "Defendants failed to
provide each Plaintiff with: * * * [a] clear and conspicuous Notice of Right to
Rescind the mortgage loan transaction as required by 15 U.S.C. § 1635(a) and Reg.
Z[,] [C.F.R.] § 226.23(a) and (b)." This allegation is not disputed on appeal.

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were rescinding their mortgage. Id. at 844. The property was sold at a sheriff's sale
and the borrowers' redemption period expired six months later. Id. The borrowers did
not exercise their redemption rights. Id. The lender filed suit against the borrowers,
and the borrowers counterclaimed, alleging, inter alia, that TILA's statutory three-year
right to rescind had been "triggered by Rand's failure to provide clear and
conspicuous notice of TILA's three-day post-transaction right to cancel." Id. at 845.
The district court granted summary judgment to the lender, and the borrowers
appealed. We reversed, finding that the lender had "violated TILA by failing to
clearly and conspicuously disclose the [borrowers'] three-day right to rescind the
transaction, thereby giving rise to a three-year period of rescission." Id. at 848. Here,
the plaintiffs argue that, "[i]n [reversing], [this court] believed the intervening, extra-
judicial 'sale' did not bar the [borrowers] from securing an order enforcing" their right
of rescission. Here, the plaintiffs maintain that the borrowers in Rand "had a right to
rescind and the court believed it had jurisdiction to declare the right was exercised
and to also enforce the right. Otherwise, it could not have decided the merits."

Rand is distinguishable. "[T]he core issue" before our court in that case was
"whether the [borrowers] had a three-year—rather than three-day—period in which
to rescind the transaction." Rand, 559 F.3d at 842. Our analysis focused on whether
the lender had fulfilled its initial disclosure and notice requirements. Id. at 845–48.
The question of whether the borrowers' notice was sufficient to exercise their right
of rescission under 15 U.S.C. § 1635 was not addressed. See id. "Questions which
merely lurk in the record, neither brought to the attention of the court nor ruled upon,
are not to be considered as having been so decided as to constitute precedents."
Webster v. Fall, 266 U.S. 507, 511 (1925). Because Rand did not address the question
presented here, we find that Rand is not controlling on whether filing a lawsuit is
necessary to exercise consumer rescission rights under TILA.

Among the federal circuits, "[t]here is a split of authority as to whether the
borrower must file a lawsuit within [the repose period] after the consummation of a

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loan transaction to exercise [his or] her right to rescind, or whether the borrower need
only assert the right to rescind through a written notice within the [repose] period."
Gilbert v. Residential Funding LLC, 678 F.3d 271, 276 (4th Cir. 2012). The Third and
Fourth Circuits have held that valid, written notice is effective, by itself, to effectuate
rescission. See id. at 276–77; Sherzer v. Homestar Mortg. Servs., 707 F.3d 255,
258–61 (3d Cir. 2013). The Ninth and Tenth Circuits, on the other hand, have held
that notice is not sufficient; those courts have held that the borrower must assert
rescission in a legal action to complete the exercise of the rescission right. See
McOmie-Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1327–30 (9th Cir. 2012);
Rosenfield v. HSBC Bank, USA, 681 F.3d 1172, 1185 (10th Cir. 2012).

Very recently, we joined the Ninth and Tenth Circuits in holding that notice is
not sufficient to exercise the right of rescission. Keiran v. Home Capital, Inc., Nos.
11-3878, 12-1053, 2013 WL 3481366, at *5 (8th Cir. July 12, 2013). Keiran found
persuasive the Tenth Circuit's analysis of the "remedial economy" of TILA's
rescission remedy in Rosenfield. Id. at *4. Rosenfield concluded that "the filing of an
action in a court (or perhaps a defensive assertion of the rescission right in a court)
. . . is required to invoke the right limited by the TILA statute of repose." 681 F.3d at
1183. As that case explained,

It may be, strictly speaking, that "by notifying the creditor, in
accordance with [Regulation Z]," 15 U.S.C. § 1635(a), a borrower may
properly alert the creditor of her intent to rescind the underlying
transaction. However, as [the borrower] would have it, transmission of
such notice would be all that is required to exercise the right of
rescission. The problem with this argument is that, in a significant
number of instances, the remedial economy of the remedy would be
jeopardized. See [Andrew Kull, Rescission and Restitution, 61 Bus.
Law. 569, 577 (2006)]. Specifically, it is self-evident that when a
borrower who has provided notice to a creditor decides later—at some
unknown, and perhaps distant, point in the future—to effectuate the
rescission right through judicial process, the underlying circumstances

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 in no small number of cases are likely to have changed significantly.
Just to provide one example: new actors may have come onto the field
post-transaction and obtained some interest in the loan or the underlying
property. Cf. Beach, 523 U.S. at 418–19, 118 S. Ct. 1408 (recognizing
that TILA's statute of repose acts to limit the clouding of a property's
title). And, as a consequence of this reality, enforcement would likely be
costly and difficult. In short, such an outcome is not consistent with the
general goal and application of a rescission remedy.

Id. at 1185 (first alteration in original). The Tenth Circuit's opinion further explained
that TILA and Regulation Z do not

establish[] that notice is a sufficient condition for the exercise of the
TILA rescission right. Read plainly, see Beach, 523 U.S. at 416, 118
S. Ct. 1408 ("[I]n this instance, the answer is apparent from the plain
language of § 1635(f)."); see also United States v. Lamirand, 669 F.3d
1091, 1094 (10th Cir.2012) ("[W]e begin with the text of [the statute].");
Copar Pumice Co. v. Tidwell, 603 F.3d 780, 794 (10th Cir.2010)
(suggesting that deference must be given to an agency's interpretation
of a regulation, unless the plain language counsels otherwise), these
provisions suggest only that the giving of notice is a necessary predicate
act to the ultimate exercise of the right, see 12 C.F.R. § 226.23(a)(2)
(suggesting that "the consumer shall notify the creditor of the rescission"
in order to "exercise the right to rescind")—not that it is sufficient for
such exercise.

Id. (second, third, and fourth alterations in original).

Consistent with Keiran, and with Rosenfield's persuasive reasoning, we hold
that "the giving of notice is a necessary predicate act to the ultimate exercise of the
right." Id. Giving notice, as the means by which one comes to "have the right to

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rescind," is not sufficient, in itself, to complete the exercise of that right.2 See 15
U.S.C. § 1635(a). The district court erred in finding that the plaintiffs' notice was
sufficient to exercise the right of rescission under § 1635. Consequently, the
plaintiffs' "right of rescission . . . expire[d] . . . upon the sale of the property" on
February 10, 2009.3 Id. at § 1635(f). Because the plaintiffs failed to file a rescission
"action in a court (or perhaps a defensive assertion of the rescission right in a court)"
prior to the sale, their claim is barred. Rosenfield, 681 F.3d at 1183. It follows that the
district court did not err in granting summary judgment to Prime on the plaintiffs'
TILA rescission claim.4

2
Section 1635(a) creates the right to rescind under TILA. That subsection
provides, in pertinent part, that "the obligor shall have the right to rescind the
transaction . . . by notifying the creditor . . . of his intention to do so." 15 U.S.C.
§ 1635(a). By the plain language of the statute, giving notice is not the means by
which the obligor exercises the right to rescind, but the means by which the obligor
"ha[s] the right to rescind." Id. (emphasis added). Further, the obligor's notice to the
creditor does not actually rescind the transaction but merely communicates the
obligor's "intention to [rescind the transaction]." Id. (emphasis added). Section
1635(a) establishes how the statutory right to rescind arises, i.e., by giving timely and
proper notice of intent to rescind. Assuming that one activates the statutory right by
giving timely and proper notice (as the plaintiffs did here), § 1635(f) establishes the
conditions under which that right expires.
3
The plaintiffs also argue that the sheriff's sale was not a "sale" within the
meaning of 15 U.S.C. § 1635(f). This argument was raised in Worthy v. World Wide
Financial Services, Inc., 347 F. Supp. 2d 502 (E.D. Mich. 2004) aff'd, 192 F. App'x.
369 (6th Cir. 2006). As that court noted, the Official Staff Commentary to Regulation
Z provides, "'A sale or transfer of the property need not be voluntary to terminate the
right to rescind. For example, a foreclosure sale would terminate an unexpired right
to rescind.'" Id. at 506 (quoting 12 C.F.R. § 226.23(a)(3) (Supp. I. 1995)).
4
Because we hold that the plaintiffs' notice was not sufficient to exercise the
right of rescission, we do not reach the plaintiffs' claim that the district court erred in
allowing Prime to assert estoppel as a defense to the plaintiffs' homestead argument
in its motion-to-reconsider memorandum.

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 B. Dismissal of TILA Damages Claim and Minnesota Statutes Annotated § 58.18
Claims
"We review de novo . . . the district court's dismissal of plaintiff's claims . . . ."
Helvey v. City of Maplewood, 154 F.3d 841, 844 (8th Cir. 1998) (citing Kohl v.
Casson, 5 F.3d 1141, 1148 (8th Cir. 1993)). Count two of the plaintiffs' complaint
sought damages under TILA against both the Smiths and Prime. The plaintiffs argue
that Prime was the Smiths' assignee for purposes of 15 U.S.C. § 1641(e)(1), which
states that "any civil action against a creditor for a violation of this subchapter, and
any proceeding under section 1607 of this title against a creditor, with respect to a
consumer credit transaction secured by real property may be maintained against any
assignee of such creditor." In a pretrial order dated March 6, 2012, the district court
found that Prime was not an assignee for purposes of § 1641(e)(1). The court stated:

Under TILA, a "creditor" is one to whom the obligation is initially
payable. A creditor's assignee, then, would be one to whom the
obligation is initially payable by way of an assignment. Here, the
obligation is the Smiths' loan to the Hartmans. The Contract for Deed
between the Smiths and Mavis and Maul Lee Hartman—not the loan
between the Smiths and the Hartmans—was assigned. [Prime] is not the
one to whom the Hartmans' obligation is initially payable; the Hartmans'
obligation is initially payable to the Smiths. The interest assigned to
[Prime] through the Assignment of [Contract for Deed] was a security
interest for the loan from [Prime] to the Smiths. Under these
circumstances, [Prime] does not fall within TILA's concept of assignee.

(Footnote omitted) (third alteration in original). In a separate pretrial order dated
March 9, 2012, the court dismissed the plaintiffs' TILA damages claim against Prime.

Prime argues that the plaintiffs' claim for damages against it is now moot.
Prime argues that because the plaintiffs "subsequently dismissed the TILA damages
claims against the Smiths at trial," the plaintiffs claims against it under § 1641(e)(1)
must fail. Prime maintains, essentially, that "an assignee's liability can be no greater

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than the assignor's." White v. Homefield Fin., Inc., 545 F. Supp. 2d 1159, 1165 (W.D.
Wash. 2008) (quotation and citation omitted). In reply, the plaintiffs argue that
"Prime did not order a trial transcript to support its theory and it should be ignored."

Neither the plaintiffs nor Prime ordered a trial transcript, so the trial transcript
is not in the record on appeal. Nevertheless, the plaintiffs' opening brief
acknowledges that the district "court disposed of all claims and entered judgment on
March 19, 2012." That judgment, which is part of the record on appeal,
Fed. R. App. P. 10(a)(1), shows that "[j]udgment [wa]s entered in favor of the
defendants and against each plaintiff." Thus, even supposing that the plaintiffs did not
dismiss their damages claim against the Smiths during trial, their claim certainly did
not survive the March 19, 2012 judgment against them. Therefore, on this record, we
determine that the plaintiffs' damages claim against the Smiths had no merit. The
plaintiffs' damages claim cannot now "be maintained against" Prime because it has
no greater liability than the Smiths. 15 U.S.C. § 1641(e)(1). Consequently, the district
court did not err in dismissing plaintiffs' TILA damages claim against Prime.

The plaintiffs also argue that the court erred in dismissing their claims against
Prime for violations of Minnesota Statutes Annotated § 58.18 in connection with
counts eleven and twelve of the complaint. The plaintiffs argue for the first time on
appeal that their state-law claims arose from Prime's conduct as the servicer of the
equitable mortgage with the Smiths. The plaintiffs did not assert this argument
below,5 and "[w]e will not address arguments raised for the first time on appeal."
Colonial Ins. Co. of Cal. v. Spirco Envtl., Inc., 137 F.3d 560, 561 (8th Cir. 1998)
(citations omitted).

5
The plaintiffs did mention this issue very late in the litigation below. But that
mention came only in a single paragraph of a letter to the court requesting leave to
file a motion to reconsider the court's order of dismissal dated March 6, 2012. The
court treated the plaintiffs' letter as a motion to reconsider and denied it without
addressing the merits of the argument.

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 C. Dismissal of the Hartmans as Plaintiffs
Finally, the plaintiffs argue that the court erred in dismissing the Hartmans as
parties to the case. The court dismissed the Hartmans as plaintiffs in an order dated
March 6, 2012, finding that they were no longer parties in interest to the litigation
because they had no ownership interest in the property subsequent to Mavis's
quitclaim of the property to Maul Lee. Given the disposition of the various claims by
the district court and this court's particular affirmations above, it is not necessary for
us to venture into the thicket of legal issues raised by Mavis's quitclaim of the
property to Maul Lee. The claims resolved by the district court and now reviewed on
appeal would not increase their merit at either level by having the Hartmans added
as parties. Plaintiffs have shown no other reason why the court's action was error.
Consequently, we find no error in the district court's dismissal of the Hartmans as
plaintiffs.

III. Conclusion
Accordingly, we reverse the district court's finding that the plaintiffs' notice
was sufficient to exercise the TILA statutory right of rescission. We affirm the district
court's grant of summary judgment, the dismissal of the plaintiffs' claims, and the
dismissal of the Hartmans as parties to the case.

MELLOY, Circuit Judge, concurring in the judgment.

I concur in the judgment insofar as this Court is bound by decisions of prior
panels. Owsley v. Luebbers, 281 F.3d 687, 690 (8th Cir. 2002). Were we writing on
a clean slate, however, I would hold for the reasons stated by Judge Murphy in her
dissent in Keiran that sending notice within three years of consummating a loan is
sufficient to "exercise" the right to rescind. See 12 C.F.R. § 1026.23(a)(2). I note
three additional points:

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 First, although TILA does not provide an express statute of limitations for
borrowers to sue for rescission, the statute does provide an express statute of
limitations for borrowers to sue for damages. See 15 U.S.C. § 1640(e) ("[A]ny action
under [§ 1640] may be brought in any United States district court, or in any other
court of competent jurisdiction, within one year from the date of the occurrence of the
violation . . . ."). That Congress provided a statute of limitations governing suits for
damages demonstrates that it knew how to impose such a limitation and would have
done the same regarding suits for rescission if it so desired; instead, however, the
provision governing rescission states only that "the obligor shall have the right to
rescind the transaction . . . by notifying the creditor, in accordance with regulations
of the Bureau, of his intention to do so." 15 U.S.C. § 1635(a) (emphasis added). And
as the Keiran majority recognized, "Regulation Z says nothing about filing suit."
__ F.3d at __, 2013 WL 3481366, at *5. But unlike the Keiran majority, who
assumed that "while Regulation Z sets forth one of the things an obligor must do to
rescind the loan—give written notice to the bank—it does not set forth the entirety
of things necessary to accomplish rescission," id. (emphases added), I "do not lightly
assume that Congress has omitted from its adopted text requirements that it
nonetheless intends to apply, and [my] reluctance is even greater when Congress has
shown elsewhere in the same statute that it knows how to make such a requirement
manifest." Jama v. Immigration & Customs Enforcement, 543 U.S. 335, 341 (2005);
see Bates v. United States, 522 U.S. 23, 29–30 (1997) ("[W]here Congress includes
particular language in one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts intentionally and purposely in
the disparate inclusion or exclusion." (alteration in original) (citation and internal
quotation marks omitted)).

Second, the Ninth Circuit's decision in McOmie-Gray v. Bank of America
Home Loans, 667 F.3d 1325, 1328 (9th Cir. 2012)—which, prior to Keiran, balanced
the two–two circuit split between the Third and Fourth Circuits and Ninth and Tenth
Circuits—offers only hollow support for the proposition that a borrower must file suit

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to exercise the right to rescind. The McOmie-Gray court acknowledged that "[w]ere
[it] writing on a blank slate, [it] might consider whether notification within three
years of the transaction could extend the time limit imposed by § 1635(f)[,]" id.
at 1328; however, the court declared itself "bound" by Miguel v. Country Funding
Corp., 309 F.3d 1161 (9th Cir. 2002). 667 F.3d at 1329. In my view, Miguel is not
instructive on the issue that was before the McOmie-Gray court or presented in
Keiran or in this case insofar as the borrower in Miguel did not send notice to the
lender of her intent to rescind or file suit for rescission within the three-year statutory
period.6 Miguel, 309 F.3d at 1163; see McOmie-Gray, 667 F.3d at 1329 ("[T]he
borrower [in Miguel] never sent a timely notice of rescission."). Accordingly, the
Miguel borrower's right to rescind had "completely extinguishe[d] . . . at the end of
the 3-year period." Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). This
material fact differentiates Miguel from McOmie-Gray, Keiran, and this case, where
the borrowers did timely send notice to the lenders within three years of the
respective loan consummations.

Lastly, while I recognize the Keiran majority's concerns regarding the possible
temporary uncertainties in titles if providing notice were sufficient to exercise the
right to rescind, I do not believe that requiring lenders to initiate declaratory-
judgment actions—rather than defend in rescission actions—is so undesirable that it
reaches a level of absurdity such that this Court should ignore the plain language of
the statute and Regulation Z. See Contemp. Indus. Corp. v. Frost, 564 F.3d 981, 985

6
The borrower in Miguel timely notified and filed suit against the lender's
agent, but the court determined that this was not the same as providing notice to the
lender itself. See 309 F.3d at 1165 ("While the [lender's] servicing agent . . . received
notice of cancellation within the relevant three-year period, no authority supports the
proposition that notice to [the agent] should suffice for notice to the [lender].
Therefore, [the] right to cancellation was extinguished as against the [lender]."), and
id. ("Because the complaint named only [the lender's agent] . . . it was not an effective
cancellation, and the right in question was extinguished when the three-year period
expired.").

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(8th Cir. 2009) ("Where statutory language is plain, 'the sole function of the
courts—at least where the disposition required by the text is not absurd—is to enforce
it according to its terms.'" (quoting Lamie v. U.S. Tr., 540 U.S. 526, 534 (2004)); see
also Harbison v. Bell, 556 U.S. 180, 198 (2009) (Thomas, J., concurring in the
judgment) ("Even if the proper interpretation of a statute upholds a 'very bad policy,'
it 'is not within our province to second-guess' the 'wisdom of Congress' action' by
picking and choosing our preferred interpretation from among a range of potentially
plausible, but likely inaccurate, interpretations of a statute." (quoting Eldred v.
Ashcroft, 537 U.S. 186, 222 (2003))). This is especially true "because the obligor's
initiation of a lawsuit would also unilaterally create a cloud on the title that would not
be resolved until a court order or a negotiated settlement." Keiran, __ F.3d at __,
2013 WL 3481366, at *11 (Murphy, J., dissenting) (emphasis added) (internal
quotation marks omitted).

Moreover, "caution requires attentiveness to the views of the administrative
entity appointed to apply and enforce a statute," and "deference is especially
appropriate in the process of interpreting [TILA] and Regulation Z," unless such
deference would lead to "demonstrably irrational" results. Ford Motor Credit Co. v.
Milhollin, 444 U.S. 555, 565 (1980). Here, the administrative agency charged with
enforcing TILA and Regulation Z is the Consumer Financial Protection Bureau (the
"Bureau"). See Dodd–Frank Wall Street Reform and Consumer Protection Act,
Pub. L. No. 111-203, § 1100A(2) (2010). The Bureau has weighed in as amicus
curiae in courts around the country on the issue of how a borrower properly exercises
the right to rescind a loan transaction, see, e.g., Sherzer v. Homestar Mortg. Servs.,
707 F.3d 255 (3d Cir. 2013)—including in Keiran—and argued that sending notice
is all that is required.
______________________________

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