Smith v. Highland Bank

United States Court of Appeals,

Eleventh Circuit.

No. 96-6159

Non-Argument Calendar.

Suzan L. SMITH, on behalf of herself and all others similarly
situated, Plaintiff-Appellant,

v.

HIGHLAND BANK, Molton Allen & Williams, Defendants-Appellees.

March 27, 1997.

Appeal from the United States District Court for the Northern
District of Alabama. (No. CV95-B-480-S), Sharon Lovelace
Blackburn, District Judge.

Before ANDERSON and BLACK, Circuit Judges, and KRAVITCH, Senior
Circuit Judge.

PER CURIAM:

Suzan Smith and members of the plaintiff class allege that

Highland Bank ("Highland"), as creditor, and Molton Allen &

Williams ("MAW"), as Highland's assignee, violated the Truth In

Lending Act ("TILA") in handling their mortgages. The district

court granted summary judgment to Highland and MAW. We affirm.

Under TILA, a debtor may rescind a mortgage "until midnight

of the third business day following the consummation of the

transaction or the delivery of the information and rescission forms

..., whichever is later...." 15 U.S.C. § 1635(a). Further, a

debtor must receive notice of her right to rescind "on a separate

document that identifies the transaction and ... clearly and

conspicuously disclose[s]" information describing the transaction

and the debtor's rights. 12 C.F.R. § 226.23(b)(1). If a creditor

neglects to comply with these requirements, it may face civil
liability under TILA, 15 U.S.C. § 1640(a), and the debtor's right

to rescind is extended for up to three years after the transaction

is complete. 12 C.F.R. § 226.23(a)(3). Smith claims that she and

the plaintiff class received statutorily deficient notice and are

therefore entitled to damages and the right to rescind for a

three-year period. She alleges that Highland violated TILA by

including, with her mortgage papers, a form entitled "Notice of

Right to Cancel," a copy of which is included as an appendix to

this opinion. The crux of Smith's objection is that the form of

the Notice deprived her of a meaningful opportunity to rescind.

The Notice not only contains an "Acknowledgment of Receipt"

that the debtor must sign to confirm that Highland complied with

TILA, but it also includes a "Certificate of Confirmation" that the

debtor is to sign after the expiration of the three-day rescission

period to indicate that she has not exercised her rescission

rights. Below the Certificate of Confirmation appears the

following: "NOTE: All parties who execute Acknowledgment of

Receipt must execute Certificate of Confirmation." Smith argues

that this statement, taken together with the placement of the

Certificate of Confirmation on the same page as the Acknowledgment

of Receipt, would lead the average consumer to believe that she had

to sign the Certificate of Confirmation when she received the

Notice. According to Smith, the form forces the debtor to waive

her rescission rights upon receipt of the Notice.

In Rodash v. AIB Mortgage Co., 16 F.3d 1142 (11th Cir.1994),

a creditor provided notice of the right to rescind, but required

the debtor to sign beneath a single paragraph that both
acknowledged the receipt of the notice and simultaneously waived

the right to rescind. We held that the notice violated TILA

because it forced an immediate waiver of rights, when TILA's

implementing regulations only permit the consumer to waive the

three-day rescission period "if the consumer determines that the

extension of credit is needed to meet a bona fide personal

financial emergency," in the form of a written statement describing

the emergency. Id. at 1145-46; 12 C.F.R. § 226.23(e)(1). Based

on the totality of the circumstances, we found that the lender

violated TILA's requirement of "clear and conspicuous" disclosure

of the right to rescind because: (1) the proffer of the notice

together with the waiver implied that waiver was possible within

the three-day period, although it is not; (2) forcing the borrower

to sign a waiver on the date of the transaction would make her

believe that the waiver was effective on that date; (3) including

the waiver in the same paragraph with the receipt of notice would

deceive the borrower as to the nature of what she was signing; and

(4) proffering the waiver along with the mortgage papers would lead

a consumer to believe that she had to sign the waiver in order to

consummate the mortgage transaction. 16 F.3d at 1146. Despite

these findings, however, we emphasized that judging a lender's

compliance with the notice provision is not mechanical; rather, a

court "must scrutinize the circumstances of the transaction." Id.

Although Smith urges us to follow Rodash, the instant case is

distinguishable in several material respects. First, even though

the Certificate of Confirmation appears on the same page as the

Acknowledgment of Receipt, it is in a distinct paragraph and,
importantly, must be separately signed.1 Second, although the form

was proffered on the date of the mortgage transaction, it does not

mislead the consumer as to whether she may rescind during the

three-day period following the transaction. It indicates that the

consumer is not to sign the Certificate of Confirmation until more

than three business days have elapsed, and the Certificate of

Confirmation subsection of the form is dated several days after the

Acknowledgment of Receipt. Third, Highland's form provided Smith

with much more detailed information about how to cancel the

mortgage transaction than the form at issue in Rodash, thereby

counteracting any confusion that the form otherwise might cause.2

Finally, although Smith creatively illustrates how one could be

misled by the "Note" below the Certificate of Confirmation, it is

clear that the intent of the "Note" is to ensure that all of the

signatories to the Acknowledgment of Receipt concur in the decision

not to rescind.3

Even apart from these differences, we believe that extending

the Rodash rationale to the instant case is unwise, as both

Congress and a recent panel of this court have indicated. Just

1
We do not read in Rodash, as Smith does, a per se ban on
forms which contain both an acknowledgment of receipt and a
waiver of rescission rights.
2
In the district court's words, because the notice, in
boldfaced type, told Smith of her right to cancel, Smith's right
was "both conspicuous and apparent on the face of the document."
Smith v. Highland Bank, 915 F.Supp. 281, 292 (N.D.Ala.1996).
3
In fact, the "Note" appears to be Highland's attempt to
comply with TILA's regulations, which require: "[w]hen more than
one consumer in a transaction has the right to rescind, the
exercise of the right by one consumer shall be effective as to
all consumers." 12 C.F.R. § 226.23(a)(4).
over a year after our decision in Rodash, Congress enacted

amendments to TILA, declaring a temporary moratorium on courts'

certification of class action suits based on certain kinds of

alleged deficiencies in the form of notice. 15 U.S.C. § 1640(i).

Neither party alleges that this provision applies to the case at

bar, but we agree with Highland and MAW that Congress's apparent

disapproval of TILA claims arising out of notice forms counsels

restraint here.4 Additionally, we note that, sinceRodash, we have

been unwilling to impose liability on lenders for unartfully-drawn

forms and have refused to extend Rodash beyond its facts. In Veale

v. Citibank, F.S.B., 85 F.3d 577, 580 (11th Cir.1996), petition for

cert. filed, No. 96-7348 (U.S. Jan.6, 1997), we characterized

Rodash as standing for the proposition that "TILA does not require

perfect notice; rather it requires a clear and conspicuous notice

of rescission rights."

Therefore, because we are convinced that Rodash represented

egregious facts distinguishable from this case and because we

conclude that a further extension of Rodash is unwarranted, we

4
Congress enacted the moratorium in response to a portion of
the Rodash decision not at issue in this case—how certain fees
are classified under TILA. Congress was concerned that the Rodash
court allowed plaintiffs to rescind a mortgage as a result of
minor TILA violations. Nevertheless, the debates surrounding the
moratorium's adoption indicate that Congress would not have us
adopt a hypertechnical reading of any part of TILA. See, e.g.,
141 Cong. Rec. H9513, H9514 (daily ed. Sept. 27, 1995)
(statement of Rep. Leach) ("The problem is that an honest mistake
of no consequence to any of the parties involved has become the
subject of shark instincts of the plaintiff's bar."); 141 Cong.
Rec. S5614, S5614 (daily ed. Apr. 24, 1995) (statement of Sen.
Mack) ("These laws encourage cookie-cutter lending in order to
avoid mistakes. Consumers are then hurt by higher rates and less
lending.")
AFFIRM the district court's order granting summary judgment.5

CA (97) 1193,SIZE-40 PICAS,TYPE-PDI

5
Because we find that Highland had no TILA liability, we do
not need to discuss MAW's liability as assignee.