Beneficial Illinois, Inc. v. Parker

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Appellate Court Date: 2017.02.09
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Beneficial Illinois Inc. v. Parker, 2016 IL App (1st) 160186

Appellate Court BENEFICIAL ILLINOIS INC., d/b/a BENEFICIAL MORTGAGE
Caption COMPANY OF ILLINOIS, Plaintiff-Appellee, v. RANDALL
PARKER a/k/a RANDALL W. PARKER; MARVELENE PARKER;
UNKNOWN OWNERS and NON-RECORD CLAIMANTS,
Defendants (Randall Parker a/k/a Randall W. Parker, Defendant-
Appellant).

District & No. First District, First Division
Docket No. 1-16-0186

Filed December 12, 2016

Decision Under Appeal from the Circuit Court of Cook County, No. 09-CH-39557; the
Review Hon. Anthony Kyriakopoulos, Judge, presiding.

Judgment Affirmed in part, reversed and remanded in part.

Counsel on Consumer Legal Group, P.C., of Matteson (Lloyd Brooks, of counsel),
Appeal for appellant.

Anselmo Lindberg Oliver, LLC, of Naperville (Robert J. Deisinger, of
counsel), for appellee.

Panel JUSTICE HARRIS delivered the judgment of the court, with opinion.
Justices Simon and Mikva concurred in judgment and opinion.
 OPINION

¶1 Defendant-appellant, Randall Parker (Randall), refinanced his home loan mortgage with
plaintiff-appellee, Beneficial Illinois Inc., d/b/a Beneficial Mortgage Company of Illinois
(Beneficial), in July 2007. In October 2008, he stopped making the required payments and
Beneficial instituted a foreclosure proceeding in October 2009. In June 2010, Randall
attempted to rescind the mortgage by mailing a letter to Beneficial. Beneficial never
responded and proceeded with the foreclosure litigation. In September 2010, Randall filed a
counterclaim and affirmative defenses. After briefing, the circuit court dismissed the
counterclaims and affirmative defenses as untimely. Eventually, Beneficial voluntarily
dismissed its foreclosure proceeding and Randall now appeals the dismissal of his affirmative
defense and counterclaims.
¶2 For the following reasons, we agree that Randall properly invoked the rescission
mechanism when he sent Beneficial the rescission letter. We also reverse the dismissal of
Randall’s counterclaim related to Beneficial’s failure to honor the rescission letter. However,
his counterclaim related to Beneficial’s failure to disclose certain information when the loan
closed is time barred.

¶3 JURISDICTION
¶4 Beneficial filed this foreclosure action on October 15, 2009. On September 1, 2010,
Randall filed an answer, affirmative defense, and counterclaims. On September 5, 2014, the
circuit court granted Beneficial’s motion to dismiss Randall’s affirmative defense and
counterclaims. On December 15, 2015, the circuit court granted Beneficial’s motion to
voluntarily dismiss the foreclosure action. Thereafter, on January 14, 2016, Randall filed his
notice of appeal. Accordingly, this court has jurisdiction over this matter pursuant to article
VI, section 6, of the Illinois Constitution, and Illinois Supreme Court Rules 301 and 303. Ill.
Const. 1970, art. VI, § 6; Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. May 30, 2008).

¶5 BACKGROUND
¶6 On July 9, 2007, Beneficial made a loan to Randall and his wife.1 The loan was secured
with a mortgage against Randall’s home. In connection with the loan, Beneficial tendered to
Randall a loan agreement (Loan Agreement) outlining the terms of the loan. Based on the
terms of the loan, Randall was required to start making payments on August 9, 2007.
¶7 The Loan Agreement contained a Truth in Lending Disclosure (TILD). The TILD
disclosed estimated terms of the loan, including the finance charges, total number of
payments, and when payments are due. In October 2008, Randall and his wife failed to make
the required loan payment as set forth in the Loan Agreement. Thereafter, on October 15,
2009, Beneficial filed a foreclosure action seeking to foreclose on Randall’s mortgage.
¶8 On June 16, 2010, Randall, through counsel, wrote to Beneficial to provide notice that
Randall elected to rescind the Loan Agreement. The letter requested that Beneficial
acknowledge Randall’s right to rescission as required by the Truth in Lending Act (TILA)
(15 U.S.C. § 1601 et seq. (2012)). The letter also requested that Beneficial provide Randall

1
Due to proceedings not relevant here, Marvelene Parker is not a party to this appeal.

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 with a loan history so he could determine what amount he might have to repay. Beneficial
did not respond to Randall’s rescission notice and continued to proceed with the foreclosure
proceeding. On September 1, 2010, Randall filed an answer, an affirmative defense, and two
counterclaims against Beneficial. In his affirmative defense, Randall argued that he timely
delivered a letter rescinding the Loan Agreement, thereby extinguishing the mortgage. In
addition, his counterclaims sought actual and statutory damages for Beneficial’s failure to
honor the rescission and for making improper disclosures when the loan closed.
¶9 Beneficial eventually filed a motion to dismiss both the affirmative defense and the
counterclaims. Beneficial argued that all of the claims were time barred by TILA’s three year
statute of repose. Additionally, Beneficial argued that the two counterclaims were barred by
TILA’s one year statute of limitations. After briefing, the circuit court agreed with Beneficial
and found the affirmative defense and counterclaims time barred. Specifically, the circuit
court found Randall’s failure to file a court action seeking rescission within three years of the
loan being made barred his rescission affirmative defense. The court also found Randall’s
damage counterclaim based on misleading disclosures was also time barred. The circuit court
did not specifically rule on the counterclaim related to failing to respond to the rescission
letter.
¶ 10 The foreclosure proceeding continued until Beneficial voluntarily agreed to dismiss the
foreclosure action on December 15, 2015. Randall filed a notice of appeal on January 14,
2016, and this appeal followed.

¶ 11 ANALYSIS
¶ 12 On appeal, Randall challenges the dismissal of his affirmative defense and his
counterclaims. As to his affirmative defense of rescission, Randall argues that a recent
United States Supreme Court case demonstrates that only a letter needs to be sent to the
lender in order to invoke TILA’s rescission clause and therefore his rescission of the loan
was timely. He also argues his damages counterclaims are not time barred.
¶ 13 In this case, Beneficial moved to dismiss Randall’s affirmative defenses pursuant to
section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2014)).
Section 2-619.1 of the Code permits combined motions pursuant to sections 2-615, 2-619,
and 2-1005. 735 ILCS 5/2-619.1 (West 2014). On appeal, a de novo standard of review
applies whether the motion was granted pursuant to either section 2-615 or section 2-619.
Doe-3 v. McLean County Unit District No. 5 Board of Directors, 2012 IL 112479, ¶ 15
(section 2-615 motion is reviewed de novo); Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351,
361 (2009) (section 2-619 motion is reviewed de novo).
¶ 14 Turning to Randall’s first issue, he argues, and Beneficial concedes, that his mailing of
the rescission letter to Beneficial was the only step he needed to take in order to rescind the
loan under TILA. In its ruling dismissing the affirmative defense and counterclaims, the
circuit court found the rescission affirmative defense to be untimely because Randall filed his
affirmative defense outside the three year window provided for in section 1635(f). 15 U.S.C.
§ 1635(f) (2012). After granting the dismissal, the United States Supreme Court took up the
issue now before this court and determined that the statutory language of TILA did not
require the filing of a lawsuit in order to rescind a loan agreement. Jesinoski v. Countrywide
Home Loans, Inc., 574 U.S. ___, 135 S. Ct. 790 (2015). In analyzing the language of section
1635(a) the Court stated, “[t]he language leaves no doubt that rescission is effected when the

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 borrower notifies the creditor of his intention to rescind. It follows that, so long as the
borrower notifies within three years after the transaction is consummated, his rescission is
timely. The statute does not also require him to sue within three years.” Id. at ___, 135 S. Ct.
at 792.
¶ 15 In its brief before this court, Beneficial concedes that, pursuant to Jesinoski, Randall
timely elected to rescind the Loan Agreement when he sent the letter on June 16, 2010. Since
Randall mailed a letter within three years of the Loan Agreement being made, the circuit
court erred in dismissing Randall’s rescission affirmative defense. Accordingly, this portion
of the circuit court’s order is reversed.
¶ 16 Beneficial also concedes that, pursuant to Jesinoski, Randall’s damages claim based on
the failure to honor the rescission letter is timely.2 Section 1635(b) states, “[w]ithin 20 days
after receipt of a notice of rescission, the creditor shall return to the obligor any money or
property given as earnest money, downpayment, or otherwise, and shall take any action
necessary or appropriate to reflect the termination of any security interest created under the
transaction.” 15 U.S.C. § 1635(b) (2012). Section 1640 provides for civil liability for any
creditor “who fails to comply with any requirement imposed under this part, including any
requirement under section 1635.” 15 U.S.C. § 1640(a) (2012). Any action based on such a
violation must be brought within one year of the occurrence. 15 U.S.C. § 1640(e) (2012).
¶ 17 Randall mailed his notice of rescission on or about June 16, 2010, and pursuant to section
1635(b), Beneficial would have 20 days after receipt of the notice to take all necessary steps
to effectuate the recession. In his counterclaim, Randall alleges Beneficial never responded to
the rescission notification. Randall filed his counterclaim for damages on September 1, 2010,
well within the one year statute of limitations provided for in section 1640(e). Accordingly,
Randall’s counterclaim for damages related to the failure to respond to the rescission letter
was timely filed and the circuit court erred in dismissing it. We therefore reverse that portion
of the circuit court’s order.
¶ 18 In his third issue, Randall challenges the circuit court’s dismissal of his counterclaim for
failing to make the proper disclosures pursuant to TILA when the loan closed. TILA states
that if a creditor fails to adequately provide the necessary disclosures, a claim for damages
may be brought. 15 U.S.C. § 1640(a) (2012). Such an action must be brought within one
year. 15 U.S.C. § 1640(e) (2012). However, section 1640(e) also provides,
“This subsection does not bar a person from asserting a violation of this subchapter in
an action to collect the debt which was brought more than one year from the date of
the occurrence of the violation as a matter of defense by recoupment or set-off in such
action, except as otherwise provided by State law.” Id.
Accordingly, TILA allows for an untimely TILA claim if it is brought as a defensive
recoupment or set-off, “except as otherwise provided by State law.” Id. Illinois courts have
interpreted this to mean a damages claim may be brought beyond TILA’s statute of
limitations if it is brought as a defense in recoupment under Illinois law. U.S. Bank National
Ass’n v. Manzo, 2011 IL App (1st) 103115, ¶ 51 (citing Mt. Vernon Memorial Estates, Inc. v.

2
While the circuit court did not address this counterclaim, Beneficial does not argue that Randall
has waived review of the issue. In this respect, we note that the waiver rule “is a limitation on the parties
and not the jurisdiction of the courts” and we choose to address this issue on the merits. Committee for
Educational Rights v. Edgar, 174 Ill. 2d 1, 11 (1996).

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 Wood, 88 Ill. App. 3d 666 (1980)). Illinois law does not have a provision directly addressing
a TILA recoupment claim, but Illinois courts have allowed them when brought pursuant to
section 13-207 of the Code. Id.; 735 ILCS 5/13-207 (West 2014). However, such a
recoupment claim must meet the requirements of section 13-207. Barragan v. Casco Design
Corp., 216 Ill. 2d 435, 445-46 (2005).
¶ 19 Section 13-207 of the Code states:
“A defendant may plead a set-off or counterclaim barred by the statute of limitation,
while held and owned by him or her, to any action, the cause of which is owned by
the plaintiff or person under whom he or she claims, before such set-off or
counterclaim as so barred, and not otherwise.” 735 ILCS 5/13-207 (West 2014).
Illinois courts view section 13-207 to allow a defendant to file a counterclaim even if the
claim would have been time barred if brought as a separate action. Cameron General Corp. v.
Hafnia Holdings, Inc., 289 Ill. App. 3d 495, 505-06 (1997). However, in order to bring a
time-barred counterclaim pursuant to section 13-207, the counterclaim must not have been
time barred when the cause of action forming the basis of the primary complaint arose.
Canada Life Assurance Co. v. Salwan, 353 Ill. App. 3d 74, 80 (1990).
¶ 20 The circuit court found Randall’s damages claim related to the improper disclosures
could not be saved by section 13-207 because by the time Beneficial’s foreclosure action
accrued, the statute of limitation for failing to make the proper disclosures had already run.
The improper disclosures were made on July 9, 2007, so Randall would have one year, or
until July 9, 2008, to file a complaint. Beneficial’s foreclosure action arose in October 2008,
when Randall failed to make the required monthly payment. At this point, Randall’s claim
for damages related to the disclosures was already time barred. Accordingly, this
counterclaim could not be saved by section 13-207.
¶ 21 Relying on Manzo, 2011 IL App (1st) 103115, and Barragan, 216 Ill. 2d 435, Randall
argues section 13-207 does not bar his claim based on misleading disclosures, but rather
represents an independent basis to save a TILA claim and does not interfere with section
1640(e). We disagree both with Randall’s interpretation of the law and his reliance on Manzo
and Barragan.
¶ 22 As previously noted, TILA allows for an untimely TILA claim if it is brought as a
defensive recoupment or set-off, “except as otherwise provided by State law.” (Emphasis
added.) 15 U.S.C. § 1640(e) (2012). Illinois courts have consistently found that an otherwise
untimely TILA claim may be brought as defensive recoupment if it meets the requirements of
the applicable Illinois law. See Wood Acceptance Co. v. King, 18 Ill. App. 3d 149, 151 (1974)
(allowing a untimely TILA counterclaim because it met the requirements under section 17 of
the Limitations Act (Ill. Rev. Stat. 1971, ch. 83, ¶ 18))3; see also Public Finance Corp. v.
Riddle, 83 Ill. App. 3d 417, 422 (1980) (allowing a TILA counterclaim brought pursuant to
section 17 of the Limitations Act).
¶ 23 Despite Randall’s claims to the contrary, the counterclaims at issue in both Barragan and
Manzo were brought in conformity with section 13-207. As the Barragan court stated, “the
saving provision [(section 13-207)] comes into play in this case because Casco owned its
contribution claim—the one that Osman countered—before Osman’s counterclaim was
3
Section 17 of the Limitations Act was the precursor to the current statute (735 ILCS 5/13-207
(West 2014)).

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 barred.” 216 Ill. 2d at 445. Osman’s claim against Casco for contribution arose on July 25,
1997, and would become time barred on July 25, 1999. Id. Casco’s original contribution
against Osman arose on September 15, 1997, well before Osman’s claim became time-barred
in July 1999. Id. at 446. Thus, the court concluded, “Casco ‘owned’ the claim that formed the
subject of Osman’s counterclaim within the meaning of section 13-207,” and Osman’s
counterclaim was not barred. Id.
¶ 24 While not discussed by the court in Manzo, the facts of that case show that Manzo’s
counterclaim was not time barred when U.S. Bank’s foreclosure action arose. Manzo’s
counterclaim, like Randall’s in this case, related to U.S. Bank’s failure to make certain
disclosures when the loan closed on November 18, 2005. Manzo, 2011 IL App (1st) 103115,
¶ 3. Pursuant to section 1640(e), the Manzos would have one year before such a claim
became time barred. Id. ¶ 48. Less than a year later, on August 11, 2006, U.S. Bank filed the
foreclosure action. Id. ¶ 3. Therefore, when U.S. Bank foreclosure action arose, the Manzos’
damages claim had yet to be time barred. The Manzo court concluded the counterclaim was
properly brought pursuant to section 13-207 and reversed the circuit court’s dismissal of it.
Id. ¶ 55.
¶ 25 Despite Randall’s claims to the contrary, the counterclaims in Manzo and Barragan
complied with section 13-207. Accordingly, we reject Randall’s argument that his untimely
counterclaim does not need to comply with section 13-207 and affirm its dismissal.

¶ 26 CONCLUSION
¶ 27 Based on the foregoing, we affirm the part of the decision of the circuit court that found
Randall’s counterclaim for wrongful disclosures to be time-barred, but we reverse the
decision of the circuit court with respect to Randall’s rescission affirmative defense and
counterclaim based on Beneficial’s failure to timely respond to the rescission letter. We
therefore remand this case for further proceedings.

¶ 28 Affirmed in part, reversed and remanded in part.

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