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Johnson v. GMAC Mortgage Corp.2/22/2005
n tender by the obligor. As respondents point out, numerous courts have held that the courts may condition an order of rescission upon such tender. See, e.g., Fed. Deposit Ins. Corp. v. Hughes Dev. Co. , 938 F.2d 889, 890 (8th Cir. 1991) ("TILA generally provides that the creditor shall perform first (i.e., return monies paid by the debtor and release its security interest); however, the Act gives courts discretion to devise other procedures, including conditioning rescissions upon the debtor's prior return of the principal." (citation omitted)); Yamamoto v. Bank of New York , 329 F.3d 1167, 1171 (9th Cir. 2003) (indicating that ninth circuit has recognized trial court's discretion to so condition rescission); Riopta, 101 F.Supp.2d at 1331-32, 1334-35 (borrowers not entitled to summary judgment on claims that lender violated TILA by refusing to release its security interest upon receiving notice of rescission because majority of cases " hold that a creditor is not required to release its security interest upon receiving a notice of rescission unless the obligor tenders or offers to tender repayment" and courts have authority to condition grant of rescission upon such tender if equity requires it).
This power reflects another goal of the statutory rescission process: to return the parties most nearly to the position they held prior to entering into the transaction. The addition of the last sentence of section 1635(b), stating that " he procedures prescribed by this subsection shall apply except when otherwise ordered by a court," . . . is a reflection of this equitable goal.
Williams, 968 F.2d at 1140.
Nor is it to say that the trial court may not determine whether proper grounds exist for termination after the borrower has notified the lender of the exercise of the right to rescind but before the court grants the remedy of rescission. See, e.g., Large , 292 F.3d at 55-56 ("Rescission under the TILA is 'automatic' in the sense that, in contrast to common law rescission, the borrower need not first return the loan proceeds received under the agreement to effect a rescission . . . . Contrary to what the Larges suggest, however, the use of the word 'automatic' in Williams presupposes that the grounds for rescission have been established, either by agreement or by an appropriate decision maker.").
Also, the respondents have not identified any authority requiring the borrower to plead -- in the first instance -- that the borrower has tendered or offered to tender. Cf. Quezner v. Advanta Mortgage Corp. , 288 B.R. 884, 888 (D. Kan. 2003) (tender may "may be an appropriate condition attached thereto under certain circumstances because of the equitable nature of the statutory remedy" but it is "not mandated as a prerequisite to rescission).
All of this is consistent with the manner in which the Missouri Supreme Court has interpreted a previous version of TILA. See Ehlert v. Ward , 588 S.W.2d 500 (Mo. banc 1979). In that case the borrower sought to rescind her credit transaction for sundry violations of TILA and accompanying regulations. Id . at 501. Based upon these violations, the Missouri Supreme Court held that the borrower "was entitled to rescind the credit transaction" and that the trial court "erred in not granting her the requested relief of rescission, including the return of all monies paid by her to respondent and the cancellation of the promissory note and the deed of trust upon her property." Id . at 503. The court simply concluded that the trial court could condition the granting of such relief upon the tender of the principal proceeds of the loan. Id. at 504. Ehlert does not require the borrower to plead tender in a TILA action, however.
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