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SUPREME COURT OF THE UNITED STATES
_________________
No. 13–684
_________________
LARRY D. JESINOSKI, et ux., PETITIONERS
v.
COUNTRYWIDE HOME LOANS, INC., et al.
on writ of certiorari to the united states court of appeals for
the eighth circuit
[January 13, 2015]
Justice Scalia delivered the opinion of the Court.
The Truth in Lending Act gives borrowers the right to rescind
certain loans for up to three years after the transaction is
consummated. The question presented is whether a borrower exercises
this right by providing written no-tice to his lender, or whether
he must also file a lawsuit before the 3-year period elapses.
On February 23, 2007, petitioners Larry and Cheryle Jesinoski
refinanced the mortgage on their home by borrowing $611,000 from
respondent Countrywide Home Loans, Inc. Exactly three years later,
on February 23, 2010, the Jesinoskis mailed respondents a letter
purporting to rescind the loan. Respondent Bank of America Home
Loans replied on March 12, 2010, refusing to acknowledge the
validity of the rescission. On February 24, 2011, the Jesinoskis
filed suit in Federal District Court seeking a declaration of
rescission and damages.
Respondents moved for judgment on the pleadings, which the
District Court granted. The court concluded that the Act requires a
borrower seeking rescission to file a lawsuit within three years of
the transaction’s consummation. Although the Jesinoskis notified
respondents of their intention to rescind within that time, they
did not file their first complaint until four years and one day
after the loan’s consummation. 2012 WL 1365751, *3 (D Minn., Apr.
19, 2012). The Eighth Circuit affirmed. 729 F. 3d 1092, 1093
(2013) (
per curiam).
Congress passed the Truth in Lending Act,82Stat.146, as amended,
to help consumers “avoid the uninformed use of credit, and to
protect the consumer against inaccurate and unfair credit
billing.”15 U. S. C. §1601(a). To this end, the Act
grants borrowers the right to rescind a loan “until midnight of the
third business day following the consummation of the transaction or
the delivery of the [disclosures required by the Act], whichever is
later, by notifying the creditor, in accordance with regulations of
the [Federal Reserve] Board, of his intention to do so.” §1635(a)
(2006 ed.).[
1] This regime grants borrowers an
unconditional right to rescind for three days, after which they may
rescind only if the lender failed to satisfy the Act’s disclosure
requirements. But this conditional right to rescind does not last
forever. Even if a lender
never makes the required
disclosures, the “right of rescission shall expire three years
after the date of consummation of the transaction or upon the sale
of the property, whichever comes first.” §1635(f). The Eighth
Circuit’s affirmance in the present case rested upon its holding in
Keiran v.
Home Capital, Inc., 720 F. 3d 721,
727–728 (2013) that, unless a borrower has filed a suit for
rescission within three years of the transaction’s consummation,
§1635(f) extinguishes the right to rescind and bars relief.
That was error. Section 1635(a) explains in unequivocal terms
how the right to rescind is to be exercised: It provides that a
borrower “shall have the right to rescind . . .
by
notifying the creditor, in accordance with regulations of the
Board, of his intention to do so” (emphasis added). The
language leaves no doubt that rescission is effected when the
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.
Nothing in §1635(f) changes this conclusion. Although §1635(f)
tells us
when the right to rescind must be exercised, it
says nothing about
how that right is exercised. Our
observation in
Beach v.
Ocwen Fed. Bank,523
U. S. 410,417 (1998), that §1635(f) “govern[s] the life of the
underlying right” is beside the point. That case concerned a
borrower’s attempt to rescind in the course of a foreclosure
proceeding initiated six years after the loan’s consummation. We
concluded only that there was “no federal right to rescind,
defensively or otherwise, after the 3-year period of §1635(f) has
run,”
id., at 419, not that there was no rescission until a
suit is filed.
Respondents do not dispute that §1635(a) requires only written
notice of rescission. Indeed, they concede that written notice
suffices to rescind a loan within the first three days after the
transaction is consummated. They further concede that written
notice suffices after that period if the parties agree that the
lender failed to make the required disclosures. Respondents argue,
however, that if the parties dispute the adequacy of the
disclosures—and thus the continued availability of the right to
rescind—then written notice
does not suffice.
Section 1635(a) nowhere suggests a distinction between disputed
and undisputed rescissions, much less that a lawsuit would be
required for the latter. In an effort to sidestep this problem,
respondents point to a neighboring provision, §1635(g), which they
believe provides support for their interpretation of the Act.
Section 1635(g) states merely that, “[i]n any action in which it is
determined that a creditor has violated this section, in addition
to rescission the court may award relief under section 1640 of this
title for violations of this subchapter not relating to the right
to rescind.” Respondents argue that the phrase “award relief” “in
addition to rescission” confirms that rescission is a consequence
of judicial action. But the fact that it can be a consequence of
judicial action when §1635(g) is triggered in no way suggests that
it can
only follow from such action. The Act contemplates
various situations in which the question of a lender’s compliance
with the Act’s disclosure requirements may arise in a lawsuit—for
example, a lender’s foreclosure action in which the borrower raises
inadequate disclosure as an affirmative defense. Section 1635(g)
makes clear that a court may not only award rescission and thereby
relieve the borrower of his financial obligation to the lender, but
may also grant any of the remedies available under §1640 (including
statutory damages). It has no bearing upon whether and how
borrower-rescission under §1635(a) may occur.
Finally, respondents invoke the common law. It is true that
rescission traditionally required either that the rescinding party
return what he received before a rescission could be effected
(rescission at law), or else that a court affirmatively decree
rescission (rescission in equity). 2 D. Dobbs, Law of Remedies
§9.3(3), pp. 585–586 (2d ed. 1993). It is also true that the Act
disclaims the common-law condition precedent to rescission at law
that the borrower tender the proceeds received under the
transaction.15 U. S. C. §1635(b). But the negation of
rescission-at-law’s tender requirement hardly implies that the Act
codifies rescission in equity. Nothing in our jurisprudence, and no
tool of statutory interpretation, requires that a congressional Act
must be construed as implementing its closest common-law analogue.
Cf.
Astoria Fed. Sav. & Loan Assn. v.
Solimino,501 U. S. 104–109 (1991). The clear import of
§1635(a) is that a borrower need only provide written notice to a
lender in order to exercise his right to rescind. To the extent
§1635(b) alters the traditional process for unwinding such a
unilaterally rescinded transaction, this is simply a case in which
statutory law modifies common-law practice.
* * *
The Jesinoskis mailed respondents written notice of their
intention to rescind within three years of their loan’s
consummation. Because this is all that a borrower must do in order
to exercise his right to rescind under the Act, the court below
erred in dismissing the complaint. Accordingly, we reverse the
judgment of the Eighth Circuit and remand the case for further
proceedings consistent with this opinion.
It is so ordered.
