DiVittorio v. HSBC BANK USA, N.A. as Trustee et al

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
___________________________________________
IN RE:
ANGELO DIVITTORIO, 	Chapter 13
DEBTOR. 	Case No. 05-20854-WCH
___________________________________________
ANGELO DIVITTORIO,
PLAINTIFF,
Adversary Proceeding
v. 	No. 09-1089
HSBC BANK, USA, N.A., AS TRUSTEE ON
BEHALF OF ACE SECURITIES CORP. HOME
EQUITY LOAN TRUST AND FOR THE
REGISTERED HOLDERS OF ACE SECURITIES
CORP. HOME EQUITY LOAN TRUST, SERIES
2006-SD1, ASSET BACKED PASS-THROUGH
CERTIFICATES, OCWEN LOAN SERVICING,
LLC, AND INDYMAC FEDERAL BANK,
DEFENDANTS.
___________________________________________
MEMORANDUM OF DECISION
I. INTRODUCTION
The matters before the Court are the consolidated Motion to Dismiss (the “Motion to
Dismiss”) on remand from the United States District Court for the District of Massachusetts (the
“District Court”) and the Motion for Summary Judgment, both filed by the Defendant HSBC Bank,
USA, N.A. (the “Defendant”), as well as the oppositions thereto filed by the Plaintiff-Debtor Angelo1
As Trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for1
registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2006-SD1, Asset
Backed Pass-Through Certificates.
1
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DiVittorio (the “Debtor”). On July 23, 2009, I granted the Motion to Dismiss and dismissed the
Debtor’s claims against the Defendant for alleged violations of the Massachusetts Consumer Credit
Cost Disclosure Act (“CCCDA”), the Massachusetts analog to the federal Truth in Lending Act2
(“TILA”), for failure to state a claim upon which relief could be granted. 	On appeal, the District3 	4
Court concluded that I failed to consider whether the Defendant complied with a portion of the
Official Staff Commentary to TILA’s enabling regulations (the “Commentary”) in calculating the
Annual Percentage Rate (the “APR”) disclosed to the Debtor on the Truth in Lending Disclosure
Statement (the “TIL Disclosure”) in connection with a refinance of the Debtor’s home and remanded
the matter for reconsideration. 	On remand, the Defendant filed the Motion for Summary Judgment5
asserting that the Debtor was judicially estopped from raising or had otherwise waived his claims
for alleged violations of the CCCDA. For the reasons set forth below, I will reaffirm my order
dismissing the Debtor’s complaint for failure to state a claim upon which relief could be granted and,
alternatively, grant the Motion for Summary Judgment. 6
Mass. Gen. Laws ch. 140D, § 1 et seq.2
15 U.S.C. § 1601 et seq.3
DiVittorio v. HSBC Bank USA, N.A. (In re DiVittorio), No. 09-1089, 2009 WL 22461384
(Bankr. D. Mass. Jul. 23, 2010).
DiVittorio v. HSBC Bank USA, N.A. (In re DiVittorio), 423 B.R. 391 (D. Mass. 2010).5
Although affirming my prior decision to dismiss the Debtor’s claims on remand6
necessarily renders the Motion for Summary Judgment moot, given the likelihood of further
appellate review, consideration of the Motion for Summary Judgment on the merits appropriately
serves the interests of judicial economy.
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II. BACKGROUND7
The facts of this case are largely not in dispute. 	The Debtor and his brother, Joseph8
DiVittorio (collectively, the “DiVittorios”), have resided at 	39-41 Bonner Avenue, Medford,
Massachusetts (the “Property”) since 1970. 	After inheriting it from their parents, the DiVittorios9
refinanced the Property thirteen times between 1998 and 2003. 	On March 13, 2003, the Debtor10
closed the present loan transaction in the original amount of $330,000 by executing a note (the
“Note”) and granting a first mortgage to IndyMac Bank, FSB, (“IndyMac”) (the “Mortgage”).11
Joseph DiVittorio, a co-owner of the property, is a signatory of the Mortgage, but is not an obligor
on the Note. 	The obligation under the Note and Mortgage was incurred primarily for personal,12
family, or household purposes. 	Although the IndyMac loan was an “income-stated loan,” the13
I take judicial notice of the docket in the present adversary proceeding, as well as that of7
the main case pending before this Court. See Rodi v. Southern New England School of Law, 389
F.3d 5, 17-19 (1st Cir. 2004) (citations omitted).
For purposes of the Motion to Dismiss, I must accept as true all allegations contained8
within the Debtor’s Complaint. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Nonetheless, I note that upon filing the Motion for Summary Judgment, the Defendant did not
challenge the factual allegations contained in the Debtor’s Complaint despite the opportunity.
Moreover, I note that aside from a few irrelevant characterizations, the Debtor does not dispute
the facts set forth in the Defendant’s Statement of Undisputed Material Facts. See [The
Defendant’s] Statement of Undisputed Material Facts (the “Statement of Facts”), Docket No. 73;
Angelo DiVittorio’s Response to HSBC’s Statement of Undisputed Material Facts and Statement
of Additional Undisputed Facts (“Statement of Additional Facts”), Docket No. 80.
Complaint, Docket No. 1 at ¶¶ 3-4.9
Id. at ¶ 10.10
Id. at ¶¶ 5, 8, 10.11
Statement of Additional Facts, Docket No. 80 at ¶19.12
Complaint, Docket No. 1 at ¶ 6.13
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Debtor contends that prior to the closing, IndyMac obtained the Debtor’s credit report and
information regarding the timeliness of his payments under his prior mortgages. 	The Defendant14
purports to be the current holder of the Mortgage.15
As previously stated, the closing took place on March 13, 2003, at which time the Debtor
received multiple disclosures regarding the Note and Mortgage, including the TIL Disclosure, a three
page document titled “Adjustable Rate Mortgage Loan Program Disclosure Non-Convertible 2/6
LIBOR Performance ARM” (the “ARM Disclosure”), the Addendum to Fixed/Adjustable Rate Note
(the “Addendum”) and the Rider to Security Instrument and Fixed/Adjustable Rate Rider (the
“Adjustable Rate Rider”). 	I note that the form of the TIL Disclosure is substantially similar to the16
model form provided in the appendix to Regulation Z, 	TILA’s enabling regulations promulgated17
by the Federal Reserve Board. 	The TIL Disclosure indicated, inter alia, an APR of 7.365%.18 	19
The TIL Disclosure further reflected that the loan contained a “variable rate feature” and
referred the Debtor to a separate disclosure regarding the variable rate. 	The ARM Disclosure,20
which appears to be a generic disclosure form for this type of loan product, explained that the interest
Id. at ¶ 11.14
Id at ¶ 5.15
Id. at ¶ 12, 15; see Complaint, Docket No. 1 at Exs. A, B; Motion filed by Creditor16
Ocwen Loan Servicing, LLC for Relief from Stay Re: 39-41 Bonner Avenue, Medford, MA
02155 (“MRS”), Docket No. 157, Case No. 05-20854-WCH, at Ex. A p5, Ex. B p17.
12 C.F.R. § 226.1 et seq.17
12 C.F.R. Pt. 226, App. H; see also 209 C.M.R. 32.28(5) (incorporating appendix H of18
Regulation Z by reference).
Complaint, Docket No. 1 at Ex. A.19
Id. at ¶ 15.20
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rate on the Note would be determined as follows:
Your Interest Rate will be based on an index rate plus a margin, rounded to the
nearest .125% (the “Interest Rate”), unless your Caps limit the amount of change in
the Interest Rate. The “Margin” is the amount which will be added to the index to
determine your Interest Rate. The Margin may be reduced by .50% for credit levels
I+, I, and II as shown in the examples below; and, by 1.00% for credit levels III and
IV after the second year of the loan if all payments for the first two years of the loan
are paid on time. If the Margin is reduced after the second year of the loan, the
Margin will not change through the remaining term of the loan. Please ask us for our
current Interest Rates and Margins. 21
As emphasized above, the interest rate was subject to a performance based rate reduction feature (the
“Reduction Feature”) by which the Debtor would qualify for a reduced margin if he made the first
two years of payments timely. While the ARM Disclosure did not indicate the Debtor’s “credit
level” or the potential margin reduction he would receive pursuant to the Reduction Feature, 	both22
the Addendum and the Adjustable Rate Rider clarified that the Debtor was entitled to a .500%
margin reduction if he made the first twenty-two payments timely. 23
According to the Complaint, IndyMac utilized the reduced interest rate the Debtor would
have been entitled to under the Reduction Feature, thereby assuming he would make the first twenty-
two payments timely, to compute the APR on the TIL Disclosure. 	The TIL Disclosure, however,24
did not reflect this assumption on its face as the basis for its APR calculation. 	Nonetheless, failure25
to make the first twenty-two payments timely would result in an additional interest payment of
Id. at Ex. B (emphasis added).21
Id. at ¶ 17.22
MRS, Docket No. 157, Case No. 05-20854-WCH at Ex. A p5, Ex. B p17.23
Complaint, Docket No. 1 at ¶ 18.24
Id. at ¶ 19.25
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approximately $100 per month for twenty-eight years and over $30,000 in additional finance
charges.26
The Debtor filed his Chapter 13 petition on October 11, 2005. 	Since that time, the Note27
and Mortgage have been the subject of a great deal of litigation between the Debtor and the
Defendant’s servicer, Ocwen Loan Servicing, LLC (“Ocwen”). 	Ocwen first moved for relief from28
stay to foreclose the Property on August 10, 2006. 	The Debtor opposed the motion, and after two29
months of negotiations, the parties filed a stipulation on October 25, 2006 whereby the Debtor would
cure a post-petition arrearage. 	On March 22, 2007, Ocwen filed an affidavit of non-compliance30
asserting that the Debtor had defaulted on the terms of the stipulation. 	The Debtor again opposed,31
and after eight continuances of the hearing on Ocwen’s affidavit of non-compliance, the Debtor filed
an Assented to Motion of Debtor for Authority to Modify Loan with Ocwen Loan Servicing, LLC
on November 30, 2007. 32
Pursuant to the Modification Agreement (the “Modification”), the interest rate on the loan
was reduced from in excess of 11% to 7% fixed, and the arrearage was amortized over the remaining
Id. at ¶ 22.26
Statement of Facts, Docket No. 73 at ¶ 4.27
Id. at ¶¶ 3, 8.28
Id. at ¶ 7; See Docket No. 69, Case No. 05-20854-WCH.29
Statement of Facts, Docket No. 73 at ¶ 7; See Docket Nos. 70, 91, Case No. 05-20854-30
WCH.
Statement of Facts, Docket No. 73 at ¶¶ 7-8.31
Statement of Facts, Docket No. 73 at ¶ 8. See Docket Nos.96, 128, Case No. 05-20854-32
WCH.
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life of the loan. 	The Modification also contained the following release (the “Release”) given by33
the Debtor:
YOUR RELEASE OF OCWEN: IN THE EVENT THAT YOU HAVE ANY
CLAIMS, ACTIONS OR CAUSES OF ACTION, STATUTE OF LIMITATIONS
OR OTHER DEFENSES, COUNTERCLAIMS OR SETOFFS OF ANY KIND
WHICH EXIST AS OF THE DATE OF THIS MODIFICATION, WHETHER
KNOWN OR UNKNOWN TO YOU, WHICH YOU NOW OR HEREAFTER MAY
ASSERT 	AGAINST 	OCWEN 	IN 	CONNECTION 	WITH 	THE 	MAKING,
CLOSING, ADMINISTRATION, COLLECTION OR THE ENFORCEMENT BY
OCWEN OF THE LOAN DOCUMENTS, THIS MODIFICATION OR ANY
OTHER 	RELATED 	AGREEMENTS, 	THEN 	BY 	EXECUTING 	THIS
MODIFICATION YOU FOREVER IRREVOCABLY WAIVE AND RELINQUISH
THEM. FOR PURPOSES OF THIS SECTION, OCWEN SHALL SPECIFICALLY,
[sic] INCLUDE BUT SHALL NOT BE LIMITED TO, PRESENT AND FORMER
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, SERVICING AGENTS,
ATTORNEYS 	AND 	ALL 	PRIOR 	AND 	SUBSEQUENT 	PARTIES 	OR
PREDECESSOR(S) IN INTEREST, TO BOTH OCWEN AND THE INVESTOR.34
The Modification expressly defined both Ocwen and “Investor” to include HSBC Bank. 	While35
both the Debtor and his former counsel signed the Modification, HSBC Bank did not sign the copy
submitted to the Court. 	I approved the Modification on December 11, 2007.36 	37
Despite the Modification, the Debtor once again fell behind on his post-petition mortgage
payments and Ocwen moved for relief from stay for the second time on October 10, 2008. 	After38
Statement of Facts, Docket No. 73 at ¶ 10, Ex. A.33
Statement of Facts, Docket No. 73 at ¶ 11, Ex. A.34
Statement of Facts, Docket No. 73 at ¶10, Ex A, ¶¶ A, D.35
Statement of Additional Facts, Docket No. 80 at ¶ 20.36
See Docket No. 137, Case No. 05-20854-WCH.37
Statement of Facts, Docket No. 73 at ¶ 13.38
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several extensions, the Debtor filed an opposition on February 3, 2009. 	On February 5, 2009, at39
the suggestion of Debtor’s counsel, I granted Ocwen’s motion for relief effective March 27, 2009. 40
Shortly thereafter, by a letter dated February 11, 2009 addressed to the Defendant, Ocwen,
and IndyMac, the Debtor purported to rescind the loan and requested an accounting, almost six years
after the closing of the refinancing. 	The Defendant disputed the validity of the Debtor’s exercise41
of rescission. 	On February 13, 2009, the Debtor, through new counsel, filed a motion seeking to42
vacate my order granting relief from stay (the “Motion to Alter Order”) on the basis that the Debtor
rescinded the loan. 	Ocwen filed an opposition, and on March 10, 2009, the Debtor filed the above-43
captioned adversary proceeding asserting novel theories in support of his claim of rescission under
the CCCDA. 	Although the statute of limitations had already expired under the CCCDA, 	the44 	45
Debtor permissibly advanced right of rescission defensively by way of recoupment.46
On March 12, 2009, I held a hearing on the Motion to Alter Order. After hearing from both
See Docket Nos. 159, 162, 166, 190, Case No. 05-20854-WCH.39
Statement of Facts, Docket No. 73 at ¶ 14. At the hearing, Debtor’s counsel offered no40
defense to Ocwen’s motion for relief from stay, but suggested that relief enter in thirty days to
afford the Debtor an opportunity to pursue a loan modification with the lender.
Id. at ¶ 34.41
Id. at ¶ 35.42
Complaint, Docket No. 1 at ¶ 34.43
Both Ocwen and the Federal Deposit Insurance Corporation, as receiver for IndyMac44
Bank, FSB, were dismissed from this adversary proceeding with the assent of the Debtor prior to
this matter being taken under advisement.
See Mass. Gen. Laws ch. 140D, § 10.45
In re DiVittorio, 2009 WL 2246138 *9.46
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parties, I declined to vacate my order, but stayed the foreclosure ninety days to determine the validity
of the Debtor’s purported rescission through the adversary proceeding on the condition that he pay
the mortgagee $2,000 per month on the first day of each month as adequate protection. 	The
Defendant moved to dismiss the adversary proceeding on April 28, 2009, and the Debtor filed an
opposition on May 21, 2009. On May 28, 2009, I conducted a hearing on the Motion to Dismiss,
and at its conclusion, took the matter under advisement.
Through his Complaint, the Debtor asserted, inter alia, that the APR stated on the TIL
Disclosure was numerically inaccurate because it was impermissibly calculated using the Reduction
Feature, or, in the alternative, the method of calculation, namely, the Reduction Feature, was not
clearly and conspicuously disclosed. 	Essentially, the Debtor contended that because he had not yet47
made twenty-two timely payments on the date of consummation, he was not entitled to a margin
reduction under the Reduction Feature, rendering the APR inaccurate. In support, the Debtor relied
on the following passage of the Commentary for the proposition that the APR must be calculated
using conditions as they exist at consummation:
When creditors use an initial interest rate that is not calculated using the index or
formula for later rate adjustments, the disclosures should reflect a composite annual
percentage rate based on the initial rate for as long as it is charged and, for the
remainder of the term, the rate that would have been applied using the index or
formula at the time of consummation. . . . 48
Alternatively, the Debtor argued that the APR was not clearly and conspicuously disclosed because
Though not relevant here, the Debtor also contended that the existence of an initial47
premium rate was not clearly and conspicuously disclosed and that the failure to specify a
payment period in the repayment schedule provided on the TIL Disclosure constituted a material
non-disclosure under the CCCDA. As the District Court’s remand order did not address my
rejection of these theories, I need not reconsider them.
12 C.F.R. Pt. 226, Supp. I, 12 C.F.R. 226.17(c)(1)(10)(I) (emphasis added).48
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the TIL Disclosure failed to reflect the assumption of timely payments. 	Moreover, the Debtor
alleged in the Complaint that “[t]he lender . . . knew or should have known that such an assumption
was not justified for the type of loan it was making. Upon information and belief, statistical data
within the lender’s possession demonstrated this.”49
On July 23, 2009, I issued a Memorandum of Decision (the “Decision”) and separate order
granting the Motion to Dismiss on all counts. Turning first to the alleged numerical inaccuracy of
the APR, I noted that neither the CCCDA nor its regulations provided any “meaningful guidance on
how one might factor in an assumption like the one now before me.” 	I rejected the applicability50
of the Commentary relied on by the Debtor because I erroneously found that it post-dated the time
of consummation and, even if it had, it was nothing more than a safe harbor and not a per se rule.51
Based upon the lack of clear instruction in the Commentary, I concluded that if the APR’s
incorporation of the Reduction Feature violated the CCCDA, it was “more likely a matter of
disclosure than computation.”52
In considering whether the APR was clearly and conspicuously disclosed, I found that it was
“not unreasonable for a lender to assume that a borrower will make timely payments . . . . [because]
[t]hat is no more than what the borrower agrees to do when he signs a note and mortgage.” 	With53
that in mind, I concluded that the APR was clearly and conspicuously disclosed because, reasonably
Complaint, Docket No. 1 at ¶ 20.49
In re DiVittorio, 2009 WL 2246138 *9.50
Id. (citing 209 C.M.R § 32.27).51
Id.52
Id. at *10.53
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assuming timely payments, the APR was calculated in a manner consistent with the Reduction
Feature formula set forth in the Addendum, Adjustable Rate Rider, and ARM Disclosure. 	The54
Debtor subsequently appealed.
On January 21, 2010, the District Court entered a Memorandum and Order in which it held
that I erred in rejecting the Commentary for two reasons (the “Remand Order”). 	First, the District55
Court noted that despite my assertion to the contrary, the relevant passage of the Commentary existed
at the time of consummation. 	Second, the District Court explained that the Supreme Court of the56
United States “has instructed that, ‘[u]nless demonstrably irrational,’ provisions of the Commentary
are dispositive statements of what the TILA and its regulations require.” 	In light of these rulings,57
the District Court remanded the Motion to Dismiss for reconsideration.58
On remand, I conducted a status conference at the parties’ request on January 28, 2010. At
the status conference, the Debtor suggested that the parties’ appellate briefs might be submitted in
lieu of further briefing, and HSBC Bank asked for an opportunity to file a motion for summary
judgment to be consolidated with the Motion to Dismiss. I granted both requests, and the Motion
for Summary Judgment was filed on March 5, 2010. 	The Debtor subsequently filed an opposition59
Id. at *11.54
In re DiVittorio, 423 B.R. at 391.55
Id. at 393.56
Id. (citing Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980)).57
Id.58
The Debtor did not oppose the Defendant’s request to consolidate the Motion to59
Dismiss with the Motion for Summary Judgment at the January 28, 2010 hearing or in his
opposition.
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on April 5, 2010, asserting, inter alia, that Joseph DiVittorio, the Debtor’s brother, had since
exercised his own right to rescind the transaction as a co-owner of the Property. 60
On April 8, 2010, I held a hearing on the consolidated Motions to Dismiss and for Summary
Judgment and, after extensive oral argument by both parties, took the matter under advisement.
III. POSITIONS OF THE PARTIES
The Defendant
With respect to the Motion to Dismiss, the Defendant characterizes the Debtor’s theories
regarding the APR disclosure as an “illogical twisting of the statute” because all TIL disclosures
assume timely payments as it “would be difficult to imagine how an originating lender could make
any coherent disclosure if it had to build in the possibility and timing of a borrower defaulting.”61
On remand, the Defendant argues that the Commentary cited by the Debtor and the District Court
is merely a red herring, and that the Decision should stand on my related findings, namely, that the
assumption of timely payments and receipt of the margin reduction was reasonable, rendering the
TIL Disclosure accurate. In support, the Defendant notes that the Commentary is devoid of any
language which would preclude such an assumption. Because the parties agree that the Defendant
calculated the APR based on a composite rate as required by the Commentary, the Defendant
construes the Debtor’s argument as asserting that the lender did not use the best available
information at the time as required by the regulations. In response, the Defendant asserts that the
disclosure provided was appropriately based on the Debtor’s contractual obligations as they existed
at consummation and rejects the premise that only events that have already occurred can be factored
Statement of Additional Facts, Docket No. 80 at ¶ 19.60
HSBC Bank’s Memorandum in Support of Motion to Dismiss, Docket No. 15 at p.6.61
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into the APR calculation.
The Defendant further contends that the Debtor’s allegation that the lender “knew or should
have known that such an assumption [of timely payments] was not justified,” is a baseless legal
conclusion not properly considered. In a footnote in its brief to the District Court, the Defendant
suggests that this is an artificial CCCDA claim premised on other claims regarding the origination
of the loan which are now time-barred. In any event, the Defendant disputes the idea that such a
default was as certain as the Debtor suggests. If it was, the Defendant posits, then the lender would
not have made the loan.
Through the Motion for Summary Judgment, the Defendant asserts two additional reasons
why the Debtor’s claims should fail as a matter of law. First, the Defendant argues that the Debtor
should be judicially estopped from asserting any loan origination claims against the Defendant
because he failed to disclose those claims in his bankruptcy case. The Defendant contends that I
accepted the Debtor’s repeated “certification” in his schedules and Statement of Financial Affairs
that he held no claims against the Defendant and that the Debtor affirmed the validity and
enforceability of the Mortgage through confirmation of his Chapter 13 plan. Moreover, based upon
the Debtor’s certification, the Defendant asserts that it negotiated and ultimately entered into a
stipulation and the Modification. By entering into those agreements, the Defendant contends that
the Debtor took the position that the Mortgage was valid and not subject to rescission, a position
which is directly at odds with this adversary proceeding. As such, the Defendant would be unfairly
prejudiced if the Debtor was permitted to advance his claims in the Complaint.
Second, the Defendant asserts that, by virtue of the Release granted by the Debtor within the
Modification in which the Defendant is encompassed by the definitions of both “Ocwen” and
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“Investor,” the Debtor waived his claims against it. 	While conceding the Release does not
specifically use the words TILA or the CCCDA, the Defendant notes a clear reference to claims “in
connection with the making, closing, administration, collection, or the enforcement . . . of the loan
documents.” 	The Defendant contends that the Release constitutes a knowing and well informed62
decision on the part of the Debtor as it was executed by him as part of the Modification, which itself
was the result of lengthy negotiations during which the Debtor was represented by counsel.
Moreover, the Defendant argues that the Modification need only be signed by the Debtor to be
enforceable against him.
The Defendant notes that there are few reported cases with respect to TILA waivers, but
argues that the most recent, Tucker v. Beneficial Mortgage Co., 	held that a plaintiff can effectively63
release his TILA rescission claims when he signs a knowing release and there is no disparate
bargaining power, proving there is no absolute prohibition. The Defendant suggests that Mills v.
Home Equity Group, Inc. 	and Parker v. Dekalb Chrysler Plymouth, 	two cases where courts64 	65
refused to honor TILA claim releases, are inapposite, outdated, and expressly rejected by Tucker.
Both are distinguishable, the Defendant asserts, because the rescission period in those cases had not
expired as a matter of law at the time the consumers signed the releases. Here, in contrast, the
Debtor received the benefit of the full four year extended right of rescission and only now asserts it
defensively through recoupment. 	Moreover, the Defendant argues that 	the Debtor, unlike the
Statement of Facts, Docket No. 73 at ¶ 11, Ex. A.62
Tucker v. Beneficial Mortgage Co., 437 F.Supp.2d 584 (E.D. Va. 2006).63
Mills v. Home Equity Group, Inc, 871 F.Supp. 1482 (D.D.C. 1994).64
Parker v. Dekalb Chrysler Plymouth, 673 F.2d 1178, 1182 (11th Cir. 1982).65
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consumer in Parker, was represented by counsel at the time he executed the release.
To the extent that the Debtor argues that the Release does not comply with the regulation
regarding waiver of a consumer’s right to rescind, 	the Defendant counters that by its express66
provisions, that section only applies to the initial three day right to rescind and not any extended right
that may arise under the statute or regulations. 	The Defendant notes that the purpose of the
regulation is to allow consumers to waive the right to rescind to meet “bona fide personal financial
emergenc[ies].” 	Such an event, the Defendant posits, could only occur at the outset of the loan67
transaction and is thus inapplicable to post-funding waivers.
In support of both the judicial estoppel and waiver arguments, the Defendant relies on
Petroski v. First Horizon Homes Loans, Inc. 	for the proposition that a discovery rule should apply68
to the present case. Because the Debtor had access to all the loan documents and was represented
by counsel throughout his bankruptcy case, the Defendant reasons that even if the Debtor was not
actually aware of his purported CCCDA claims, he could have discovered them at an earlier date.69
With respect to judicial estoppel, the Defendant also contends that intent to conceal is not an
element, but nonetheless suggests that if it were, delaying an inevitable foreclosure would suffice.
Finally, with respect to the Debtor’s allegation that Joseph DiVittorio has now exercised his
own right of rescission rendering both the judicial estoppel and waiver arguments moot, the
See 209 C.M.R. § 32.23(5).66
Id.67
Petroski v. First Horizon Home Loans, Inc., No. Civ.A.02-8022, 2004 WL 155173668
(E.D. Pa. Jul. 9, 2004).
See Salois v. The Dime Savings Bank of New York, FSB, 128 F.3d 20, 25 (1st Cir.69
1997).
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Defendant asserts that it is irrelevant because Joseph DiVittorio does not have a claim pending
against the Defendant here or in any court. Additionally, while the Defendant concedes that the
regulations provide that a co-owner has a separate right of rescission, it argues that the regulation
cannot expand statutory rights where the statute only references the obligor.
The Debtor
On remand, the Debtor continues his opposition to the Motion to Dismiss by challenging the
numerical accuracy of the APR as stated on the TIL Disclosure. 	First, the Debtor contends that I70
erred as a matter of law by not accepting as true his allegation in the Complaint that the lender “knew
or should have known that such an assumption [of timely payments] was not justified.” The Debtor
argues that the statement is a factual allegation and not a bare legal conclusion. 	As a factual
allegation, the Debtor asserts that I was required to accept it as true and erred by not only rejecting
it, but assuming the opposite to be true, namely, the assumption of timely payments is reasonable.
In light of this allegation and the Commentary which states that the APR should be calculated
based on conditions that existed at the time of consummation, the Debtor argues that the Defendant
did not use the best information available. Concluding that the Defendant “knew or should have
known” that sub-prime borrowers would be delinquent in their payments, the Debtor asserts that the
Reduction Feature amounted to an unlikely contingency that artificially depressed the APR on the
TIL Disclosure. In this way, the Reduction Feature was “untethered” to the circumstances as they
existed at the time of consummation and was not the best information available.
In further support of his argument, the Debtor characterizes the Reduction Feature as an
The Debtor also challenges my findings with respect to his other theories, but as70
previously stated, those issues are not effected by the District Court’s Remand Order and I see no
reason to reconsider them.
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insidiously designed loan product that provides for a precisely defined numerical and temporal
alteration of the rate structure based upon a contingency, which he argues, was unlikely to occur.
In this way, the Reduction Feature is different from a late charge because, at the time of
consummation, its impact is known and measurable. 	Accordingly, the Debtor asserts that the
Defendant must suffer the consequences of its improbable prediction, implicitly arguing that the
relative deceptiveness of the disclosure is based upon its ultimate impact. 	To hold otherwise,
suggests the Debtor, would encourage lenders to creatively hide finance charges such that materially
different loan products would have identical APRs, precluding informed comparison and teasing
borrowers into disadvantageous loans.
While the Debtor concedes that, “in a technical sense,” he was legally obligated to make
every payment on time, he argues that at the time of consummation, the Defendant’s obligation to
apply the Reduction Feature was only contingent. 	Because the Defendant did not have a legal
obligation to utilize the more favorable rate, the Debtor asserts it should be barred from using “an
improbable assumption that the contingency will be met” to prevent misleading and inaccurate
disclosures.
The Debtor also opposes the Motion for Summary Judgment on three grounds. First, with
respect to judicial estoppel, the Debtor contends that failure to schedule an asset does not
automatically result in the application of the judicial estoppel doctrine. 	The Debtor further argues71
that judicial estoppel is not applied where the party’s prior position was based on inadvertence or
mistake. As such, the Debtor asserts that application of a discovery rule would be inappropriate as
See GE HFS Holdings, Inc. v. Nat’l Union Fire Ins. Co. Of Pittsburgh, PA, 52071
F.Supp.2d 213, 223 (D. Mass. 2007).
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inadvertence only exists “when a party either lacks knowledge of the undisclosed claim or has no
motive for their concealment.” 	Moreover, the Debtor argues that the case law in this circuit72
requires a debtor to have been “playing fast and loose” in his failure to disclose an asset for judicial
estoppel to apply. 	In contrast, the Debtor contends that his non-disclosure was innocent and a73
result of the Defendant’s initial concealment of its calculation method. In light of the Defendant’s
repeated characterization of the Debtor’s claims as “novel,” the Debtor asserts that it was reasonable
for the claims not to be discovered until a second attorney reviewed the loan documents.
Second, the Debtor argues that the Release is ineffective because it ignores both the statute
and regulations. Relying on Parker, Mills, and a third case, Johnson v. Steven Sims Subaru, Inc., 74
he contends that there is a special interest in guarding statutory remedies and courts must distinguish
“pre-dispute” waivers from “post-dispute” waivers. The Debtor argues that the regulations provide
the only “pre-dispute” means of waiving the right to rescission. 	In support, he notes that the court75
in Parker refused to give effect to a release of a “prospective TILA claim” where the plaintiff was
unaware of any such claim and lacked an appreciation of what rights she was waiving. 	Similarly,76
in Mills, the court refused to give effect to a release which expressly included reference to Regulation
Id. at 224 (quoting Barger v. City of Cartersville, Georgia, 348 F.3d 1289, 1295 (11th72
Cir. 2003)).
See Payless Wholesale Distribs., Inc. v. Alberto Culver, Inc., 989 F.2d 570, 571 (1st73
Cir. 1993).
Johnson v. Steven Sims Subaru, Inc., No. 92 C 6355, 1993 WL 761231 (N.D. Ill. June74
9, 1993).
See 209 C.M.R. § 32.23(5).75
Parker v. Dekalb Chrysler Plymouth, 673 F.2d at 1182.76
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Z absent the narrowly drawn circumstances contemplated by the statute. 	Citing Johnson, the77
Debtor argues that even “post dispute,” TILA requires a specific waiver. 78
Although somewhat vague, the Debtor’s definition of “post-dispute” in this context appears
to be one in which the consumer is actually aware of the right to rescind and has previously raised
the TILA/CCCDA claim to the lender in some way. Moreover, he contends that his representation
by legal counsel at the time of the Release was insignificant because he still did not know he had a
claim under the CCCDA and cites the Defendant’s non-disclosure of the “true” APR. Nonetheless,
at oral argument the Debtor suggested that even if he knew of the non-disclosure, he could still
pursue the claim as a “private attorney general.”79
Because he was unaware of the existence of the claim at the time the Modification was
executed, the Debtor argues that there was no dispute and that the “pre-dispute” rules apply.
Applying those rules, namely, 209 C.M.R. § 32.23(5), the Debtor asserts the Release was ineffective
because the regulation requires the Debtor to provide a written statement describing a bona fide
personal financial emergency, specifically waiving the right to rescind, and signed by all consumers
with a right to rescind.80
Alternatively, the Debtor argues that the Release was ineffective under the Statute of Frauds
because it must be signed by the party to be charged, who in this case, he contends, is the
Mills v. Home Equity Group, Inc, 871 F.Supp. at 1486.77
Johnson v. Steven Sims Subaru, Inc., 1993 WL 761231 *4.78
Trans. April 8, 2010 at 21, ¶¶ 1-5.79
See 209 C.M.R. § 32.23(5).80
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Defendant. 	Furthermore, the Debtor asserts that the express language of the Release does not cover81
the Defendant because use of both “Ocwen” and “Investor” in the Release, which were both
“misleadingly” defined to include the Defendant earlier in the Modification, suggests Ocwen has two
different meanings in the provision. As such, the Debtor argues that I should not give effect to such
broad language.
Finally, the Debtor argues that both the Defendant’s arguments for judicial estoppel and
waiver are moot in light of Joseph DiVittorio’s exercise of his separate right of rescission. 	In
support, the Debtor notes that the regulations expressly state that “each consumer whose ownership
is or will be subject to the security interest shall have the right to rescind the transaction . . . .”82
IV. DISCUSSION
A. TILA and the CCCDA
To appropriately set the stage, a few words about TILA and the CCCDA would be helpful.
“Both TILA and CCCDA were enacted ‘to assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms available to him and avoid
the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing
and credit card practices.’” 	Additionally, “[b]oth acts provide that a borrower whose loan is secured83
by his principal dwelling and who has been denied the requisite disclosures may rescind the loan
Mass. Gen. Laws ch. 259, § 1.81
209 C.M.R. § 32.23(1)(a).82
Fidler v. Cent. Coop. Bank (In re Fidler), 226 B.R. 734, 736 (Bankr. D. Mass. 1998)83
(quoting Beach v. Ocwen Federal Bank, 523 U.S. 410, 412 (1998)).
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transaction.” 	For this reason, the CCCDA is sometimes referred to as the Massachusetts Truth in84
Lending Act. 	In Massachusetts, however, credit transaction subject to the CCCDA are exempt85
from many of the provisions of TILA. 	Nevertheless, because the provisions of the two statutes are86
substantially the same, TILA remains relevant to this inquiry and federal court decisions with respect
to TILA are instructive in construing the parallel provisions of the CCCDA. 87
From the outset, it is important to remember that the CCCDA, like TILA, is a disclosure
statute and does not “substantively regulate consumer credit.” 	To that end, the Supreme Court of88
the United States has observed that “[m]eaningful disclosure does not mean more disclosure. Rather,
it describes a balance between competing considerations of complete disclosure . . . and the need to
Id. See 15 U.S.C. § 1635; Mass. Gen. Laws ch. 140D, § 10.84
Jaaskelainen v. Wells Fargo Bank, N.A. (In re Jaaskelainen), 391 B.R. 627, 63685
(Bankr. D. Mass. 2008), aff’d in part, vacated in part, Wells Fargo Bank, N.A. v. Jaaskelainen,
407 B.R. 449 (D. Mass. 2009) (finding the bankruptcy court has authority to condition rescission
on the debtors’ ability to tender).
The Federal Reserve Board has exempted credit transactions within Massachusetts86
subject to the CCCDA from chapters two and four of TILA. 12 C.F.R. Pt. 226, Supp. I, 12 C.F.R.
§ 226.29(a) ¶ 4; see Laudani v. Tribeca Lending Corp. (In re Laudani), 401 B.R. 9, 25 n.13
(Bankr. D. Mass. 2009). Chapter two of TILA includes sections 1631 through 1646. The
displacement of federal law is not absolute, however, and it is well established that borrowers
retain at least the ability to file suits in federal court pursuant to 15 U.S.C. § 1640. Belini v.
Washington Mut. Bank, FA, 412 F.3d 17, 20 (1st Cir. 2005).
In re Fidler, 226 B.R. at 736; Mayo v. Key Fin. Serv., Inc., 424 Mass. 862, 864 (1997).87
See also 209 C.M.R. § 32.27 (compliance with the Federal Reserve Board’s Official Staff
Commentary, which does not conflict with Mass. Gen. Laws ch. 140D or 209 C.M.R. 32.00 or an
advisory opinion of the Commissioner, shall be deemed in compliance with the CCCDA); 209
C.M.R. § 32.28 (incorporating appendices D, E, F, G, H, and J of Regulation Z by reference).
Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1120 (9th Cir. 2009); see also88
Rendler v. Corus Bank, 272 F.3d 992, 996 (7th Cir. 2001).
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avoid . . . [informational overload].” 	Moreover, the United States Court of Appeals for the First89
Circuit has rejected a rule of hyper-technicality with respect to TILA violations in favor of an
objective standard of clear and conspicuous disclosure. 	In adopting this standard, the First Circuit90
reasoned that by amending TILA in 1995 to provide higher tolerance levels for “honest mistakes in
carrying out disclosure obligations . . . Congress made manifest that although it had designed the
TILA to protect consumers, it had not intended that lenders would be made to face overwhelming
liability for relatively minor violations.” 91
B. The Motion to Dismiss
1. The Fed. R. Civ. P. 12(b)(6) Standard
In Ashcroft v. Iqbal, the Supreme Court of the United States explained the standard for
dismissal under Fed. R. Civ. P. 12(b)(6), made applicable in adversary proceedings by Fed. R. Bankr.
P. 7012(b):
To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to “state a claim to relief that is plausible on its face.” . . . A claim
has facial plausibility when the plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged. . . . The plausibility standard is not akin to a “probability requirement,” but
it asks for more than a sheer possibility that a defendant has acted unlawfully. . . .
Where a complaint pleads facts that are “merely consistent with” a defendant's
liability, it “stops short of the line between possibility and plausibility of ‘entitlement
to relief.’” . . .
Two working principles underlie our decision in Twombly. First, the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to
Ford Motor Credit Co. v. Milhollin, 444 U.S. at 568.89
See Santos-Rodriguez v. Doral Mortgage Corp., 485 F.3d 12, 17 n.6 (1st Cir. 2007);90
McKenna v. First Horizon Home Loan, 475 F.3d 418, 424 (1st Cir. 2007).
McKenna v. First Horizon Home Loan, 475 F.3d at 424.91
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legal conclusions. . . . Second, only a complaint that states a plausible claim for relief
survives a motion to dismiss. 92
To reiterate, “[a]lthough for the purposes of a motion to dismiss [I] must take all of the
factual allegations in the complaint as true, [I] ‘a[m] not bound to accept as true a legal conclusion
couched as a factual allegation.’” 	Indeed, the First Circuit has explained that I need not “swallow93
the plaintiff's invective hook, line, and sinker; [and that] bald assertions, unsupportable conclusions,
periphrastic circumlocutions, and the like need not be credited.”94
2. The Numerical Accuracy of the APR Disclosed
As I previously explained in the Decision:
The APR is defined as “a measure of the cost of credit, expressed as a yearly rate,
that relates the amount and timing of value received by the consumer to the amount
and timing of payments made.” 	The regulations provide that the APR “shall be
determined in accordance with either the actuarial method or the United States Rule
method” and further state that “[e]xplanations, equations, and instructions for
determining the annual percentage rate in accordance with the actuarial method are
set forth in appendix J to Regulation Z.” Generally, appendix J states that the APR
“shall be the nominal annual percentage rate determined by multiplying the unit-
period rate by the number of unit-periods in a year.” 	Beyond that, appendix J
provides no meaningful guidance on how one might factor in an assumption like the
one now before me.95
Nonetheless, the Debtor contends that the answer lies in the Commentary, which states in
relevant part:
When creditors use an initial interest rate that is not calculated using the index or
Ashcroft v. Iqbal, – U.S. –, 129 S.Ct. 1937, 1949-1950, 173 L.Ed.2d 868 (2009)92
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556-570 (2007)) (citations omitted).
Id. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. at 555).93
Aulson v. Blanchard, 83 F.3d 1, 3 (1st Cir. 1996).94
In re DiVittorio, 2009 WL 2246138 *9 (citations omitted).95
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formula for later rate adjustments, the disclosures should reflect a composite annual
percentage rate based on the initial rate for as long as it is charged and, for the
remainder of the term, the rate that would have been applied using the index or
formula at the time of consummation. . . . 96
Having now considered the substance of this Commentary, I find that it is too vague to provide any
meaningful assistance with the issue now before me. Although I did not rely on this passage in the
Decision, I implicitly accepted its basic premise that the operative date for the APR calculation is
the time of consummation. 	With that in mind, the Commentary is silent as to the question posed97
here: namely, whether a lender, at the time of consummation, can factor an assumption of timely
payments into the APR calculation?
The parties each rely on different considerations to fill in the gap left by the Commentary.
Generally, the CCCDA requires disclosures to “reflect the terms of the legal obligation between the
parties” and, in the absence of exact information, be “based on the best information reasonably
available at the time the disclosure is provided.” 	The Defendant asserts that the terms of the Note98
and Mortgage required timely payments, while the Debtor argues that an assumption of timely
payments was contrary to the best information available. In the Decision, I accepted the Defendant’s
argument, finding that an assumption of timely payments is reasonable because “[t]hat is no more
than what the borrower agrees to do when he signs the note and mortgage.” 	The Debtor, however,99
asserts that this was error for several reasons.
12 C.F.R. Pt. 226, Supp. I, 12 C.F.R. 226.17(c)(1)(10)(i) (emphasis added).96
Moreover, the Debtor does not dispute that the Defendant employed a composite rate.97
209 C.M.R. § 32.17(3)(a), (b).98
In re DiVittorio, 2009 WL 2246138 *10.99
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First, the Debtor contends that I was required to accept as true his allegation as set forth in
the Complaint that the lender “knew or should have known that such an assumption [of timely
payments] was not justified.” 	I disagree. As discussed above, I am not bound to accept legal100
conclusions couched in fact. 	While what the Defendant “knew or should have known” might101
otherwise be a factual allegation, whether something is “justified” is fundamentally a legal
determination. Moreover, the vagaries associated with the Debtor’s position are evident from the
Complaint, which goes on to provide that “[u]pon information and belief, statistical data within the
lender’s possession demonstrated [that the assumption of timely payments was not justified],” but
provides no additional elaboration. 	Although the Debtor alleged the existence of statistical data102
within the Defendant’s possession, the content and sufficiency of that data is described only as a
legal conclusion in the Complaint. 	While I must accept as true that the Defendant possessed
“statistical data,” I have been given no facts on which to base a legal conclusion that the data was
insufficient to justify an assumption of timely payments.
Even assuming, arguendo, that the Defendant had in its possession statistical data showing
that sub-prime borrowers were likely to be delinquent in their mortgage payments, it would be
irrelevant in this context. 	First and foremost, all disclosures are premised on what the parties
obligate themselves to do. 	This is what the regulation requires and the reason is obvious- to103
Complaint, Docket No. 1 at ¶ 20.100
Bell Atlantic Corp. v. Twombly, 550 U.S. at 555.101
Complaint, Docket No. 1 at ¶ 20.102
209 C.M.R. § 32.17(3)(a) (“The disclosures shall reflect the terms of the legal103
obligation between the parties.”)
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assume otherwise would render every disclosure an estimate and preclude any meaningful disclosure.
For this reason, I question whether a borrower’s strict compliance with the terms of his legal
obligation can ever be deemed “unknown” for the purposes of this regulation. 	Therefore, because104
the lender had the exact information, resort to the “best information reasonably available,” whatever
that may have been, was unnecessary.
While the Debtor attempts to distance himself from this obligation by acknowledging only
its “technical” accuracy and emphasizing the contingent nature of the Defendant’s obligation to
adjust the interest rate based upon the Reduction Feature, these characterizations miss the mark. The
Debtor was obligated to make timely payments and, upon making twenty-two timely payments, the
Defendant was obligated to adjust the interest rate based upon a reduced margin to determine the
interest rate for the remaining term of the loan. Indeed, if at the time of consummation one assumes
the borrower will strictly comply with his obligations, which I find the regulation requires, then
logically the lender must similarly factor in any obligation based on that strict compliance.
As previously stated, the CCCDA is a disclosure statute and does not “substantively regulate
consumer credit.” 	In this way, the Debtor’s attack on the design of the product itself belies its true105
nature as a backdoor attempt to revive a time-barred predatory lending claim. 	Indeed, the central106
See 12 C.F.R. Pt. 226, Supp. I, 12 C.F.R. 226.17(c)(2)(i)(1) (“Information is unknown104
if it is not reasonably available to the creditor at the time the disclosures are made.”)
See Hauk v. JP Morgan Chase Bank USA, 552 F.3d at 1120; Rendler v. Corus Bank,105
272 F.3d at 996.
See, e.g., Commonwealth v. Fremont Investment & Loan, 452 Mass. 733, 897 N.E.2d106
548 (2008) (affirming injunction that restricted lender from foreclosing certain sub-prime loans
where lender should have known that loans with four identified characteristics were “doomed to
foreclosure” and thus unfair under Mass. Gen. Laws ch. 93A, § 2).
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premise of the Debtor’s Complaint, that the assumption of timely payments was not justified, sounds
in negligence and speaks to the lender’s business practices. 	Although dressed up in terms of
numerical inaccuracy, the Debtor’s argument is that the Defendant, by use of a complex adjustable
interest rate feature premised on the Debtor’s obligation to make timely payments, was able to
disclose a better APR than he would likely receive. That simply is not a CCCDA claim because the
disclosure was based upon what the regulations required.
Admittedly, Congress intended the APR to provide a simple means for consumers to compare
loan products. 	Nonetheless, regardless of how one calculates the APR for this loan, either using107
the Reduction Feature or not, I note that the figure disclosed would have been identical to some other
loan product’s APR that was not subject to any conditional feature. 	As neither TILA nor the108
CCCDA substantively regulate credit terms, I cannot say the present calculation violates either
statute absent a clearer directive from either Congress or the Federal Reserve Board. 	Even if
regulators are unable to keep pace with the ingenuity of lenders, it is not the Court’s role to read new
See, e.g., Buford v. American Fin. Co., 333 F.Supp. 1243, 1245 (N.D. Ga. 1971) (“In107
order to accomplish this purpose the Act creates two artificial terms-‘finance charge’ and ‘annual
percentage rate’-the determination of which is removed from the individual creditors and,
instead, established by statute and regulation. The idea is to put a simple price tag on credit so
that the consumer may ‘comparison shop’ in credit transactions by looking at the ‘annual
percentage rate.’ H.R. Rep. No. 1040, 90th Cong., 2d Sess. (1968).”).
To illustrate, imagine three loan products: A, B, and C. Products A and B are variable108
rate loans with composite APRs of 8% and 16%, respectively. Neither is subject to any
conditional interest rate feature such as the one in this case. Product C, however, is a variable
rate loan with an incentive feature that provides the borrower with a composite APR of 8% if the
borrower makes the first twenty-two payments timely and a composite APR of 16% if he does
not. Without question, Product C is materially different from Products A and B. Nonetheless, no
matter how one assumes Product C should be calculated, the APR disclosed will be identical to
either Product A or B.
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requirements and prohibitions into the statute. 	This further supports my conclusion that the Debtor109
has attempted to re-characterize a time-barred predatory lending claim as a rescission claim under
the CCCDA.
Therefore, after reconsideration in light of the District Court’s ruling, I again conclude that
the Debtor has not stated a claim under the CCCDA for which relief can be granted.
C. The Motion for Summary Judgment
In the interests of judicial economy, I will consider the Motion for Summary Judgment as an
alternate basis for relief. 	In so doing, I will assume, contrary to my findings above and in the
Decision, that the Debtor has stated a claim under the CCCDA. Before delving into the merits,
however, I must separately address Joseph DiVittorio’s purported exercise of his right to rescind as
a co-owner of the Property.
Without question, neither judicial estoppel nor the Release would bar Joseph DiVittorio from
exercising his right to rescind because, as far as I am aware, he has not taken a contrary position
before any other court and did not sign the Modification. This is undoubtedly why he attempted to
rescind after the Motion for Summary Judgment was filed. Nonetheless, Joseph DiVittorio is not
a plaintiff in this adversary proceeding or in any other action against the Defendant. As such, I need
not consider the effect, if any, of his separate claim of rescission. 110
To be clear, I do not mean to suggest that I accept the “mischievous” connotation the109
Debtor has attached to the word “creative.” Instead, I merely note that the absence of express
guidance on this point suggests that products such as these likely were not contemplated by
lawmakers.
I note, however, that assuming his exercise was premised on the same allegations110
contained in the Debtor’s Complaint, I would find that Joseph DiVittorio had not stated a claim
for rescission under the CCCDA.
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1. The Summary Judgment Standard
Pursuant to Fed. R. Civ. P. 56, summary judgment “shall be rendered if the pleadings, the
discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as
to any material fact and that the movant is entitled to judgment as a matter of law.” 	“A ‘genuine’111
issue is one supported by such evidence that ‘a reasonable jury, drawing favorable inferences,’ could
resolve it in favor of the nonmoving party.” 	Material facts are those having the potential to affect112
the outcome of the suit under the applicable law. 113
The party seeking summary judgment “always bears the initial responsibility . . . of
identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions
on filed, together with the affidavits, if any,’ which demonstrate the absence of a genuine issue of
material fact.” 	The nonmoving party must then “produce ‘specific facts, in suitable evidentiary114
form, to . . . establish the presence of a trialworthy issue.’” 	A trialworthy issue cannot be115
established by “conclusory allegations, improbable inferences, and unsupported speculation.” 	The116
Fed. R. Civ. P. 56(c) made applicable in adversary proceedings by Fed. R. Bankr. P.111
7056.
Triangle Trading Co. v. Robroy Indus., Inc., 200 F.3d. 1, 2 (1st Cir. 1999)(quoting112
Smith v. F.W. Morse & Co., Inc., 76 F.3d 413, 427 (1st Cir. 1996)).
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); McCarthy v. Northwest113
Airlines, Inc., 56 F.3d 313, 314-315 (1st Cir. 1995); Nereida-Gonzalez v. Tirado-Delgado, 990
F.2d 701, 703 (1st Cir. 1993).
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Anderson v. Liberty Lobby, Inc.,114
477 U.S. at 248.
Triangle Trading Co., 200 F.3d at 2 (quoting Morris v. Gov’t Dev't Bank of Puerto115
Rico, 27 F.3d 746, 748 (1st Cir. 1994)).
Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir. 1990)(quoting Medina-Munoz v.116
R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990)).
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Court must view the record in the light most favorable to the nonmoving party and draw all
reasonable inferences in its favor. 	Nonetheless, the absence of a material factual dispute is merely117
a “condition necessary,” but not a “condition sufficient” to summary judgment. 	The moving party118
must still demonstrate an entitlement to judgment as a matter of law.119
2. Judicial Estoppel
The doctrine of judicial estoppel bars a party from asserting a position in one legal
proceeding which is contrary to a prior position successfully asserted in another. 	Recognizing that120
it is discretionary doctrine based in equity, the Supreme Court of the United States stated the
following:
Courts have observed that “[t]he circumstances under which judicial estoppel may
appropriately be invoked are probably not reducible to any general formulation of
principle,” . . . . Nevertheless, several factors typically inform the decision whether
to apply the doctrine in a particular case: First, a party's later position must be
“clearly inconsistent” with its earlier position. . . . . Second, courts regularly inquire
whether the party has succeeded in persuading a court to accept that party's earlier
position, so that judicial acceptance of an inconsistent position in a later proceeding
would create “the perception that either the first or the second court was misled,” .
. . . Absent success in a prior proceeding, a party's later inconsistent position
introduces no “risk of inconsistent court determinations,” . . . and thus poses little
threat to judicial integrity. . . . A third consideration is whether the party seeking to
assert an inconsistent position would derive an unfair advantage or impose an unfair
detriment on the opposing party if not estopped. . . .
In enumerating these factors, we do not establish inflexible prerequisites or an
Nicolo v. Philip Morris, Inc., 201 F.3d 29, 33 (1st Cir. 2000).117
Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 764 (1st Cir.1994).118
Id.119
Fleet Nat’l Bank v. Gray (In re Bankvest Corp.), 375 F.3d 51, 61 (1st Cir. 2004) (“The120
doctrine of judicial estoppel takes effect when the proponent has shown that the party to be
estopped ‘succeeded previously with a position directly inconsistent with the one [it] currently
espouses.’ Lydon v. Boston Sand & Gravel Co., 175 F.3d 6, 13 (1st Cir. 1999).”).
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exhaustive formula for determining the applicability of judicial estoppel. Additional
considerations may inform the doctrine's application in specific factual contexts.121
In the First Circuit, judicial estoppel has been applied when a debtor fails to disclose a claim
in bankruptcy proceeding and later seeks to assert it. 	“In such a situation, the plan to ‘[c]onceal122
your claims; get rid of your creditors on the cheap, and start over with a bundle of rights’ constitutes
‘an unacceptable abuse of judicial proceedings.’” 	Nevertheless, estoppel is not the automatic123
result of a failure to schedule an asset as courts have been reluctant to apply the equitable doctrine
where the debtor’s failure arose from inadvertence, such as a lack of knowledge of the undisclosed
claim.124
In GE HFS Holdings, Inc., Judge Gertner recognized that, “[w]hile the parameters of the
doctrine of judicial estoppel are ‘hazy,’ and each case must be decided on its own facts, the First
Circuit has decided that there are at least two conditions which must be satisfied before the doctrine
may be applied.” 	First, the legal or factual position advanced in the earlier proceeding must be125
“directly inconsistent” with the position now asserted. 	Second, the party must have succeeded in126
New Hampshire v. Maine, 532 U.S. 742, 749-751 (2001) (citations omitted).121
See, e.g., In re Bankvest Capital Corp., 375 F.3d at 61; Payless Wholesale Distribs.,122
Inc. v. Alberto Culver, Inc., 989 F.2d at 571; Sullivan v. Decision One Mortgage (In re Sullivan),
346 B.R. 4, 31-32 (Bankr. D. Mass. 2006); Xytest Corp. v. Mitchell (In re Mitchell), 255 B.R. 97,
108 (Bankr. D. Mass. 2000).
GE HFS Holdings, Inc. v. Nat’l Union Fire Ins. Co. Of Pittsburgh, PA, 520 F.Supp.2d123
at 223 (quoting Payless Wholesale Distribs., Inc. v. Alberto Culver, Inc., 989 F.2d at 571).
Id. at 224; see also New Hampshire v. Maine, 532 U.S. at 753 (“We do not question124
that it may be appropriate to resist application of judicial estoppel ‘when a party’s prior position
was based on inadvertence or mistake.’ John S. Clark Co. v. Faggert & Frieden, P.C., 65 F.3d
26, 29 (4th Cir. 1995).”).
Id. at 223.125
In re Bankvest Capital Corp., 375 F.3d at 61.126
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the prior proceeding, meaning that the court “accepted the legal or factual assertion alleged to be at
odds with the position advanced in the current forum . . . .”127
Although the Defendant and Debtor argued at length regarding the Debtor’s knowledge of
his non-disclosure, I find that the Defendant has otherwise failed to satisfy one of the mandatory
conditions identified by the First Circuit for application of judicial estoppel. 	Contrary to the
Defendant’s assertion, I never “accepted” a position advanced by the Debtor as to the existence or
non-existence of any claim under the CCCDA. Without question, no such claim appeared on the
Debtor’s schedules, but unlike the cases which have applied the doctrine, I have not granted the
Debtor any relief, such as a discharge, based upon representations made in them. 	Indeed, the128
Debtor could still amend his schedules and Chapter 13 plan to reflect an omitted asset if necessary.
For that reason, confirmation of the Debtor’s plan would not amount to “acceptance of a position”
in the same manner.
The Defendant’s reliance on the stipulation and Modification are equally unavailing. Both
are in the nature of a settlement, and the First Circuit has held that a court does not accept the legal
or factual allegations of the underlying matter by approving a settlement, rendering judicial estoppel
inappropriate. 	I am also unimpressed by the Defendant’s assertion that it relied upon the Debtor’s129
tacit position that the Mortgage was valid and not subject to rescission in negotiating and executing
Gens v. Resolution Trust Corp. (In re Gens), 112 F.3d 569, 572-73 (1st Cir. 1997).127
See, e.g., Jeffrey v. Desmond, 70 F.3d 183 (1st Cir. 1995); Payless Wholesale Distribs.,128
Inc. v. Alberto Culver, Inc., 989 F.2d at 571; Russo v. Russo (In re Russo), No. 07-1194, 2007
WL 4233118 (Bankr. D. Mass. Nov. 28, 2007); In re Sullivan, 346 B.R. at 32; Petroski v. First
Horizon Home Loans, Inc., 2004 WL 1551736 *3; In re Mitchell, 255 B.R. at 104; Leary v.
Miller (In re Leary), 241 B.R. 266 (Bankr. D. Mass. 1999).
In re Bankvest Capital Corp., 375 F.3d 61 (citing Bates v. Long Island R.R. Co., 997129
F.2d 1028, 1038 (2d Cir.1993), Water Technologies Corp. v. Calco Ltd., 850 F.2d 660, 665-66
(Fed. Cir. 1988) and Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th Cir. 1982)).
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the Modification. If the Defendant truly relied on the Debtor’s representations, one wonders why
the Modification nonetheless purports to contain a release of such claims.
Accordingly, based upon the principles set forth by the First Circuit, I find that application
of judicial estoppel is not appropriate in this case.
3. Waiver
As noted by the parties, there is little authority with respect to the validity of TILA claim
waivers. Nonetheless, they agree, at least in theory, that TILA claims are waivable under certain
circumstances. Not surprisingly, they part company on the issues of what those circumstances are
whether they exist here.
Both TILA and the CCCDA provide that the Board or the Commissioner, respectively, may,
if such action is found “necessary in order to permit homeowners to meet bona fide personal
financial emergencies, prescribe regulations authorizing the modification or waiver of any rights
created under this section to the extent and under the circumstances set forth in those regulations.”130
Accordingly, the regulations to both statutes provide that:
The consumer may modify or waive the right to rescind if the consumer determines
that the extension of credit is needed to meet a bona fide personal financial
emergency. To modify or waive the right, the consumer shall give the creditor a dated
written statement that describes the emergency, specifically modifies or waives the
right to rescind, and bears the signature of all the consumers entitled to rescind.
Printed forms for this purpose are prohibited . . . .131
Regulation Z, unlike the Massachusetts analog, provides three additional subparagraphs describing
situations where the consumer’s need to obtain funds immediately due to natural disasters shall be
15 U.S.C. § 1635(d); Mass. Gen. Laws ch. 140D, § 10(d).130
12 C.F.R. § 226.23(e)(1); 209 C.M.R. § 32.23(5).131
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regarded as a bona fide personal financial emergency. 	The Commentary generally reiterates the132
requirements set forth in the regulations and does not elaborate further.133
Both parties agree that the preceding regulation does not apply to what the Debtor describes
as a “post-dispute” waiver, such as the settlement of a lawsuit. 	The Defendant contends that this134
regulation applies only to the initial three-day rescission period and not any extended period arising
from the failure to provide material disclosures. 	In light of the text of the regulation, and135
particularly the additional paragraphs included in Regulation Z, I am persuaded that the Defendant
is correct. Based on the examples of a “bona fide personal financial emergenc[ies]” provided in
Regulation Z, essentially situations where the consumer is unable to wait for the initial rescission
period to expire before the loan is funded, I find it difficult to see how one could arise at a time other
than consummation of the transaction. This, however, does not entirely address the issue implicitly
raised by the Debtor, namely, whether it is possible to waive the right of rescission after the
expiration of the initial rescission period but before the underlying claim is raised.
Due to the dearth of case law available, a brief discussion of each is warranted. Buford v.
American Fin. Co. was decided by the United States District Court for the Northern District of
Georgia in 1971. 	The facts involved a lender disclosing a notary fee of $1.00 as a separate item136
instead of including it in the calculation of finance charges and APR. The plaintiff signed a release
after the commencement of the case in which she received $10.00 in return for releasing the
See 12 C.F.R. § 226.23(e)(2), (3), (4).132
See 12 C.F.R. Pt. 226, Supp. I, 12 C.F.R. 226.23(e)(1),(2).133
See, e.g., Tucker v. Beneficial Mortgage Co., 437 F.Supp.2d at 589.134
See 15 U.S.C. § 1635(a); Mass. Gen. Laws ch. 140D, § 10(a).135
Buford v. American Fin. Co., 333 F.Supp. at 1243.136
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defendants of all liability under TILA. 	Relying on Brooklyn Savs. Bank v. O’Neil, 	the court137
analogized TILA to the Fair Labor Standards Act and concluded that “‘[w]here a private rights [sic]
is granted in the public interest to effectuate a legislative policy, waiver . . . will not be allowed
where it would thwart the legislative policy it was designed to effectuate.’” 	As such, the court held138
the release obtained was void as contrary to public policy. 139
In 1982, the United States Court of Appeals for the Eleventh Circuit rejected Buford’s rule
of absolute prohibition in Parker v. DeKalb Chrysler Plymouth. 	In that case, the plaintiff financed140
the purchase of a vehicle from the defendant, who failed to make all the material disclosures required
under the statute. 	Five days later, the plaintiff returned to the defendant’s dealership reporting141
mechanical problems with the vehicle. 	For consideration of $500, the plaintiff signed a release142
covering “any and all claims from the beginning of the world . . . including but not limited to any
claim I might have arising out of my purchase . . . .” 	Nonetheless, the plaintiff brought a TILA143
claim shortly thereafter, asserting that when she signed the release she believed that it covered only
the mechanical difficulties she had been having with her car and was not informed of her rights
under TILA. 	Like Buford, the Eleventh Circuit considered the public policy concerns as discussed144
Brooklyn Savs. Bank v. O’Neil, 324 U.S. 697 (1945).137
Buford v. American Fin. Co., 333 F.Supp. at 1248 (quoting Brooklyn Savs. Bank v.138
O’Neil, 324 U.S. at 704).
Id. at 1249.139
Parker v. Dekalb Chrysler Plymouth, 673 F.2d at 1182.140
Id. at 1179.141
Id.142
Id.143
Id.144
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in the Brooklyn Savs. Bank case, but stated that “[w]e disagree with . . . the absolute rule of Buford
. . . which holds all attempted releases of TILA claims null and void.” 	Instead, the Eleventh145
Circuit held that under the circumstances of the case:
Parker's release does not bar her TILA claim because we are convinced that she was
unaware that the release encompassed her TILA rights. Parker's uncontroverted
affidavit states that DeKalb never mentioned TILA when it gave her the release.
Although DeKalb disputes the type of representations made to Parker concerning the
repair of her Cordoba, it does not deny the absence of any disclosures about TILA.
More importantly, the release itself does not contain any reference to prospective
TILA claims, and the policies underlying TILA, as we have explained, do not permit
us to read her TILA rights into the boiler plate language of “any and all claims.”
While a consumer may have good reason to believe that “all claims” in the release
applies to mechanical problems afflicting a new car, they may be unfairly deceived
if we allow such broad language to bar their claims under an Act of which they may
be unaware and which was passed for the protection of all borrowers, both gullible
and sophisticated.146
Eleven years later, the validity of a TILA waiver was addressed by the United States District
Court for the Northern District of Illinois in Johnson v. Steven Sims Subaru, Inc. 	The defendant147
in that case, another auto dealership, used standard lease forms which violated TILA. 	The plaintiff148
raised the TILA violations prior to filing suit, at which time the defendant mailed her a check, which
she cashed, containing the following language on its back: “Accepted by payee as payment in full
of any and all monies due payee from drawer of any nature whatsoever.” 	Noting that “TILA149
requires ‘strict technical compliance, regardless of actual injury’ and its statutory mandate of
disclosure of material terms is intended to benefit all consumers, not just the individual claimant,’
Id. at 1181-1182.145
Id. at 1182 (citation omitted) (emphasis added).146
Johnson v. Steven Sims Subaru, Inc, 1993 WL 761231 *4.147
Id. at *1.148
Id. at *4-5.149
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the court held that “the failure of the alleged release to specifically waive [the plaintiff’s] TILA
claims violates the spirit of explicit disclosure that permeates TILA.”150
A year and a half later, the United States District Court for the District of Columbia decided
Mills v. Home Equity Group, Inc. 	Factually, this case is the most similar to the one at bar. The151
plaintiff entered into a loan agreement with the lender, and within two years had defaulted and
executed a loan modification with the assistance of pro bono counsel. 	The loan modification152
contained a release which expressly referenced claims arising out of the loan documents including
those under Regulation Z. 	Shortly thereafter, the plaintiff defaulted again, but this time sought to153
rescind the transaction based upon the non-disclosure of finance charges, the schedule of payments,
and the total of the payments to be made. 	Like Johnson, the Mills court noted that TILA “must154
be complied with meticulously,” but found that the waiver provisions of 12 C.F.R. 226.23(e)(1) were
not satisfied. 	The court cited Parker and Brooklyn Savs. Bank, but ultimately held:155
Plaintiff 	properly exercised her right 	to 	rescind 	within 	three years 	of 	the
consummation of the loan transaction. This right was not waived by the settlement
entered into with Defendant. Plaintiff was not told she had the unequivocal right to
rescind. Indeed, the new loan amount included the unpaid principal and interest. For
there to be any basis to argue that Plaintiff waived her statutorily conferred rights, she
would have had to at the least been given the right to rescind and declined to assert
it.
At no time did Defendant Bennett offer her such a right. Rather at all times,
Id. at *5 (quoting Parker v. Dekalb Chrysler Plymouth, 673 F.2d at 1181).150
Mills v. Home Equity Group, Inc, 871 F.Supp. at 1482.151
Id. at 1484.152
Id.153
Id.154
Id. at 1486.155
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Defendant Bennett denied that Plaintiff had a valid claim under the Act.156
Curiously, the court focused on the defendant’s non-disclosure of the right to rescind, but the facts
do not reveal that it was one of the material disclosures whose absence gave rise to the right.
The final and most recent case, Tucker v. Beneficial Mortgage Co., is also the most factually
distinct. In this case, the United States District Court for the Eastern District of Virginia held that
the plaintiffs had previously waived their right to rescission by joining a class-action settlement
negotiated by the state’s Attorney General. 	Noting the factual distinctions separating this release157
from the ones in Parker, Mills, and Buford, the court found that a settlement effectuated by the
Attorney General on behalf of private consumers did not undermine the legislative intent of TILA.158
Moreover, the court recognized that invalidating a waiver under such circumstances would
undermine the ability of both State Attorneys General and private consumers to negotiate future
TILA settlements.159
The Debtor attempts to reconcile these cases by distinguishing “pre-dispute” waivers from
“post-dispute” waivers. Having reviewed these cases carefully, however, I find that these labels are
too simplistic and ignore the subtleties of each decision. Moreover, I disagree with both the Johnson
and Mills cases as they clearly applied a hyper-technical standard which has been rejected by the
First Circuit. 	Under a clear and conspicuous disclosure standard, the Johnson case is particularly160
Id.156
Tucker v. Beneficial Mortgage Co., 437 F.Supp.2d at 586.157
Id. at 588.158
Id. at 589.159
See Johnson v. Steven Sims Subaru, Inc, 1993 WL 761231 *5; Mills v. Home Equity160
Group, Inc, 871 F.Supp. at 1486. I also disagree with the Buford decision, but need not discuss it
further as neither party suggests that there is an absolute prohibition against TILA waivers.
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troubling because the plaintiff expressly raised her TILA claims before cashing the check. As there
can be no argument that she did not realize what she was waiving, the only justification for holding
the release invalid is the technical absence of a reference to TILA. Going even further, the Mills case
appears to suggest that an express reference to Regulation Z is insufficient unless prior to executing
the release the lender offers the plaintiff an opportunity to rescind, even where the right to rescind
was initially disclosed at the time of consummation. Additionally, contrary to Mills, I have already
concluded that the 12 C.F.R. § 226.23(e)(1), as well as the Massachusetts analog, does not apply to
the extended right of rescission.
Debtor’s characterizations are also based on too broad a reading of Parker. Notably, the
Eleventh Circuit expressly limited its holding to the circumstances of that case. 	Although the161
Eleventh Circuit stated that the policies underlying TILA would not permit a waiver with general
boiler plate “any and all claims” language, it did not hold that prospective TILA waivers were against
public policy. Instead, the Eleventh Circuit held that under the circumstances of that case, such
broad language is unfairly deceptive. Considering that the waiver in question arose in the context
of a vehicle repair only days after the purchase, contained only general “any and all claims”
language, and was signed without the assistance of counsel, the Eleventh Circuits’ concern was
likely whether or not this could have been knowing and voluntary release.
Neither the federal courts within the First Circuit nor the Massachusetts state courts have
addressed the validity of a TILA/CCCDA waiver. Regardless of the context, courts unanimously
Parker v. Dekalb Chrysler Plymouth, 673 F.2d at 1182 (“We simply find that a release161
given under the circumstances in this case does not bar a claim under the Truth in Lending Act.”)
(emphasis added).
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define waiver as the intentional relinquishment of a known right. 	Although the specific rights in162
question often raise unique considerations for the reviewing court, judicial review of a waiver or
release, at a minimum, requires that they are “knowing and voluntary.” 	“The inquiry into waiver163
consists of two questions: whether a party actually knew []he was relinquishing a benefit, and
whether []he acted voluntarily in doing so.” 	To answer these questions, the First Circuit has164
endorsed a “totality of the circumstances” approach to determining the validity of waivers.165
In the present case, the Debtor argues that his waiver was not “knowing” because he was
unaware that he had a CCCDA claim due to the Defendant’s concealment of the “true” APR.
See, e.g., United. States v. Olano, 507 U.S. 725, 733 (1993); United States v. Morgan,162
384 F.3d 1, 7 (1st Cir. 2004); Irons v. FBI, 811 F.2d 681, 686 (1st Cir. 1987) withdrawn on reh'g
on other grounds, 880 F.2d 1446 (1st Cir. 1989); Alan Corp. v. Int’l Surplus Lines Ins. Co., 823
F.Supp. 33, 42 (D. Mass. 1993); Micro Control Sys., Inc. v. Cadkey Corp. (In re Cadkey Corp.),
324 B.R. 424, 428 (D. Mass. 2005); Moss v. Old Colony Trust Co., 246 Mass. 139, 150, 140
N.E. 803 (1923); St. John Bros. v. Falkson, 237 Mass. 399, 402, 130 N.E. 51 (1921); Normandin
v. Eastland Partners, Inc., 68 Mass.App.Ct. 377, 413, 862 N.E.2d 402 (2007).
See, e.g., Melanson v. Browning-Ferris Indus., Inc., 281 F.3d 272, 276 (1st Cir. 2002)163
(applying six-factor “knowing and voluntary” test to waiver of sexual discrimination claims
under Title VII); Rivera-Flores v. Bristol-Myers Squibb Caribbean, 112 F.3d 9, 12 (1st Cir.
1997) (applying a totality of the circumstances approach to determining the validity of waivers to
case brought under the American with Disabilities Act); Rowe v. Town of North Reading, No.
984216, 2001 WL 170655, at *7 (Mass. Super. Jan. 5, 2001) (applying “knowing and voluntary”
standard to handicap and age discrimination claims under Massachusetts law).
Smart v. Gillete Co. Long-Term Disability Plan, 70 F.3d 173, 182 (1st Cir. 1995). The164
First Circuit has frequently cited the following six factors as relevant and helpful to the totality of
the circumstances inquiry: (1) the plaintiff's education, business experience, and sophistication;
(2) the parties' respective roles in deciding the final terms of the arrangement; (3) the agreement's
clarity; (4) the amount of time available to the plaintiff to study the agreement before acting on it;
(5) whether the plaintiff had independent advice-such as the advice of counsel-when she signed
the agreement; and (6) the nature of the consideration tendered in exchange for the waiver. Id.
(citing Finz v. Schlesinger, 957 F.2d 78, 81 (2d Cir. 1992), cert. denied, 506 U.S. 822 (1992)).
Rivera-Flores v. Bristol-Myers Squibb Caribbean, 112 F.3d at 12; Smart v. Gillete Co.165
Long-Term Disability Plan, 70 F.3d at 181.
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Notably, the First Circuit rejected a similar argument in the context of a statute of limitations
defense. 	In Salois v. The Dime Savs. Bank of New York, the plaintiffs asserted that their TILA166
claims were timely due to equitable tolling under both state and federal law in light of the
defendant’s “concealment” of the negative amortization structure of their loan. 	The First Circuit,167
citing Massachusetts law, disagreed, concluding that the plaintiffs had been on inquiry notice
because they had the loan documents and therefore all the information necessary to discover their
claims. 	Moreover, the First Circuit rejected the plaintiffs’ assertion that the claim was not168
discovered until they consulted with an attorney, noting the absence of newly discovered
information. 	Although not expressly addressed, the First Circuit also dismissed the plaintiffs’169
argument that the complexity of the math involved rendered the claim “concealed.”170
Based upon the principles set forth in the Salois case, I find that as a matter of Massachusetts
law, the Debtor’s possession of the loan documents put him on inquiry notice of his purported
CCCDA claims and his right to rescind. Moreover, by specifically referencing claims arising “in
connection with the making, closing, administration, collection, or the enforcement . . . of the loan
documents,” the Release should have compelled him to investigate the possibility of such claims.
Salois v. The Dime Savings Bank of New York, FSB, 128 F.3d at 25.166
Id. at 24.167
Id. at 26; see Hull v. Attleboro Savings Bank, 33 Mass.App.Ct. 18, 24, 596 N.E.2d 358168
(1992) (under Massachusetts law, “one who signs a writing that is designed to serve as a legal
document . . . is presumed to know its contents.”); see also Seaboard Sur. Co. v. Town of
Greenfield, 370 F.3d 215, 226 (1st Cir. 2004); Lerra v. Monsanto Co., 521 F.Supp. 1257, 1262
(D.Mass.1981); Connecticut Jr. Republic v. Doherty, 20 Mass.App.Ct. 107, 110, 478 N.E.2d 735
(1985).
Salois v. The Dime Savings Bank of New York, FSB, 128 F.3d at 26.169
See Id. at 23.170
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It is also significant that the Debtor executed this Release as part of the Modification after eight
months of negotiations with the Defendant, during which he was represented by counsel. 	As a171
necessary part of that representation, prior counsel would have reviewed the loan documents,
analyzed any possible claims arising therefrom, negotiated the terms of the Modification, explained
them to the Debtor, and made a recommendation with respect to a course of action. 	Consequently,172
I find the Debtor’s execution of the Release contained within the Modification was knowing and
voluntary.
Having satisfied the minimum requirements of a valid release, I must consider what other
requirements might exist in the TILA/CCCDA context. Although the Eleventh Circuit in Parker
ultimately disagreed with Buford’s absolute prohibition rule, it was persuaded by the idea that
“‘[w]here a private rights [sic] is granted in the public interest to effectuate a legislative policy,
waiver . . . will not be allowed where it would thwart the legislative policy it was designed to
effectuate.’” 	In this context, the Eleventh Circuit was convinced that general “any and all claims”173
language would thwart the public interest in deterring inconsistent and indecipherable lending
practices as embodied by TILA. I concur and conclude that as disclosure statutes, TILA and the
I further note that the Release was undoubtedly part of the consideration required by171
the Defendant to enter into the Modification.
I further note that the Debtor has not offered any compelling or coherent reason why172
only successor counsel could discover his purported CCCDA claims. Regardless, “[t]here are
few tenets so well established in American jurisprudence as the proposition that a client is bound
by the mistakes of its chosen counsel.” Chestnut v. City of Lowell, 305 F.3d 18, 26 (1st Cir.
2002); see, e.g., Irwin v. Dept. of 93 Veterans Affairs, 498 U.S. 89, 92 (1990) (explaining that in
“our system of representative litigation . . . each party is deemed bound by the acts of his
lawyer-agent”); Hoult v. Hoult, 57 F.3d 1, 5 (1st Cir. 1995) (“We have repeatedly held that the
acts and omissions of counsel are customarily visited upon the client in a civil case.” (internal
quotation marks omitted)).
Buford v. American Fin. Co., 333 F.Supp. at 1248 (quoting Brooklyn Savs. Bank v.173
O’Neil, 324 U.S. at 704).
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CCCDA require any waiver of such claims to be clearly and conspicuously disclosed.
In the First Circuit, clear and conspicuous disclosure is measured objectively, meaning
“courts must evaluate the adequacy of TILA disclosures from the vantage point of a hypothetical
average consumer-a consumer who is neither particularly sophisticated nor particularly dense.”174
In this light, I find that the Release satisfies this burden as it expressly references claims arising “in
connection with . . . the loan documents.” While the average consumer may not fully appreciate the
full breadth of this language without the assistance of counsel, which I note the Debtor had, he would
certainly understand that a claim arising from the adequacy of the disclosures in the loan documents
would be included. The absence of the words “TILA,” “CCCDA,” and “Regulation Z” are irrelevant
as the Release conveys the same message without such technical references.
Finally, I note that the Release is much more specific than the one in Parker, and arises in
a substantially different context. Unlike Parker, where the release contained no reference to the loan
documents and was signed in connection with vehicle repairs, the Release specifically identifies
claims arising in connection with the loan documents and was signed following lengthy negotiations
with the Defendant regarding a Modification. Moreover, this Debtor, unlike any of the plaintiffs in
the cases discussed above, received the full benefit of the extended rescission periods under both
TILA and the CCCDA before signing the Release. Although the Massachusetts legislature preserved
a recoupment defense in the statute, a release signed at this stage does not give rise to the same
concerns regarding lenders inappropriately trying to draft around their disclosure requirements. 175
The Debtor also argues that the Release is unenforceable under the Massachusetts Statute of
Palmer v. Champion Mortgage, 465 F.3d 24, 28 (1st Cir. 2006).174
See Mass. Gen. Laws ch. 140D, § 10(i)(3).175
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Frauds because the Defendant did not sign the copy submitted to the Court. 	The statute provides,176
in relevant part:
No action shall be brought:
* * *
Fourth, Upon a contract for the sale of lands, tenements or hereditaments or of any
interest in or concerning them. . .
* * *
Unless the promise, contract or agreement upon which such action is brought, or
some memorandum or note thereof, is in writing and signed by the party to be
charged therewith or by some person thereunto by him lawfully authorized.177
Apparently, the Debtor erroneously believes that the Defendant is the party to be charged with the
Modification. It is well-established that an agreement need only be signed by the party against whom
it is to be enforced to satisfy the Statute of Frauds. 	Accordingly, it is irrelevant that the Defendant178
did not sign or just did not produce the signed copy of the Modification because the Debtor did and
the Defendant seeks to enforce it against him.
I am also unpersuaded by the Debtor’s argument that the language of the Release is
ambiguous because the Defendant is by definition both “Ocwen” and the “investor” in that
paragraph. 	Although use of the conjunctive in the Release is ultimately redundant, it is not
misleading and does not give rise to multiple definitions of Ocwen as the Debtor suggests.
In sum, I find that the Release is valid and that the Debtor has waived his claims under the
CCCDA.
Mass. Gen. Laws ch 259, § 1.176
Id.177
See Old Colony R. Corp. v. Evans, 72 Mass. 25 (1856); Slater v. Smith, 117 Mass. 96178
(1875); Dresel v. Jordan, 104 Mass. 407 (1870).
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V. CONCLUSION
In light of the foregoing, I will enter an order reaffirming my order granting the Motion to
Dismiss and, alternatively, granting the Motion for Summary Judgment.
______________________________
William C. Hillman
United States Bankruptcy Judge
Dated: May 28, 2010
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