JOHN S. BURSON, ET AL.
JEFFREY G. CAPPS
Argued September 9, 2014.
Circuit Court for Frederick County. Case No. 10-C-09-003783. Certiorari to the Court of Special Appeals (Circuit Court for Frederick County). Mary Ann Stepler JUDGE.
ARGUED BY Joshua Tropper (Baker, Donelson, Bearman, Caidwell & Berkowski. P.C. of Atlanta. GA; Linda S. Woolf, Christopher Corchiarino, Josevh B. Wolf,. Goodell, DeVries, Leech & Dann, LLP of Baltimore. MD) on brief FOR PETITIONERS
ARGUED BY Richard I. Chaifetz (Michael P. Coyle, Chaifetz & Coyle. P.C. of Columbia, MD) on brief FOR RESPONDENT
ARGUED BEFORE Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Watts, JJ. Opinion by Harrell, J. Adkins and McDonald, JJ., concur in part and dissent in part. Watts, J., joins judgment only. Judge Adkins has advised that she joins this opinion.
[440 Md. 332] Harrell, J.
May one undo what one has not done yet? Although the answer to this abstract question has been the premise for many a time travel " B" movie, it bodes even less well for a borrower or borrowers attempting to rescind loans that have not been consummated, within the meaning of the federal Truth in Lending Act (" TILA" ), 15 U.S.C. § 1601 et seq (2012). Prior to closing on a home refinancing loan, Respondent, Jeffrey G. Capps, submitted a notice of rescission of the loan to the lender. A
day or two after submitting the notice, Capps signed a Note and Deed of Trust consistent with the negotiated terms of the ostensibly rescinded loan. The loan proceeds were distributed as agreed to previously by the parties. Capps made payments on the Note for approximately two years before defaulting on the loan. After a foreclosure sale occurred, Capps filed exceptions, arguing that he had rescinded validly the loan pursuant to 15 U.S.C. § 1635. The Circuit Court for Frederick County overruled the exceptions and ratified the sale. In an unreported opinion, the Court of Special Appeals reversed the Circuit Court, holding that the rescission notice was timely. Because there was no language in § 1635 or Regulation Z--TILA's implementing regulation-- prohibiting [440 Md. 333] a borrower from rescinding a loan prior to consummation of the transaction, the intermediate appellate court reasoned that such an initiative, when viewed in a light favoring borrowers, was supported by the statute. We shall reverse, holding that, under TILA, the loan may not be rescinded before it came into being.
Just the Facts, If You Please
In March of 2003, Respondent, Jeffrey G. Capps (hereinafter " Capps" ), purchased a home located at 2909 Loch Haven Court, Ijamsville, Maryland. Early in 2007, Capps decided to pursue refinancing his home loan. He applied for refinancing through Endeavor Mortgage Group--a loan broker--to EquiFirst Corporation. In February of 2007, EquiFirst offered Capps terms of a refinancing, which offer he rejected. In March of 2007, EquiFirst offered Capps a second proposal, which he rejected as well. In April of 2007, EquiFirst offered Capps a third refinance package, which he accepted.
The state of this record conjures illusions of multiple factual currents, pulling in seemingly different directions. Although we find no material disputes of fact were generated properly with regard to the dispositive question before us, and
accordingly [440 Md. 334] no evidentiary hearing was sought or held, we shall call-out the confusion generated and burn away the obscuring fog at the same time.
The Deed of Trust and Adjustable Rate Note implementing the third offer were signed by Capps on 17 April 2007.  These [440 Md. 335] documents secured a loan for $350,000. The settlement date on the financing statement was April 24, and the loan proceeds (net of charges, costs, and fees) were disbursed on April 25, in satisfaction of the pre-existing mortgage ($292,061.86) and Capps's credit card debts ($32,045), with an additional $5,878.31 to the borrower directly.
On April 15 or 16, 2007, Capps attempted to rescind a loan by faxing to EquiFirst a form titled " Notice of Right to [440 Md. 336] Cancel"  referring solely to a property address of 2909 Loch Haven Court, Ijamsville, MD, 21754. In the subject line on the fax cover sheet of this form, Capps stated " I wish to exercise this Right[.] Please see attached form." This document was received by EquiFirst. Capps alleges that
at some [440 Md. 337] point after he sent the fax, someone from EquiFirst " told [him] that this rescission was not effective, that [he] could not rescind, and that the mortgage would remain in effect." Capps did not identify which EquiFirst employee made such statements, nor did he substantiate from any other source that the conversation occurred. He alleged further that he " believed what EquiFirst told [him]" and therefore began making payments on the loan. In 2009, Capps lost his job and became unable to make his monthly mortgage payments.
On 30 September 2009, Petitioners (the Substitute Trustees, or " Trustees" ) filed in the Circuit Court for Frederick County an Order to Docket Foreclosure, thereby commencing an action to foreclose under the deed of trust. On 30 December 2009, Capps filed a Motion to Stay or Dismiss the foreclosure proceeding, in which he argued that he had rescinded the loan, pursuant to 15 U.S.C. § 1635, by faxing a " Notice of Right to Cancel" to EquiFirst. Also on 30 December 2009, Capps filed in the foreclosure action a third-party complaint against EquiFirst and Wells Fargo, again arguing that he rescinded timely and validly the loan and also that EquiFirst violated TILA by refusing to recognize his rescission. Wells Fargo filed a Motion to Dismiss the Third-Party Complaint, [440 Md. 338] arguing that, whatever the merits, Capps's claim fell beyond the applicable statute of limitations and further that he waived his claims by accepting the benefits of the transaction. Wells Fargo's motion was granted ultimately on 2 May 2011. On 7 December 2011, the note holder purchased the home for $275,000 at a foreclosure public auction. A Report of Sale was filed on 5 January 2012.
Capps filed on 23 February 2012 Exceptions to the Foreclosure Sale, where he argued again that he had rescinded the loan. The Substitute Trustees reiterated their position that Capps's TILA claim was barred by the applicable statute of limitations, that they had standing to foreclose, and further that Capps did not raise any allegations which, if true, could result in the sale being rescinded. The exceptions were overruled at a hearing on 3 April 2012, and the sale was ratified on 5 April
That same day, the court entered an Order of Ratification of Sale. Capps appealed to the Court of Special Appeals.
[440 Md. 339] In an unreported opinion, the Court of Special Appeals reversed the Circuit Court, addressing the question of whether the loan had been rescinded " lawfully."  The Court of Special Appeals reasoned that TILA's overarching purpose was to " protect consumers in a rather difficult and complicated process." Because there was no language in § 1635 or Regulation Z--TILA's implementing regulation-- prohibiting a borrower from rescinding a loan prior to the consummation of the transaction, the Court of Special Appeals reasoned that such an action, when viewed in a light favoring the interests of borrowers, was supported by the statute. Otherwise, reasoned the intermediate appellate court, the rights of borrowers to protect themselves would be restricted severely, contrary to Congress' stated goals in TILA. The three judge panel of our appellate colleagues explained that the three-day window for rescissions did not open at closing and then shut at midnight three business days later, but rather the window remained open throughout the negotiation process for a loan commitment leading up to closing and lapsed at the end of three days after closing. The intermediate appellate court remanded the case to the Circuit Court to (1) determine whether it is possible for all parties to return to the status quo ante, (2) use its equitable powers to restore Capps's credit rating should he be able to return the proceeds of the loan, and (3) determine whether EquiFirst violated TILA by ignoring intentionally Capps's rescission notice.
[440 Md. 340] We granted the Trustees' Petition for Writ of Certiorari. 435 Md. 501, 79 A.3d 947 (2013). The Trustees posed the following three questions in their petition:
1. Whether a TILA Notice of Rescission can be effective to cancel a loan transaction that has not yet taken place, and remain effective despite the issuing party's subsequent acceptance of the benefits of the transaction?
2. Whether a TILA action filed in December 2009 on the basis of a Notice of Rescission issued in April 2007 was untimely as beyond the one-year statute of limitation in 15 U.S.C. § 1640(e)?
3. Whether rescission is an available remedy when the trial court has no jurisdiction over either the original lender or its assignee because all ...