in the united states court of appeals for …. 12-15267 in the united states court of appeals for...

No. 12-15267

IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

_________________________________________________________________

REID I. TAMAYOSE and NADINE K. TAMAYOSE,

Appellants,

vs.

OPTION ONE MORTGAGE CORPORATION, H&R BLOCK BANK, RESIDENTIAL CREDIT SOLUTIONS, INC., and OLD REPUBLIC TITLE &

ESCROW OF HAWAII, LTD.,

Appellees.

_______________________________________________________

On Appeal From The United States District Court For The District Of Hawaii

OPENING BRIEF _______________________________________________________

Gary Victor Dubin

Frederick J. Arensmeyer Dubin Law Offices

55 Merchant Street, Suite 3100 Honolulu, Hawaii 96813

Telephone: (808) 537-2300 Facsimile: (808) 523-7733

E-Mail: [email protected] E-Mail: [email protected]

Attorneys for Appellants

Case: 12-15267 10/12/2012 ID: 8359439 DktEntry: 18-1 Page: 1 of 32

mailto:[email protected]

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TABLE OF CONTENTS 1. Jurisdictional Statement ………………............................................................... 1

2. Statement of Issues on Appeal………………………………………………….. 1

3. Statement of the Case ………………………………………………………….. 2

4. Statement of Facts……………………………………………………………… 3

5. Summary of Argument …..…………………………………………………….. 5

6. Argument ……..………………………………………………………………... 8

Borrowers pursuant to the plain language of Section 1635(b) of

Title 15 of the United States Code do not have the burden of

proving that they can refinance a mortgage loan if granted a Truth-

in-Lending Act (“TILA”) rescission before a District Court

determines whether they are actually entitled to a TILA

rescission…………………………………………………….....8

If this Court’s Yamamoto decision is interpreted to mean that

borrowers have the burden of proving that they can refinance a

mortgage loan if granted a TILA rescission before a District Court

determines whether they are actually entitled to a TILA rescission,

that Panel decision should be limited or overturned………….17

If the lower court’s interpretation of Yamamoto is deemed correct

and Yamamoto is not to be limited or overturned, in the

circumstances of this case however, especially where no findings

were made as to the relative equities of the parties, the borrowers’

ability to tender a TILA rescission amount if subsequently

receiving a rescission award was in genuine dispute and precluded

granting summary judgment…………………………………..20

7. Conclusion ……………………………………………………………………. 23

Certificate of Compliance………………………………………………………27

Certificate of Service…………………………………………………………...28


ii

TABLE OF AUTHORITIES

CASES Addisu v. Fred Meyer, Inc., 198 F.3d 1130 (9th Cir. 2000)………………………………….22

Aquino v. Public Finance Discount Corp., 606 F.2d 504 (E.D. Pa. 1985)……………………9

Balderas v. Countrywide Bank, N.A., 664 F.3d 787, 791 (9th Cir. 2011)…………………...24

Barlow v. Evans, 992 F. Supp. 1299 (M.D. Ala. 1997)…………………………………….. .14

Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998)………………………………………...11

Cowen v. United of Texas, F.S.B., 70 F.3d 937 (7th Cir. 1995)……………………………..14

Cromwell v. Countrywide Home Loans, Inc., 461 B.R. 99 (Bk. D. Mass. 2011)…………....18

Dinsmore-Thomas v. FDIC, 1998 U.S. App. LEXIS 2777 (9th Cir. 1998)………………….16

F.D.I.C. v. Hughes, 684 F. Supp. 616 (1988)………………………………………………….9

Ford Motor Company v. Milhollin, 444 U.S. 555 (1980)……………………………………13

Giza v. Amcap Mortgage, Inc., 428 B.R. 266 (Bk. D. Mass. 2010)…………………………18

Hawaii Community Federal Credit Union v. Keka, 94 Haw. 213, 11 P.3d 1 (2000)………...21

In re Wepsic, 231 B.R. 768 (S.D. Calif. 1998)……………………………………………….16

Jackson v. Grant, 890 F. 2d 118 (9th Cir. 1989) ……………………………………………..10

Kajitani v .Downey Savings and Loan Association, F.A., 647 F. Supp. 2d 1208 (2008)…….21

Kakogui v. American Brokers Conduit, 2010 WL 1265201 *4 (U.S.D.C. N.D. Cal. 2010)…18

LaGrone v. Johnson, 534 F.2d 1360 (9th Cir. 1976)………………………………………….14

Ljepava v. M.L.S.C. Properties, Inc., 511 F.2d 935 (9th Cir. 1975)……………………...11, 14

McPhillips v. Gold Key Lease, Inc., 38 F. Supp 2d 975 (M.D. Ala. 1999)…………………..14

Mourning v. Family Publications Service, Inc., 411 U.S. 356 (1973)………………………..13


iii

Musick v. Burke, 913 F.2d. 1390 (9th Cir. 1990)…………………………………………. ..23

Nissan Fire & Marine Ins. Co. Ltd. v. Fritz Cos., Inc., 210 F.3d 1099 (9th Cir. 2000)…….. .23

Palmer v. Wilson, 502 F.2d 860 (9th Cir. 1974)……………………………………………..14

Pettola v. Nissan Motor Acceptance, 44 F. Supp. 2d 442 (D. Conn. 1999)………………….14

Porter v. Cal. Dep't of Corr., 419 F.3d 885 (9th Cir. 2005)…………………………………..22

Quintero Family Trust v. OneWest Bank, F.S.B., 2010 WL 392312 *3

(U.S.D.C. S.D. Cal. 2010)………………………………………………………………...19, 21

Riopta v. Amresco Residential Mortgage Corp., 101 F. Supp. 2d 1326 (D. Haw. 1999)……16

Rossman v. Fleet Bank (R.I.) National Association, 280 F.3d 384 (3rd Cir. 2002)………….13

Rudisell v. Fifth Third Bank, 622 F.2d 243 (1980)…………………………………………….8

Sawada v. Endo, 57 Haw. 608, 561 P.2d 1291 (1977)………………………………………..24

Semar v. Platte Valley Federal Savings & Loan Association,

791 F.2d 699 (9th Cir. 1986)………………………………………………………….10, 14, 15

Smith v. Highland Bank, 915 F. Supp. 281 (N.D. Ala. 1996),

affirmed on other grounds, 108 F.3d 1325 (11th Cir. 1997)………………………………….14

Sosa v. Fite, 498 F.2d 114 (5th Cir. 1974)…………………………………………………… .9

Swayze v. Ameriquest Mortgage Co., 2004 WL 6057264 *5 (U.S.D.C. N.D. Ga. 2004)….. .19

T .W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626 (9th Cir. 1987)………22

Williams v. Homestake Mortgage Co., 968 F.2d 1137 (11th Cir. 1992) ……………………10

Willams v. Saxon Mortgage Co., 2008 WL 45739 *5 and n.10 (U.S.D.C. S.D. Ala. 2008). ..19

Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003)……………………………..

……………………………………………………………. .1, 2, 7, 8, 10, 14, 15, 17, 20, 21, 24


1

JURISDICTIONAL STATEMENT

This case, filed in State Court on November 23, 2009 accompanied by a

timely jury trial demand, was removed by the Defendants to the District Court for

the District of Hawaii on March 30, 2010, pursuant to 28 U.S.C. §§ 1331, 1441 and

1446 (federal question jurisdiction) and the Truth-in-Lending Act, 15 U.S.C. §

1601 et seq.

This court has appellate jurisdiction pursuant to Rule 4(a)(1)(A) of the

Federal Rules of Appellate Procedure, a separate Rule 58 Judgment having been

entered on January 5, 2012 and a Notice of Appeal having been entered within

thirty days thereafter on February 6, 2012 (the intervening and ending weekend not

included in the computation).

This Appeal is from a final judgment that disposes of all claims of all

parties.

STATEMENT OF ISSUES ON APPEAL

1. Do borrowers pursuant to Section 1635(b) of Title 15 of the United States

Code have the burden of proving that they can refinance a mortgage loan if granted

a Truth-in-Lending Act (“TILA”) rescission before a District Court is to determine

whether they are actually entitled to a TILA rescission?

2. Did this Court in Yamamoto v. Bank of New York, 329 F.3d 1167 (9th

Cir. 2003), answer the above question in the affirmative, that borrowers have the


2

burden of proving that they can refinance a mortgage loan if granted a Truth-in-

Lending Act (“TILA”) rescission before a District Court determines whether they

are actually entitled to a TILA rescission, and if so, should the panel decision in

Yamamoto be therefore narrowed or overturned?

3. If the lower court’s interpretation of Yamamoto is correct and Yamamoto

is not to be overturned, in the circumstances of this case however, especially where

no findings were made as to the relative equities of the parties, was not the

borrowers’ ability to tender a TILA rescission amount if receiving a rescission

award in genuine dispute precluding summary judgment?

STATEMENT OF THE CASE

Appellants (“Tamayoses”) canceled their mortgage loan entered into with

their original lender, Appellee Option One Mortgage Corporation (“Option One”),

on November 29, 2006, based on TILA violations, and did so by letter of

cancellation mailed on December 4, 2008, after being threatened with a nonjudicial

foreclosure auction on that date by a purported assignee of their mortgage loan,

Appellee H&R Block Bank (“H&R”), through a purported loan servicer, Appellee

Residential Credit Solutions, Inc. (“RCS”).

The lower court dismissed the Tamayoses’ TILA rescission claim without

deciding whether they were actually entitled to a TILA rescission, without

deciding what the TILA rescission amount would be, and without giving them time


3

thereafter to refinance, concluding that they had not met their threshold burden of

proof establishing beforehand that they could successfully refinance their mortgage

loan if subsequently granted a TILA rescission, citing as controlling precedent a

2003 decision of a panel of this Court in Yamamoto, supra.

The Tamayoses timely appealed, seeking reversal, either correcting the

lower court’s misinterpretation of the Yamamoto decision or its overruling.

STATEMENT OF FACTS

The lower court did not address whether the Tamayoses were entitled to a

TILA rescission, but only concluded that they had not proven that they could

tender the TILA rescission amount if granted a TILA rescission.

Thus the threshold issue on appeal is a timing issue: Whether the granting of

a TILA rescission is required and borrowers have to be informed what the TILA

rescission amount is before they must prove that they can successfully rescind.

The factual history of this case is set out in the lower court’s terminating

summary judgment order (Excerpts of Record (“ER”), at 3-11), and in the

Declaration of Nadine K. Tamayose (Doc. No. 101) and the Supplemental

Declaration of Nadine K. Tamayose (Doc. No. 113).

Briefly, on or about November 29, 2006, the Tamayoses entered into a

predatory loan transaction with Option One in Honolulu, providing Option One

with a promissory note and a mortgage on what they contend was their principal


4

dwelling, the subject property, dated November 22, 2006 in the amount of

$1,025,000, with Option One named as their mortgagee.

The Tamayoses contend that they did not each receive at closing two

accurate and complete requisite TILA notices of the right to cancel as to said 2006

loan, or at any time thereafter, only one blank-dated copy which they placed in

evidence below; nor did the Tamayoses receive accurate and complete good faith

estimates or complete TILA disclosures at the time of their loan application or loan

consummation or at any other time, instead given loan terms less advantage than

what they had expected and bargained for.

Accordingly, exercising their TILA rights, the Tamayoses through counsel

on December 4, 2008, cancelled their 2006 loan transaction and related Note and

Mortgage as a matter of federal and state law, timely rescinding as automatically

null and void their 2006 loan transaction and related Note and Mortgage, receipted

for by RCS purporting to be the servicing agent for H&R which, purporting on that

date to be the Tamayoses’ then mortgagee, had meanwhile noticed a nonjudicial

foreclosure sale for noon on that date, which was thereafter reportedly cancelled.

Option One and H&R, however, have continued to refuse to recognize the

Tamayoses’ cancellation, demanding full payment on their original mortgage loan;

and RCS, eventually claiming to be the Tamayoses’ new mortgagee, thereafter


5

threatened a new nonjudicial foreclosure sale of the subject property which was

scheduled for November 18, 2009, and apparently discontinued.

RCS was granted leave of court to file a Counterclaim for foreclosure (Doc.

No. 69) towards the end of the case, but never filed a Counterclaim thereafter.

SUMMARY OF ARGUMENT

The undersigned counsel for the Tamayoses orally argued the Yamamoto

case before this Court on May 9, 2003 in San Francisco, and returns to this Court

thirteen years later seeking justice for borrowers in this Circuit, for it is

respectfully submitted that the Panel1 that decided Yamamoto as well as then

Hawaii District Judge Samuel King below never intended that that case should

have evolved beyond its limiting facts into the unfortunate mischievous precedent

that it has now become.

As applied below, Yamamoto is being widely interpreted in this Circuit and

elsewhere as persuasive precedent to broadly mean that District Courts “may

condition TILA rescission on a borrower’s ability to first tender the loan proceeds”

(ER, at 73), reversing the burden of proof and reversing the order of events for

rescission, and for the Tamayoses that has meant saddling them with the burden of

proof as to their ability to tender without even knowing the rescission amount, and

without having proof that they have the right to rescind to show to family members

1 The Yamamoto Panel consisted of Circuit Judges Goodwin, Rymer, and T.G.

Nelson.


6

or prospective lenders or real estate brokers should they have to sell the property in

order to pay the rescission amount.

Indeed, the lower court, embracing Yamamoto, rejected outright the

Tamayoses’ claim that “they might be able to pay the loan proceeds through

refinancing, borrowing from friends, or even selling the subject property” (ER, at

66), as nothing more than “metaphysical” (ER, at 75).

In doing so, it is submitted that the lower court confused the statutory

requirement of tender, which is a condition subsequent after a TILA rescission is

first granted, viewing tender of the TILA rescission amount instead as a condition

precedent to that Congressional remedy in terms of the burden of proof and even

before the amount is determined by the court, misled by the overly broad language

found in Yamamoto, concluding mistakenly that the Tamayoses had proven no

“genuine issue for trial” (ER. at 75 – emphasis in the original).

Altering the sequence of TILA rescission events so as to place the

evidentiary burden on borrowers before trial and before a rescission, to first prove

their ability to tender, faulting the Tamayoses who like virtually all borrowers

instantaneously “could not make a lump-sum payment of the loan proceeds” (ER,

at 65) is clearly not what Yamamoto was about.

In Yamamoto, unlike the treatment afforded the Tamayoses below (ER, at

63-67), then District Judge Samuel King was persuaded to deny rescission and


7

dismiss the TILA complaint only because in the Yamamotos’ oral depositions they

had earlier stated that they could not refinance under any circumstances, 329 F.3d

at 1173 (“no matter what”), but even then Judge King gave them and their

daughter, Tampon, 60 days to try to do so, Yamamoto, 329 F.3d at 1160.

When the prospect of selling the property to pay the rescission amount was

emphasized in oral argument, the Yamamoto Panel inconsistently expressly

recognized that prospect, that the property might be sold to pay off the rescission

amount, 329 F.3d at 1173, but that did not change the result:

Whether the call is correct must be determined on a case-

by-case basis, in light of the record adduced. Here, for

example, at oral argument Tampon pressed upon us the

possibility that borrowers could refinance or sell the

property between the time a court grants rescission and

when pay back is required, yet to do so they must have an

order in hand. We express no opinion on this, for there is

nothing at all to this effect in the record. We simply

decide that in the circumstances of this case, the court did

not lack discretion to modify the sequence of rescission

events to assure that Tampon could repay the loan

proceeds before going through the empty (and expensive)

exercise of a trial on the merits.

Here, however, that argument was made, but ignored (ER, at 22), the lower

court continuing to place the burden of proof on just about everything with the

Tamayoses.


8

ARGUMENT

Point One

Borrowers pursuant to the plain language of Section

1635(b) of Title 15 of the United States Code do not

have the burden of proving that they can refinance a

mortgage loan if granted a Truth-in-Lending Act

(“TILA”) rescission before a District Court

determines whether they are actually entitled to a

TILA rescission.

As explained in the Declaration of Nadine K. Tamayose (Doc. No. 101,

paragraphs 14-16), the Tamayoses “have a close-knit extended family on Kauai as

well as many close friends who we believe would help us refinance . . . . And were

we unable to secure refinancing assistance, we could sell our residence, which

obviously we would prefer not to do, but those are choices that as a practical

matter we cannot make until we receive a TILA rescission principal reduction and

know what that amount will be and have something official to show lenders,

family and friends.”

The lower court ignored that explanation altogether, misapplying

Yamamoto, assuming that Yamamoto was correctly decided.

Prior to the decision of the Yamamoto Panel, no federal court in any Circuit

had ever required borrowers to tender first before adjudicating the validity of their

rescission claims.

In Rudisell v. Fifth Third Bank, for instance, the Sixth Circuit Court of

Appeals concluded “[s]ince Congress clearly intended to give a right to rescind to


9

persons in appellants’ situation, this Court feels it must grant them that right,” 622

F.2d 243, 254 (1980). Only then did the Sixth Circuit condition rescission upon

plaintiff’s tender of the reasonable valuable of the aluminum siding.

Similarly, in F.D.I.C. v. Hughes, the Eight Circuit affirming, the lower court

first determined that the rescission claim was valid, and then and only then directed

the tender of net principal within one year, followed by a technical release of the

security interest, 684 F. Supp. 616, 625-626 (1988).

Federal law, moreover, clearly mandates that both lenders and borrowers

should be treated equally and both given their day in court – both tendering at the

same time.

Earlier decisions, for instance, requiring creditors to rescind first, foregoing

a decision on the merits, or forfeiting the principal if the court determined the

consumer’s claim later to be valid, have been universally discredited; see, e.g.,

Sosa v. Fite, 498 F.2d 114 (5th Cir. 1974).

Lenders that dispute rescissions are today not at the mercy of borrowers’

unilateral actions. They can avoid violating their obligation to perform first by

filing declaratory judgment actions within 20 days following notice of the

rescission; see Aquino v. Public Finance Discount Corp., 606 F.2d 504, 508 (E.D.

Pa. 1985).


10

When borrowers, who are the intended beneficiaries of TILA, similarly seek

court intervention, it is inequitable and uneven treatment to require them “to

sacrifice [their] day in Court” because of an inability to make an immediate pretrial

tender; Rohner & Miller, Truth in Lending, at 652.

TILA clearly contemplates that it is the lender, if anyone is required to go

first, who must perform first; id.; Williams v. Homestake Mortgage Co., 968 F.2d

1137, 1140 (11th Cir. 1992).

Yamamoto, on the other hand, it can be argued, as was initially seen by

those of us participating in that decision, did not depart from that established

federal precedent by announcing any contrary general proposition of law, but was

decided solely based on the peculiar circumstances of that case where the

borrowers admitted in their prior deposition testimony, unlike here, that they could

not refinance under any circumstances, 329 F.3d at 1173, supra, which was

equivalent to waiving their TILA rescission rights without more.

To interpret Yamamoto in any other way as a supposed general proposition

of law would turn TILA’s mutual obligations into a one-sided, pretrial bond

imposed only on the very party who is “inherently at a disadvantage in loan and

credit transactions,” bestowing a windfall on the more powerful creditor; Semar v.

Platte Valley Federal Savings & Loan Association, 791 F.2d 699, 705 (9th Cir.

1986); Jackson v. Grant, 890 F. 2d 118, 122 (9th Cir. 1989), both of which


11

decisions are still the good law throughout this jurisdiction and heavily relied upon

elsewhere.

And, while federal courts have increasingly exercised their equitable powers

to reorder TILA’s rescission remedy procedurally to protect both parties, it has

always been equally clear in doing so that federal courts must be careful not to

“frustrat[e] the main purpose of the Act, which is to allow rescission,” Ljepava v.

M.L.S.C. Properties, Inc., 511 F.2d 935, 944 (9th Cir. 1975).

At its core, it is -- if nothing else -- a matter of being faithful to the express

Congressional language of Section 1635(b) of Title 15, there being no justification

for disregarding a statute’s plain meaning, Beach v. Ocwen Federal Bank, 523 U.S.

410, 417 (1998); see Section 1636(b):

When an obligor exercises his right to rescind under

subsection (a) of this section, he is not liable for any

finance or other charge, and any security interest given

by the obligor, including any such interest arising by

operation of law, becomes void upon such a rescission.

Within 20 days after receipt of a notice of rescission, the

creditor shall return to the obligor any money or property

given as earnest money, downpayment, or otherwise, and

shall take any action necessary or appropriate to reflect

the termination of any security interest created under the

transaction. If the creditor has delivered any property to

the obligor, the obligor may retain possession of it. Upon

the performance of the creditor's obligations under this

section, the obligor shall tender the property to the

creditor, except that if return of the property in kind

would be impracticable or inequitable, the obligor shall

tender its reasonable value. Tender shall be made at the

location of the property or at the residence of the obligor,


12

at the option of the obligor. If the creditor does not take

possession of the property within 20 days after tender by

the obligor, ownership of the property vests in the obligor

without obligation on his part to pay for it. The

procedures prescribed by this subsection shall apply

except when otherwise ordered by a court.

Similarly, Regulation Z carries forward that legislative intent in its

Commentary to § 226.23(d)(4):

Modifications. The procedures outlined in § 226.23(d)(2)

and (3) may be modified by a court. For example, when a

consumer is in bankruptcy proceedings and prohibited

from returning anything to the creditor, or when the

equities dictate, a modification might be made. The

sequence of procedures under § 226.23(d)(2) and (3), or a

court's modification of those procedures under §

226.23(d)(4), does not affect a consumer's substantive

right to rescind and to have the loan amount adjusted

accordingly. Where the consumer's right to rescind is

contested by the creditor, a court would normally

determine whether the consumer has a right to rescind

and determine the amounts owed before establishing the

procedures for the parties to tender any money or

property.

Recognizing since the inception of TILA that the oversight of such

consumer protections is a full-time job, Congress delegated broad rule-making

authority to the Federal Reserve Board to implement TILA in Title 15, and the

United States Supreme Court has consistently upheld the Board’s broad

discretionary power to promulgate all necessary interpretative regulations to ensure

that the Board has adequate powers to prevent predatory lending practices as


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13

Congress intended, Mourning v. Family Publications Service, Inc., 411 U.S. 356

(1973).

The power of the Federal Reserve Board was further strengthened by the

United States Supreme Court’s decision in Ford Motor Company v. Milhollin, 444

U.S. 555, 565-568 (1980):

[C]aution requires attentiveness to the views of the

administrative entity appointed to apply and enforce a

statute. And deference is especially appropriate in the

process of interpreting the Truth in Lending Act and

Regulation Z. Federal Reserve Board staff opinions

construing the Act or Regulation should be dispositive

for several reasons. . . .

Furthermore, Congress has specifically designated the

Federal Reserve Board and staff as the primary source for

interpretation and application of truth-in-lending law. . . .

That statutory provision signals an unmistakable

congressional decision to treat administrative rulemaking

and interpretation under TILA as authoritative.

Moreover, language in the legislative history evinces a

decided preference for resolving interpretive issues by

uniform administrative decision, rather than piecemeal

through litigation. . . .

Finally, wholly apart from jurisprudential considerations

or congressional intent, deference to the Federal Reserve

is compelled by necessity; a court that tries to chart a true

course to the Act’s purpose embarks upon a voyage

without a compass when it disregards the agency’s views.

Federal Reserve Board amendments to Regulation Z are controlling in all

federal courts and have even been held to be fully retroactive in scope; see, e.g.,

Rossman v. Fleet Bank (R.I.) National Association, 280 F.3d 384, 389-390 (3rd


14

Cir. 2002) (Federal Reserve Board staff opinions construing TILA or interpreting

Regulation Z, unless demonstrably irrational, are dispositive, and must be

construed in favor of the consumer); Cowen v. United of Texas, F.S.B., 70 F.3d

937, 943 (7th Cir. 1995); (Federal Reserve Board’s staff commentary given great

weight and retroactive effect); Pettola v. Nissan Motor Acceptance, 44 F. Supp. 2d

442 (D. Conn. 1999) (agency commentary interpreting existing law is even applied

retroactively); McPhillips v. Gold Key Lease, Inc., 38 F. Supp 2d 975 (M.D. Ala.

1999) (agency commentary clarifying unsettled and conflicting law is applied

retroactively); Barlow v. Evans, 992 F. Supp. 1299 (M.D. Ala. 1997) (agency’s

clarifying commentary is applied retroactively); Smith v. Highland Bank, 915 F.

Supp. 281 (N.D. Ala. 1996), affirmed on other grounds, 108 F.3d 1325 (11th Cir.

1997) (Federal Reserve Board’s clarifying commentary given retroactive effect).

Any contrary, broader interpretation of Yamamoto would also be contrary to

judicial decisions adhered to for decades in this Circuit; see, e.g., Semar v. Platt

Valley Federal Savings & Loan Association, 791 F.2d 699 (9th Cir. 1986);

LaGrone v. Johnson, 534 F.2d 1360 (9th Cir. 1976); Ljepava v. M.L.S.C.

Properties, Inc., 511 F.2d 935 (9th Cir. 1975); and Palmer v. Wilson, 502 F.2d 860

(9th Cir. 1974).

In Semar, for instance, this Court held that a TILA rescission effects a

cancellation of finance and other charges and is a substantive right that courts are


15

not free to ignore, and that courts are obligated to exercise equitable discretion to

structure rescission in a manner that is fair to both parties only after an

adjudication on the merits occurs at trial.

Semar, moreover, expressly held that courts do not have equitable discretion

to revise the substantive provisions of the statute; Semar, 791 F.2d at 705-706 n.15.

In Semar, the creditor specifically as here argued that the court had

equitable discretion to deny a borrower’s right to rescission as defined by TILA;

id. at 705-706. This Court in Semar, to the contrary, held that a borrower’s

rescission automatically cancels any obligation to pay finance or other charges and

that this is a substantive requirement of TILA that courts are not free to amend

(“we defer to Congress’ method of enforcing TILA and follow the plain language

of the statutes,” id. at 706), only thereafter to condition rescission on tender of the

rescission amount.

This is one of the key distinctions that the lower court missed, instead

concluding “that rescission should be conditioned on Plaintiffs’ tender of the loan

proceeds” (ER, at 18) before there is an adjudication as to the merits of their

rescission claim, when substantively the reverse is true.

No one is contending that as in Yamamoto where borrowers admit that they

will not be able to tender the rescission amount no matter what, that the courts

must go through the waste of a trial, but here the Tamayoses made no such


16

admissions, but to the contrary described the resources available to them to tender,

once granted a TILA rescission.

Semar, Palmer, and their progeny -- permitting district courts to condition

the termination of a lender’s security interest on tender by borrowers of the net

principal owing after deduction of finance and other charges -- nowhere overturned

in the Yamamoto decision of this Court, unanimously have held and been the

controlling case law in this jurisdiction during a collective span of almost forty

years, that the cancellation of finance and other charges cannot be substantively

altered by courts; see, e.g., Riopta v. Amresco Residential Mortgage Corp., 101 F.

Supp. 2d 1326, 1336 (D. Haw. 1999).

Thus, as another Ninth Circuit panel held in Dinsmore-Thomas v. FDIC,

1998 U.S. App. LEXIS 2777 (9th Cir. 1998), for instance, where rescission is

conditioned on tender, and the consumer is unable to make a tender, the consumer

is still entitled to cancellation of finance and other charges on the loan (“in

addition, after Dinsmore-Thomas failed to satisfy the repayment condition, the

district court properly reinstated the promissory note for the reduced sum of

$96,739.63 rather than the full amount of $180,750.00”), id. at 3. Accord, In re

Wepsic, 231 B.R. 768, 777 S.D. Calif. 1998).

Thus, even were the Tamayoses unable to refinance for any reason, the

balance owing on their loans should still have been reduced to the TILA rescission


17

amount were they to establish at trial that they were nevertheless entitled to a TILA

rescission remedy, affecting any later deficiency judgment or subsequent attempt

to refinance once a state court foreclosure were filed (which would take as much as

one or more additional years) that further illustrates how a take-it-or-leave-it

demand in advance of trial, seeking summary judgment otherwise, is a practical

and legal thwarting of Congressional intent.

In contrast, by misinterpreting Yamamoto below, the lower court further

effectively prejudiced the procedural and the substantive rights of the Tamayoses,

requiring them to prove that they could make an unrealistic, immediate tender

without first having the validity of their rescission claim adjudicated in their favor

so as to prove that to family and friends or a new lender or a loan broker or a real

estate broker so as to secure refinancing or a sale, all based upon their extended

family resources or the market value of their residential property and not their cash

assets.

POINT TWO

If this Court’s Yamamoto decision is interpreted to mean

that borrowers have the burden of proving that they can

refinance a mortgage loan if granted a TILA rescission

before a District Court determines whether they are

actually entitled to a TILA rescission, that Panel decision

should be limited or overturned.

The indiscriminate, broad brush interpretation given the Yamamoto decision

below investing courts with wide and virtually unreviewable discretion, moreover,


18

invoking summary judgment by reversing the burden of proof and reversing the

order of events for rescission, has produced conflicting results in federal courts in

other Circuits wrestling with how to interpret Yamamoto, and is not even being

consistently applied in Ninth Circuit District Courts; e.g.:2

Giza v. Amcap Mortgage, Inc., 428 B.R. 266, 274-275 (Bk. D. Mass. 2010)

(Judge Henry Boroff: “some courts . . . have interpreted [TILA along with an

identical Massachusetts statute] to give courts the equitable power to condition

rescission on tender by the borrower . . . Yamamoto . . . . [To the contrary] these

procedures address the process by which rescission occurs after the security

interest has been voided” – emphasis in the original).

Cromwell v. Countrywide Home Loans, Inc., 461 B.R. 99, 133-134 (Bk. D.

Mass. 2011) (Judge William Hillman: “I must respectfully disagree [with

Yamamoto which] . . . goes further to place non-statutory and non-regulatory

conditions on the legal availability of the right to rescind based upon the court’s

‘equitable discretion to modify rescission procedures’[reviewing legislative and

regulatory materials]”).

2 Yamamoto has lead to several additional disagreements within the Ninth Circuit.

There is also a difference within Ninth Circuit District Courts, not however

applicable here but similarly needing attention from this Court, regarding how

Yamamoto applies to the tender pleading issue, one line of cases reading

Yamamoto to require borrowers to plead present ability to tender the TILA

rescission amount in order to survive a motion to dismiss, while others holding that

Yamamoto does not. See Kakogui v. American Brokers Conduit, 2010 WL

1265201 *4 (U.S.D.C. N.D. Cal. 2010).


19

Swayze v. Ameriquest Mortgage Co., 2004 WL 6057264 *5 (U.S.D.C. N.D.

Ga. 2004) (Judge Gerrilyn Brill: “no other conclusion can be reached than that a

bona fide rescission is automatic upon notification from the debtor. This does not

mean, as a case relied upon by a defendant argues, that a ‘borrower could get out

from under a secured loan simply by claiming TILA violations, whether or not the

lender had actually committed any.’ Yamamoto . . . . Yamamoto overlooks the

possibility of a court retroactively declaring the validity of a security interest” –

emphasis in the original).

Willams v. Saxon Mortgage Co., 2008 WL 45739 *5 and n.10 (U.S.D.C.

S.D. Ala. 2008) (Judge William Steele: “[T]he request that the Court order

plaintiffs to produce ‘definitive evidence’ of their ability to tender the necessary

rescission amounts is both problematic and irregular [‘speculation’]. It is black-

letter law that, on summary judgment, ‘[t]he moving party bears the initial burden

of showing the court, by reference to materials on file, that there are no genuine

issues of material fact that should be decided at trial.’ * * * * In Yamamoto, itself,

the panel found that ‘it was clear from the evidence that the borrower lacks

capacity to pay back what she has received’”).

Quintero Family Trust v. OneWest Bank, F.S.B., 2010 WL 392312 *3

(U.S.D.C. S.D. Cal. 2010) (Judge Irma Gonzalez: “In the present case, because of

the ‘egregious’ facts alleged and because the balance of equities weighs in


20

Plaintiff’s favor, the Court refuses [to apply Yamamoto] to alter the statutorily-

provided sequence. . . . Accordingly, the Court will not require Plaintiffs to

demonstrate a present ability to tender” – emphasis in the original).

POINT THREE

If the lower court’s interpretation of Yamamoto is deemed

correct and Yamamoto is not to be limited or overturned, in

the circumstances of this case however, especially where no

findings were made as to the relative equities of the parties,

the borrowers’ ability to tender a TILA rescission amount if

subsequently receiving a rescission award was in genuine

dispute and precluded granting summary judgment.

The lower court had no contrary evidence before it presented by any of the

defendants establishing that the Tamayoses could not eventually tender the yet to

be established rescission amount, and instead exclusively relied upon the

Tamayoses’ deposition and declaration testimony, which if anything were clearly

the opposite of being confessive, as had otherwise occurred in Yamamoto and

triggered the result there, although District Judge Samuel King nevertheless gave

the Yamamotos a full sixty days to attempt to refinance or sell their property.

Again, for instance, as explained in the Declaration of Nadine K. Tamayose

(Doc. No. 101, paragraphs 14-16), the Tamayoses “have a close-knit extended

family on Kauai as well as many close friends who we believe would help us

refinance . . . . And were we unable to secure refinancing assistance, we could sell

our residence, which obviously we would prefer not to do, but those are choices

that as a practical matter we cannot make until we receive a TILA rescission


21

principal reduction and know what that amount will be and have something official

to show lenders, family and friends.”

Under these circumstances, and making no attempt as in Quintero, supra, to

balance the equities even though in attempting to refinance to get a better interest

rate the Tamayoses wound up with a less attractive overall interest rate (ER, at 46-

47), the lower court should not have granted summary judgment.

The Tamayoses’ constitutional right to a jury trial on the merits of that

equitable claim is clearly established in Hawaii state law both by the Hawaii

Supreme Court in Hawaii Community Federal Credit Union v. Keka, 94 Haw. 213,

16-17, 11 P.3d 1 (2000) and more recently by the District Court below in Kajitani

v .Downey Savings and Loan Association, F.A., 647 F. Supp. 2d 1208, 1219

(2008), rendering summary judgment in such situations inappropriate, and more so

where the equities are to be balanced if that is part of the Yamamoto test as it was

decided in Quintero, supra.

For instance, as a unanimous Hawaii Supreme Court reiterated in reversing

the summary judgment in Keka while addressing the inappropriateness of granting

mortgage foreclosure summary judgments in such inequitable “bait-and-switch”

circumstances, even though “the record in the present matter contains very scanty

evidence of the circumstances surrounding the Kekas’ loan transaction”:


22

“HRS Section 480-2, as its federal counterpart in the FTC

Act, was constructed in broad language in order to constitute

a flexible tool to stop and prevent fraudulent, unfair or

deceptive business practices for the protection of both

consumers and honest business [persons].” Ai v. Frank

Huff Agency, Ltd., 61 Haw. 607, 616, 607 P.2d 1304, 1311

(1980) (footnote omitted).

“[A] practice is unfair when it offends established public policy

and when the practice is immoral, unethical, oppressive,

unscrupulous or substantially injurious to consumers.” Rosa

[v. Johnston] 3 Haw. App. at 427, 651 P.2d at 1234. . . .

Our consumer protection statute is remedial in nature and must

be liberally construed in order to accomplish the purpose for

which it was enacted. . . . Applying this principle, and viewing

the record and the inferences drawn therefrom in the light most

favorable to the Kekas, there is a genuine issue of material fact

as whether the Credit Union engaged in unfair and deceptive

trade practices, in violation of HRS ch. 480.

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary

judgments shall be granted only when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” T .W. Elec. Serv., Inc. v. Pac. Elec.

Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp., 477

U.S. at 323). See also Porter v. Cal. Dep't of Corr., 419 F.3d 885, 891 (9th Cir.

2005); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000).

Parties seeking summary judgment, contrary to what occurred below, have

both the initial burden of production and the ultimate burden of persuasion on a


23

motion for summary judgment. Nissan Fire & Marine Ins. Co. Ltd. v. Fritz Cos.,

Inc., 210 F.3d 1099, 1102 (9th Cir. 2000).

Moreover, courts in summary adjudication proceedings are not allowed to

make credibility assessments or weigh conflicting evidence, Musick v. Burke, 913

F.2d. 1390, 1394 (9th Cir. 1990), yet that is what the lower court purposely did.

The defendants below, on the other hand, did not meet their burden of proof,

and the lower court improperly wrongfully shifted that burden at the outset onto

the Tamayoses pertaining to their ability to tender.

The Tamayoses continually objected to the granting of summary judgment

with respect to all three points set forth above.3

CONCLUSION

For all of the above reasons, it is respectfully submitted that the decision of

the lower court should be reversed and the case remanded and permitted to

continue to a decision on the merits of the Tamayoses’ TILA rescission and

equitable claims, including a determination as to the rescission amount, trial by

jury properly demanded, and the Tamayoses if successful regarding the substance

of their TILA rescission claim should be given adequate time in which to refinance

or sell their property.

3 See Transcript of Proceedings for December 5, 2011, ER, at 46-48; Concise

Statements in Opposition, Doc. Nos. 97, 98, 99 and 100; Declaration of Nadine K.

Tamayose, Doc. No. 101; Memorandum in Opposition to Summary Judgment,

Doc. No. 103; Supplemental Declaration of Nadine K. Tamayose.


24

This Court’s Yamamoto decision in the process should be revisited and

either narrowed in scope or completely overturned, with appropriate guidance

provided to our District Courts concerning how to decide such cases in a consistent

manner in future cases.

And there was never more need to do so, given the present nationwide

predatory lending foreclosure crisis and the devastating slaughter of borrowers

taking place daily, especially in some parts of the Ninth Circuit. This is certainly

no time to scuttle such indispensable Congressional consumer protections.

Courts have long recognized the special importance to the welfare of this

Nation of protecting a family’s “single most important asset,” its residence, not

only from an economic point of view, but also for its inherent social values -- as its

location often determines where children go to school, where families worship,

where family and friends reside, and where the elderly spend their remaining years,

in the absence of which borrowers may become dependent on public housing and

welfare, if available, and parental control may be lost and marriages may break up

as a result; see Sawada v. Endo, 57 Haw. 608, 616, 561 P.2d 1291 (1977).

It was Chief Judge Kozinski of this Court in Balderas v. Countrywide Bank,

N.A., 664 F.3d 787, 791 (9th Cir. 2011), who recently succinctly summarized the

importance of allowing borrowers to exercise their TILA rescission rights without


25

restricting their full evidentiary rights, by analogy equally applicable here, in this

way:

As we've said before, “so long as the plaintiff alleges

facts to support a theory that is not facially implausible,

the court's skepticism is best reserved for later stages of

the proceedings when the plaintiff's case can be rejected

on evidentiary grounds.” In re Gilead Sciences Securities

Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008). Here,

the Balderases clearly alleged in their complaint that they

were never given a Notice of Right to Cancel that

complied with TILA. If they can prove up this allegation

at trial, they'll win.

DATED: Honolulu, Hawaii; October 12, 2012.

/s/ Gary Victor Dubin

___________________________ GARY VICTOR DUBIN FREDERICK ARENSMEYER Attorneys for Appellants Reid I. Tamayose and

Nadine K. Tamayose


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26

STATEMENT OF RELATED CASES

None


27

CERTIFICATE OF COMPLIANCE

I hereby certify that this Opening Brief, pursuant to Rule 32(a)(7)(C) of the

Federal Rules of Appellate Procedure is proportionately spaced, double-spaced,

using a Times New Roman Typeface, 14-point size, with a total word count of

5,930 words as determined by the Windows XP word processing operating system

used to prepare said document.



___________________________ GARY VICTOR DUBIN FREDERICK ARENSMEYER Attorneys for Appellants Reid I. Tamayose and Nadine K. Tamayose


28

CERTIFICATE OF SERVICE

I hereby certify that on the date first written below a true and correct copy of

the aforementioned Opening Brief was duly filed by electronic transmission,

thereby served upon the following attorneys representing the Appellees in this

Appeal:

Jade Lynne Ching, Esq. Lester K.M. Leu, Esq.

Miriah Holden, Esq. Gary Y. Okuda, Esq.

1001 Bishop Street, Suite 1800 Karyn Doi, Esq.

Honolulu, Hawaii 96813 222 Merchant Street

Honolulu, Hawaii 96813

Attorneys for Appellees

Option One Mortgage Corporation Attorneys for Appellee

and H&R Block Bank Residential Credit Solutions

Kevin W. Herring, Esq.

Connie Chow, Esq.

1099 Alakea Street, Suite 1400

Honolulu, Hawaii 96813

Attorneys for Appellee

Old Republic Title & Escrow

of Hawaii, Ltd.



___________________________ GARY VICTOR DUBIN FREDERICK ARENSMEYER Attorneys for Appellants Reid I. Tamayose and Nadine K. Tamayose


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