Beach v. Great Western Bank
1997 WL 57232, 692 So. 2d 146 (1997)
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Rule of Law:
The statutory right of rescission under the federal Truth in Lending Act (TILA), 15 U.S.C. § 1635(f), is a statute of repose that completely extinguishes the right after three years and cannot be revived as a defense of recoupment in a foreclosure action initiated after the three-year period has expired.
Facts:
- In August 1986, David and Linda Beach obtained a loan from Great Western Bank, secured by a mortgage on their home, to pay off a previous construction loan.
- At closing, Great Western provided the Beaches with disclosure documents as required by the Truth in Lending Act (TILA).
- These disclosure documents contained minor errors, overstating the Beaches' monthly mortgage payment by fifty-eight cents and the finance charge by $7.24.
- The Beaches made payments on the loan for over five years.
- On December 1, 1991, the Beaches defaulted on their mortgage by failing to make their required installment payments.
Procedural Posture:
- In June 1992, Great Western Bank filed a foreclosure action against David and Linda Beach in a Florida trial court.
- The Beaches raised several affirmative defenses, including a right to rescind the loan under the Truth in Lending Act (TILA).
- The trial court entered a final judgment of foreclosure for Great Western, ruling that the Beaches' right to rescind was precluded because it was not asserted within three years of the loan's closing.
- The Beaches, as appellants, appealed the trial court's judgment to the Florida Fourth District Court of Appeal.
- The Fourth District Court of Appeal affirmed the trial court's decision and certified a question of great public importance to the Supreme Court of Florida regarding the TILA rescission right.
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Issue:
Under Florida law, may a borrower's right of rescission under the Truth in Lending Act (TILA), which expires three years after the transaction, be revived as a defense of recoupment in a foreclosure action brought more than three years after the loan was consummated?
Opinions:
Majority - Per Curiam
No, a borrower's right of rescission under TILA may not be revived as a defense of recoupment after the three-year expiration period. The court reasoned that TILA's three-year limit on the right of rescission, found in 15 U.S.C. § 1635(f), is a statute of repose, not a statute of limitations. A statute of repose creates both a right and its remedy and extinguishes them completely after a fixed period, whereas a statute of limitations merely bars the remedy. The court highlighted that Congress included a 'savings clause' in § 1640 allowing TILA damage claims to be raised in recoupment after the one-year limitations period, but deliberately omitted a similar clause for the right of rescission in § 1635. This intentional exclusion demonstrates Congress’s intent to make the three-year deadline an absolute extinguishment of the right, which therefore cannot be revived as an equitable defense.
Analysis:
This decision solidifies the distinction between a statute of limitations and a statute of repose within the context of federal consumer credit law. It establishes that TILA's three-year right of rescission is an absolute cutoff that cannot be equitably tolled or revived as a defensive measure, providing lenders with certainty and finality in mortgage transactions after three years. The ruling curtails borrowers' ability to use rescission as a powerful defensive tool in foreclosure actions brought long after the loan's consummation. This case serves as a key example of statutory interpretation, emphasizing that a legislature's deliberate omission of language in one section of a statute, when that language is present in another, is presumed to be intentional and must be given effect by the courts.
