Truth In Lending Act Period of Repose is Not Jurisdictional; Error For District Court to Take Judicial Notice of Deed When its Very Validity is Challenged
DOSS v. CLEARWATER TITLE (December 24, 2008)
Doss refinanced his home. First Franklin Financial Corporation (“Franklin”) loaned him $135,000 on the condition that he obtain title insurance. He did so. At closing, the itemization of costs indicated that he paid $500 for the title insurance. In fact, he paid almost $1500. Doss filed suit against Franklin and others, alleging violations of the Truth in Lending Act (“TILA”) and the Illinois Consumer Fraud and Deceptive Practices Act. The court entered a default judgment against Franklin, which Franklin moved to set aside. Other defendants moved to dismiss for failure to state a claim, alleging that Doss sold his home before filing suit. Although Doss disputed this fact in the district court, the court nevertheless granted the motion and dismissed the TILA count. The court then exercised its discretion to dismiss the state law claims as well. It also struck “as moot” all pending motions, including Franklin’s motion to set aside the default. Doss appeals.
In their opinion, Judges Manion, Wood and Tinder reversed and remanded. The Court first rejected defendants’ argument that the district court lacked jurisdiction because of Doss’ sale of the property. TILA does provide that the right of rescission expires upon the sale of the property. That provision is not jurisdictional, however. It is simply a precondition to substantive relief. The Court also addressed its own jurisdiction, given that the district court dismissed without prejudice. Although a dismissal without prejudice is usually not appealable, the Court held that the case fit within an exception. The Court will entertain an appeal where it is clear that the court below was finished with the case and where TILA’s three year period of repose would have prevented Doss from refiling the case.
On the merits, the Court held that the district court erred in relying on the deed, a matter outside the pleading, in granting a Rule 12(b)(6) motion. Instead, the court should have converted the motion to a Rule 56 motion for summary judgment and given Doss a chance to respond. Furthermore, the deed was not a subject for judicial notice since its very validity was in dispute. The Court added that a) Franklin’s motion was not moot but since it did not cross-appeal, the default judgment is final, and b) the state law claims should be reinstated.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select