United States District Court, District of Rhode Island
KEVIN E. SWEET, JR., Plaintiff,
ANTHONY THOMAS, III, Defendants.
John J. McConnell, Jr. United States District Judge
The single issue before the Court in deciding the Defendants' Motion for Summary Judgment is whether the Truth in Lending Act (TILA) applies to the loan transaction between Kevin Sweet, Jr. and the Defendants. After a review of all of the evidence submitted in the light most favorable to the Plaintiff, the Court has determine that no genuine issue of material fact exists and the Defendants are entitled to judgment as a matter of law because the TILA does not apply to the transaction at issue.
On August 25, 2011, T&E Investments, LLC ("T&E") and Chaim Pizem made a $75, 000 loan to Kevin E. Sweet, Jr., evidenced by a note and secured by a mortgage on a multi-family house located in Coventry, Rhode Island. Mr. Sweet fell behind in his mortgage payments resulting in a foreclosure auction on behalf of T&E and Mr. Pizem, pursuant to the power of sale in the mortgage. As a result of the foreclosure, T&E took title to the property. Three days prior to the foreclosure auction, Mr. Sweet had sent the Defendants a notice requesting rescission of the loan.
After the foreclosure was completed, Mr. Sweet filed suit in the Superior Court and filed a lis pendens to accompany it. Defendants responded by removing the action to this Court.
II. STANDARD OF REVIEW
Summary judgment is appropriate whenever "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." Fed.R.Civ.P. Rule 56(c). An adverse party "may not rest upon the mere allegations or denials" of that party's pleading, but rather, "must set forth specific facts showing that there is a genuine issue for trial." Rule 56(e).
Generally, a "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. When reviewing the evidence, the Court "must construe 'the record in the light most favorable to the nonmovant and resolv[e] all reasonable inferences in that party's favor' while safely ignoring 'conclusory allegations, improbable inferences, and unsupported speculation.'" Colon-Fontanez v. Municipality of San Juan, 660 F.3d 17, 27 (1st Cir. 2011) (quoting Carroll v. Xerox Corp., 294 F.3d 231, 237 (1st Cir. 2002)).
All three counts of the Amended Complaint allege that the Defendants violated the TILA. The TILA provides that consumers have a right to rescind certain types of loans under certain conditions. See 15 U.S.C.A. § 1600 et seq. When the proceeds of a "consumer credit transaction" is "primarily for personal, family, or household purposes." (15 U.S.C. § 1602(f)) and involves the granting of a security interest in the "principal dwelling of the person to whom credit is extended, " then the borrower has a right to rescind the transaction within three business days. See § 1635(a). There are therefore two key requirement for the TILA to apply in this case; the loan must be for "personal" use on the "principal dwelling" of the borrower.
There is no genuine issue of material fact as to any of the following and therefore, as a matter of law, the TILA does not apply to the Plaintiff, the Defendants, or to this transaction: (1) Mr. Sweet did not use the loan "primarily for personal, family, or household purposes;" and (2) Mr. Sweet did not utilize the property as a "principal dwelling." Because the TILA does not apply, Mr. Sweet had no right to rescind the subject loan and all of his claims fail as a matter of law.
A. Loan Document Establishes TILA not Applicable
At the closing of the loan in question, Mr. Sweet signed a document entitled 'Non-Applicability of Truth in Lending" and dated August 25, 2011. (ECF No. 50-2). It states, ". . . the loan is not for personal, family, household or agricultural use. More specifically, the loan shall be used solely for business or commercial purposes or business or commercially related purposes. The net proceeds of the loan shall be used for the sole purpose of business investment." Id.
Under the TILA, the right of rescission is only applicable to a "consumer credit transaction" for personal purposes that will involve the granting of a security interest in the "principal dwelling of the person to whom credit is extended." See 15 U.S.C.A. §§ 1602, 1635(a). As noted above, a consumer credit transaction is one in which "the party to whom credit is offered or extended is a natural person, and the money, property, or services which are the subject of the ...