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Ex-Wife Needed for TILA Rescission Claim

Although the Harrisonburg U.S. District Court earlier said plaintiff homeowner had stated a plausible claim for rescission under the Truth in Lending Act based on a post-dated right-to-rescission form signed by plaintiff and his ex-wife at closing, the court must dismiss plaintiff’s suit as it cannot grant an appropriate rescissionary remedy under TILA without the presence or cooperation of plaintiff’s ex-wife.

The Conrads, who are now divorced, own a personal residence in Broadway, Va., that was initially secured by two deeds of trust in favor of defendant FMB. Lora Conrad was the sole debtor under the previous deeds of trust. Plaintiff’s amended complaint claims FMB violated TILA by having him and his now ex-wife sign a post-dated right to rescission form at the loan closing and represents that Lora Conrad will cooperate in his efforts to rescind. It is now clear, however, that she will not cooperate. Meanwhile, plaintiff continues to occupy the residence without paying either the obligation secured by the current deed of trust or the obligations the current refinancing agreement and deed of trust replaced.

Plaintiff seeks the equitable remedy of rescission. Because the mortgage he seeks to rescind is a refinancing agreement, rescission would essentially return the parties – plaintiff, his ex-wife and FMB – to their position before entering into the current loan agreement. That is, if the right to rescission is actually available to plaintiff, he would have no obligation because he was not an obligor under the two previous loan agreements and deeds of trust. But the ex-wife is not a party to this proceeding; plaintiff purposely did not seek to join her; and she, understandably, is not willing to cooperate with plaintiff’s attempts to rescind.

Under the circumstances, it appears clear to this court that the ex-wife is indispensable to the just adjudication of this case. The court cannot grant relief that is truly equitable and consonant with due process without the ex-wife’s presence or agreement. Nor could the court shape a rescission of the refinancing mortgage to avoid prejudice to the ex-wife.

Plaintiff’s motion to voluntarily dismiss his suit comes one year after filing his case and shortly before trial. Under the circumstances, it is clear to the court that plaintiff’s request necessarily prejudices FMB, causing undue delay and significant expense. Plaintiff has been living in the house making no payments under the current or previous mortgages for at least a year, while the costs, expense and attorney’s fees associated with this litigation continue to mount. The court finds it proper for plaintiff to pay FMB’s costs, expenses and attorney’s fees as a condition to voluntary dismissal. If he fails to pay, the court will deny plaintiff’s motion and dismiss his complaint with prejudice because the court cannot provide the equitable remedy of rescission without the ex-wife’s presence, agreement or cooperation.

Conrad v. Farmers and Merchants Bank (Wilson) No. 5:10cv00047, April 7, 2011; USDC at Harrisonburg, Va. VLW 011-3-186, 7 pp.

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