Sixth Circuit Rules "Envelope Theory" Fails to Rebut the Presumption of Receipt of TILA Notice of Cancellation

05 September 2012 Consumer Class Defense Counsel Blog

The United States Court of Appeals for the Sixth Circuit has ruled Janet and Raymond Lee could not rescind their mortgage loan from Countywide Home Loans because they could not prove they were not each given two notices of their right to cancel it as the Truth in Lending Act requires. 15 U.S.C. § 1635(a). Their case was like many others. In 2006 the Lees signed “standard documents” to refinance their mortgage. They did not read what they signed. 

In 2009 the Lees wanted out of their loan. They sued Countywide claiming violations of various state and federal laws. The Lees asserted that they are entitled to rescind their mortgage because they each did not receive two of the copies required notice of right to cancel. 

In response, Countywide produced a copy of a form the Lees signed acknowledging that they had in fact received the proper number of copies. This created a rebuttal presumption of receipt. 15 U.S.C. § 1635(c). The Lees tried to rebut the presumption using what is commonly known as the “envelope theory.” Mr. Lee submitted an affidavit which stated: 

We retained copies of all of the papers we received that were associated with our loan. The only copies of loan documents we received were from the person who conducted our closing at Trident Title Agency. He informed us that the documents he gave us were our copies of the closing documents. I have examined the copy package provided us at closing in preparation for making this affidavit. The documents attached hereto as Exhibit B-1 are all of the papers we received in connection with the loan with Countrywide. 

The packet only contained one notice. The lower court ruled that they did not rebut the presumption and the Sixth Circuit agreed. Simply asserting that everything they received was in the package they submitted into evidence was not enough. This Sixth Circuit case is important. Many courts have subscribed to the envelope theory. Many times a plaintiff will say, “I put my loan documents in a file and did not touch them until I took them to my lawyer who discovered that the extra copies were missing.” The court, rejecting this logic found, “[a]ny number of explanations could account for the missing notices.” Because the Truth in Lending Act placed the burden of proof on the Lees, the evidence they presented was insufficient to defeat summary judgment.

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