Editor: David Reiss
Brooklyn Law School

February 19, 2013

Utah District Court Holds that Plaintiff’s TILA Claims Are Time-Barred and that MERS Does Not Need to Possess the Note in Order to Appoint a Trustee or Authorize a Trustee to Foreclose

By Justin Rothman

In Rhodes v. Aurora Loan Services, No. 2:10 CV 00230 TC, 2010 WL 3219310 (D. Utah Aug. 13, 2010), the United States District Court of Utah granted Defendants’ motion to dismiss Plaintiff’s claims.


In October 2006, Plaintiff refinanced the loan on his residence. On August 26, 2009, after Plaintiff failed to make payments on his loan, James Woodall, the trustee appointed by MERS, recorded a notice of default on Plaintiff’s residence. Plaintiff sent a notice of rescission of the loan pursuant to the Truth in Lending Act (TILA) on November 10, 2009. Defendants allegedly provided deficient TILA disclosures to Plaintiff including an incorrect payment schedule and an improper notice of interest rate for an adjustable rate mortgage.


Plaintiff filed a claim for violation of TILA and for rescission under TILA. The court found that both of these claims were time-barred. First, any claim for violation of TILA must be brought “within one year from the date of the occurrence of the violation.” The court stated that in the Tenth Circuit, “the statute of limitations on TILA claims runs from the time the consumer credit transaction was consummated.” The court went on to say that since there was not “legal basis for tolling the statute of limitations in this case,” the time ran on Plaintiff’s TILA claims in October 2007, one year after Plaintiff refinanced the loan on his residence. Second, if the lender never submits the required TILA disclosures, which is what was alleged in this case, “the borrower’s right to rescission expires three years after the consummation of the transaction.” Plaintiff claims to have delivered notice of rescission on November 10, 2009, more than three years after he consummated his loan transaction in October 2006.


Plaintiff also filed a claim for fraud, contending that Defendants initiated non-judicial foreclosure without showing ownership of the note. The court pointed to a large body of case law in supporting its proposition that “MERS has the authority to foreclose in behalf of the lender and that MERS need not possess the note in order to appoint a trustee in behalf of the lender who does hold the note.” In addition, the court referenced Utah Code Ann. § 57-1-21 to 38 in stating that there is “no requirement that the beneficiary produce the actual note in order to authorize the trustee to foreclose on the property secured by the note.” Therefore, the court granted Defendant’s motion to dismiss both the TILA claims and fraud claim.

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