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District Court Erred in Requiring More than Mortgagee's Testimony to Rebut Presumption She Received Truth in Lending Act Documents

Monday, August 29, 2011

Andrea J. Chiller | Bloomberg Law Cappuccio v. Prime Capital Funding LLC, No. 09-4055, 2011 BL 211507 (3d Cir. Aug. 16, 2011) Karen Cappuccio contacted a representative from a brokerage firm to refinance the mortgage on her home. The firm submitted an application on her behalf to two lenders and facilitated the closing of a loan from each. Cappuccio later claimed that she never wanted to obtain two separate mortgages and that she did not agree to the terms of the loans. After the lenders refused her demand for rescission or restitution, she filed suit against the lenders, the brokerage firm, and several other parties involved in the closing. One of the claims Cappuccio asserted in the suit was that she failed to receive proper notification of her right to cancel the mortgage as required by the Truth In Lending Act (TILA), 15 U.S.C. §§ 1601–67f. At trial, the district court instructed the jury that because she had signed a form acknowledging the receipt of a notice of the right to cancel at the closing, there was a presumption that she had actually received notice and that "something more than just her testimony [was] needed to rebut the presumption." (Internal quotation and alteration omitted.) After the jury returned a verdict in favor of defendants on the TILA claim, Cappuccio appealed to the U.S. Court of Appeals for the Third Circuit, arguing that the jury instruction was erroneous. Unless provided otherwise by statute, Rule 301 of the Federal Rules of Evidence sets out the rule for rebutting a presumption in a civil action. As the Third Circuit explained, the "quantum of evidence" needed to overcome a presumption is minimal, and the Court has, in the past, found that testimony from a single witness, even a self-interested one, was sufficient as long as it was based on personal knowledge and was not conclusory. Here, the Court found that Cappuccio provided sufficient, nonconclusory testimony to rebut the presumption that she received the proper notification of her right to cancel the mortgage under Rule 301. In addition, nothing in the statute indicated that Congress intended to impose a higher burden to rebut a presumption arising in a TILA claim. Accordingly, the Third Circuit concluded that the district court erred in instructing the jury that something more than Cappuccio's testimony was required. Furthermore, it concluded that the error was not harmless. Defendants argued that since Cappuccio did, in fact, offer additional evidence in support of her claim, any effect the error might have had was eradicated. The Court disagreed, noting that the erroneous instruction could have altered the weight the jury gave her testimony and other evidence she presented. It also rejected defendants' argument that even if the correct instruction were given, Cappuccio would still not have prevailed. Whether or not she received notice turned on several credibility determinations that the Court was unwilling to undertake. Lastly, it concluded that she was also prejudiced by the district court continuing to make reference throughout the trial to the presumption that she received notice, noting that as soon as she presented sufficient evidence to rebut the presumption, it should have "dropped out" of the case, and the failure to do so could have confused the jury. Accordingly, the Third Circuit vacated the verdict on the TILA claim and remanded the matter back to the district court.

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