                                                            NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT
                            _______________

                        No. 09-2214, 09-2215 & 09-2367
                               _______________

                             JENNIFER ST. HILL,
                                        Appellant (No. 09-2214)
                                    v.

                    TRIBECA LENDING CORPORATION;
                LASALLE BANK NATIONAL ASSOCIATION;
                 LITTON LOAN SERVICING; FINANCIAL &
                     CONSULTING STRATEGIES, INC.

                                     LASALLE BANK NATIONAL,
                                         Appellant (No. 09-2215)

                                    TRIBECA LENDING CORPORATION,
                                         Appellant (No. 09-2367)
                               _______________

                 On Appeal from the United States District Court
                    For the Eastern District of Pennsylvania
                     (D.C. Civil Action No. 2-07-cv-05300)
                   District Judge: Honorable Juan R. Sanchez
                                _______________

                   Submitted Under Third Circuit LAR 34.1(a)
                              November 15, 2010
                              _______________

             Before: AMBRO, FISHER, and GARTH, Circuit Judges

                       (Opinion filed: December 8, 2010)
                              _______________

                                  OPINION
                               _______________
AMBRO, Circuit Judge
       Debtor Jennifer St. Hill appeals from the District Court’s decision after trial that

neither the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., nor the

Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S.

§ 201-1 et seq., entitles her to rescind her mortgage in favor of Tribeca Lending

Corporation (“Tribeca”). St. Hill also appeals the District Court’s order denying her

claims for money damages against Financial & Consulting Strategies, Inc. (“FCS”),

under Pennsylvania’s Credit Services Act (“CSA”), 73 P.S. § 2181, et seq., and Loan

Broker Trade Practice Regulations (“LBTPR”), 37 Pa. Code § 305.1. She appeals as well

the District Court’s rejection of her fraud-related claims under the UTPCPL. Tribeca

cross-appeals the District Court’s ruling that it violated the TILA by failing to disclose

the fees that St. Hill paid her mortgage broker. For the reasons that follow, we affirm the

District Court’s rejection of rescission, though for a different reason.1

                                      I. Background

       St. Hill obtained a home mortgage loan from Tribeca for $1.3 million that she now

seeks to rescind. In 2004, she experienced financial difficulty in connection with her debt

collection business, and filed for Chapter 7 bankruptcy. In 2006, St. Hill decided to

refinance her home mortgage to pay her trustee in bankruptcy to satisfy the creditors of

her business. To that end, a friend referred St. Hill to Francis Kilson, who provided

general financial advice but was not a mortgage broker. Kilson then introduced St. Hill

to David Diamond, who worked for FCS as a mortgage broker. Diamond arranged the


1
 The other parties affected are LaSalle Bank National Association (current holder of the
mortgage) and Litton Loan Servicing (the servicer for LaSalle).
                                              2
loan with Tribeca. At the outset, St. Hill agreed with Kilson to a charge of $13,500 for

his services, but the payment was not to come out of the loan proceeds. St. Hill also

entered into a brokerage contract with Diamond, in which she agreed to pay him $13,000.

       In the course of the transaction (and prior to closing), Tribeca’s loan officer, Adam

Turkewicz, told Diamond and St. Hill that Diamond would have to waive his fees in

order to proceed with the particular type of loan that was arranged for St. Hill. The

District Court found that Turkewicz told both Diamond and St. Hill that Diamond would

have to pursue his fees outside the settlement papers. St. Hill paid Diamond $6,500 a few

days after settlement and $6,500 or $7,000 (the amount is disputed) over the course of the

year after settlement.

       Fourteen months after closing the loan, St. Hill attempted to rescind it on the

ground that there were disclosure violations. After a two-day bench trial, the District

Court determined that St. Hill was not entitled to rescind the loan. It also concluded that

the TILA did not require disclosure of Kilson’s fees because he was not a mortgage

broker. However, because the TILA requires disclosure of all finance charges, which are

defined by the statute’s implementing regulation (Regulation Z) as any “fees charged by

a mortgage broker,” the Court found that Tribeca had violated the TILA by failing to

disclose Diamond’s broker fees. Nonetheless, it concluded that St. Hill could not recover

damages because the one-year limitations period for recovery had elapsed. The District

Court also rejected St. Hill’s claims under the UTPCPL.2


2
 Prior to trial, the District Court granted partial summary judgment in favor of FCS on
St. Hill’s CSA and LBTPR claims.
                                             3
                        II. Jurisdiction and Standard of Review

       The District Court had jurisdiction under 28 U.S.C. § 1331, the TILA, 15 U.S.C.

§ 1640(e), and the Real Estate Settlement Practices Act, 12 U.S.C. § 2614. It also

exercised supplemental jurisdiction over St. Hill’s state law claims under 28 U.S.C.

§ 1367(a). We have jurisdiction over a final order from the District Court under 28

U.S.C. § 1291.

       “On the appeal of a bench trial, we review a district court’s findings of fact for

clear error and its conclusions of law de novo.” McCutcheon v. Am. Servicing Co., 560

F.3d 143, 147 (3d Cir. 2009).

                                   III. Discussion

A. St. Hill’s rescission claims

       St. Hill argues that she has a right to rescind her loan under both the TILA and the

UTPCPL’s Door-to-Door Sales Act provision, 73 P.S. § 201-7. As bases for rescission,

she claims that Tribeca under-disclosed the financing charges in connection with

Diamond’s and Kilson’s fees and made other disclosure violations in connection with the

adjustable interest rate and the Notice of Right to Cancel.3 The District Court held that


3
       Though we do not reach the issue (as we conclude the TILA does not apply), we
agree with the District Court that, even if the TILA were applicable, Kilson’s fees are not
finance charges subject to disclosure. Kilson is not a mortgage broker subject to the
TILA; he is simply a “third party” for its purposes. Per Regulation Z, the TILA requires
disclosure of third-party fees only if the lender “requires the use of a third party as a
condition of or an incident to the extension of credit, even if the consumer can choose the
third party; or [the lender] retains a portion of the third-party charge, to the extent the
portion is retained.” 12 C.F.R. § 226.4(a)(1) (emphasis added). In this context, we make
no further reference to St. Hill’s arguments concerning Kilson.

                                              4
St. Hill was not entitled to rescind the loan because she had received the requisite

disclosures, with the exception of Diamond’s fees. As for the latter, the failure to

disclose Diamond’s fees violated the TILA. However, no remedy existed, as St. Hill

filed her claim too late.

       We agree with the District Court that neither the TILA nor the UTPCPL supports

St. Hill’s arguments for rescission, but for a different reason. We believe that neither

statute applies to the transaction here because St. Hill’s loan was principally for business,

not consumer, purposes. Therefore, we do not reach the question of whether St. Hill

would be entitled to rescind if either statute applied.

       The TILA and the UTPCPL (including the Pennsylvania Door-to-Door Act) apply

only to consumer credit transactions. Under the TILA, consumer credit means credit

“offered or extended” to a consumer “primarily for personal, family, or household

purposes.” 15 U.S.C. § 1602(h); see 12 C.F.R. § 226.2(12). Similarly, the UTPCPL is

limited to the same transactions. 23 P.S. § 201-9.2(a). The TILA does not apply to

“[c]redit transactions involving extensions of credit primarily for business, commercial,

or agricultural purposes.” 15 U.S.C. § 1603(1).

       In this regard, whether we reach the merits of St. Hill’s claims depends on the

loan’s primary purpose. Was it is personal or commercial? Our inquiry goes to the

“transaction as a whole.” See Gombosi v. Carteret Mortg. Corp., 894 F. Supp. 176,

       By contrast, as a mortgage broker, the “[s]pecial rule” on “mortgage broker fees”
applied to Diamond and FCS. Id. § 226.4(a)(3). It requires that any “[f]ees charged by a
mortgage broker . . . are finance charges even if the creditor does not require the
consumer to use a mortgage broker and even if the creditor does not retain any portion of
the charge.” Id.
                                              5
181 (E.D. Pa. 1995). Even if a transaction has some personal purpose, the TILA does not

necessarily apply. Quinn v. A.I. Credit Corp., 615 F. Supp. 151, 154 (E.D. Pa. 1985).

Moreover, several courts have agreed that simply because the loan is secured by a family

home does not mean that the loan was primarily personal. See, e.g., Sherrill v. Verde

Capital Corp., 719 F.2d 364, 367 (5th Cir. 1983); Bokros v. Assocs. Fin., Inc., 607 F.

Supp. 869, 872 (N.D. Ill. 1984); In re DiPietro, 135 B.R. 773, 777 (Bankr. E.D. Pa.

1992).

         To prevail on a TILA claim, St. Hill had the burden of showing that the Act

applied to her case.4 See Katz v. Carte Blanche Corp., 496 F.2d 747, 751 (3d Cir. 1974).

We do not believe that she proved at trial that the primary purpose of her loan was

sufficiently consumer-oriented to put it within the ambit of the TILA.

         The record shows that, though St. Hill’s home served as collateral, the purpose of

the loan was to pay her business creditors. Prior to the refinancing, St. Hill used her

home as collateral for her business debts. When her business ran into trouble, she had to

file for personal bankruptcy to protect her home. She testified that “the sole reason for . .

. getting the refi[nancing] was because the house had increased in value and [she] wanted

4
  She claims that Tribeca waived the argument that the TILA does not apply because it
both “admitted” this in its answer and failed to raise the claim until a post-trial
submission. We disagree. To the former, we are not bound by a party’s admissions
“concerning questions of law.” Mintz v. Am. Gen. Fin. Servs., 434 F.3d 222, 228 (3d Cir.
2006). To the latter, “[t]he purpose of requiring the defendant to plead available
affirmative defenses in his answer is to avoid surprise and undue prejudice by providing
the plaintiff with notice and the opportunity to demonstrate why the affirmative defense
should not succeed.” In re Sterten, 546 F.3d 278, 285 (3d Cir. 2008) (quoting Robinson
v. Johnson, 313 F.3d 128, 134-35 (3d Cir. 2002)). We do not believe that disagreement
over this threshold issue could possibly shock St. Hill, a person skilled in debt collection
matters.
                                              6
to pay off the trustee and . . . the creditors. There was no other reason . . . .” App. 949-

50 (emphases added). In light of this evidence, the District Court found that St. Hill

needed the loan “for the trustee to satisfy her business creditors during a Chapter 7

bankruptcy.” For St. Hill, the likely alternative to refinancing was the seizure of her

home as an asset in bankruptcy. In short, her business debts were the but-for cause of the

loan.

        St. Hill points out that only 29% of the loan went directly to her creditors. The

rest of the principal went to settlement charges, the satisfaction of a pre-existing

mortgage, taxes and liens, and the trustee’s fees and commission. However, we do not

believe that these other payments indicate the loan’s primary purpose. The District Court

in Gombosi encountered a similar situation. There, as here, the Gombosi family had

refinanced their home and a portion of the proceeds were used to pay off business loans.

It was clear to the Court that the Gombosis did not refinance to obtain a lower interest

rate or lower monthly payments. Also, the satisfaction of the prior mortgage was a

necessary condition of the second loan. With respect to fees and taxes, the Court stated

that “[s]ince these costs would have been incurred whatever the purpose of the loan, we

find that they do not carry any weight in the determination of the primary purpose of this

transaction.” 894 F. Supp. at 181. It concluded that

        [a]ll these facts indicate that the refinancing of an existing residential
        mortgage and the making of tax payments were not the primary purpose of
        the . . . loan. Rather, the primary purpose of the . . . loan was to acquire the
        remaining proceeds after the satisfaction of all the conditions of obtaining
        the loan. Thus, we find that the disposition of those remaining proceeds
        must weigh heavily in determining the primary purpose of the . . . loan.


                                               7
Id. (emphasis added).

       In our case, refinancing was obviously not the primary purpose of the $1.3 million

Tribeca loan, as it resulted in a higher interest rate and higher monthly payments (as in

Gombosi). Also, the $738,634.59 payment to satisfy the existing mortgage was an

express condition of the Tribeca loan—again, not the primary purpose. Finally, the

settlement charges, taxes, fees, and commission would have been paid regardless of the

loan’s purpose or the nature of the bankruptcy debts. Thus, as in Gombosi, we are

persuaded that the destination of the remaining proceeds is the most relevant

consideration in the designation of the loan as consumer or commercial.

       Turning to our facts, after satisfying the pre-existing mortgage ($738,634.59), the

bankruptcy trustee’s fees and commission ($137,500), settlement charges ($75,558.29),

and other taxes and liens against the home (about $40,000), the remaining balance of

$377,533.43 was paid directly to St. Hill’s creditors. Though she quibbles that the record

does not conclusively show her creditors were business and not consumer, the testimony

noted above convinces us they were the former. In the circumstances before us, that St.

Hill could only apply 29% of the principal directly toward her commercial liabilities does

not detract from our conclusion that the loan’s primary purpose was commercial.

Therefore, we conclude that the TILA does not apply to St. Hill’s loan as a matter of law.

       We likewise reject that the Pennsylvania Door-to-Door Act applies to the

transaction in this case. As noted above, we do not believe this loan is within the ambit

of the UTPCPL because it is not a consumer loan. Even if it were, we also note an

additional reason why this transaction is not covered by the Door-to-Door Act.

                                             8
       The Door-to-Door Act protects the consumer at home from solicitation or other

inappropriate pressure to assume debt. Here, neither Diamond nor Tribeca solicited St.

Hill in her home, personally or by telephone. The only contact with the home was the

closing, which was held there. But as the District Court found, the closing was at St.

Hill’s home office, for her convenience, as it was her principal place of business.

Therefore, we conclude that the loan was not entered into as the result of or in connection

with in-person contact or a call on St. Hill at her home. We will not stretch the statute to

apply to this case.

Claims against FCS under the CSA and the LBTPR

       St. Hill also argues that the District Court erred in granting summary judgment to

FCS on St. Hill’s CSA and LBTPR claims for misrepresenting the terms of the loan. We

disagree.

       We exercise plenary review over the District Court’s grant of summary judgment,

viewing “the underlying facts and all reasonable inferences therefrom in the light most

favorable to the party opposing the motion.” McGreevy v. Stroup, 413 F.3d 359, 363 (3d

Cir. 2005).

       As noted by the District Court, the CSA does not apply to FCS. It covers “credit

services organizations.” 73 P.S. § 2183. They do not, however, include “[a]ny person

organized, chartered or holding a license or authorization certificate to make loans or

extensions of credit pursuant to the laws of the Commonwealth or the United States who

is subject to regulation and supervision by an official or agency of the Commonwealth or



                                              9
the United States.” Id. § 2182. FCS is a mortgage broker licensed by the

Commonwealth and regulated by the Pennsylvania Department of Banking.

       The LBTPR covers “[l]oan broker[s].” 37 Pa. Code § 305.2. Excluded from that

definition is any “person, copartnership, association or corporation expressly regulated by

a regulatory body or officer of this Commonwealth or of the United States, such as State

and nationally chartered banks, savings and loan associations and their regulated

subsidiaries.” Id. As FCS is regulated in a manner contemplated by this exclusion, the

LBTPR also does not apply to it.

       Because neither the CSA nor the LBTPR applies to this case, FCS was entitled to

judgment as a matter of law. See also Parker v. Long Beach Mortg. Co., 534 F. Supp. 2d

528, 537-38 (E.D. Pa. 2008) (holding licensed mortgage brokers are not covered by either

the CSA or the LBTPR).

Fraud and the UTPCPL

       St. Hill also appeals the District Court’s denial of her fraud claims brought under

the UTPCPL against Tribeca and FCS. As noted above, the UTPCPL does not apply to

non-consumer transactions. Thus, we do not address these claims.

                                     *   *   *    *   *

       For the reasons discussed above, though our reasoning differs in part, we affirm

the District Court’s judgments.




                                             10
