Development Bank of the Philippines v. Arcilla Jr.

FACTS:

Issues:

Atty. Felipe P. Arcilla, Jr. was employed by the

Development Bank of the Philippines (DBP) in October 1981.
He availed of an Individual Housing Project loan sometime in
1982. In 1983, DBP and Arcilla executed a Deed of
Conditional Sale over a parcel of land, including the house to
be constructed on the property, for P160, 000.00. Arcilla
borrowed the amount from DBP for the purchase of the lot and
the construction of the house. The loan was payable in 25
years, with a P1, 417.91 amortization per month, at 9%
interest per annum.

1. Was DBP compliant with R.A. No. 3765 and CB

Circular No. 158?

DBP gave Arcilla the option of converting his loan into a

regular loan if he retired early. By 1985, the amortization
amount increased to P1, 691.51. Arcilla opted for early
retirement in 1986, and so the loan was converted into a
regular loan. In 1987, Arcilla signed three promissory notes
amounting to P186, 364.15, and was obliged to pay service
charges and interest. DBP reserved the right to increase or
decrease the interest rate of the loan as well as other charges
and fees, with prior notice to Arcilla. DBP later granted Arcilla
a cash advance of P32, 000.00, at 9% per annum, which was
consolidated to the outstanding balance of Arcillas original
balance.
Arcilla later defaulted on payments. As of October 31,
1990, the outstanding balance was P241, 940.93, including
interest, fees, and penalties. DBP rescinded the Conditional
Sale Agreement in 1990, but in January 1992 DBP offered
Arcilla the opportunity to repurchase the lot upon full payment
of the current appraisal or the updated total, whichever was
higher. This offer was reiterated in October 7, 1992. Arcilla
did not respond. DBP placed the property up for sale at public
bidding on February 14, 1994.
Arcilla filed a case against DBP, alleging that DBP failed
to furnish him with the disclosure statement required by
Republic Act (R.A.) No. 3765 and Central Bank (CB) Circular
No. 158 prior to the execution of the deed of conditional sale
and the conversion of his loan account with the bank into a
regular housing loan account. DBP countered that it
substantially complied with R.A. No. 3765 and CB Circular
No. 158 because the details required were disclosed in the
promissory notes, deed of conditional sale and the required
notices sent to Arcilla. DBP further argued that its failure to
comply strictly with R.A. No. 3765 did not affect the validity
and enforceability of the loan agreement. DBP interposed a
counterclaim for the possession of the property.
The RTC ruled in Arcillas favour, ordering DBP to furnish
Arcilla with the required disclosures, and rendered DBPs
rescission null and void. On appeal, however, the Court of
Appeals reversed the RTC, ruling that DBP substantially
complied with R.A. No. 3765 and CB Circular No. 158. Both
parties appealed to the Supreme Court: Arcilla, for a reversal
of the CA ruling and reversion to the RTC ruling, and DBP for
partial reconsideration in asking the CA to order Arcilla to
vacate
the
property.

2. Was Arcilla liable to vacate the property and pay

rentals for his occupation of the property from the time of the
notarial rescission?
Ratio: If the borrower is not duly informed of the data required by the law
prior to the consummation of the availment or drawdown, the lender will have
no right to collect such charge or increases thereof, even if stipulated in the
promissory note. However, such failure shall not affect the validity or
enforceability of any contract or transaction.

Held:
1. Yes, DBP substantially complied with R.A. No. 3765
and CB Circular No. 158. The Court found that DBP failed to
disclose the requisite information in the disclosure statement
form. Ordinarily, the lender has no right to collect any interest,
charges, or fees without due notice to the borrower. However,
DBP did include such information on interests, charges, fees,
and penalties in the loan transaction documents between it and
Arcilla. The Court considered this as substantial compliance.
Additionally, there was no evidence that DBP sought to collect
interest, charges, or fees beyond what was contained in the
documents provided to Arcilla.
2. Yes, Arcilla is liable to vacate the property, but the
Court made no ruling on the issue of rentals. The Court
adopted the findings of the CA, stating that had Arcilla been
an ordinary borrower, it would have been inclined to be
stricter in the application of the Truth in Lending Act, insisting
that the borrower be fully informed of what he is entering into.
However, the Court noted that Arcilla was a lawyer, and so
presumed that Arcilla would not be so negligent as to sign
papers he had not carefully studied. Additionally, as an
employee of DBP, Arcilla ought to have known the terms of
the loan he was applying for.
The Court remanded the matter of the determination of
rental payments to the RTC, as no evidence was adduced by
DBP with respect to such rentals.
Disposition: Arcillas appeal is DENIED, CA ruling is UPHELD;
case remanded to RTC for determination of reasonable rental
payments.

New Sampaguita Builders vs. PNB

Facts
Sampaguita secured a loan from PNB in an aggregate amount
of 8M pesos, mortgaging the properties of Sampaguitas
president
and
chairman
of
theboard. Sampaguita also executed several promissory notes
due ondifferent
dates (payment
dates).
The first
promissory note had 19.5%interest rate. The 2nd and 3rd had
21.5%. a uniform clause therein permitted PNB to increase the
rate within the limits allowed by law at any time depending
on whatever policy it may adopt in the future x x x, without

even giving prior notice to petitioners. There was also a clause

in the promissory note that stated that if the same is not paid 2
years after release then it shall be converted to a medium term
loan and the interstate for such loan would apply. Later on,
Sampaguita defaulted on its payments and failed to comply
with obligations on promissory notes. Sampaguita thus
requested for a 90 day extension to pay the loan. Again they
defaulted, so they asked for loan restructuring. It partly paid
the
loan
and
promised
to
pay the
balance
lateron. AGAIN they failed to pay so PNB extrajudicially fore
closed themortgaged properties. It was sold for 10M. PNB
claimed that Sampaguita owed it 12M so they filed a case in
court asking sampaguita to pay for deficiency. RTC found that
Sampaguita
was automatically entitled
to the
debt relief package of PNB and ruled that the latter had no
cause of action against the former. CA reversed, saying
Sampaguita was not entitled, thus ordered them to pay the
deficiency Appeal = Went to SC. Sampaguita claims the loan
was bloated so they dont really owe PNB anymore, but it just
overcharged them.
Issues
1.W/N the loan accounts are bloated:
YES. There is no deficiency; there is actually an overpayment of more than
3M based on the computation of the SC.

Whether PNB could unilaterally increase interest rates:

NO.

Ratio:
Sampaguitas accessory duty to pay interest did not give
PNB unrestrained freedom to charge any rate other than that
which was agreed upon. Noninterest shall be due, unless
expressly stipulated in writing. It would be the
zenith of farcicality to specify and
agree
upon rates that could be subsequently upgraded at whim by
only
one
party
to
the agreement. The unilateral determination and imposition
of increased rates isviolative of the principle of mutuality of
contracts ordained in Article 1308 of the Civil Code. Onesided impositions do not have the force of law between
the parties, because such impositions are not based on the
parties essential equality. Although escalation clauses are
valid in maintaining fiscal stability and retaining the value of
money on long-term contracts, giving respondent an unbridled
right to adjust the interest independently and upwardly would
completely take away from petitioners the right to assent to
an important modification in their agreement and would also
negate the element of mutuality in their contracts. The clause
cited earlier made the fulfillment of the contracts dependent
exclusively upon the uncontrolled will of respondent and was
therefore void. Besides, the pro forma promissory notes have
the character of a contract adhesion, where the parties
donot bargain on equal footing, the weaker partys [the debtor
s]participation being reduced to the alternative to take it or
leave
it.Circular that lifted
the ceiling of interest rates of usury law did not authorize
either party to unilaterally raise the interest rate without the
others consent. The interest ranging from 26 percent to 35
percent in the statements of account -- must be equitably
reduced for being iniquitous, unconscionable and

exorbitant. Rates found to be iniquitous or unconscionable

are void, as if it there were no express contract thereon. Above
all, it is undoubtedly against public policy to charge
excessively for the use of money
It cannot be argued that assent to the increases can be implied
either from the June 18, 1991 request of petitioners for loan
restructuring or from their lack of response to the statements
of account sent by respondent. Such request does not indicate
any agreement to an interest increase; there can be no implied
waiver of a right when there is no clear, unequivocal and
decisive act showing such purpose. Besides, the statements
were not letters of information sent to secure their conformity;
and even if we were to presume these as an offer, there was no
acceptance. No
one
receivinga proposal to modify a loan contract, especially intere
st -- a vitalcomponent -- is obliged to answer the proposal.
Besides, PNB did not comply with its own stipulation that
should the loan not be paid 2 years after release of money then
it shall be converted to a medium term loan.*Court applied
12% interest rate instead for being a forbearance of
money(there were some pieces of evidence presented by
PNB in court that sampaguita objected to. Lower courts
overruled
the
objections
but
SC
said
the objections were correct and
the evidence should not have been admitted. I.e. contract
wasnt signed by the parties, a part of the contract wasnt
properly annexed/no reference was made in the main
contract.)In addition to the preceding discussion, it is then
useless
to
labor
the
pointthat the increase in rates violates the impairment clause o
f theConstitution, because the sole purpose of this provision is
to safeguard the integrity of valid contractual agreements
against unwarranted interference by the State in the form of
laws. Private individuals intrusions on interest rates is
governed by statutory enactments like the Civil Code
Consolidated Bank vs. CA
FACT:
Petitioner Solidbank is a domestic banking corporation
organized and existing under Philippine laws. Private
respondent L.C. Diaz and Company, CPAs, is a professional
partnership engaged in the practice of accounting.
In March 1976, L.C. Diaz opened a savings account with
Solidbank. On 14 August 1991, L.C. Diaz through its cashier,
Mercedes Macaraya, filled up a savings (cash) deposit slip for
P990 and a savings (checks) deposit slip for P50. Macaraya
instructed the messenger of L.C. Diaz, Ismael Calapre, to
deposit the money with Solidbank. Macaraya also gave
Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the
two deposit slips and the passbook. The teller acknowledged
the receipt of the deposit by returning to Calapre the duplicate
copies of the two deposit slips. Teller No. 6 stamped the
deposit slips with the words DUPLICATE and SAVING
TELLER 6 SOLIDBANK HEAD OFFICE. Since the
transaction took time and Calapre had to make another deposit
for L.C. Diaz with Allied Bank, he left the passbook with
Solidbank. Calapre then went to Allied Bank. When Calapre
returned to Solidbank to retrieve the passbook, Teller No. 6
informed him that somebody got the passbook. Calapre

went back to L.C. Diaz and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate
copies with a check of P200,000. Macaraya and Calapre went
to Solidbank and presented to Teller No. 6 the deposit slip and
check. The teller stamped the words DUPLICATE and
SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the
duplicate copy of the deposit slips. When Macaraya asked for
the passbook, Teller No. 6 told Macaraya that someone got the
passbook but she could not remember to whom she gave the
passbook. When Macaraya asked Teller No. 6 if Calapre got
the passbook, Teller No. 6 answered that someone shorter than
Calapre got the passbook. Calapre was then standing beside
Macaraya.
The following day L.C. Diaz learned of the unauthorized
withdrawal the day before (14 August 1991) of P300,000 from
its
savings account. The withdrawal slip for the P300,000 bore
the signatures of the authorized signatories of L.C. Diaz,
namely Diaz and Rustico L. Murillo. The signatories,
however, denied signing the withdrawal slip. A certain Noel
Tamayo received the P300,000.
L.C. Diaz demanded from Solidbank the return of its money.
Solidbank refused. L.C. Diaz filed a Complaint for Recovery
of a Sum of Money against Solidbank. The trial court absolved
Solidbank. L.C. Diaz appealed to the CA. CA reversed the
decision of the trial court. CA denied the motion for
reconsideration of Solidbank. But it modified its decision by
deleting the award of exemplary damages and attorneys fees.
Hence this petition.
ISSUE:
WON petitioner Solidbank is liable.
RULING:
Yes. Solidbank is liable for breach of contract due to
negligence, or culpa contractual.
The contract between the bank and its depositor is governed
by the provisions of the Civil Code on simple loan. Article
1980 of the Civil Code expressly provides that x x x savings
x x x deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan. There
is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the
creditor. The depositor lends the bank money and the bank
agrees to pay the depositor on demand. The savings deposit
agreement between the bank and the depositor is the contract
that determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the
fiduciary nature of banking. The bank is under obligation to
treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their
relationship.
This fiduciary relationship means that the banks obligation to
observe high standards of integrity and performance is
deemed written into every deposit agreement between a bank
and its depositor. The fiduciary nature of banking requires
banks to assume a degree of diligence higher than that of a
good father of a family. Article 1172 of the Civil Code states
that the degree of diligence required of an obligor is that
prescribed by law or contract, and absent such stipulation then
the diligence of a good father of a family. Section 2 of RA
8791 prescribes the statutory diligence required from banks

that banks must observe high standards of integrity and

performance in servicing their depositors.
However, the fiduciary nature of a bank-depositor relationship
does not convert the contract between the bank and its
depositors from a simple loan to a trust agreement, whether
express or implied. Failure by the bank to pay the depositor is
failure to pay a simple loan, and not a breach of trust. The law
simply imposes on the bank a higher standard of integrity and
performance in complying with its obligations under the
contract of simple loan, beyond those required of non-bank
debtors under a similar contract of simple loan.
The fiduciary nature of banking does not convert a simple loan
into a trust agreement because banks do not accept deposits to
enrich depositors but to earn money for themselves.
Solidbanks Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that responsibility
arising from negligence in the performance of every kind of
obligation is demandable. For breach of the savings deposit
agreement due to negligence, or culpa contractual, the bank is
liable to its depositor.
Calapre left the passbook with Solidbank because the
transaction took time and he had to go to Allied Bank for
another transaction. The passbook was still in the hands of the
employees of Solidbank for the processing of the deposit when
Calapre left Solidbank. When the passbook is in the
possession of Solidbanks tellers during withdrawals, the law
imposes on Solidbank and its tellers an even higher degree of
diligence in safeguarding the passbook.
Solidbanks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or
his authorized representative. For failing to return the
passbook to Calapre, the authorized representative of L.C.
Diaz, Solidbank and Teller No. 6 presumptively failed to
observe such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party authorized to
receive the same.
In culpa contractual, once the plaintiff proves a breach of
contract, there is a presumption that the defendant was at fault
or negligent. The burden is on the defendant to prove that he
was not at fault or negligent. In contrast, in culpa aquiliana the
plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that
Solidbank breached its contractual obligation to return the
passbook only to the authorized representative of L.C. Diaz.
There is thus a presumption that Solidbank was at fault and its
teller was negligent in not returning the passbook to Calapre.
The burden was on Solidbank to prove that there was no
negligence on its part or its employees. But Solidbank failed to
discharge its burden. Solidbank did not present to the trial
court Teller No. 6, the teller with whom Calapre left the
passbook and who was supposed to return the passbook to
him. Solidbank also failed to adduce in evidence its standard
procedure in verifying the identity of the person retrieving the
passbook, if there is such a procedure, and that Teller No. 6
implemented this procedure in the present case.
Solidbank is bound by the negligence of its employees under
the principle of respondent superior or command
responsibility. The defense of exercising the required diligence
in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa
aquiliana. The bank must not only exercise high standards of
integrity and performance, it must also insure that its

employees do likewise because this is the only way to insure

that the bank will comply with its fiduciary duty
Proximate Cause of the Unauthorized Withdrawal
proximate cause is that causes which, in natural and
continuous sequence, unbroken by any efficient intervening
cause, produces the injury and without which the result would
not have occurred. Proximate cause is determined by the facts
of each case upon mixed considerations of logic, common
sense, policy and precedent.
L.C. Diaz was not at fault that the passbook landed in the
hands of the impostor. Solidbank was in possession of the
passbook while it was processing the deposit. After
completion of the transaction, Solidbank had the contractual
obligation to return the passbook only to Calapre, the
authorized representative of L.C. Diaz. Solidbank failed to
fulfill its contractual obligation because it gave the passbook
to another person.
Had the passbook not fallen into the hands of the impostor, the
loss of P300,000 would not have happened. Thus, the
proximate cause of the unauthorized withdrawal was
Solidbanks negligence in not returning the passbook to
Calapre.
Doctrine
of
Last
Clear
Chance
The doctrine of last clear chance states that where both parties
are negligent but the negligent act of one is appreciably later
than that of the other, or where it is impossible to determine
whose fault or negligence caused the loss, the one who had the
last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss. The antecedent negligence of the
plaintiff does not preclude him from recovering damages
caused by the supervening negligence of the defendant, who
had the last fair chance to prevent the impending harm by the
exercise of due diligence.
We do not apply the doctrine of last clear chance to the present
case. This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last clear
chance to avoid the loss, would exonerate the defendant from
liability. Such contributory negligence or last clear chance by
the plaintiff merely serves to reduce the recovery of damages
by the plaintiff but does not exculpate the defendant from his
breach of contract
Mitigated
Damages
under Article 1172, liability (for culpa contractual) may be
regulated by the courts, according to the circumstances. This
means that if the defendant exercised the proper diligence in
the selection and supervision of its employee, or if the plaintiff
was guilty of contributory negligence, then the courts may
reduce the award of damages. In this case, L.C. Diaz was
guilty of contributory negligence in allowing a withdrawal slip
signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced.
In PBC v. CA where the Court held the depositor guilty of
contributory negligence, we allocated the damages between
the depositor and the bank on a 40-60 ratio. Applying the same
ruling to this case, we hold that L.C. Diaz must shoulder 40%
of the actual damages awarded by the appellate court.
Solidbank must pay the other 60% of the actual damages.
WHEREFORE, the decision of the Court of Appeals is
AFFIRMED with MODIFICATION.

Spouses Silos vs. PNB

In loan agreements, it cannot be denied that the rate of interest is a principal
condition, if not the most important component. Thus, any modification
thereof must be mutually agreed upon; otherwise, it has no binding effect.

Facts
Spouses Eduardo and Lydia Silos secured a revolving credit
line with Philippine National Bank (PNB)through a real estate
mortgage as a security. After two years, their credit line
increased. Spouses Silos then signed a Credit
Agreement, which was also amended two years later, and seve
ral Promissory Notes (PN) asregards their Credit Agreements
with PNB. The said loan was initially subjected to a19.5%
interest rate per annum. In the Credit Agreements, Spouses
Silos bound themselves to the power of PNB to modify the
interest rate depending on whatever policy that PNB may
adopt in the future, without the need of notice upon
them. Thus, the said interest rates played from 16% to as high
as 32% per annum. Spouses Silos acceded to the policy by
pre-signing a total of twenty-six (26) PNs leaving the
individual applicable interest rates at hand blank since it
would be subject to modification by PNB. Spouses Silos
regularly renewed and made good on their PNs, religiously
paid the interests without objection or fail. However, during
the 1997 Asian Financial Crisis, Spouses Silos faltered when
the interest rates soared. Spouses Silos 26th
PN became past due, and despite repeated demands by PNB,
they failed to make good on the note
.
Thus, PNB foreclosed and auctioned the involved security for
the mortgage. Spouses Silos instituted an action to annul the
foreclosure sale on the ground that the succeeding interest
rates used in their loan agreements was left to the sole will of
PNB, the same fixed by the latter without their prior consent
and thus, void. The Regional Trial Court (RTC) ruled that such
stipulation authorizing both the increase and decrease of
interest rates as may be applicable is valid. The Court of
Appeals (CA) affirmed the RTC decision.
Issue
May the bank, on its own, modify the interest rate in a loan
agreement without violating the mutuality of contracts?
Ruling
No.
Any modification in the contract, such as the interest rates, mu
st bemade with the consent of the contracting parties. The
minds of all the parties must meet as to the proposed
modification, especially when it affects an important aspect of
the agreement. In the case of loan agreements, the rate of
interest is a principal condition, if not the most important
component

Jesinoski vs. Countrywide Home loans

Facts
Exactly three years after borrowing money from respondent
Countrywide Home Loans, Inc., to refinance their home
mortgage, petitioners Larry and Cheryle Jesinoski sent
Countrywide and respondent Bank of America Home Loans,
which had acquired Countrywide, a letter purporting to rescind
the transaction. Bank of America replied, refusing to
acknowledge the rescissions validity. One year and one day
later, the Jesinoskis filed suit in federal court, seeking a
declaration of rescission and damages. The District Court
entered judgment on the pleadings for respondents, concluding
that a borrower can exercise the Truth in Lending Acts right
to rescind a loan, see 15 U. S. C. 1635(a), (f), only by filing a
lawsuit within three years of the date the loan was
consummated. The Jesinoskis complaint, filed four years and
one day after the loans consummation, was ineffective. The
Eighth Circuit affirmed.
Held
A borrower exercising his right to rescind under the Act need
only provide written notice to his lender within the 3-year
period, not file suit within that period. Section 1635(a)s
unequivocal termsa borrower shall have the right to
rescind . . . by notifying the creditor . . . of his intention to do
so (emphasis added)leave no doubt that rescission is
effected when the borrower notifies the creditor of his
intention to rescind. This conclusion is not altered by
1635(f), which states when the right to rescind must be
exercised, but says nothing about how that right is exercised.
Nor does 1635(g)which states that in addition to
rescission the court may award relief . . . not relating to the
right to rescindsupport respondents view that rescission is
necessarily a consequence of judicial action. And the fact that
the Act modified the common-law condition precedent to
rescission at
Justice Scalia Opinion
The Truth in Lending Act gives borrowers the right to
rescind certain loans for up to three years after the
transaction is consummated. The question presented is
whether a borrower exercises this right by providing written
notice to his lender, or whether he must also file a lawsuit
before the 3-year period elapses. On February 23, 2007,
petitioners Larry and Cheryle Jesinoski refinanced the
mortgage on their home by borrowing $611,000 from
respondent Countrywide Home Loans, Inc. Exactly three
years later, on February 23, 2010, the Jesinoskis mailed
respondents a letter purporting to rescind the loan.
Respondent Bank of America Home Loans replied on March
12, 2010, refusing to acknowledge the validity of the
rescission. On February 24, 2011, the Jesinoskis filed suit in
Federal District Court seeking a declaration of rescission and
damages. Respondents moved for judgment on the pleadings,
which the District Court granted. The court concluded that
the Act requires a borrower seeking rescission to file a lawsuit
within three years of the transactions consummation.
Although the Jesinoskis notified respondents of their
intention to rescind within that time, they did not file their first
complaint until four years and one day after the loans

consummation. 2012 WL 1365751, *3 (D Minn., Apr. 19,

2012). The Eighth Circuit affirmed. 729 F. 3d 1092, 1093
(2013) (per curiam). Congress passed the Truth in Lending
Act, 82 Stat. 146, as amended, to help consumers avoid the
uninformed use of credit, and to protect the consumer against
inaccurate and unfair credit billing. 15 U. S. C. 1601(a). To
this end, the Act grants borrowers the right to rescind a loan
until midnight of the third business day following the
consummation of the transaction or the delivery of the
[disclosures required by the Act], whichever is later, by
notifying the creditor, in accordance with regulations of the
[Federal Reserve] Board, of his intention to do so. 1635(a)
(2006 ed.).* This regime grants borrowers an unconditional
right to rescind for three days, after which they may rescind
only if the lender failed to satisfy the Acts disclosure
requirements. But this conditional right to rescind does not
last forever.
Even if a lender never makes the required
disclosures, the right of rescission shall expire three years
after the date of consummation of the transaction or upon the
sale of the property, whichever comes first. 1635(f). The
Eighth Circuits affirmance in the present case rested upon its
holding in Keiran v. Home Capital, Inc., 720 F. 3d 721, 727
728 (2013) that, unless a borrower has filed a suit for
rescission within three years of the transactions
consummation, 1635(f) extinguishes the right to rescind and
bars relief. That was error. Section 1635(a) explains in
unequivocal provision, 1635(g), which they believe provides
support for their interpretation of the Act. Section 1635(g)
states merely that, [i]n any action in which it is determined
that a creditor has violated this section, in addition to
rescission the court may award relief under section 1640 of
this title for violations of this subchapter not relating to the
right to rescind.
Respondents argue that the phrase award relief
in addition to rescission confirms that rescission is a
consequence of judicial action. But the fact that it can be a
consequence of judicial action when 1635(g) is triggered in
no way suggests that it can only follow from such action. The
Act contemplates various situations in which the question of a
lenders compliance with the Acts disclosure requirements
may arise in a lawsuitfor example, a lenders foreclosure
action in which the borrower raises inadequate disclosure as
an affirmative defense. Section 1635(g) makes clear that a
court may not only award rescission and thereby relieve the
borrower of his financial obligation to the lender, but may
also grant any of the remedies available under 1640
(including statutory damages). It has no bearing upon
whether and how borrower-rescission under 1635(a) may
occur.
Finally, respondents invoke the common law. It is
true that rescission traditionally required either that the
rescinding party return what he received before a rescission
could be effected (rescission at law), or else that a court
affirmatively decree rescission (rescission in equity). 2 D.
Dobbs, Law of Remedies 9.3(3), pp. 585586 (2d ed. 1993).
It is also true that the Act disclaims the common law condition
precedent to rescission at law that the borrower tender the
proceeds received under the transaction. 15 U. S. C. 1635(b).

But the negation of rescission-at laws tender requirement

hardly implies that the Act codifies rescission in equity.
Nothing in our jurisprudence, and no tool of statutory
interpretation, requires that acongressional Act must be
construed as implementing its closest common-law analogue.
Cf. Astoria Fed. Sav. & Loan Assn. v. Solimino, 501 U. S. 104,
108109 (1991). The clear import of 1635(a) is that a
borrower need only provide written notice to a lender in order
to exercise his right to rescind. To the extent 1635(b) alters
the traditional process for unwinding such a unilaterally

rescinded transaction, this is simply a case in which statutory

law modifies common-law practice. * * * The Jesinoskis
mailed respondents written notice of their intention to rescind
within three years of their loans consummation. Because this
is all that a borrower must do in order to exercise his right to
rescind under the Act, the court below erred in dismissing the
complaint. Accordingly, we reverse the judgment of the Eighth
Circuit and remand the case for further proceedings consistent
with this opinion. It is so ordered.