Ames v. JP Morgan Chase Bank, N.A.

• Decision Date: 07 March 2016
• Docket Number: No. S15G1007.,S15G1007.
• Citation: 783 S.E.2d 614
• Parties: AMES et al. v. JP MORGAN CHASE BANK, N.A., et al.
• Court: Georgia Supreme Court

783 S.E.2d 614

AMES et al.

v.JP MORGAN CHASE BANK, N.A., et al.

No. S15G1007.

Supreme Court of Georgia.

March 7, 2016.

Jon B. McPhail, Jon Mcphail & Associates, Alpharetta, for appellant.

David Marino Pernini, Dustin Scott Sharpes, Wargo & French LLP, Dallas Robert Ivey, Aldridge Pite, LLP, Kimberly Ann Rizzotti Weber, Aldridge Connors, LLP, Atlanta, for appellee.

Peter Lawrence Lublin, Rubin Lublin, LLC, Norcross, Bret Jacob Chaness, Rubin Lublin, LLC, Peachtree Corners, for amicus appellee.

NAHMIAS

, Justice.

In 2007, Cindy and David Ames executed a security deed to their residential property in favor of Washington Mutual Bank, F.A. (WaMu). WaMu's receiver, the Federal Deposit Insurance Corporation (FDIC), later assigned the deed to JP Morgan Chase Bank, N.A (Chase). When Chase initiated a non-judicial foreclosure sale on the property, the Ameses filed lawsuits in state court and then in federal court, alleging among other things that the assignment of the security deed to Chase was invalid.

We granted certiorari to decide whether the Georgia Court of Appeals erred in concluding in the state lawsuit that the Ameses lack standing to bring such a challenge to the assignment, a conclusion based on that court's previous decisions in Montgomery v. Bank of America, 321 Ga.App. 343, 740 S.E.2d 434 (2013)

, and Jurden v. HSBC Mortgage Corp., 330 Ga.App. 179, 765 S.E.2d 440 (2014) (physical precedent only). As explained below, we hold that the Court of Appeals did not err. We also hold, alternatively, that the assignment issue raised by the Ameses is precluded because it has already been resolved against them in their federal lawsuit by the United States Court of Appeals for the Eleventh Circuit. See Ames v. J.P. Morgan Chase Bank, N.A., 623 Fed.Appx. 983, 986–987 (11th Cir.2015). We therefore affirm.

1. The property at issue in this case is a plot of land with a very expensive house on it in Alpharetta, Georgia. The Ameses acquired the property on February 16, 2000. On March 30, 2007, they executed the security deed in favor of WaMu to secure a loan refinancing the house for $4,650,000. That deed was recorded in Fulton County on April 6, 2007. The deed grants and conveys the property and the power of sale to WaMu and its "successors and assigns." On September 25, 2008, WaMu was declared insolvent, the FDIC was appointed receiver for WaMu, and the FDIC and Chase executed a purchase and assumption agreement that transferred certain WaMu assets to Chase, including all loans and loan commitments of WaMu. In a power of attorney document recorded in Fulton County on December 18, 2008, the FDIC explained that under the terms and conditions of the purchase and assumption agreement, "[Chase] acquired, among other [WaMu] Assets, all real estate ... of [WaMu]," with limited exceptions not relevant here. The FDIC appointed Chase "to act as Attorney–in–Fact for the [FDIC]" for the limited purpose of transferring "any interest in real estate ... and any personal property appurtenant to the real estate from the [FDIC] to [Chase] or to an affiliate of [Chase]." The document states that the limited power of attorney was effective on September 25, 2008 and "automatically revoked" on September 25, 2010.

On August 22, 2012, Chase assigned the Ameses' security deed to itself, purporting to do so as attorney-in-fact for the FDIC. The assignment, which was recorded in Fulton County on September 4, 2012, recited that it was "intended to further memorialize the transfer that occurred by operation of law on September 25, 2008." The assignment was signed by two vice presidents on behalf of Chase. The Ameses allege that in October or November 2012, they asked Chase to provide a "P 190 screen shot" to verify existing business records and prove that Chase was a secured creditor under their deed, but Chase declined.

At some point during this period, the Ameses apparently defaulted on the loan. Chase hired a law firm, Aldridge Pite, LLP (Aldridge), to initiate a non-judicial foreclosure sale, which was set for January 2, 2013. In response to the threatened foreclosure, the Ameses filed suit against Chase and Aldridge in Fulton County Superior Court in December 2012, alleging among other things that Chase had not been able to provide proof of its ownership of the security deed.¹ The parties agreed to temporarily suspend the foreclosure sale, and the Ameses voluntarily dismissed their case on February 25, 2013.

On April 2, 2013, Aldridge sent a letter to the Ameses notifying them that a foreclosure sale was now set for May 7, 2013. The notice identified Chase as the entity with authority to negotiate and modify the terms of the mortgage. The Ameses contacted Chase and Aldridge demanding proof that Chase was in possession of the loan note and security deed and attempting to stop the foreclosure, but the parties were unable to negotiate an agreement. On April 30, 2013, the Ameses again filed suit in Fulton County Superior Court, moving for a temporary restraining order (TRO) to stop the foreclosure and asserting, among other things, that the assignment of the security deed was invalid so Chase did not have the power to initiate the foreclosure.

The foreclosure sale was then cancelled. The Ameses withdrew their TRO motion as to the cancelled sale, but they continued to pursue their case. On July 29, 2013, Aldridge filed a motion to dismiss. On October 9, 2013, the Ameses filed an amended complaint, adding claims related to possible clouds on the title to the property due to security deeds and liens recorded by the property's previous owners.

On November 18, 2013, the superior court granted Aldridge's motion to dismiss as to both Aldridge and Chase, ruling that the amended complaint failed to state a claim. As relevant here, the superior court relied on the Court of Appeals's decision in Montgomery to conclude that the Ameses do not have standing to challenge the assignment of the security deed to Chase. The Ameses filed a motion to set aside or reconsider the dismissal order, and after the superior court denied that motion, they filed a timely notice of appeal to this Court.

On June 6, 2014, we transferred the appeal to the Court of Appeals because this case does not involve any subject matter within the current exclusive or general appellate jurisdiction of this Court. See Ga. Const. of 1983, Art. V, Sec. VI, Par. II–III. On February 27, 2015, the Court of Appeals affirmed the superior court's judgment in an opinion not to be officially reported, relying on Montgomery and Jurden to hold in Division 2(b) that the Ameses lack standing to challenge the validity of the assignment of the security deed to Chase. We granted the Ameses' petition for certiorari to review that holding.²

2. While the state court proceedings outlined above were playing out, the Ameses were litigating many of the same issues in a parallel case they filed in federal court. On March 28, 2013, a month before the Ameses filed the state case being appealed here, they filed suit against Chase, Aldridge, and others in a federal district court in Florida, invoking diversity and federal question jurisdiction and asking for, among other things, a declaratory judgment that the security deed for the property had not been validly transferred from WaMu to Chase. Three months after the state case was dismissed by the superior court, the district court dismissed the federal case with prejudice, concluding that the Ameses' claims against Chase and Aldridge were precluded by res judicata under Georgia law because the claims were either already decided in the state dismissal order or could have been raised in the state case. See Ames v. J.P. Morgan Chase Bank, N.A., No. 8:13–cv–806–T–23TGW, 2014 WL 585653, at *3–4 (M.D.Fla., Feb. 14, 2014)

.³

On appeal, the Eleventh Circuit affirmed the district court's dismissal, but for a different reason. See Ames, 623 Fed.Appx. at 986–987

. In an unpublished opinion, the federal appellate court held that the district court had misapplied Georgia preclusion law, explaining that the superior court's decision was not final under Georgia law because it was on appeal at the time of the district court decision and still was not final because this Court had granted the Ameses' petition for certiorari review. See id. at 986. The Eleventh Circuit recognized that "[u]nder the Full Faith and Credit Act, 28 U.S.C. § 1738, a federal court must give preclusive effect to a state court judgment to the same extent as would courts of the state in which the judgment was entered." Id. (citation omitted). The Eleventh Circuit properly held that, " ‘[i]n Georgia, a judgment is suspended when an appeal is entered within the time allowed. And the judgment is not final as long as there is a right to appellate review.’ " Id. (emphasis removed) (quoting Greene v. Transp. Ins. Co., 169 Ga.App. 504, 506, 313 S.E.2d 761 (1984) ). See also id. (noting that " ‘Georgia is, apparently, among the minority of states that treat a lower court judgment on appeal as not final for purposes of collateral estoppel or res judicata’ " (citation omitted)). The Eleventh Circuit then proceeded to consider the Ameses' claims against Chase and Aldridge on the merits and concluded that the Ameses "lack standing under Georgia law to challenge the assignment," citing Montgomery and Jurden. Ames, 623 Fed.Appx. at 986–987.

Thus, the Eleventh Circuit beat us to the punch on the question of the Ameses' standing. The preclusive effect in state court of a federal court judgment like the Eleventh Circuit's is determined by federal common law. See Semtek Intl. Inc. v. Lockheed Martin Corp., 531 U.S. 497, 508, 121 S.Ct. 1021, 149 L.Ed.2d 32 (2001)

. See also CS–Lakeview At Gwinnett, Inc. v. Retail Dev. Partners, 268 Ga.App. 480, 483–484, 602 S.E.2d 140 (2004) (following Semtek ). If the federal decision was rendered under the court's federal question jurisdiction, the uniform federal rules of preclusion declared by the United States...