Bolger v. McCusker (In re Bolger)

• Decision Date: 10 March 2022
• Docket Number: Bankruptcy No. 19-16411-AMC,Adv. Proc. No. 13-00669-AMC
• Citation: 638 B.R. 709
• Parties: IN RE Suzanne L. BOLGER, Debtor. Suzanne L. Bolger, Plaintiff v. Jacqueline McCusker and JPMorgan Chase Bank N.A., Defendants
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

638 B.R. 709

IN RE Suzanne L. BOLGER, Debtor.

Suzanne L. Bolger, Plaintiff

v.Jacqueline McCusker and JPMorgan Chase Bank N.A., Defendants

Bankruptcy No. 19-16411-AMC

Adv. Proc. No. 13-00669-AMC

United States Bankruptcy Court, E.D. Pennsylvania.

Signed March 10, 2022

Roger V. Ashodian, William H. Hall, IV, Regional Bankruptcy Center of SE PA, Havertown, PA, for Plaintiff.

Lily G. Becker, Douglas J. Gush, Michaela Dragalin Young, Morgan Lewis & Bockius, Philadelphia, PA, Michael S. Bomstein, Pinnola & Bomstein, Philadelphia, PA, Richard W. Esterkin, Morgan,Lewis and Bockius, Los Angeles, CA, for Defendant.

Ashely M. Chan, United States Bankruptcy Judge

I. INTRODUCTION

By way of background, in July 2005, Suzanne Bolger ("Debtor") and Charles Bolger, her then-husband ("Mr. Bolger"), transferred title to their residential real property located at 1575 Doerr Road, Quakertown, PA ("Property") to Jacqueline McCusker ("McCusker") allegedly in order to stay a sheriff's sale of the Property. Case No. 13-669 ECF Doc. ("ECF") 1, Compl. Ex. B; ECF 23, Am. Compl. 6, 8, 9. In exchange, Debtor and Mr. Bolger would retain possession of the Property pursuant to a lease agreement, as well as the option to re-purchase the Property using a credit in the amount of 50% of the Property's equity. Compl. Ex. C, D. Concurrent with the sale of the Property, McCusker executed a note and mortgage against the Property to finance its purchase. Id. at Ex. A. A few years later, McCusker re-financed that obligation with Washington Mutual Bank ("WaMu"). Am. Compl. ¶ 26. See also Case No. 13-669 ECF 276, Ren. Summ. J. Mot. St. Undisputed Facts p. 3, Grageda Decl. Ex. 1, 2. Subsequently, JPMorgan Chase Bank, N. A. ("Chase") acquired the loan McCusker had taken out with WaMu from the Federal Deposit Insurance Corporation ("FDIC") acting as receiver for WaMu, and thereafter initiated foreclosure proceedings against the Property, eventually obtaining a judgment against the Property in March 2010. Ren. Summ. J. Mot. St. Undisputed Facts p. 3, Grageda Decl. ¶ 3.

In this adversary proceeding, Debtor now essentially alleges that to induce Debtor to relinquish title to the Property, McCusker made certain false representations, including that she would preserve the equity in the Property to apply towards the Debtor's re-purchase of the Property rather than diverting it to a company which McCusker owns, and that the alleged fraud renders McCusker's title and Chase's interest in the Property by virtue of the loan McCusker took out against the Property with WaMu invalid. Am. Compl. ¶¶ 8, 9, 33-44. Chase now moves for summary judgment in its favor on the basis that there is no genuine dispute that the D'Oench Duhme doctrine and/or 12 U.S.C. § 1823(e) bars the Debtor's claims against Chase as a matter of law. Ren. Summ. J. Mot. p. 5-9. Ultimately, because 12 U.S.C. § 1823(e) bars the Debtor from raising McCusker's alleged misrepresentations, including those related to the side option to purchase agreement, to attempt to diminish or defeat Chase's interest in a facially unconditional note secured by a mortgage against the Property which Chase acquired from FDIC when no written acknowledgment of those misrepresentations signed by WaMu appears anywhere in WaMu's loan file, the Court will grant summary judgment in favor of Chase.

II. FACTUAL & PROCEDURAL BACKGROUND

On April 11, 2013, Debtor filed a petition for relief under chapter 13 of the Bankruptcy Code. Case No. 13-13214 ECF 1. The Debtor commenced this adversary proceeding on December 24, 2013 by filing a complaint ("Original Complaint") against defendants Chase and McCusker to recover free and clear title to the Property which had allegedly been transferred to McCusker pursuant to a mortgage foreclosure rescue scam ("Adversary Proceeding"). Case No. 13-0669 ECF 1, Compl. ¶¶ 9, 10, 26-35. On March 5, 2014, Chase filed a motion to dismiss the Original Complaint for failure to state a claim upon which relief could be granted ("First Motion to Dismiss"). Case No. 13-669 ECF 11. The Court granted the First Motion to Dismiss as to Chase without prejudice on April 16, 2014, but also granted Debtor leave to file an amended complaint. Id. at ECF 17, 18.

On April 28, 2014, Debtor filed an amended complaint ("Amended Complaint"). Id. at ECF 23. The Amended Complaint alleges, inter alia, that in 2005, the Property was scheduled for sheriffs sale in Bucks County, Pennsylvania. Am. Compl. ¶ 6. After receiving an advertisement in the mail for "Foreclosure Relief Services" from "Defendant-McCusker or from an entity or person acting at the direction of, in concert with, or in conspiracy with Defendant-McCusker," the Debtor and Mr. Bolger allegedly entered into an agreement with McCusker whereby McCusker would purchase the Property for $300,000, lease it back to Debtor and Mr. Bolger for $925/month, and grant Debtor and Mr. Bolger the option to re-purchase the Property. Id. at ¶¶ 7, 8, 9. The Amended Complaint goes on to allege that Long Beach Mortgage agreed to provide financing to McCusker to fund her purchase of the Property. Id. at ¶ 18.

According to the Amended Complaint, on July 7, 2005, the settlement date for the sale of the Property to McCusker, McCusker executed a mortgage in favor of Long Beach Mortgage against the Property in the principal amount of $240,000 ("Long Beach Mortgage Obligation"). Id. at ¶¶ 14, 19. The same day, Debtor and Mr. Bolger executed and delivered a deed to the Property conveying ownership to McCusker; executed a residential lease agreement for the Property with J&J Realty Acquisition, LLC ("J&J Realty"), an entity allegedly owned by McCusker, acting as landlord ("Lease Agreement");¹ and executed a document with J&J Realty entitled "Option Agreement." Id. at ¶¶ 9(d), 15, 16; Compl. Ex. B, Ex. C, Ex. D.

Pursuant to the Option Agreement, a copy of which is attached to the Original Complaint and referenced in the Amended Complaint, J&J Realty was identified as "Seller" and Debtor and Mr. Bolger were identified as "Buyer." Compl. Ex. C. Under the Option Agreement, J&J Realty, Debtor, and Mr. Bolger agreed "as long as Buyer is not in default of any of its obligations under the Lease Agreement dated July 7, 2005," Debtor and her husband would have the option to purchase the premises under certain conditions. Id. Specifically, the Option Agreement provided that "[t]he total purchase price to be paid by Buyer to Seller for the Premises (the ‘Purchase Price’) shall be equal to the value of the property as determined by an appraisal to be conducted at the time of conveyance. Seller shall issue to Buyer a credit at the closing equal to fifty per cent (50%) of the equity remaining at the time of conveyance." Id.

The HUD-1 settlement statement executed on July 7, 2005 by McCusker and Mr. Bolger in connection with the sale of the Property ("Settlement Statement"), and attached to the Original Complaint and referenced in the Amended Complaint, reflects that the sale proceeds were applied to pay: $161,103.94 in satisfaction of the first mortgage on the Property held by Greenpoint Mortgage Company; $10, 262.51 in satisfaction of a lien apparently held by Resurgent Capital Services; $4,299 in satisfaction of "settlement charges to seller"; and $124,504.07, the remaining equity, to J&J Realty despite it allegedly having no lien against the Property. Am. Compl. ¶¶ 9, 14; Compl. Ex. A.

According to the Amended Complaint, on July 8, 2005, the day after settlement for the sale of the Property to McCusker, the sheriffs sale of the Property was stayed. Am. Compl. ¶ 24. On and subsequent to the settlement date, Debtor allegedly continued to reside in the Property under the Lease Agreement, and paid rent until October 2008.² Id. at ¶¶ 9(g), 21, 25, 27; Compl. Ex. D, E, F. Meanwhile, according to the Amended Complaint, in or around July 2007, McCusker re-financed the Property's Long Beach Mortgage Obligation with WaMu during the time Debtor continued to reside in the Property, and Chase subsequently "acquired Washington Mutual Bank" and "stands in the shoes of Washington Mutual." Am. Compl. 26, 27, 30.

In February 2009, Debtor was allegedly contacted by an agent from the Federal Bureau of Investigation ("FBI") as part of an investigation into McCusker, and was advised not to pay rent. Id. at ¶ 10. Meanwhile, in January 2010, Chase initiated mortgage foreclosure proceedings against the Property in the Bucks County Court of Common Pleas, and on March 15, 2010, judgment was entered in favor of Chase. Id. at ¶¶ 31, 32. Thereafter, on June 22, 2011, McCusker was found guilty of conspiracy, wire fraud, mail fraud, and conspiracy to launder money for her role in a fraudulent foreclosure rescue scam executed against certain individuals. Id. at ¶ 12; United States v. McCusker, Crim. Act. Nos. 09-771-1, 2012 WL 6628027, at *2 (E.D. Pa. Dec. 20, 2012).

Ultimately, the Amended Complaint contends that " [d]efendant-McCusker falsely promised to help Plaintiff and her then husband save the home from sheriffs sale" and that "[d]efendant-McCusker defrauded the Plaintiff and her then husband" through the above-described "scheme," specifically alleging that "[r]ather than preserve equity in the Home to be applied toward the Plaintiff's purchase option as agreed, Defendant-McCusker eliminated such equity by causing the cash value of such equity to be transferred to J&J Realty Acquisition" when "[d]efendant McCusker had no intention and no ability to replace the equity in the Home at the time of the exercise of the Plaintiff's option to purchase." Am. Compl. ¶¶ 8, 9. The Amended Complaint further avers that Long Beach Mortgage either "knew the transaction was a scheme designed to deprive Plaintiff and her then husband of title to and all equity in the Home and was aware of Exhibit C [the Option Agreement], or Long Beach Mortgage would have easily discovered the nature of the transaction, including the existence of Exhibit C, by making reasonable...