Starkey v. Deutsche Bank Nat'l Trust Co.

• Citation: 109 N.E.3d 1108
• Decision Date: 11 September 2018
• Docket Number: No. 16-P-1594,16-P-1594
• Parties: H. Christopher STARKEY & another v. DEUTSCHE BANK NATIONAL TRUST COMPANY, trustee,& others.
• Court: Appeals Court of Massachusetts

109 N.E.3d 1108

H. Christopher STARKEY & another¹

v.DEUTSCHE BANK NATIONAL TRUST COMPANY, trustee,² & others.³

No. 16-P-1594

Appeals Court of Massachusetts, Barnstable..

Argued December 11, 2017.

Decided September 11, 2018.

Glenn F. Russell, Jr., Fall River, for the plaintiffs.

Charles L. Solomont, Boston, for Deutsche Bank National Trust Company & another.

Present: Rubin, Lemire, & Shin, JJ.

RUBIN, J.

The plaintiffs, H. Christopher Starkey and Louisa H. Starkey, entered into a mortgage loan transaction in which they executed a promissory note in favor of Washington Mutual Bank, FA (Washington Mutual), as lender and payee in the amount of $1,000,000, on November 22, 2005, and gave Washington Mutual a mortgage on their residential real property in South Yarmouth. The plaintiffs ultimately fell behind on their mortgage payments. On May 14, 2009, Deutsche Bank National Trust Company (Deutsche Bank), as trustee for WaMu Mortgage Pass Through Certificates Series 2006-AR1 Trust (trust), brought a "Complaint to Foreclose Mortgage" against the plaintiffs under the Servicemembers Civil Relief Act, as a final step prior to initiating the process of foreclosure through publication. On June 10 and June 15, 2009, the plaintiffs sent "Notice[s] of Rescission" to Deutsche Bank as trustee of the trust, in which they claimed the right to rescind the November 22, 2005, transactions. After receiving no response, they filed their November, 2009, complaint in the instant action in Superior Court, naming as defendants Deutsche Bank, as trustee for the trust; JPMorgan Chase Bank, N.A. (JPMorgan Chase), successor in interest to Washington Mutual; and other entities related to JPMorgan Chase or Washington Mutual. The plaintiffs sought declaratory relief, damages, and rescission of the mortgage and note, alleging that the defendants have no enforceable rights with respect to the mortgage and note due to their failure to properly convey these assets into the trust (count 1), that the note and mortgage were obtained without disclosures mandated by G. L. c. 140D (count 2), that the plaintiffs were fraudulently induced to sign the mortgage and note (count 3), that the defendants breached their contract with the plaintiffs by refusing to allow the plaintiffs to rescind the mortgage loan (count 4), that the defendants violated the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601 - 2617 (2006) (count 5), that the defendants violated the consumer protection statute, G. L. c. 93A (count 6), and that the defendants violated the borrower's interest statute, G. L. c. 183, § 28C (a ) (count 7).

The defendants filed motions to dismiss in January, 2010. In their memoranda in support of the motions to dismiss, the defendants did not raise any argument that dismissal was required by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L. 101-73, 103 Stat. 183, the relevant portions of which are codified at 12 U.S.C. § 1821(c) - (l) (2006). However, at argument on the motions, without prior notice to the plaintiffs, the defendants presented the judge with a copy of Demelo v. U.S. Bank Nat'l Ass'n, 727 F.3d 117 (1st Cir. 2013), and argued that FIRREA, as construed by Demelo, required dismissal of the suit.

The motion judge ordered the dismissal of all but one claim in the complaint -- count 5 as against JPMorgan Chase -- solely on the basis of FIRREA. At the first opportunity to address that statute, after the decision was rendered, the plaintiffs filed a motion for reconsideration, arguing the inapplicability of FIRREA. That motion was denied the same day it was filed. Eventually the remaining count 5 claim was resolved by mutual agreement and dismissed by separate judgment. A second judgment then entered dismissing counts 1 through 4, 6, and 7, on the basis of FIRREA. Before us now is the plaintiffs' timely appeal from that judgment (as corrected to remedy a clerical mistake).

On appeal the only issue before us is whether FIRREA requires dismissal of these counts. In light of the procedural history described, we think the plaintiffs' arguments were adequately raised below.⁴ Additional relevant facts will be described in the course of our discussion below.

Analysis. On September 25, 2008, Washington Mutual Bank, formerly Washington Mutual Bank, FA,⁵ was declared insolvent and placed into receivership of the Federal Deposit Insurance Corporation (FDIC). See Thompson v. Washington Mut., 806 F.Supp.2d 197, 199 (D.D.C. 2011). Its assets were immediately sold to defendant JPMorgan Chase. FIRREA sets forth a claims procedure that requires creditors of failed banks to file claims with the FDIC, and divests courts of jurisdiction to hear these claims against these banks, or the FDIC as receiver, until administrative remedies with the FDIC have been exhausted. Specifically, the statute provides,

"Except as provided in this subsection, no court shall have jurisdiction over--

"(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the Corporation [i.e., the FDIC] has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or

"(ii) any claim relating to any act or omission of such institution or the Corporation as receiver."

12 U.S.C. § 1821(d)(13)(D). The defendants argue that the statute bars the plaintiffs' claims because it eliminates the trial court's jurisdiction, and that the plaintiffs are remitted to the claim procedure set forth in FIRREA, under which the deadline for filing claims has now passed. See Alkasabi v. Washington Mut. Bank, F.A., 31 F.Supp.3d 101, 104 (D.D.C. 2014) (FDIC set December 30, 2008, as deadline for filing claims against the Washington Mutual receivership).

Procedural setting. As an initial matter, in their complaint, the plaintiffs alleged that their mortgage was "apparently" held by "Washington Mutual, Inc., or one of its subsidiaries" on the date of Washington Mutual's insolvency. They alleged that they were not informed that anyone other than the original mortgagee, Washington Mutual, held their mortgage loan prior to their receipt of the trust's Complaint to Foreclose Mortgage. The notion that the mortgage loan was held by Washington Mutual on the date of its placement in receivership (September 25, 2008) was certainly a reasonable inference, since, three days before bringing the May 14, 2009, Complaint to Foreclose Mortgage, the trust was purportedly assigned the mortgage by JPMorgan Chase. The assignment was signed by Barbara Hindman, vice-president of JPMorgan Chase, recorded in the Barnstable Registry of Deeds on May 20, 2009, and accompanied by an affidavit by the FDIC stating that JPMorgan Chase came to own all of Washington Mutual's "loans and loan commitments" on September 25, 2008.

Although the memoranda in support of the defendants' motions to dismiss, filed by a single attorney purporting to represent all the defendants, including JPMorgan Chase and the trust, did nothing to clarify the question of who owned the note and the mortgage at what times, the plaintiffs did append to an opposition memorandum a copy of the "Pooling and Servicing Agreement" (PSA), an agreement between WaMu Asset Acceptance Corp. as depositor of a set of assets (primarily mortgage loans), Washington Mutual Bank as servicer of those loans, Deutsche Bank as trustee of the trust, and Deutsche Bank Trust Company Delaware as Delaware trustee. Its inclusion suggests that the mortgage was securitized and sold to the trust long before Washington Mutual's insolvency. That document reveals that the trust obtained all its assets through a purchase from WaMu Asset Acceptance Corp., the set of assets being valued at over $1.5 billion. The PSA states that those assets include "Mortgage Loans" that would be conveyed to the trust on the closing date, January 30, 2006. "Mortgage Loan[ ]" is relevantly defined to include both the note and the mortgage. According to the PSA, the "Mortgage Files," which include the mortgage notes and recorded mortgages, endorsed or assigned respectively either in blank, to the trust, or to the trustee, were also to be delivered to the trust on January 30, 2006. The trust then issued a variety of classes of "certificates," each representing a fractional ownership interest in the bundle of Mortgage Loans that made up the trust assets, and the certificates were subsequently sold on the open market. The PSA appears to make no provision, and appears to grant the trust no authority, for acquisition of additional assets by the trust subsequent to the closing date.

Arguing that FIRREA bars the plaintiffs' claims if the mortgage was owned by Washington Mutual on the date of its placement in receivership, the defendants now contend that because the plaintiffs, understandably in light of the defendants' own conduct, pleaded that the mortgage was "apparently" owned by Washington Mutual on that date, the plaintiffs have "pled themselves out of court."

At this stage in the proceedings, however, we need not determine what claims or actions might be barred by FIRREA with respect to assets owned by Washington Mutual on the date it went into receivership. That is because the judge, appropriately, considered the PSA in ruling on the motions to dismiss, specifically concluding that "[t]he mortgage was quickly packaged into a security sold to Deutsche Bank." The judge thus implicitly treated the motions as ones for summary judgment under Mass. R. Civ. P. 56, 365 Mass. 824 (1974), rather than as motions to dismiss under Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974). See Mass. R. Civ. P. 12 (b) ("If, on any motion asserting the defense numbered [6], to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment...