Willner v. Dimon

• Citation: 849 F.3d 93
• Decision Date: 16 February 2017
• Docket Number: No. 15-1678,15-1678
• Parties: Michael A. WILLNER, Debtor in Possession; Marguerite Evans Willner, Plaintiffs–Appellants, v. James DIMON, individually, as President and CEO of JP Morgan Chase Bank, National Association; JP Morgan Chase Bank, N.A., a national banking association; Select Portfolio Servicing, INC., a Utah Corporation; Does (1–19) inclusive, persons yet to be determined, if any, involved in the acts complained of herein; U.S. Bank National Association, as Trustee, successor in interest to Bank of America, N.A., as Trustee, successor by merger to LaSalleBank, N.A., as Trustee, of the WaMu Mortgage Pass–Through Certificates Series 2006–AR15 Trust, a national banking association, Defendants–Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

849 F.3d 93

Michael A. WILLNER, Debtor in Possession; Marguerite Evans Willner, Plaintiffs–Appellants,

v.James DIMON, individually, as President and CEO of JP Morgan Chase Bank, National Association; JP Morgan Chase Bank, N.A., a national banking association; Select Portfolio Servicing, INC., a Utah Corporation; Does (1–19) inclusive, persons yet to be determined, if any, involved in the acts complained of herein; U.S. Bank National Association, as Trustee, successor in interest to Bank of America, N.A., as Trustee, successor by merger to LaSalleBank, N.A., as Trustee, of the WaMu Mortgage Pass–Through Certificates Series 2006–AR15 Trust, a national banking association, Defendants–Appellees.

No. 15-1678

United States Court of Appeals, Fourth Circuit.

Argued: October 25, 2016

Decided: February 16, 2017

ARGUED: Benjamin Stark Softness, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C.; Michael A. Willner, Lorton, Virginia, for Appellants. Brent J. McIntosh, SULLIVAN & CROMWELL, Washington, D.C.; Matthew Douglas Patterson, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia, South Carolina, for Appellees. ON BRIEF: David C. Frederick, KELLOGG, HUBER, HANSEN, TODD, EVANS & FIGEL, P.L.L.C., Washington, D.C., for Appellant Marguerite Evans Willner. Brian M. Barnwell, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia, South Carolina; John Curtis Lynch, Mary Catherine Zinsner, Harrison Scott Kelly, TROUTMAN SANDERS LLP, Virginia Beach, Virginia, for Appellees.

Before AGEE, DIAZ, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Diaz wrote the opinion, in which Judge Agee and Judge Thacker joined.

DIAZ, Circuit Judge:

Michael Willner (an attorney) and Marguerite Willner appeal the district court's dismissal of their pro se complaint wherein they seek, inter alia, a declaration that JP Morgan Chase Bank ("Chase") and U.S. Bank cannot foreclose on their home. The district court dismissed certain Counts for lack of subject matter jurisdiction pursuant to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and other Counts for failure to state a claim. As we explain below, the district court lacked subject matter jurisdiction over most of the Counts that the Willners appeal because they did not first submit the claims underlying those Counts to administrative review. The other Counts relevant here fail to state a claim. Accordingly, we affirm.

I.

A.

When reviewing a district court's grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) or 12(b)(6) in response to a defendant's facial challenge to a complaint, we accept as true all factual allegations set forth in the complaint. Kerns v. United States , 585 F.3d 187, 192 (4th Cir. 2009). Applying that standard to the Willners' complaint, we assume the following facts.

The Willners purchased as tenants by the entirety property (the "Property") in Lorton, Virginia, in 1989 and built a house thereupon. In August 2006, the Willners considered selling the Property but instead decided to refinance after speaking with an agent from Washington Mutual Bank, FA ("WMBFA"). The WMBFA agent told Mr. Willner to contact a Washington Mutual Bank ("WMB") agent to fill out a loan application. Mr. Willner did so, and told the WMB agent that he expected to earn about $52,000 in 2006. The WMBFA agent also told the Willners that the Property was worth in excess of $5 million. The same agent led the Willners to believe that WMBFA wouldn't foreclose on the Property in the event of a missed payment.

In September 2006, the Willners closed on a $3 million loan (the "Loan") from WMBFA. Mr. Willner signed a note (the "Note"); Mrs. Willner did not. Mrs. Willner had previously told the WMBFA agent that she didn't want to put her ownership interest in the Property at risk, and said the same to a title agent at the closing. Based upon each agent's response, Mrs. Willner believed that her interest in the Property would remain unencumbered. However, both Mr. and Mrs. Willner signed a deed of trust (the "Deed of Trust"), which secured the Loan and for which WMBFA was the beneficiary.

The Deed of Trust provided that "any Borrower who co-signs this Security Instrument but does not execute the Note ... is co-signing this Security Instrument only to mortgage, grant and convey the co-signer's interest in the Property ... [and] is not personally obligated to pay the sums secured by this Security Instrument." J.A. 489. Mr. Willner also signed an "Affiliated Business Arrangement Disclosure Statement Notice" which "indicated" that WMBFA and WMB "existed concurrently as separate and distinct entities." J.A. 40–41.

Less than two months after the closing, WMB sold the Note to WaMu Asset Acceptance Corporation, which securitized the Note by depositing it into the WaMu Mortgage Pass–Through Certificates Series 2006–AR15 (the "2006–AR15 Trust"), "a special purpose entity controlled by WMB." J.A. 42. WMB was the sponsor and servicer of the 2006–AR15 Trust (and Note), while LaSalle Bank was the trustee. WMBFA remained the beneficiary under the Deed of Trust.

On September 25, 2008, the Office of Thrift Supervision declared WMB insolvent and appointed the Federal Deposit Insurance Corporation (the "FDIC") as receiver. On that same day, Chase entered into a Purchase and Assumption Agreement with the FDIC, whereby Chase purchased substantially all of WMB's assets and assumed substantially all of its liabilities. Under the Purchase and Assumption Agreement, Chase did not assume any liability for WMB's acts or omissions. Chase purchased the right to service the Loan, but allegedly did not purchase the Note or Deed of Trust because "WMB sold the Note and [Deed of Trust] on or before October of 2006." J.A. 47–48.

In October 2008, the Willners received notice that the Office of Thrift Supervision had closed WMB and appointed the FDIC as receiver. Also in October 2008, LaSalle Bank merged into Bank of America, which became the trustee for the 2006–AR15 Trust. At some later point, U.S. Bank became the trustee for the 2006–AR15 Trust as successor in interest to Bank of America, and it remains so today.

In July 2010, the Willners attempted to refinance the Property through Chase. A Chase agent told the Willners that their income wasn't sufficient to qualify for a loan. Mr. Willner spoke with Chase representatives, who directed him to Chase's website. One suggestion on the Chase website was to list the home for sale, which Mr. Willner did to no avail. In April 2011, Chase CEO James Dimon signed a Consent Order with the Office of the Comptroller of the Currency, in which Chase agreed to correct problems with its servicing and foreclosure practices. In May 2011, the Willners defaulted.

In June 2011, Mr. Willner applied for a loan modification from Chase through the Making Home Affordable Program. In August 2011, Chase identified the Note for collection through foreclosure, and Mrs. Willner tried to call Dimon to discuss the foreclosure process but was only able to speak with one of his assistants.

In September 2011, Mr. Willner came upon WMB documents from 2006 which showed that his financial status had not qualified him for the loan which he had ultimately received. One of those documents listed his annual income for 2006 at $624,000. In March 2012, Mr. Willner discovered other information, including: a WMB document which showed that WMB had conducted another appraisal in 2006 prior to the closing, and that the Property was appraised for only $4 million; a WMB document from the 2006 closing which listed his income at $52,000 per month; and Securities and Exchange Commission filings which showed that as of April 4, 2005, WMBFA allegedly ceased to exist.

In May 2012, Chase informed Mr. Willner that he was not eligible for a modification under the Making Home Affordable Program. That program allegedly only applied to loans for $759,000 or less, and allegedly required that eligibility determinations be made within 30 days. On November 30, 2012, Chase informed the Willners that it intended to foreclose on the Property and auction it on December 18, 2012. On December 13, 2012, Mr. Willner (but not Mrs. Willner) filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Eastern District of Virginia. U.S. Bank then filed a proof of claim in the bankruptcy court claiming the right to foreclose on the Property.

In May 2013, U.S. Bank re-appointed Chase as the master servicer of the 2006–AR15 Trust, and in August 2013, Chase appointed Select Portfolio Servicing as the sub-servicer. U.S. Bank moved for relief from stay in the bankruptcy court in September 2014.

B.

Mr. and Mrs. Willner filed a pro se 27–Count complaint against Chase, Chase's CEO James Dimon, U.S. Bank, and Select Portfolio Servicing. Of those 27 Counts, only the following are relevant to this appeal:

• Count 1 (against Chase and U.S. Bank) for a declaratory judgment that there is no right to foreclose under the Deed of Trust;

• Count 2 (against Chase and U.S. Bank) for breach of contract based on absence of right to foreclose because the Note is defective;

• Count 3 (against Chase and U.S. Bank) for negligence based on breach of duty to Mr. Willner to seek the aid and direction of a court of equity before foreclosing;

• Count 5 (against Chase, U.S. Bank, and Select Portfolio Servicing) for a declaratory judgment that the Note and Deed of Trust are unenforceable;

• Count 6 (against Chase and U.S. Bank) for a declaratory judgment that the Note is not secured by Mrs. Willner's ownership interest in the Property;

• Count 7 (against U.S. Bank) for fraudulent concealment in the loan origination;• Count 8 (against Chase, U.S. Bank, and Select Portfolio Servicing) for a declaratory judgment that the Deed of Trust is void based on lack of meeting of the minds;

• Count 9 (against U.S. Bank) for equitable estoppel related to misrepresentations made during the loan origination;

• Count 14 (against Chase and U.S. Bank) for constructive fraud

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