2013 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

2-11-2013

Jose Tellado v. Indymac Mtg Ser

Precedential or Non-Precedential: Precedential

Docket No. 11-2708

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Recommended Citation

"Jose Tellado v. Indymac Mtg Ser" (2013). 2013 Decisions. Paper 1182.

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 11-2708 AND 11-3249

JOSE TELLADO; MARIA TELLADO

v.

INDYMAC MORTGAGE SERVICES, a division of One 

West Bank, FSB; 

HOME FUNDING GROUP, LLC

IndyMac Mortgage Services,

 Appellant

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D. C. No. 2-09-cv-05022)

District Judge: Honorable Petrese B. Tucker

Argued on September 10, 2012

Before: SCIRICA, ROTH and BARRY, Circuit Judges

(Opinion filed: February 11, 2013)

Martin C. Bryce, Jr., Esquire (Argued)

Damian L. DiNicola, Esquire

Ballard Spahr

1735 Market Street

51st Floor

Philadelphia, PA 19103

Counsel for Appellant

Justin K. Miller, Esquire
2

C. Paul Scheuritzel, Esquire

Larsson & Scheuritzel

1500 Market Street

Centre Square West, Suite 3510

Philadelphia, PA 19102

Counsel for Appellant

Andrew J. Soven, Esquire

Reed Smith

1650 Market Street

2500 One Liberty Place

Philadelphia, PA 19103

Scott M. Michelman, Esquire (Argued)

Public Citizen Litigation Group

1600 20th Street, N. W. 

Washington, D. C. 20009

Margaret E. Robinson, Esquire

Irwin L. Trauss, Esquire

Philadelphia Legal Assistance

42 South 15th Street

Suite 500

Philadelphia, PA 19102

Counsel for Appellees

O P I N I O N

ROTH, Circuit Judge:

This appeal is from the District Court’s order to cancel 

a mortgage loan made by IndyMac Bank, FSB, to Jose and

Maria Tellado. After IndyMac failed and was placed into 

receivership, with the Federal Deposit Insurance Corporation 

(FDIC) as its receiver, the mortgage loan was purchased from 

the FDIC by OneWest Bank, FSB. OneWest challenges the

District Court’s August 8, 2011, order directing OneWest to 

cancel the loan and refund to the Tellados all payments made 
3

under the mortgage loan agreement. OneWest also 

challenges the $10,000 penalty that the District Court levied 

against OneWest for failing to comply with the District 

Court’s order to produce its Chief Executive Officer (CEO) at 

trial. For the reasons that follow, we will reverse both the 

District Court’s August 8, 2011, order and the penalty order.

penalty order.

I. FACTS

In June 2007, Jose Tellado heard a Spanish-language 

radio advertisement for mortgage refinancing services. When 

he called the number provided, he reached Carlos Enrique 

and spoke with him exclusively in Spanish to arrange a 

refinancing of their existing mortgage on their home at 519 

Morris Street in Philadelphia, Pennsylvania. Enrique helped 

Tellado and his wife, Maria, with the submission of a loan 

application and arranged for a closing agent to visit the 

Tellados’ home. Philip Bloom, a closing agent and notary 

acting as a representative of IndyMac, conducted the closing 

at the Tellados’ home. The relevant loan documents which he 

provided to them, including the notice of the right to cancel, 

were in English. Oral communications between Bloom and 

the Tellados, who speak primarily Spanish, were conducted 

through Marcelina Fuster, the Tellados’ daughter, who served 

as an interpreter. She translated Bloom’s verbal instructions 

and his explanations of the loan documents. 

The lender on the mortgage was IndyMac, a federally 

chartered savings bank. IndyMac subsequently failed, and on 

July 11, 2008, it was entered into FDIC receivership. On 

March 18, 2009, the FDIC transferred the Tellados’ loan, in 

addition to other loans formerly owned by IndyMac, to 

OneWest under a Master Purchase Agreement (MPA). 

Pursuant to the MPA, OneWest assumed only certain 

liabilities.

On August 5, 2009, the Tellados sent a notice of 

cancellation to IndyMac Mortgage Services, a division of 

OneWest, stating that they sought to cancel the loan pursuant 

to Pennsylvania’s Unfair Trade Practices and Consumer 

Protection Law (UTPCPL), 73 P.S. § 201-7. In the notice, 

they explained that the basis for their cancellation was that 
4

they had received all documents related to the mortgage, 

including the notice of the right to cancel, in English while all 

prior oral discussions relating to the transaction had been 

conducted in Spanish. They notified OneWest of their intent 

to file suit if they did not receive a response within ten days. 

When OneWest did not respond, the Tellados filed suit in 

Pennsylvania state court on August 24, 2009.1

 On October 

27, 2009, they filed an amended complaint seeking a 

determination that the loan was void and that OneWest had 

forfeited the right to any further payment or, in the 

alternative, seeking triple damages based on the amount of 

the payments they had made on the loan or on the amount of 

the security interest retained in their home. On November 2, 

2009, OneWest removed the case to the District Court.2

OneWest then filed a motion to dismiss under Rule 

12(b)(6), a motion for summary judgment, and a motion to 

dismiss for lack of subject matter jurisdiction. The District 

Court denied all of these requests for relief. On November 3, 

2010, the District Court scheduled the case for a bench trial 

beginning on November 8. In the scheduling order, the 

District Court also ordered the CEO of OneWest to appear at 

the trial. 

After the bench trial, the District Court ruled in the 

Tellados’ favor. The court found that the loan transaction, 

from the initial contact through the loan closing, was 

conducted in Spanish. The court, therefore, held that the 

UTPCPL, 73 P.S. § 201-7, governed the transaction because 

the Tellados had purchased mortgage refinancing services for 

a price in excess of twenty-five dollars. Under 73 P.S. § 201-

7, the Tellados could cancel the transaction within three days 

of receiving a valid notice of the right to cancel in the same 

 1 The named defendant in the suit was formally IndyMac 

Mortgage Services, the division of OneWest that legally held 

the Tellados’ mortgage.

2 OneWest also responded to the Tellados in a letter dated 

October 15, 2009, denying their request to rescind the 

mortgage, and on November 3, 2009, it sent them a notice of 

its intention to foreclose.
5

language as that principally used in the oral sales 

presentation. Because IndyMac had not provided notice in 

Spanish, the language of the loan transaction, the District 

Court held that IndyMac had failed to provide proper notice 

and the three-day cancellation period had never begun to run. 

The District Court found that the written cancellation the 

Tellados provided to OneWest on August 9, 2009, was 

effective and binding. The District Court ordered OneWest to 

refund to the Tellados all payments that had been made on the 

mortgage, terminate its security interest in the Tellados’ 

home, and return any negotiable instrument executed in 

connection with the transaction. The court also permitted the 

Tellados to keep the principal that had originally been lent to 

them by IndyMac.

Subsequently, without further notice or hearing, the 

District Court on December 1, 2010, imposed a $10,000 

penalty on OneWest under Rule 16(f)(1)(C) because 

OneWest’s CEO had not appeared at trial as provided for in 

the court’s scheduling order.

3

 OneWest appealed. It 

argues that the District Court erred in multiple ways in 

finding for the Tellados after trial and in denying OneWest’s 

motions to dismiss and for summary judgment. OneWest 

also contends that the District Court erred in imposing a 

$10,000 penalty because OneWest had failed to follow the 

order requiring the presence of its CEO at trial.

II. DISCUSSION

We have appellate jurisdiction over this appeal of the 

District Court’s final order under 28 U.S.C. § 1291. “On the 

appeal of a bench trial, we review a district court’s findings of 

 3 OneWest filed a Motion to Alter, Amend or Otherwise 

Clarify the December 1, 2010, Order and to Stay Enforcement 

of the Sanction on December 29, 2010. On June 17, 2011, 

the District Court entered an order stating that the penalty was 

to be borne solely by OneWest and not by its CEO. It also 

denied OneWest’s request to stay the penalty. OneWest 

appealed the December 1, 2010, order on June 22, 2011, and 

paid the penalty on June 27, 2011. OneWest also appealed 

the penalty in its August 18, 2011, appeal of the District 

Court’s August 8, 2011, order.
6

fact for clear error and its conclusions of law de novo.” 

McCutcheon v. America’s Servicing Co., 560 F.3d 143, 147 

(3d Cir. 2009). 

A. Subject Matter Jurisdiction

OneWest argues that the District Court lacked subject 

matter jurisdiction over the Tellados’ claim based on the 

Financial Institutions Reform, Recovery, and Enforcement 

Act of 1989 (FIRREA). Whether subject matter jurisdiction 

exists is “a legal question over which we exercise plenary 

review.” Nat. Union Fire Ins. Co. of Pittsburgh v. City 

Savings, F.S.B., 28 F.3d 376, 383 (3d Cir. 1994). 

FIRREA, which was passed in response to the savings 

and loan crisis of the 1980s, gives the FDIC the authority to 

act as receiver or conservator for failed institutions. Benson v. 

JPMorgan Chase Bank, N.A., 673 F.3d 1207, 1211 (9th Cir. 

2012). The statute also creates an administrative claims 

process for institutions in receivership and limits judicial 

review of certain claims. See 12 U.S.C. § 1821(d)(3)-(13). 

Section 1821(d)(13)(D) provides:

Except as otherwise 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 

[FDIC] has been appointed receiver, including assets 

which the [FDIC] may acquire from itself as such 

receiver; or 

(ii) any claim relating to any act or omission of such 

institution or the [FDIC] as receiver.

12 U.S.C. § 1821(d)(13)(D). We have interpreted section 

1821(d)(13)(D) to be a “statutory exhaustion requirement: in 

order to obtain jurisdiction to bring a claim in federal court, 

one must exhaust administrative remedies by submitting the 

claim to the receiver in accordance with the administrative 

scheme for adjudicating claims detailed in § 1821(d).” Nat. 

Union Fire Ins. Co. of Pittsburgh, 28 F.3d at 383; see also
7

Rosa v. Resolution Trust Corp., 938 F.2d 383, 391 (3d Cir. 

1991). 

The District Court determined that it had subject 

matter jurisdiction over the Tellados’ claim against OneWest 

without directly addressing whether the jurisdictional bar in 

section 1821(d)(13)(D) applied.4

 OneWest argues that 

section 1821(d)(13)(D) precluded the District Court from 

exercising jurisdiction over this claim because the claim is 

predicated upon an act or omission of IndyMac, specifically 

IndyMac’s failure at closing to provide notice in Spanish of 

the right to cancel, and because the Tellados failed to exhaust 

their administrative remedies under FIRREA. 

We agree. Under section 1821(d)(13)(D)(ii), courts do 

not have jurisdiction over a “claim relating to any act or 

omission of such institution or the [FDIC] as receiver.” 12 

U.S.C. § 1821(d)(13)(D)(ii). We have interpreted “such 

institution” in section 1821(d)(13)(D)(ii) to refer back to the 

“depository institution for which the [FDIC] has been 

appointed receiver” which is identified in section 

1821(d)(13)(D)(i). Rosa, 938 F.2d at 392. Here, the 

Tellados’ claim against the purchasing bank, OneWest, 

relates to an omission of the depository institution, IndyMac. 

We have not previously addressed whether FIRREA’s 

jurisdictional bar applies to claims against a purchasing bank 

based on the conduct of the depository institution or receiver, 

but several other circuits have concluded that it does apply. 

See Benson, 673 F.3d at 1214; Am. Nat’l Ins. Co. v. FDIC, 

642 F.3d 1137, 1144 (D.C. Cir. 2011); Vill. of Oakwood v. 

State Bank & Trust Co., 539 F.3d 373, 386-87 (6th Cir. 

2008). 

In Benson, the Ninth Circuit Court of Appeals 

determined that claims brought against a purchasing bank, 

based on the failed bank’s alleged malfeasance in connection 

with a Ponzi scheme, were jurisdictionally barred under 

section 1821(d)(13)(D) because “[t]he bulk of plaintiffs’ 

 4 The District Court made an oral ruling from the bench that it 

did have jurisdiction and, on November 30, 2010, denied as 

moot OneWest’s motion to dismiss for a lack of subject 

matter jurisdiction. 
8

claims plainly qualify as ‘functionally, albeit not formally’ 

against a failed bank.” 673 F.3d at 1215 (citing Am. Nat’l Ins. 

Co., 642 F.3d at 1144 (“Where a claim is functionally, albeit 

not formally, against a depository institution for which the 

FDIC is receiver, it is a ‘claim’ within the meaning of 

FIRREA’s administrative claims process.”)). The court 

further noted that “[c]laims of independent misconduct by an 

institution that purchases a failed bank are not covered by 

FIRREA’s exhaustion requirement” but found that the 

plaintiffs had not adequately pled a claim based on the 

assuming bank’s independent, post-purchase conduct. Id. at 

1215-17.

As in Benson, the Tellados’ claim is functionally, 

albeit not formally, against IndyMac. The Tellados 

characterize their claim as a claim against OneWest for its 

own misconduct, pointing to OneWest’s failure to cancel the 

loan in response to the Tellados’ August 2009 notice of 

cancellation. However, as the District Court correctly held, 

the Tellados’ notice of cancellation was valid only because 

IndyMac had failed to provide proper notice of the right to 

cancel and as a result the cancellation period had not begun to 

run. Without IndyMac’s wrongdoing, the Tellados would 

have no right to cancel and therefore no claim. Thus, the 

Tellados’ claim is not a claim of independent misconduct by 

OneWest; rather, it relates to an act or omission of the 

depository institution, IndyMac, and is, therefore, 

jurisdictionally barred under section 1821(d)(13)(D)(ii).

The Tellados contend, however, that their claim is 

based on OneWest’s failure to honor their August 2009 

cancellation demand. Thus, they claim, it is not susceptible 

of resolution through FIRREA’s administrative process and is 

not a claim within the meaning of section 1821(d)(13)(D)(ii). 

The Tellados attempt to bolster this argument with the fact 

that the deadline to present an administrative claim under 

FIRREA could have expired as early as October 2008, before 

their August 2009 cancellation demand. 

However, as already established, their claim is wholly 

dependent upon IndyMac’s wrongdoing. In Village of 

Oakwood, the Sixth Circuit Court of Appeals, holding that 

claims asserted against the assuming bank but “directly 
9

related to acts or omission of the FDIC as receiver of 

Oakwood” were jurisdictionally barred, reasoned that 

“permit[ting] claimants to avoid [the] provisions of (d)(6) and 

(d)(13) by bringing claims against the assuming bank . . . 

would encourage the very litigation that FIRREA aimed to 

avoid.” 539 F.3d at 386 (internal quotation marks omitted). 

The D.C. Circuit Court of Appeals similarly cautioned in 

American National Insurance Company that “plaintiffs 

cannot circumvent FIRREA’s jurisdictional bar by drafting 

their complaint strategically.” 642 F.3d at 1144. The fact that 

the deadline for bringing a claim through the administrative 

process may have passed does not convert the Tellados’ claim 

into a claim “not susceptible of resolution through the claims 

procedure.” Because the Tellados’ claim is functionally 

against IndyMac, it is a claim within the meaning of 

FIRREA’s administrative process. The Tellados cannot 

bypass the requirements of FIRREA by bringing the claim 

against OneWest. 

For these reasons, the entirety of the Tellados’ claim is 

jurisdictionally barred under section 1821(d)(13)(D), and the 

District Court did not have subject matter jurisdiction over it.5

B. Penalty Order

1. Jurisdiction

Because we find the District Court lacked subject 

matter jurisdiction over the underlying matter, we must now 

determine whether the District Court also lacked jurisdiction 

to impose the $10,000 penalty against OneWest for failing to 

comply with the order to produce its CEO at trial. “A final 

determination of lack of subject-matter jurisdiction of a case 

in a federal court . . . does not automatically wipe out all 

proceedings had in the district court at a time when the 

district court operated under the misapprehension that it had 

 5 Because we find section 1821(d)(13)(D) bars jurisdiction 

here, we will not go on to determine if the MPA preempts 

Pennsylvania law or if the Home Owners’ Loan Act and its 

implementing regulations, 12 C.F.R. §§ 560.2(a) and (b), 

preempt the Tellados’ claim.
10

jurisdiction.” Willy v. Coastal Corp., 503 U.S. 131, 137 

(1992); see also In re Orthopedic “Bone Screw” Prod. Liab. 

Litig., 132 F.3d 152, 156 (3d Cir. 1997) (“[D]espite the 

inability of a court to decide the merits of a case over which it 

lacks jurisdiction, a court does have the inherent authority 

both over its docket and over the persons appearing before 

it.”). 

Sanctions have been upheld in the absence of subject 

matter jurisdiction when the sanctions order is collateral to 

the merits. See Willy, 503 U.S. at 138 (upholding Rule 11 

sanctions in a case in which the district court was later found 

to lack subject matter jurisdiction because the sanctions order 

did not “raise the issue of a district court adjudicating the 

merits of a ‘case or controversy’ over which it lacks 

jurisdiction”); In re Orthopedic “Bone Screw” Prod. Liab. 

Litig., 132 F.3d at 157 (vacating a sanctions order dismissing 

the case with prejudice when the district court was later 

determined to lack subject matter jurisdiction because the 

dismissal with prejudice had “the effect of adjudicating the 

merits of the case” but upholding a $500 monetary sanction 

against a litigant for failure to appear at a hearing). However, 

a civil contempt order would fall in the absence of subject 

matter jurisdiction. See U.S. Catholic Conference v. Abortion 

Rights Mobilization, Inc., 487 U.S. 72, 80 (1988) (holding 

that a civil contempt order for refusal to comply with a 

subpoena would fall if the district court lacked subject matter 

jurisdiction). In Willy, the Supreme Court distinguished 

between a civil contempt order and a Rule 11 sanction, noting 

that “[c]ivil contempt is designed to force the contemnor to 

comply with an order of the court” whereas “Rule 11 is 

designed to punish a party who has already violated the 

court’s rules.” Willy, 503 U.S. at 139. On that basis, the 

Court reasoned that a civil contempt order “should fall with a 

showing that the court was without authority to enter the 

decree,” but a Rule 11 sanction, grounded in “[t]he interest in 

having the rules of procedure obeyed,” should not. Id. 

Here, the penalty order for defying the District Court’s 

order requiring the presence of OneWest’s CEO at trial is 

collateral to the merits of the underlying action. Additionally, 

although issued under Rule 16(f)(1)(C), the penalty order is 

analogous to the Rule 11 sanctions in Willy because it was 
11

designed to punish OneWest for its past violation of the order 

requiring the CEO’s presence at trial. See Olcott v. Delaware 

Flood Co., 76 F.3d 1538, 1553 (10th Cir. 1996) (finding 

sanctions pursuant to Rules 16(f) and 37(b) analogous to Rule 

11 sanctions in Willy and thus enforceable in the absence of 

subject matter jurisdiction). Issued after the conclusion of the 

trial, the penalty order could not effectively coerce 

compliance with an order requiring the CEO’s presence at 

trial and thus is unlike a civil contempt order.

For these reasons, we find that the penalty order does 

not fall away based on the District Court’s lack of subject 

matter jurisdiction over the underlying matter.

2. Due Process

OneWest challenges the penalty order on several other 

grounds. We address OneWest’s argument that the penalty 

order violates due process. 

We review sanctions orders for abuses of discretion, 

but “when the procedure the district court uses in imposing 

sanctions raises due process issues of fair notice and the right 

to be heard . . ., our review is plenary.” Martin v. Brown, 63 

F.3d 1252, 1262 (3d Cir. 1995). “A finding of contempt, 

even under the auspices of Rule 16, must satisfy due process 

requirements. . . . Due process requires that a potential 

contemnor be given notice and a hearing regardless of 

whether the contempt is civil or criminal in nature.” Newton 

v. A.C. & S., Inc., 918 F.2d 1121, 1127 (3d Cir. 1990) 

(internal citations omitted). In Newton, we held that “a court 

may not find a party or counsel in civil contempt for settling a 

case after a deadline fixed by the court without affording 

them their due process rights of adequate notice and a prior 

hearing.” Id. at 1129. 

Here, the District Court imposed the $10,000 penalty 

without providing the parties notice or a hearing on the issue. 

The District Court heard argument regarding OneWest’s 

failure to comply with the order requiring the CEO’s presence 

at trial but did not issue the penalty order at that time or give 

notice of a possible penalty then or at any time prior to 

issuing the order. Nor was there a separate hearing on the 
12

issue of the penalty. Accordingly, the District Court violated 

due process requirements by not giving OneWest notice or 

the opportunity to be heard.

We conclude that the penalty must be reversed on this 

basis. Normally, we would vacate the order and remand the 

case to the District Court for further consideration of the 

penalty. However, we see nothing in the facts of this case 

that would justify a penalty. Therefore, the penalty order 

cannot stand.

III. CONCLUSION

For the foregoing reasons, we will reverse the District 

Court’s Order of August 8, 2011, and the penalty order.