UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

JOHN J. PEMBROKE LIVING TRUST, 

 Plaintiff - Appellant, 

v. 

U.S. BANK NATIONAL ASSOCIATION, 

as Trustee for WAMU Series 2006-AR11 

Trust; SELECT PORTFOLIO 

SERVICING, INC.; JP MORGAN CHASE 

BANK, N.A.; HOLLAND & HART LLP; 

CYNTHIA RILEY, 

 Defendants - Appellees. 

No. 17-1244 

(D.C. No. 1:16-CV-00020-CMA-MEH) 

(D. Colo.) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before BRISCOE, HARTZ, and McHUGH, Circuit Judges. 

_________________________________ 

The John J. Pembroke Living Trust defaulted on a $1,905,000 residential 

mortgage loan for a home in Colorado after the loan changed hands several times. 

Facing foreclosure, Pembroke Trust sued two banks and a loan servicer in state court. 

It sought to enjoin foreclosure and to acquire the property by enforcing a 

 *

 After examining the briefs and appellate record, this panel has determined 

unanimously that oral argument would not materially assist in the determination of 

this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore 

ordered submitted without oral argument. This order and judgment is not binding 

precedent, except under the doctrines of law of the case, res judicata, and collateral 

estoppel. It may be cited, however, for its persuasive value consistent with 

Fed. R. App. P. 32.1 and 10th Cir. R. 32.1. 

FILED 

United States Court of Appeals 

Tenth Circuit 

April 27, 2018

Elisabeth A. Shumaker 

Clerk of Court
2 

right-of-first-refusal agreement it had made with the original lender. The state court 

rejected Pembroke Trust’s arguments and found for the defendants on their 

counterclaims for breach of the promissory note and judicial foreclosure. 

Undeterred, Pembroke Trust tried to cancel the loan shortly after the state 

court’s ruling by sending the loan servicer a notice of rescission under the Truth in 

Lending Act (TILA), 15 U.S.C. § 1635. But the foreclosure process was well 

underway and the rescission notice did not elicit a response, so Pembroke Trust 

appealed the state-court judgment and filed this related action in federal court—this 

time adding the law firm that assisted with the foreclosure process (Holland & Hart 

LLP) and a former Washington Mutual Bank (WaMu) employee whose endorsement 

appears on the note (Cynthia Riley) as defendants. 

The federal lawsuit seeks an injunction to stop further debt-collection activity. 

It also includes claims for violations of TILA, violations of the federal Fair Debt 

Collection Practices Act (FDCPA) and a similar Colorado statute, common-law 

fraud, and negligence. The district court dismissed the injunctive-relief claim under 

the Younger abstention doctrine, derived from Younger v. Harris, 401 U.S. 37 

(1971). It also held that the rescission notice was untimely, thereby rejecting those 

claims under TILA and the FDCPA that were dependent on the validity of the 

rescission notice. The remaining claims not based on the rescission notice (the 

nonrescission claims) were stayed under the Colorado River abstention doctrine, 

derived from Colorado River Water Conservation District v. United States, 424 U.S. 

800, 817-19 (1976); but after the state appellate court issued its opinion affirming the 
3 

judgment rendered in the foreclosure proceeding, the district court dismissed the 

stayed claims. We affirm. 

I. Background 

The facts and procedural history of this case are thoroughly recounted in the 

Colorado Court of Appeals opinion that affirmed the state trial court’s dismissal 

order and foreclosure decree, the federal magistrate judge’s report and 

recommendation, and the district court’s order adopting that recommendation. We 

repeat them only as needed to frame the issues on appeal. 

On May 19, 2006, John Pembroke refinanced a residential mortgage loan and 

signed a $1,905,000 promissory note in favor of WaMu. At the same time, he and his 

wife Linda executed a deed of trust, acting as trustees for their respective living 

trusts. The day before, Pembroke Trust had entered into a right-of-first-refusal 

agreement with WaMu, which gave Pembroke Trust the option to purchase the 

property in the event of a proposed transfer. (This side agreement’s failure to survive 

successive transfers of the loan later became a focus of the state-court action.) 

The Pembrokes made payments until they defaulted on the loan in 2011. Over 

the years, the loan changed hands, as did the company that serviced it. WaMu sold it 

to a loan pooling trust called the “WaMu Series 2006-AR11 Trust” (the Loan Trust) 

in 2006, but retained servicing rights. When WaMu failed in 2008, the Federal 

Deposit Insurance Corporation (FDIC) took over as receiver and sold the bulk of 

WaMu’s assets—including the servicing rights to the note and the deed of trust—to 

appellee JPMorgan Chase Bank, N.A. (Chase). Chase, in turn, transferred the 
4 

servicing rights to appellee Select Portfolio Servicing, Inc. (SPS) and the note and 

deed of trust to appellee U.S. Bank National Association as trustee. 

II. Jurisdiction

The appellees contend as a threshold matter that we do not have subject-matter 

jurisdiction over the nonrescission claims because Pembroke Trust did not comply 

with the administrative-exhaustion requirements of the Financial Institutions Reform, 

Recovery, and Enforcement Act of 1989 (FIRREA). The district court did not reach 

this jurisdictional issue because it abstained from adjudicating these claims on other 

grounds. Nevertheless, we have “an independent obligation to determine whether 

subject-matter jurisdiction exists,” 1mage Software, Inc. v. Reynolds & Reynolds Co., 

459 F.3d 1044, 1048 (10th Cir. 2006) (internal quotation marks omitted); 

accordingly, we requested supplemental briefing on this issue. 

FIRREA bars courts from exercising jurisdiction over claims based on the acts 

or omissions of depository institutions that have been placed into receivership by the 

FDIC until the claimant has exhausted its administrative remedies. See 12 U.S.C. 

§ 1821(d)(13)(D)(ii) (limiting judicial review of claims “relating to any act or 

omission” of a failed bank or of the FDIC as receiver); see also Resolution Tr. Corp. 

v. Love, 36 F.3d 972, 975-76 (10th Cir. 1994) (“[FIRREA] establishes administrative 

procedures for adjudicating claims asserted against [failed financial institutions]. . . . 

Pursuant to § 1821(d)(13)(D) of the act, a court does not have jurisdiction over a 

claim unless it has first been presented to the agency.”). Pembroke Trust does not 
5 

allege, and the record does not reflect, any pursuit of administrative remedies, much 

less exhaustion of those remedies. 

Whether FIRREA bars our jurisdiction turns on the timing of the appellees’ 

purported misconduct. Administrative exhaustion is required if a claim arises before 

the depository institution enters receivership. See Homeland Stores, Inc. v. 

Resolution Tr. Corp., 17 F.3d 1269, 1272-74 (10th Cir. 1994); Resolution Tr. Corp. 

v. Mustang Partners, 946 F.2d 103, 106 (10th Cir. 1991) (per curiam) (mortgagor’s 

right to continue pursuing counterclaims was “dependent upon its compliance with 

FIRREA’s claims provisions,” where counterclaim against mortgagee was pending 

when Resolution Trust Corporation was appointed as mortgagee’s receiver). As the 

Seventh Circuit explained in another case involving Ms. Riley and WaMu, “Any of 

Riley’s acts or omissions as an employee or agent of WAMU taken before the FDIC 

receivership would be attributable to WAMU for purposes of liability, and FIRREA 

bars a court from considering this claim against WAMU . . . in the absence of 

administrative exhaustion.” Mains v. Citibank, N.A., 852 F.3d 669, 679 (7th Cir.) 

(emphasis added), cert. denied, 138 S. Ct. 227 (2017). 

The appellees characterize Pembroke Trust’s claims as “rely[ing] on the 

pre-receivership conduct of Ms. Riley while she was an employee of WaMu,” Riley’s 

Suppl. Answer Br. at 8, or on pre-receivership “misconduct by WaMu,” Aplees. 

Suppl. Br. at 13. To the extent that Pembroke Trust is asking us to resolve 

allegations of pre-receivership misconduct, the appellees are correct: we lack 

jurisdiction. 
6 

But it is clear from Pembroke Trust’s complaint that the alleged misconduct 

stretches years beyond WaMu’s failure and placement into receivership. The 

complaint contends that someone altered the blank copy of the note—which had not 

been endorsed back in 2006—to shore up title problems by fraudulently placing 

Ms. Riley’s endorsement on it after she no longer had endorsement authority. This 

event supposedly occurred sometime between 2012 and 2014—a time frame that is 

indisputably post-receivership. The FIRREA exhaustion requirement does not apply 

to post-receivership misconduct. See Homeland Stores, 17 F.3d at 1272-76. 

Therefore, we have jurisdiction over these nonrescission claims. 

III. Analysis 

A. Nonrescission Claims 

The state trial court made the following relevant findings in the “Judgment and 

Decree of Foreclosure”: 

 The Loan Trust, for which U.S. Bank became the trustee, acquired the 

promissory note in August 2006 “in good faith, for value, and without 

notice of the Pembrokes’ or the Pembroke Trusts’ claims and defenses.” 

Aplt. App., Vol. 1 at 234. 

 The promissory note “was not fabricated or falsified as suggested by the 

Pembroke Trusts.” Id.

 “The Loan Trust is the holder in due course of the original Note indorsed in 

blank. . . . .” Id.

The Colorado Court of Appeals affirmed these determinations after Pembroke Trust 

filed this lawsuit. We review de novo whether this affirmance precludes Pembroke 

Trust’s nonrescission claims. See Campbell v. City of Spencer, 777 F.3d 1073, 1077 
7 

(10th Cir. 2014) (a district court’s grant of a motion to dismiss on preclusion grounds 

is reviewed de novo). 

The essence of Pembroke Trust’s nonrescission claims is that the promissory 

note is not valid or authentic and is thus unenforceable. The appellees argue that 

issue and claim preclusion bar Pembroke Trust from relitigating enforceability. We 

apply Colorado law to assess the state-court judgment’s preclusive effect. 

See Marrese v. Am. Acad. of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985) (the 

full-faith-and-credit statute, 28 U.S.C. § 1738, directs federal courts “to refer to the 

preclusion law of the State in which judgment was rendered”). 

Issue preclusion bars a party from relitigating a discrete issue in a current 

proceeding if (1) a prior proceeding resulted in a final judgment on the merits; (2) the 

issue is identical to an issue actually adjudicated in the prior proceeding; (3) the party 

against whom preclusion is asserted had a full and fair opportunity to litigate the 

issue in the prior proceeding; and (4) the party against whom preclusion is asserted 

was a party or is in privity with a party in the prior proceeding. See Foster v. Plock, 

394 P.3d 1119, 1123 (Colo. 2017). 

These four conditions were satisfied here. Pembroke Trust properly does not 

challenge the first and fourth factors. The state-court judgment on the merits is now 

final because the Colorado Court of Appeals upheld the trial court’s decision and 

Pembroke Trust did not file a petition for writ of certiorari. And Pembroke Trust was 

the plaintiff in both proceedings. 
8 

As for the second condition, Pembroke Trust’s defense to the state-court 

foreclosure action and its nonrescission claims in federal court turn on the resolution 

of an identical issue: Is the promissory note enforceable? The state court actually 

adjudicated this question when it found that U.S. Bank holds the promissory note in 

due course as the trustee for the Loan Trust. Under Colorado law a holder in due 

course takes a note “free from all claims to [the note] and most defenses of any party 

to [it].” La Junta State Bank v. Travis, 727 P.2d 48, 51 (Colo. 1986). 

Finally, Pembroke Trust had a full and fair opportunity to litigate this issue. It 

suggests that all it challenged before the state court was the authenticity of 

Mr. Pembroke’s signature on the promissory note, and that it could not have 

challenged the legitimacy of Ms. Riley’s endorsement there because it was not yet 

aware of the problem. But the state-court record shows otherwise. Not only did 

Pembroke Trust seek discovery relating to Ms. Riley’s endorsement, see Aplt. App., 

Vol. 1 at 241 (interrogatory no. 6 requesting Chase to “[e]xplain all the facts and 

circumstances of how the endorsement signed by Cynthia Riley was placed on the 

NOTE, including the date upon which the endorsement was placed upon the NOTE”),

but it also stated in opposing summary judgment that “there is a question of fact 

whether [the Loan Trust] took the Note with notice of an unauthorized signature or 

has been altered [sic],” id., Vol. 3 at 699. Then at trial Pembroke Trust challenged 

the authenticity and timing of Ms. Riley’s endorsement, as well as her authority, 

when it argued that the note was endorsed after the 2012 foreclosure. Having had a 

full and fair opportunity to litigate this issue, Pembroke Trust cannot overcome the 
9 

preclusion bar by citing additional evidence that should have been presented before 

entry of judgment in the prior case. See Jones v. United States, 466 F.2d 131, 136 

(10th Cir. 1972) (where a party did not effectively present its case at the first trial, 

“affording [that party] a second opportunity in which to litigate the matter, with the 

benefit of hindsight, would contravene the very principles upon which collateral 

estoppel is based and should not be allowed”). 

The nonrescission claims are barred by issue preclusion. We therefore need 

not address claim preclusion. 

B. Rescission Claims 

The rescission claims fare no better. We review de novo the district court’s 

dismissal of these claims under Rule 12(b)(6) on the ground that the notice of 

rescission was untimely. See Braxton v. Zavaras, 614 F.3d 1156, 1159 (10th Cir. 

2010) (“We review de novo the dismissal of an action under Rule 12(b)(6) based on 

the statute of limitations.”). A consumer’s unconditional right to rescind under TILA 

expires three business days after consummation of the loan or after delivery of the 

required disclosures and rescission forms, whichever is later. See 15 U.S.C. 

§ 1635(a). A consumer also has a conditional right to rescind: “[W]hen a creditor 

fails to deliver the material disclosures and information and rescission forms required 

by TILA, a borrower retains the right to rescind until the creditor delivers those 

required documents.” Pohl v. U.S. Bank, 859 F.3d 1226, 1228 (10th Cir. 2017). 

But “even if the creditor never delivers the required documents, the conditional right 
10 

to rescind lasts no longer than three years after the consummation of the transaction.” 

Id. (citing § 1635(f)). 

Pembroke Trust does not argue that the appellees failed to provide the required 

disclosures and rescission forms. Accordingly, the loan’s consummation begins the 

three-year period to rescind. Pembroke Trust tries to characterize the consummation 

date as a factual issue. But TILA’s implementing regulation, Regulation Z, defines 

“[c]onsummation” to mean “the time that a consumer becomes contractually 

obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13). When a consumer 

becomes contractually obligated is determined by state law. See id. § 226.2(b)(3). 

Under Colorado law an enforceable contract is formed when there is “mutual assent 

to an exchange, between competent parties, with regard to a certain subject matter, 

for legal consideration.” FDIC v. Fisher, 292 P.3d 934, 937 n.2 (Colo. 2013) 

(internal quotation marks omitted). Here, the parties entered into an enforceable 

contract on the closing date for the mortgage loan; at that time, Mr. Pembroke 

executed the promissory note and the deed of trust in exchange for a $1,905,000 

residential mortgage loan from WaMu. 

The closing date—and thus the consummation date—was May 19, 2006. Yet 

Pembroke Trust waited until May 2015 to send a notice of rescission to the loan 

servicer, SPS. Pembroke Trust’s rescission notice thus came many years too late. It 

contends there are no time limitations on the right to rescind because a “rescission 

notice is effective upon mailing by operation of law” under Jesinoski v. Countrywide 

Home Loans, Inc., 135 S. Ct. 790 (2015). Aplt. Reply Br. at 4. But this contention 
11 

misreads Jesinoski. The Supreme Court’s focus was on “how the right to rescind is 

to be exercised,” and it concluded that § 1635 requires only a notice of rescission, not 

a suit for rescission. See Jesinoski, 135 S. Ct. at 792 (emphasis added). Regarding 

the time for rescission, the Court made clear that the right to rescind “does not last 

forever” and “‘shall expire three years after the date of consummation of the 

transaction or upon the sale of the property, whichever comes first.’” Id. (quoting 

§ 1635(f)). It did not allow for perpetual rescission. The district court was correct in 

dismissing the TILA claims as untimely. 

Our conclusion that the rescission notice was untimely also disposes of 

Pembroke Trust’s remaining argument that the district court improperly dismissed its 

request for injunctive relief under the Younger doctrine. Pembroke Trust asked the 

district court to “invoke its equitable powers and enjoin [the defendants’] ongoing 

debt collection activity.” Aplt. App., Vol. 1 at 32 (third claim for relief in First 

Amended Complaint). Later, it characterized this claim as “a request to effectuate its 

rights under [TILA] for a rescission issued under the act” through a notice sent on 

May 21, 2015. Id., Vol. 3 at 762 (objections to Magistrate Judge’s Report and 

Recommendation). The request for injunctive relief clearly depends on a viable 

TILA claim, which does not exist. 
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IV. Conclusion 

We affirm the district court’s dismissal of Pembroke Trust’s claims. 

Entered for the Court 

Harris L Hartz 

Circuit Judge