Court Opinion

ID: 3199262
Source: CourtListenerOpinion
Date Created: 2016-04-29 20:00:27.517266+00
Date Added: 2024-06-11T14:50:27.124034
License: Public Domain

Not for Publication in West's Federal Reporter

          United States Court of Appeals
                       For the First Circuit

No. 15-1732

                              CAROL PROAL,

                        Plaintiff, Appellant,

                                     v.

                     JPMORGAN CHASE BANK, N.A.,

                         Defendant, Appellee,

                       DOES 1–100, inclusive,

                               Defendants.

          APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF MASSACHUSETTS

         [Hon. David H. Hennessy, U.S. Magistrate Judge]

                                  Before

                  Torruella, Lipez, and Kayatta,
                          Circuit Judges.

     Ramón Massó-Flores and Law Offices of Ramón Massó-Flores on
brief for appellant.
     Wayne E. George, Todd S. Holbrook, and Morgan, Lewis & Bockius
LLP on brief for appellee.

                             April 29, 2016
            KAYATTA, Circuit Judge.         The sole issue in this appeal

is    whether   the    administrative   exhaustion   requirements   of    the

Financial Institutions Reform, Recovery, and Enforcement Act of

1989 ("FIRREA"), Pub. L. No. 101-73, 103 Stat. 183 (codified in

scattered sections of 12 U.S.C.), apply to the claims that Carol

Proal    ("Proal")      brought   against    JPMorgan   Chase   Bank,    N.A.

("Chase") under Massachusetts's Predatory Home Loan Practices Act

("PHLPA"), Mass. Gen. Laws ch. 183C, and other state laws after

Chase relied on a mortgage that Proal granted to SouthStar Funding,

LLC ("SouthStar"), and that Chase later acquired, to conduct a

summary process foreclosure on Proal's home.

            Briefly summarized, Proal claims that SouthStar issued

her a high-cost loan in exchange for a note and a mortgage on her

principal residence without first assuring itself of her ability

to repay the loan, in violation of the PHLPA, see id. § 4; that

Washington Mutual Bank ("WaMu") acquired the note and was assigned

the     mortgage      following   SouthStar's    bankruptcy;    that     WaMu

subsequently failed and was put into receivership by the Federal

Deposit Insurance Corporation ("FDIC"); that the FDIC then sold

the note and mortgage to Chase; and that, in the wake of Chase's

acquisition of Proal's home in foreclosure on the loan, Proal

should be able to set aside the foreclosure by relying on certain

affirmative defenses that flowed with the mortgage under the PHLPA,

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see   id.   §   15,   even   though      she   never      asserted   any   claims

administratively under the FIRREA.

            The briefing in this case has provided both the district

court and this court with little meaningful assistance.                         As

relevant here, the FIRREA requires exhaustion of an administrative

claims-processing     regime     prior    to    judicial     proceedings    with

respect to two categories of claims or actions:                   (1) claims or

actions     seeking   "payment     from,       or   any     action   seeking     a

determination    of   rights   with      respect    to,"    the   assets   of   an

institution taken over by the FDIC, 12 U.S.C. § 1821(d)(13)(D)(i);

or (2) claims relating to "any act or omission" of such an

institution or of the FDIC as receiver, id. § 1821(d)(13)(D)(ii).

In moving to dismiss, Chase referred exclusively to the second

category, and only then indirectly, by arguing that Proal's claim

was not "against [Chase] for its actions."                   In support, Chase

relied on Demelo v. U.S. Bank National Ass'n, 727 F.3d 117 (1st

Cir. 2013), in which we held that a mortgagor's claim against a

post-receivership mortgagee arising out of a pre-receivership act

by a failed institution is subject to the FIRREA's administrative

exhaustion requirement, see id. at 122–23.                  In response, Proal

argued that Demelo is distinguishable because, unlike in Demelo,

where the mortgagor's claim was based on an "act or omission" of

the failed bank, her claim was not "based on acts or omissions of

either WaMu or the FDIC."        Despite its reliance on Demelo, Chase

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did not explain whether or how Proal's claim was based on an act

or omission of the failed bank, i.e., of WaMu, such that FIRREA

exhaustion should apply.

          The district court acknowledged Proal's argument that

"because [her] claims . . . are a result of the actions of SouthStar

and not the failed bank, her action is not a claim under FIRREA."

Proal v. JPMorgan Chase, No. 14-14292, 2015 WL 3616111, at *3 (D.

Mass. June 9, 2015).       The district court nevertheless granted

Chase's motion to dismiss, id. at *4, concluding that exhaustion

applies because Chase acquired the note and mortgage from the FDIC

and did not do anything wrongful on its own, see id. at *3 (citing

Demelo, 727 F.3d at 124).    Implicitly, this logic suggests that as

long as Chase received a failed bank's assets from the FDIC, and

committed no wrong itself, we must presume that Proal's claims

regarding those assets were based on an act or omission of the

failed bank or the FDIC.      The district court and Chase do not

explain why we would so presume, nor do they grapple with the

potential implications of such a capacious construction of "act or

omission" in this context.1

     1   We   note   that   such   a   reading   of   12   U.S.C.
§ 1821(d)(13)(D)(ii)--which would make the FIRREA's exhaustion
requirement operative whenever there is any legal defect in a
failed institution's assets--would threaten to render superfluous
12 U.S.C. § 1821(d)(13)(D)(i), which directly requires exhaustion
of certain claims relating to the assets of an institution taken
into FDIC receivership.

                                - 4 -
          On appeal, Proal argues again that Demelo "deals with

successor liability based on the acts or omissions of the failed

bank," and that her claims do not.         Thus challenged once more to

explain how Proal's claims are based on an act or omission of WaMu,

Chase offers not a hint of an explanation.

          Proal   then   devotes    much   of   her   appellate   brief   to

countering an argument that Chase never made in the district court-

-that exhaustion applies because her action seeks a determination

of rights with respect to an asset of the failed bank.               Proal

points out that our prior decision in Bolduc v. Beal Bank, SSB,

167 F.3d 667 (1st Cir. 1999), seems to reject any such argument in

a case like this, see id. at 671–72, albeit only with respect to

a plaintiff's affirmative defenses to foreclosure (which is all

Proal now seeks to assert).2   Thus prompted, Chase devotes a single

paragraph to arguing that Bolduc was wrong because, in the view of

the Ninth Circuit, "a claim aimed at preventing a lender from

obtaining repayment of a loan or any realization on its security

     2 Proal initially sought money damages on a number of claims
that are derivative of her underlying PHLPA claim.      On appeal,
however, Proal has abandoned any claim to money damages,
characterizing her suit as "a foreclosure defense action" and
bringing her claims in line with those raised in Bolduc by
affirmatively representing that she is not "seeking any kind of
'payment' from any bank." Accepting this disclaimer, we leave it
to the district court, with the aid of the parties, to determine
which of Proal's equitable claims remain in force and what sort of
relief, if any, she may now seek under Massachusetts law in light
of the fact that the challenged foreclosure has already occurred.

                                   - 5 -
interest is clearly a claim against the lender that seeks 'a

determination of rights with respect to a bank asset.'"         Rundgren

v. Wash. Mut. Bank, FA, 760 F.3d 1056, 1063–64 (9th Cir. 2014)

(quoting 12 U.S.C. § 1821(d)(13)(D)(i)).          Notwithstanding the

implied suggestion that we overrule one of our own precedents,

Chase offers no argument as to why we should do so.           See United

States v. Melvin, 628 F. App'x 774, 776 (1st Cir. 2015) (absent

extraordinary circumstances or new Supreme Court or en banc circuit

authority, prior panel decisions bind subsequent panels in the

same circuit).

          In view of the foregoing, and particularly in light of

Chase's failure to explain what act or omission of the failed bank

or the FDIC provides the basis for Proal's claim, we find Demelo

inapplicable   and   Bolduc   otherwise   controlling.   We    therefore

reverse the dismissal for lack of subject-matter jurisdiction and

remand for further proceedings directed at Chase's arguments that

Proal's complaint should be dismissed for failure to state a

claim.3

     3 Proal has challenged the district court's suggestion that
even if the district court has subject-matter jurisdiction over
Proal's claims, those claims will be barred on statute of
limitations grounds. Proal, 2015 WL 3616111, at *3 n.5. Chase
did not raise a statute of limitations defense in its motion to
dismiss, nor has it responded to Proal's arguments on appeal.
"Ordinarily, affirmative defenses, such as the statute of
limitations, are subject to pleading and proof." Dempsey v. Sears
Roebuck & Co., 963 F.2d 366, 366 (1st Cir. 1992) (table opinion)
(per curiam).   We therefore do not treat the district court's

                                 - 6 -
footnoted dictum as a holding and so leave it to the district court
in the first instance to rule on any statute of limitations defense
that Chase might hereafter raise, if the district court determines
that Chase has not waived its opportunity to raise such a defense.

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