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Starkey v. Deutsche Bank National Trust Co.

Appeals Court of Massachusetts, Barnstable

September 11, 2018

H. CHRISTOPHER STARKEY & another [1]
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY, trustee, [2] & others. [3]

          Heard: December 11, 2017.

         Civil action commenced in the Superior Court Department on November 20, 2009. Motions to dismiss were heard by Christopher J. Muse, J., and entry of judgment was ordered by him.

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

          Charles L. Solomont 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)-(1) (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'1 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 ...

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