Proal v. JPMorgan Chase Bank, N.A.

Not for Publication in West's Federal Reporter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.
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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.
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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
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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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