Bank of America v. Macho

2011 Ohio 5495

BANK OF AMERICA PLAINTIFF-APPELLEE

v.JUNE MACHO, ET AL. DEFENDANTS-APPELLANTS

No. 96124

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

Dated: October 27, 2011

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED

Civil Appeal from the

Cuyahoga County Court of Common Pleas

Case No. CV-696021

BEFORE: Celebrezze, P.J., Sweeney, J., and Keough, J.

RELEASED AND JOURNALIZED: October 27, 2011

ATTORNEY FOR APPELLANT JUNE MACHO

Mark S. Shearer

FOR APPELLEES

For Bank of America

Bryan Kostura

Bricker & Eckler, L.L.P.

-and-

Nelson M. Reid

Anne Marie Sferra

Bricker & Eckler, L.L.P.

For Federal Deposit Insurance Corporation, as Receiver for

Washington Mutual Bank, f.k.a. Washington Mutual Bank, FA

Gregory J. O'Brien

Michael J. Zbiegien, Jr.

Taft Stettinius & Hollister, L.L.P.

Oak Mortgage Co., pro se

c/o Darren Rose

33250 N. Burr Oak Drive

FRANK D. CELEBREZZE, JR., P.J.:

{¶ 1} Appellant, June Macho, brings the instant appeal challenging the trial court's dismissal of her cross-claim against Washington Mutual Bank, F.A. ("WaMu") and the Federal Deposit Insurance Corporation ("FDIC"), a substituted party as receiver for WaMu.

{¶ 2} In October 2006, Macho agreed to refinance her home for $149,250 with WaMu and signed a note and mortgage evidencing the debt. The loan was originated by Oak Mortgage Company ("Oak") and its employee, mortgage broker Bob Tengler. Macho alleges that the loan application was fraudulently completed by Tengler to show that Macho received more income from social security and her pension than she stated and that she received conflicting and inaccurate disclosure statements from WaMu, Oak, and the title company involved in the transaction, Anthem Escrow ("Anthem").¹ Macho also agreed to a second loan from WaMu in the amount of $15,000.

{¶ 3} On September 25, 2008, WaMu was taken over by the Office of Thrift Supervision, and the FDIC was appointed as receiver over WaMu's assets, which JPMorgan Chase Bank, N.A. ("Chase") purchased.

{¶ 4} By June 17, 2009, Macho had become delinquent on her mortgage, and Bank of America N.A. ("BofA"), assignee of the primary note and mortgage, filed a foreclosure suit on that date. After a title search, BofA named WaMu as a party becauseit may have had an interest in the property as a result of the $15,000 loan. BofA served WaMu at the address of a Chase office in Ohio. Macho then filed an answer, cross-claim, counterclaim, and third-party complaint against BofA, WaMu, Oak, Tengler, and Anthem.

{¶ 5} On July 8, 2010, the FDIC made a limited appearance to file a motion to be substituted for WaMu and moved to dismiss the complaint against it. A hearing was held regarding the motion to dismiss where the FDIC argued that the trial court did not have subject matter or personal jurisdiction over it, relying on provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), Pub.L. 101-73, 103 Stat. 183. The trial court ultimately agreed with the FDIC and dismissed the complaint against it for lack of subject matter jurisdiction. Macho timely filed a notice of appeal assigning a single error.

{¶ 6} I. "The trial court erred when it found that it had no subject matter jurisdiction over the FDIC."

Law and Analysis

I. Subject Matter Jurisdiction

{¶ 7} After a party files a Civ.R. 12(B)(1) motion to dismiss, the trial court must determine whether the complaint contains allegations of a cause of action that the trial court has authority to decide. Crestmont Cleveland Partnership v. Ohio Dept. of Health (2000), 139 Ohio App.3d 928, 936, 746 N.E.2d 222. The Ohio Supreme Court has further noted that the "trial court is not confined to the allegations of the complaint when determining its subject-matter jurisdiction pursuant to a Civ.R. 12(B)(1) motion to dismiss, and it may consider material pertinent to such inquiry." Southgate Dev. Corp. v. Columbia Gas Transm. Corp. (1976), 48 Ohio St.2d 211, 358 N.E.2d 526, paragraph one of the syllabus. We apply a de novo review to the trial court's decision on a motion to dismiss for lack of subject matter jurisdiction. Crestmont Cleveland Partnership at 936.

{¶ 8} FIRREA was enacted in 1989 after the savings and loan scandals of the 1980's to allow the expeditious seizure of a failing bank to limit its effect on the financial system and individual depositors. Brady Dev. Co., Inc. v. Resolution Trust Corp. (C.A.4, 1994), 14 F.3d 998, 1002-1003. This system allows the FDIC to be appointed receiver over a failing or failed financial institution's assets for the purpose of resale or distribution in a fair and orderly manner.² Id. at 1003. FIRREA also establishes a mandatory claims procedure for creditors seeking monetary redress from the defunctfinancial institution for all claims. Robbins v. Foothill Nissan (1994), 22 Cal.App.4th 1769, 1783-1785, 28 Cal.Rptr.2d 190.

A. The FIRREA Claims Process

{¶ 9} The trial court does not have authority to determine Macho's claims against WaMu because provisions in FIRREA limit jurisdiction and mandate a claims process, which Macho had not undertaken at the time she filed her complaint.

{¶ 10} 12 U.S.C. 1821(d)(3)-(13) provides for a mandatory claims procedure. 12 U.S.C. 1821(d)(3) and (4) vest the FDIC with authority to promulgate rules for the determination of all claims against the assets of failed financial institutions. 12 U.S.C. 1821(d)(6) provides for very limited judicial review with jurisdiction restricted to the "the district or territorial court of the United States for the district within which the depository institution's principal place of business is located or the United States District Court for the District of Columbia * * *."³

{¶ 11} Macho's claims against WaMu are of the type constituting "claims" under FIRREA. In a federal bankruptcy case, In re Shirk (Bankr.Ct.S.D.Ohio 2010), 437 B.R. 592, similar claims alleging fraud and violations of state and federal lending laws were brought against Chase as successor to WaMu after the FDIC had been appointed receiver of WaMu's assets. The Shirk court held that "[t]he Shirks' claims for misrepresentation (Complaint, ¶ ¶ 9 & 10), TILA violations (15 U.S.C. § 1601, et seq.) (Complaint, ¶ ¶ 11-17), and negligence (Complaint, ¶ 20) constitute claims 'relating to any act oromission of [a failed institution] or the Corporation as a receiver' and, therefore, are subject to FIRREA's jurisdictional bar." Id. at 601, citing 12 U.S.C. 1821(d)(13)(D); Jackson v. F.D.I.C. (Feb. 19, 2010), E.D. Mich. No. 09-10991. See, also, IndyMac Bank, F.S.B. v. MacPherson (E.D.N.Y. 2009), 672 F.Supp.2d 313, 316.

{¶ 12} The present case is factually similar to Shirk. In both instances, parties asserted claims against a failed financial institution or its successor after the FDIC had been appointed receiver alleging improprieties in the origination of a home loan. The conclusion of the court in Shirk is equally applicable to the present case and is dictated by the need of the FDIC "to dispose of the bulk of claims against failed financial institutions expeditiously and fairly." H.R. Rep. No. 54(I), 101st Cong., 1st Sess. 419 (1989), reprinted in 1989 U.S.C.C.A.N. 86, 215. Congress has established a claims process for the orderly administration of the liquidation of the assets of failed banks and has determined that those asserting claims against those institutions shall go through a claims process before seeking judicial intervention.⁴ This process is mandatory in the present case, and the trial court is without jurisdiction to address Macho's claims against WaMu.

B. Notice

{¶ 13} Macho attempts to get around these jurisdictional hurdles by claiming she did not receive notice of the appointment of the FDIC, and therefore, the provisions of FIRREA do not apply.

{¶ 14} FIRREA has strict notice requirements in 12 U.S.C. 1821(d)(3)(B) to preserve the due process rights of creditors of and those with claims against institutions where the FDIC has been appointed receiver. Accordingly, the FDIC uses a bank's records to notify all listed creditors on its books. 12 U.S.C. 1821(d)(3)(C). Some claims, such as the one at issue here, would not be listed in such records as WaMu, or the FDIC was not notified about the claim until Macho filed her cross-claim in 2009. ⁵ However, pursuant to 12 U.S.C. 1821(d)(3)(B), the FDIC published notice of its appointment as receiver in the Seattle Times, a publication circulated in WaMu's principle place of business, and a national publication, the Wall Street Journal. Additionally, after receiving notice of Macho's claims, the FDIC alleges that it sent her notice of the mandatory claims process.

{¶ 15} The Southern District Court of Ohio has determined that a party could not escape the claims process by arguing a lack of notice when the FDIC published its appointment in the same fashion and sent notice of the claims process after it learned of the claim following the filing of suit. White v. Chase Bank USA, NA (Sep. 28, 2010), S.D.Ohio No. 3:10CV021. The Northern District of Ohio has held similarly, finding the provisions of FIRREA applied to claimants who were unknown creditors when notice bypublication in the same manner was accomplished by the FDIC. Brandow v. F.D.I.C. (Dec. 22, 2008), N.D.Ohio 2008 No. 1:08-CV-02771.

{¶ 16} In the present case, the FDIC accomplished notice by publication in the Seattle Times and the Wall Street Journal. Further, the FDIC sent a notice of the administrative claims procedure to Macho on July 16, 2010, as stated in its July 23, 2010 reply to Macho's opposition to its motion to dismiss.

{¶ 17} Here, as in Shirk, Macho argues that she should not be made to exhaust administrative remedies when she did not receive proper notice. The Shirk court held that even if proper notice was not received, "Congress did not intend for the FDIC to lose jurisdiction based on its failure to mail a takeover notice as FIRREA itself delineates the parameters within which claimants are exempt...