Frykberg v. Jpmorgan Chase Bank

490 B.R. 652

Jon A. FRYKBERG, Debtor.Jon A. Frykberg, Plaintiff–Appellant,

v.JPMorgan Chase Bank, National Association, Defendant–Appellee.

BAP No. MW 12–050.

Bankruptcy No. 10–43546–HJB.

Adversary No. 10–04140–HJB.

United States Bankruptcy Appellate Panel of the First Circuit.

April 18, 2013.

Preempted

M.G.L.A. c. 140D, § 8; c. 183C §§ 2, 3.

Laird J. Heal, Esq., on brief for Plaintiff–Appellant.

Daniel J. Finnegan, Esq., Springfield, MA, and Donn A. Randall, Esq., Boston, MA, on brief for Defendant–Appellee.

Before LAMOUTTE, KORNREICH, and CABÁN, United States Bankruptcy Appellate Panel Judges.

LAMOUTTE, Bankruptcy Judge.

The debtor-plaintiff, Jon A. Frykberg (the “Debtor”), appeals from a bankruptcy court order granting summary judgment in favor of JPMorgan Chase Bank, NA (“Chase”) as to all counts on the ground that federal law preempts all of the Debtor's causes of action. For the reasons set forth below, we AFFIRM the order.

BACKGROUND

The Debtor filed a petition for chapter 13 relief in July 2010. He subsequently filed a three-count adversary complaint against Chase relating to a 2004 home mortgage which he gave to Washington Mutual Bank, F.A. (“WaMu”), to secure a $269,500.00 note.¹ After the loan transaction, Chase acquired from the Federal Deposit and Insurance Corporation (“FDIC”) certain of WaMu's assets, including the Debtor's note.

The Debtor complained in Count I that WaMu, the loan originator, failed to provide him with the number of copies of the Notice of Right to Cancel required by Mass. Gen. Laws ch. 140D, § 8.² He also alleged that WaMu violated that statute by providing him with an inaccurate Truth in Lending Disclosure Statement. Accordingly, in Count I, the Debtor sought rescission of the loan, damages, and attorneys' fees. In Count II, he requested a determination that he and his wife held the subject property free and clear of the mortgage. In Count III, he alleged that the loan was a “high-cost home loan” within the meaning of Mass. Gen. Laws ch. 183C, § 2,³ and that he did not receive credit counseling as required for such loans by that statute. Accordingly, he requested an order declaring the loan unenforceable. The Debtor did not assert any claim based upon federal law.

After answering the complaint, Chase filed a motion for summary judgment as to all counts, which the Debtor opposed. Relying on Hollingworth v. Beneficial Mass., Inc. (In re Hollingworth), 453 B.R. 32 (Bankr.D.Mass.2011), Chase argued for the first time in its reply to the Debtor's opposition that federal law preempted the Debtor's state law claims. At the September 2011 hearing on the summary judgment motion, the Debtor complained that Chase had neglected to raise the preemption issue in its motion. The court therefore granted Chase additional time to amend the motion to add its preemption claims, and allowed the Debtor time to respond thereto.

In its amended summary judgment motion which followed, Chase primarily argued: (1) the federal Home Owner's Loan Act (“HOLA”), 12 U.S.C. § 1461, et seq., preempted the Debtor's claims under both Mass. Gen. Laws ch. 183C and ch. 140D; and (2) the federal Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., separately preempted the Debtor's Mass. Gen. Laws ch. 183C claims. Chase further argued that even if federal law did not preempt the Debtor's state law claims, the Debtor could not establish a claim under either Mass. Gen. Laws ch. 183C or Mass. Gen. Laws ch. 140D. Lastly, Chase asserted that the Debtor was not entitled to relief from Chase because the FDIC retained liability related to or arising out of the Debtor's loan when it transferred the loan to Chase.

The Debtor opposed the amended summary judgment motion, arguing, among other things, that: (1) Chase's preemption argument was untimely; (2) the subject loan was a high-cost home loan under Massachusetts law; (3) the failure to provide two copies of the Notice of Right to Cancel, standing alone, was sufficient to support an extended right of rescission; and (4) Chase understated the amount financed.

After the hearing, the bankruptcy court granted the amended summary judgment motion, ruling from the bench as follows:

I am in this case fully persuaded by the arguments made by [Chase], so much so that I'm simply going to adopt the arguments made by [Chase] in its Memorandum of Law ... except with respect to one section ... that suggests that delivering only one copy of a Notice of Right to Cancel is a technical defect which ought to be seen as ministerial and not material.... In light of the fact that I've adopted the other positions taken by Chase, my omission of that particular argument is somewhat immaterial.

The next day, the court entered an order granting Chase's amended motion for summary judgment. The Debtor moved for reconsideration which the court denied as untimely. Thereafter, the court entered final judgment in favor of Chase on all counts of the complaint and this appeal followed. On appeal, the parties reiterate the arguments presented below.⁴

JURISDICTION

A bankruptcy appellate panel is “duty-bound” to determine its jurisdiction before proceeding to the merits, even if not raised by the litigants. Boylan v. George E. Bumpus, Jr. Constr. Co., Inc. (In re George E. Bumpus, Jr. Constr. Co., Inc.), 226 B.R. 724, 725–26 (1st Cir. BAP 1998) (quoting Fleet Data Processing Corp v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998) (internal quotations omitted)). A panel may hear appeals from “final judgments, orders, and decrees [pursuant to 28 U.S.C. § 158(a)(1) ] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3) ].” In re Bank of New England Corp., 218 B.R. at 645. “An order granting summary judgment, where no counts remain, is a final order.” DeGiacomo v. Traverse (In re Traverse), 485 B.R. 815, 817 (1st Cir. BAP 2013) (citation omitted). Thus, we have jurisdiction.

STANDARD OF REVIEW

A bankruptcy court's findings of fact are reviewed for clear error and its conclusions of law are reviewed de novo. See Lessard v. Wilton–Lyndeborough Coop. Sch. Dist., 592 F.3d 267, 269 (1st Cir.2010). “We apply a de novo standard of review to orders granting summary judgment.” In re Traverse, 485 B.R. at 819.

DISCUSSION

I. The Summary Judgment Standard

“Under Fed.R.Civ.P. 56, made applicable to bankruptcy proceedings pursuant to Fed. R. Bankr.P. 7056, ‘[i]t is apodictic that summary judgment should be bestowed only when no genuine issue of material fact exists and the movant has successfully demonstrated an entitlement to judgment as a matter of law.’ ” B.B. v. Bradley (In re Bradley), 466 B.R. 582, 585 (1st Cir. BAP 2012) (quoting Desmond v. Varrasso (In re Varrasso), 37 F.3d 760, 763 (1st Cir.1994)). The “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in the original).

There is no genuine issue of any material fact concerning the preemption issue. Therefore, entry of summary judgment by the bankruptcy court was appropriate.

II. The Preemption Doctrine

“The doctrine of federal preemption is rooted in the Supremacy Clause, which provides that ‘the laws of the United States ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, anything in the Constitution of any State to the Contrary notwithstanding.’ ” SPGGC, LLC v. Ayotte, 488 F.3d 525, 530 (1st Cir.2007) (quoting U.S. Const. art. VI, cl. 2). “Federal statutes and the regulations adopted thereunder have equal preemptive effect.” Id. (citing Fid. Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 159–60, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982)). A federal statute or regulation may preempt a state regulatory scheme in three relevant ways.⁵Id.

First, Congress can expressly preempt state law by explicit statutory language. Second, Congress can enact a regulatory scheme so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it, also known as “field preemption”. In such cases, state regulation will be invalid even if it does not directly conflict with federal laws or regulations. Third, federal law may be in irreconcilable conflict with state law, also known as “conflict preemption.” This may occur when compliance with both state and federal statutes and regulations is a physical impossibility, or when compliance with the state statute would frustrate the purposes of the federal scheme.

Id. at 530–31 (internal quotations and citations omitted).

III. HOLA and Preemption of State Law

Congress enacted HOLA in 1933 in reaction to the Great Depression, and “[i]ts goal was ‘to provide emergency relief with respect to home mortgage indebtedness' through ‘a radical and comprehensive response to the inadequacies of the existing state systems.’ ” Sovereign Bank v. Sturgis, 863 F.Supp.2d 75, 91 (D.Mass.2012) (quoting de la Cuesta, 458 U.S. at 159–60, 102 S.Ct. 3014). “The Act provided for the creation of a system of federal savings and loan associations, which would be regulated ... so as to ensure their vitality as permanent associations to promote the thrift of the people in a cooperative manner, to finance their homes and the homes of their neighbors.” de la Cuesta, 458 U.S. at 159–60, 102 S.Ct. 3014 (citations omitted). “In 1989, Congress created the Office of Thrift Supervision (‘OTS') and gave its director broad authority under HOLA to regulate and ‘govern the powers and operations of every Federal savings and loan association from its cradle to its corporate grave.’ ” Sturgis, 863 F.Supp.2d at 91 (quoting de la Cuesta, 458 U.S. at 145, 102 S.Ct. 3014). “This is an extremely broad grant of power that provides ample authority for the [OTS...