Stewart V. JPMorgan Chase Bank, N.A. v. Stewart (In re Stewart)

473 B.R. 612

In re Arthur Douglas STEWART and Christine Ann Stewart, Debtors.

Arthur Douglas Stewart and Christine Ann Stewart, Movants,

v.JPMorgan Chase Bank, N.A., et al., Respondents.

Arthur Douglas Stewart and Christine Ann Stewart, Plaintiffs,

v.Chase Bank and Archer Land Settlement Services, Defendants.

Bankruptcy No. 10–26939JAD.

Adversary No. 10–2654JAD.

United States Bankruptcy Court, W.D. Pennsylvania.

May 21, 2012.

David A. Colecchia, Greensburg, PA, for Movants.

James McNally, Joshua Baker, Metz Lewis Brodman Must O'Keefe LLC, Pittsburgh, PA, for Respondents.

Archer Land Settlement Services, pro se.

Ronda J. Winnecour, Pittsburgh, PA, Chapter 13 Trustee, Office of the United States Trustee.

MEMORANDUM OPINION

JEFFERY A. DELLER, Bankruptcy Judge.

The primary matter before the Court is Defendant JPMorgan Chase Bank, N.A.'s Motion to Dismiss Plaintiffs' Complaint (the “ Motion to Dismiss ”), seeking dismissal of all but two Counts asserted in the adversary complaint filed on December 24, 2010 (the “ Complaint ”). Also before the Court is a Motion to Request Derivative Standing to Exercise Trustee's Powers Under §§ 544, 547, and 548 Nunc Pro Tunc (the “ Motion for Derivative Standing ”) filed by Douglas and Christine Stewart (the “Debtors” or “Plaintiffs”) in support of Count IV alleged in the Complaint, and motion to strike filed in response thereto by the chapter 13 trustee (the “Trustee”). For the reasons set forth below this Court will grant the Motion to Dismiss in its entirety. The Court will also grant the Trustee's motion to strike the Motion for Derivative Standing in the adversary proceeding, and deny the relief requested by the Debtors therein.

I. Facts Alleged

For the purpose of evaluating the Motion to Dismiss, the Court will take the following allegations as true. The Debtors reside at 102 Magnolia Drive, Greensburg, Pennsylvania (the “Property”). In response to a flyer, the Debtors contacted Ace Mortgage Holdings LLC, (“Ace”) and completed a telephone application for mortgage refinancing. (Adv. No. 10–2654, Doc. # 1, Complaint, ¶¶ 18, 27).¹ Upon contacting Ace, the Debtors were allegedly promised a monthly payment which excluded escrow amounts for taxes and homeowners insurance. ( Id. ¶ 28).

In connection with the refinancing, Ace retained Arthur Trexler d/b/a Norwin Appraisal Services (“Trexler”) to complete an appraisal of the Property. ( Id. ¶¶ 19, 35, 37). The original appraisal figure was $345,000. ( Id. ¶ 38). The refinancing could not be completed based on this appraisal figure, so the agents and employees of Ace allegedly pressured Trexler to increase the appraisal figure to $363,000. ( Id. ¶¶ 39–41).

As a result of the Debtors' application and the revised appraisal figure, the Debtors and Ace closed on a refinancing of the Debtors' existing mortgage on or about October 26, 2007 (the “Refinancing”). ( Id. ¶¶ 21, 29, 42). The Refinancing provided the Debtors with the funds intended to satisfy their prior mortgage obligation on the Property (the “Loan”). ( Id. ¶ 21). A promissory note evidencing the Loan amount of $352,110 and mortgage were issued on the Property. ( See id. ¶ 44, Exhibits “E” and “AF”). Washington Mutual Bank (“WaMu”) was the named originator of the Loan. ( Id. ¶ 44, Exhibit “E”). The Debtors protested to Ace that they could not afford the contemplated repayment amount, but were allegedly assured that they would be permitted to refinance again in the future. ( Id. ¶ 30).

Archer Land Settlement Services (“Archer”) then prepared a HUD–1 Settlement Statement. ( Id. ¶¶ 20, 43). This HUD–1 included a yield spread premium of $10,563.13 as part of the amount financed, and failed to disclose the cost of the private mortgage insurance. ( Id. ¶¶ 46–49). Additionally, WaMu allegedly provided a “kickback” to Ace in the form of the yield spread premium in connection with the Refinancing. ( Id. at ¶ 58). Ace subsequently shared the proceeds of this kickback with other entities listed on the HUD–1 form. ( Id.). The HUD–1 provided to the Debtors was allegedly not the same HUD–1 provided to WaMu to consummate the Refinancing. ( Id. ¶¶ 56–58, 100).

On September 25, 2008, the Office of Thrift Supervision appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver for WaMu.² ( Id. ¶¶ 12–13). That same day, JPMorgan Chase Bank, N.A. (“JPMorgan”) acquired certain assets from WaMu via a Purchase and Assumption Agreement (the “Purchase Agreement”), including the note and deed of trust evidencing and securing the Debtors' Loan.³ (See Doc. # 40, Brief in Opposition to Motion to Dismiss, p. 3 and Audio Recording of Hearing Held in Courtroom D, July 29, 2011 (12:21–12:23 PM)).

At some point the Debtors defaulted on their mortgage obligation to JPMorgan. (Doc. # 40, p. 3). As a result, JPMorgan obtained a default judgment in mortgage foreclosure against the Debtors on August 6, 2010 in the Court of Common Pleas of Westmoreland County.⁴ ( See id.; see also Doc. # 18, Exhibit “A”). Shortly thereafter, the Debtors sent a rescission request to JPMorgan on or about August 8, 2010. (Doc. # 40, p. 4). The Debtors allege that this rescission request also constituted a “qualified written request” (“QWR”) under 12 U.S.C. § 2605(e). ( Complaint, ¶ 64). In a letter dated August 18, 2010, JPMorgan refused to accept the Debtors rescission request and returned several documents to the Debtors in response to the alleged QWR. ( Complaint, ¶ 6 1, Exhibit “AI”).

The Debtors filed a voluntary petition for chapter 13 bankruptcy relief on September 29, 2010. (Case No. 10–26939, Doc. # 1). The Debtors' claim the value of the Property is $225,000 and as a result of their “rescission request” list JPMorgan as the holder of a “contingent” and “disputed” unsecured claim in the amount of $347,496. ( Id. at Schedules “A” and “F”). JPMorgan filed a proof of claim in the amount of $404,123.53. ( See Case. No. 10–26939, Claim # 19). On December 24, 2010, the Debtors filed the instant Complaint against JPMorgan, Archer, and “other unknown Entities or persons.” (Case No. 10–26939, Doc. # 39, Adv. No. 10–2654, Doc. # 1).

The Complaint is comprised of a dizzying array of factual allegations and legal conclusions in support of various claims against entities linked to the Refinancing. At its core, the Complaint alleges eight counts against JPMorgan and the other defendants.

• Count I is asserted against JPMorgan and “Other Unknown Entities or Parties” for various alleged violations of the Truth in Lending Act, 15 U.S.C. § 1601et seq. (“TILA”). ( Complaint, ¶¶ 45–62).

• Count II is asserted against JPMorgan only for various alleged violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. (“RESPA”). ( Id. ¶¶ 63–73).

• Count III is asserted against JPMorgan for various alleged violations of the Fair Debt Collection Practices Act (“FDCPA”). ( Id. ¶¶ 74–82).

• Count IV is asserted against JPMorgan for an alleged “544(A)(3) PREFERENCE” and seeks to exercise the avoidance powers of the Trustee to somehow avoid JPMorgan's allegedly unperfected security interest in the Property. ( Id. ¶¶ 83–87).

• Count V is asserted against JPMorgan and alleges that through various acts JPMorgan “violated the catch-all provision of Pennsylvania's Unfair Trade Practices and Consumer Protection Law....” (the “UTPCPL”). ( Id. ¶ 91).

• Count VI is the final count alleged solely against JPMorgan and is for an alleged “breach of the implied covenant of fair dealing.” ( Id. ¶¶ 93–98).

• Count VII is asserted against JPMorgan and Archer for “civil conspiracy/fraud.” ⁵ ( Id. ¶¶ 99–102).

• Finally, Count VIII (incorrectly identified as a second “Count VII”), is asserted against Archer and alleges that through various acts, Archer “violated the catch-all provision of Pennsylvania's Unfair Trade Practices and Consumer Protection Law....” ( Id. ¶ 105).

In response to the Complaint, JPMorgan moves to dismiss all counts with the exception of Count III ⁶ and Count VIII, which is asserted against Archer only. ( See Doc. # 17). The remaining claims against JPMorgan can be split into four categories: (1) non-bankruptcy claims asserted under Counts I, II, V, VI and VII seeking damages for the acts and/or omissions of WaMu (and affiliated entities) occurring prior to the execution of the Purchase Agreement; (2) a claim for rescission or “annulment” of JPMorgan's security interest in the Property pursuant to TILA provisions alleged in Count I; (3) non-bankruptcy claims for the alleged malfeasance of JPMorgan in its capacity as a servicer of the Loan; and (4) a bankruptcy avoidance and/or preference claim against JPMorgan seeking avoid JPMorgan's allegedly unperfected security interest in the Property.

JPMorgan alleges that the first three categories of counts in the Complaint should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(1) and/or 12(b)(6), applicable in this adversary proceeding through Federal Rule of Bankruptcy Procedure 7012. Specifically, JPMorgan argues that this Court is barred from exercising subject-matter jurisdiction over the first category of claims asserted under Counts I, II, V, VI and VII, because the Debtors have failed to comply with the administrative claims resolution process required by the Financial Institutions Reform Recovery and Enforcement Act of 1989, Pub.L. No. 101–73, 103 Stat. 183 (“FIRREA”).⁷ JPMorgan also alleges that this Court lacks subject-matter jurisdiction over the Debtors' attempt to rescind the Loan (the second category of claims) as a result of the Rooker–Feldman doctrine.⁸

As to the remaining claims under Counts I, II, V, VI and VII, JPMorgan argues that this third category of claims should also be dismissed for failure to state a claim as to each of these Counts pursuant to Fed.R.Civ.P. 12(b)(6) because the Debtors have not sufficiently alleged any wrongdoing by JPMorgan.

Finally, with respect to Count IV, both JPMorgan and the Trustee assert that the...