United States Court of Appeals
For the First Circuit
No. 12-2485
EDIMARA DEMELO AND EDILSON DEMELO,
Plaintiffs, Appellants,
v.
U.S. BANK NATIONAL ASSOCIATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Selya and Thompson,
Circuit Judges.
Carmeneliza Pérez-Kudzma, with whom Pérez-Kudzma Law Office,
P.C. was on brief, for appellants.
Stephen C. Reilly, with whom Jennifer E. Greaney and Sally &
Fitch LLP were on brief, for appellee.
August 16, 2013
SELYA, Circuit Judge. The Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73,
103 Stat. 183 (codified as amended in scattered sections of 12
U.S.C.), gives federal regulators a customized set of tools with
which to ease the disruption often attendant to bank failures.
When federal regulators step in, however, parties in interest
ignore FIRREA-imposed requirements at their peril. This case, in
which we affirm the district court's entry of judgment for a
successor bank, bears witness to that verity.
I. BACKGROUND
The following facts are, for all intents and purposes,
undisputed. In December of 2004, the plaintiffs, Edimara Demelo
and her husband, Edilson Demelo, refinanced their home in Stoneham,
Massachusetts by means of a new $388,000 loan from Downey Savings
and Loan Association, a federally insured financial institution.
The variable rate loan was amortized on a 30-year schedule, secured
by a first mortgage, and structured so that the first year's
monthly payments would remain fixed. In subsequent years, the
borrowers' payments would fluctuate as the interest rate varied,
but those payments could not be increased by more than 7.5 percent
over the prior year's payments.
This sort of arrangement has the potential to inflate a
loan's principal balance as the monthly payments may be
insufficient to cover escalating interest rates in full. With this
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eventuality in mind, the loan documents provided that the monthly
payments would be increased to cover the entire owed principal and
interest in the event that the outstanding principal balance
reached 110 percent of the original loan amount.
That is what happened here: in February of 2008 — after
four years of controlled monthly payments and steadily mounting
interest rates — the plaintiffs' monthly loan payment doubled to
account for the substantial growth of the underlying principal
balance. The plaintiffs reached out to Downey Savings for
assistance, but none was forthcoming.
What goes around comes around and, in November of 2008,
the Office of Thrift Supervision closed Downey Savings and
appointed the Federal Deposit Insurance Corporation (FDIC) as its
receiver. See 12 U.S.C. § 1821(c)(3)(A); 75 Fed. Reg. 45114-01,
2010 WL 2990405 (Aug. 2, 2010). The FDIC entered into both a
purchase and assumption agreement and a loan sale agreement with
the defendant, U.S. Bank. By virtue of these agreements, U.S. Bank
assumed all of Downey Savings' loans and mortgages.
The plaintiffs subsequently defaulted on their mortgage
loan, and U.S. Bank initiated foreclosure proceedings. In June of
2011, U.S. Bank sent, by certified mail, to each of the plaintiffs
a "Notice of Mortgagee's Sale of Real Estate." See Mass. Gen. Laws
ch. 244, § 14. The plaintiffs executed receipts confirming that
each of them had received this mailing. Concurrently, U.S. Bank
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caused to be published on three separate occasions notice of the
foreclosure sale.
On July 25, 2011, U.S. Bank conducted a foreclosure sale
and later recorded a foreclosure deed. Despite the foreclosure
sale and several attempts to evict them through summary process,
the plaintiffs continued to occupy the demised premises. Several
months after the consummation of the foreclosure sale, the
plaintiffs went on the offensive. They sued U.S. Bank in a
Massachusetts state court, seeking money damages and injunctive
relief. They claimed, among other things, that the loan made by
Downey Savings violated various state consumer protection laws and
that the foreclosure was unlawful.
Citing diversity of citizenship and the existence of a
controversy in the requisite amount, U.S. Bank removed the case to
the federal district court. See 28 U.S.C. §§ 1332(a), 1441. It
then moved to dismiss the plaintiffs' complaint. See Fed. R. Civ.
P. 12(b)(1), (b)(6). The district court dismissed some but not all
of the plaintiffs' claims. U.S. Bank proceeded to answer what was
left of the complaint.
U.S. Bank soon moved for summary judgment, see Fed. R.
Civ. P. 56, renewing its jurisdictional argument and adding other
arguments. The plaintiffs opposed this motion but the district
court, ruling ore tenus, granted it.
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The plaintiffs appeal. They train their sights on the
district court's summary judgment ruling. Specifically, they
maintain that the loan violated the Borrower's Interest Act, see
Mass. Gen. Laws ch. 183, § 28C; that it violated the Predatory Home
Loan Practices Act, see id. ch. 183C, §§ 1-19; and that the
foreclosure sale was invalid because U.S. Bank did not have a
specific written assignment of the mortgage as required by state
law.
II. ANALYSIS
We review an order granting summary judgment de novo,
taking the properly documented facts and all reasonable inferences
therefrom in the light most agreeable to the non-moving parties
(here, the plaintiffs). See Houlton Citizens' Coal. v. Town of
Houlton, 175 F.3d 178, 184 (1st Cir. 1999).
A. The Consumer Protection Claims.
The plaintiffs have advanced state statutory claims
predicated on the Borrower's Interest Act and the Predatory Home
Loan Practices Act. These claims have a common thread: each
asserts that Downey Savings, in making the loan, violated a state
consumer protection law. The plaintiffs assign error to the
district court's entry of summary judgment on these claims.
We pause to note a potential source of uncertainty. The
district court's dispositive ruling was made by way of a bench
decision. This decision is unclear as to which of the several
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grounds urged by U.S. Bank for rejecting the claims the court found
persuasive. Because we are not restricted to the district court's
reasoning but may affirm its entry of summary judgment on any basis
made manifest by the record, see id., this lack of clarity does not
require us to remand for further elucidation. Rather, we simply
hinge our adjudication on FIRREA's jurisdictional bar.1
FIRREA sets forth a detailed claims-processing regime.
See 12 U.S.C. § 1821(d)(3)-(13). This regime affords "a
streamlined method for resolving most claims against failed
institutions in a prompt, orderly fashion, without lengthy
litigation." Marquis v. FDIC, 965 F.2d 1148, 1152 (1st Cir. 1992).
The FDIC, once ensconced as receiver, must publish a notice
requiring claims to be filed with it by a specified date. 12
U.S.C. § 1821(d)(3)(B)(i). It has 180 days within which to approve
or disallow a filed claim. Id. § 1821(d)(5)(A)(i). Disappointed
claimants may either pursue an administrative review process or
seek judicial review in an appropriate federal district court. Id.
§ 1821(d)(6)(A).
This claims-processing regime is not optional:
participation in it is "mandatory for all parties asserting claims
against failed institutions." Marquis, 965 F.2d at 1151. The
1
Because the jurisdictional bar defeats the plaintiffs'
consumer protection claims, see text infra, we need not address the
other grounds for summary judgment advanced by U.S. Bank.
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failure to pursue an administrative claim is fatal. See id. at
1152-53.
In the case at hand, the FDIC published the notice that
FIRREA requires. See 12 U.S.C. § 1821(d)(3)(B)(i). Since the
plaintiffs' consumer protection claims arise out of and relate
exclusively to pre-receivership acts or omissions of the failed
financial institution (Downey Savings), the plaintiffs' eschewal of
the claims-processing regime renders those claims nugatory. We
explain briefly.
FIRREA proscribes judicial review of covered claims
where, as here, plaintiffs have failed to comply with the
statutorily mandated claims-processing regime. This proscription
is clear as a bell. The statute unambiguously states (with
exceptions not relevant here):
[N]o 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 [FDIC] has been
appointed receiver, including assets which the
[FDIC] may acquire from itself as such
receiver; or
(ii) any claim relating to any act or omission
of [the failed] institution or the [FDIC] as
receiver.
Id. § 1821(d)(13)(D). This language operates to strip the federal
district courts of subject-matter jurisdiction whenever a plaintiff
tries to pursue a covered claim without going through the claims-
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processing regime. See Acosta-Ramírez v. Banco Popular de P.R.,
712 F.3d 14, 19-20 (1st Cir. 2013); Simon v. FDIC, 48 F.3d 53, 56-
57 (1st Cir. 1995). We conclude, therefore, that because the
plaintiffs did not comply with the requirements of the claims-
processing regime, the jurisdictional bar erected by section
1821(d)(13)(D) pretermits their consumer protection claims.
The plaintiffs make three feeble efforts to forestall
this conclusion. None of these efforts carries the day.
First, the plaintiffs contend that the statutory claims-
processing regime and the corresponding jurisdictional bar apply
only to claims against the FDIC while the failed bank is under
receivership. This contention is quixotic. The language of the
statute precludes such an interpretation: the challenged provision
explicitly applies to any act or omission of the failed financial
institution. See 12 U.S.C. § 1821(d)(13)(D)(ii).
There is, moreover, no principled basis for the
plaintiffs' implication that the jurisdictional bar exists only
during the currency of a receivership. Our cases leave no doubt
that such a circumscription does not exist. See, e.g., Royal Car
Rental, Inc. v. Banco Popular de P.R., No. 12-2131, 2013 WL
2278613, at *2 (1st Cir. May 24, 2013) (per curiam) (applying
FIRREA's jurisdictional bar post-receivership); Acosta-Ramírez, 712
F.3d at 18-20 (same).
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This brings us to the plaintiffs' second proposed escape
hatch: their ipse dixit that FIRREA's exhaustion requirement
applies only to creditors' claims and not to consumer claims. Once
again, the language of the relevant statutory provision compels us
to reject the plaintiffs' proposed limitation.
FIRREA explicitly bars jurisdiction over "any claim
relating to any act or omission" of the failed financial
institution. 12 U.S.C. § 1821(d)(13)(D)(ii) (emphasis supplied).
We have given this provision the full scope that its text demands
and, in doing so, we have not limited it to creditors' claims.
See, e.g., Simon, 48 F.3d at 56-57 (enforcing jurisdictional bar
when parties asserting a defense to a contingent loan guaranty
failed to comply with FIRREA's claims-processing regime); Lloyd v.
FDIC, 22 F.3d 335, 337 (1st Cir. 1994) (holding that a mortgagor's
complaints "lie in the maw of" section 1821(d)(13)(D)). It is,
therefore, unsurprising that the only court of appeals to have
squarely addressed the relatively novel proposition advanced by the
plaintiffs has held — as we hold today — that FIRREA's
jurisdictional bar applies unreservedly to consumer protection
claims. See Tellado v. IndyMac Mortg. Servs., 707 F.3d 275, 279-81
(3d Cir. 2013).
The Tenth Circuit's decision in Homeland Stores, Inc. v.
Resolution Trust Corp., 17 F.3d 1269 (10th Cir. 1994), much bruited
by the plaintiffs, is not to the contrary. The Homeland court held
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that claims arising from the post-receivership management of assets
— that is, actions taken pursuant to the FDIC's conservator powers
— are not subject to FIRREA's jurisdictional bar. Id. at 1275.
This holding, as to which we take no view, does not help the
plaintiffs because their claims arise exclusively from pre-
receivership conduct of the failed financial institution.
The plaintiffs make a further attempt to execute an end
run around the sweeping language of FIRREA's jurisdictional bar.
This attempted end run rests on 12 U.S.C. § 1821(d)(10). But this
specialized provision deals with the payment of claims (not the
filing of claims) and specifically references "creditor claims."
It is, however, wholly separate from the jurisdictional bar erected
by section 1821(d)(13)(D). Consequently, the plaintiffs' reliance
on the specialized payment-of-claims provision is misplaced.2
Third — and finally — the plaintiffs argue that they
should be excused from FIRREA's exhaustion requirement because they
2
Indeed, the inclusion of the specific term "creditor" in
section 1821(d)(10) and its omission from section
1821(d)(13)(D)(ii) cuts against the plaintiffs' position. See,
e.g., Citizens Awareness Network, Inc. v. United States, 391 F.3d
338, 346 (1st Cir. 2004) ("The principle is clear that Congress's
use of differential language in various sections of the same
statute is presumed to be intentional and deserves interpretive
weight."). As we have said, "[i]t is an orthodox tenet of
statutory construction that where Congress includes particular
language in one section of a statute, but omits it in another
section of the same Act, it is generally presumed that Congress
acts intentionally and purposely in the disparate inclusion or
exclusion." In re 229 Main St. Ltd. P'ship, 262 F.3d 1, 5-6 (1st
Cir. 2001) (internal quotation marks omitted).
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were never notified of their opportunity to file claims. But this
argument is raised for the first time on appeal, and the attempt to
raise it runs headlong into one of the mainstays of the catechism
of appellate practice: "If any principle is settled in this
circuit, it is that, absent the most extraordinary circumstances,
legal theories not raised squarely in the lower court cannot be
broached for the first time on appeal." Teamsters, Chauffeurs,
Warehousemen & Helpers Union, Local No. 59 v. Superline Transp.
Co., 953 F.2d 17, 21 (1st Cir. 1992). No extraordinary
circumstances sufficient to warrant disregarding this important
principle exist here.
At any rate, the summary judgment record contains no
evidentiary support for the plaintiffs' belated contention that
they were unaware of the need to file an administrative claim. It
is elementary that a "non-moving party must point to facts
memorialized by materials of evidentiary quality and reasonable
inferences therefrom to forestall the entry of summary judgment."
Certain Interested Underwriters at Lloyd's v. Stolberg, 680 F.3d
61, 65 (1st Cir. 2012). This infirmity may be a direct result of
the plaintiffs' failure to raise the argument below; but whatever
the cause, the infirmity is terminal.
In any event, the argument lacks force. FIRREA only
requires that the FDIC mail notice to known creditors or claimants,
see 12 U.S.C. § 1821(d)(3)(C), and the plaintiffs' claims were not
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advanced until well after Downey Savings failed. Thus, they could
not have been known to the FDIC at the time of receivership.
Notice was given by publication, and notice by publication is
sufficient for inchoate claims. See, e.g., Freeman v. FDIC, 56
F.3d 1394, 1402 (D.C. Cir. 1995); Meliezer v. Resolution Trust Co.,
952 F.2d 879, 882-83 (5th Cir. 1992); cf. Tellado, 707 F.3d at 281
(holding that "[t]he fact that the deadline for bringing a claim
through the administrative process may have passed" does not
preclude the application of FIRREA's jurisdictional bar).
We add, moreover, that once an inchoate claim
materializes, FIRREA creates a pathway for the holder of such a
claim to introduce it into the claims-processing regime. See 12
U.S.C. §§ 1821(d)(5)(A)(ii), (C)(ii). The plaintiffs have not
tried to invoke this remedy.
There is one loose end. A recent decision of the
Massachusetts Supreme Judicial Court (SJC) cited by the plaintiffs
at oral argument held that when a high-cost mortgage loan is
assigned, the assignee bank is liable for "all affirmative claims
and defenses." Drakopoulos v. U.S. Bank Nat'l Ass'n, ___ N.E.2d
___, ___ (Mass. 2013) (2013 WL 3470485, at *3 & n.11) (citing Mass.
Gen. Laws ch. 183C, § 15(a)). "[A]ll affirmative claims," the SJC
determined, includes not only those brought under the Predatory
Home Loan Practices Act but also other consumer protection
statutes. Id. This determination of successor liability has no
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bearing for us because here, unlike in Drakopoulos, U.S. Bank
acquired the mortgage by way of the powers vested in the FDIC under
FIRREA. Thus, the plaintiffs' claims are subject to FIRREA's
statutory scheme, specifically the claims-processing requirements
and corresponding jurisdictional bar. See 12 U.S.C.
§ 1821(d)(13)(D). The plaintiffs do not assert any independent
claim against U.S. Bank for its actions.
That ends this aspect of the matter. We hold, without
serious question, that FIRREA's exhaustion requirement applies
four-square to the plaintiffs' consumer protection claims. It
follows inexorably that the plaintiffs' failure to file those
claims with the FDIC divested the district court of subject-matter
jurisdiction. Consequently, the claims were appropriately
jettisoned.
B. The Remaining Claim.
We proceed to the plaintiffs' remaining claim: that the
foreclosure sale was unlawful because U.S. Bank did not possess a
written assignment of the mortgage at the time of foreclosure (and,
thus, could not validly exercise the power of sale contained in the
mortgage). The plaintiffs base this claim on the strictures of a
state statute requiring transfers of interests in land to be in
writing. See Mass. Gen. Laws ch. 183, § 3. This statute, as
interpreted by the SJC, applies to assignments of mortgages on real
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property. See U.S. Bank Nat'l Ass'n v. Ibañez, 941 N.E.2d 40, 51-
54 (Mass. 2011).
We pause at the threshold to make clear that this claim
is not moot. The consummation of the foreclosure sale does not
render the claim moot because the plaintiffs' complaint, in part,
prays for money damages as a means of ameliorating the asserted
wrong. See Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282,
290 (1st Cir. 2013). We turn, therefore, to the merits of the
claim.
The FDIC, as a matter of federal law, succeeded to the
assets of Downey Savings as receiver. See 12 U.S.C.
§ 1821(d)(2)(A). Acting in that capacity, the FDIC was empowered
by federal law to "transfer any asset or liability of [the failed
bank] . . . without any approval, assignment, or consent with
respect to such transfer." Id. § 1821(d)(2)(G)(i)(II). The
plaintiffs do not contest that the FDIC, pursuant to this
authority, transferred all of Downey Savings' mortgages and loans
(including the mortgage and loan at issue here) to U.S. Bank.
The plaintiffs argue that these circumstances are not
enough to permit U.S. Bank to exercise a power-of-sale provision in
a transferred mortgage. They point out that the property is in
Massachusetts and that Massachusetts law requires a specific
written assignment of a real estate mortgage. See Ibañez, 941
N.E.2d at 51-53. This argument is all sizzle and no steak.
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The plaintiffs' mortgage was assigned to U.S. Bank by
operation of federal law, which specifically authorizes the FDIC to
transfer assets of a failed financial institution "without . . .
assignment." 12 U.S.C. § 1821(d)(2)(G)(i)(II). To demand anything
beyond what is spelled out in FIRREA's statutory scheme would
require us to turn the Supremacy Clause, U.S. Const. art. VI, cl.
2, upside down. We hold that a transfer of a mortgage, authorized
by federal law, obviates the need for the specific written
assignment that state law would otherwise require. Accordingly,
the district court did not err in granting summary judgment on this
claim.
III. CONCLUSION
We need go no further. For the reasons elucidated above,
the judgment of the district court is affirmed.
Affirmed.
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