Demelo v. U.S. Bank National Association
727 F.3d 117
1st Cir.2013Background
- In 2004 Edimara and Edilson Demelo took a variable-rate, 30-year mortgage from federally insured Downey Savings; payments were capped to rise no more than 7.5% per year but the loan included a provision increasing payments if principal exceeded 110% of original balance.
- By February 2008 the loan principal exceeded 110% and payments doubled; plaintiffs sought assistance from Downey but received none.
- In November 2008 the Office of Thrift Supervision closed Downey and the FDIC was appointed receiver; the FDIC transferred Downey’s loans and mortgages to U.S. Bank via purchase-and-assumption and loan-sale agreements.
- The Demelos defaulted; U.S. Bank foreclosed in July 2011 and recorded a foreclosure deed after sending statutorily required notices; plaintiffs remained in possession and sued in Massachusetts state court asserting consumer-protection violations and that U.S. Bank lacked a written assignment when foreclosing.
- U.S. Bank removed to federal court; the district court granted summary judgment to U.S. Bank; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs’ state consumer-protection claims may proceed in federal court despite FIRREA | Demelo: state claims valid; FIRREA exhaustion inapplicable to consumer claims or to post-receivership assignees; also lacked notice of filing requirement | U.S. Bank: FIRREA mandates administrative claims process and bars federal jurisdiction over claims relating to acts of failed institution absent compliance | Held: FIRREA’s claims-processing/exhaustion requirement bars these claims because they arise from pre-receivership acts and plaintiffs failed to file claims with FDIC |
| Whether FIRREA’s jurisdictional bar applies to consumer claims (not just creditors) | Demelo: exhaustion limited to creditor claims; consumer claims exempt | U.S. Bank: statutory language covers “any claim relating to any act or omission” of failed institution — includes consumer claims | Held: Bar applies to consumer-protection claims (citing prior First Circuit and Third Circuit precedent) |
| Whether lack of individual mailed notice to plaintiffs excuses FIRREA exhaustion | Demelo: they were never notified of claims process, so excused from filing | U.S. Bank: FDIC provided required published notice; plaintiffs’ claims arose post-receivership and could not be "known" creditors; plaintiffs raised this issue too late and offered no evidentiary support | Held: Argument waived on appeal and unsupported; notice by publication sufficed for inchoate claims; plaintiffs not excused |
| Whether U.S. Bank could validly foreclose without a Massachusetts-style written assignment | Demelo: Massachusetts law requires written assignment of a mortgage to exercise power of sale (Ibañez) | U.S. Bank: FDIC, as receiver, transferred assets to U.S. Bank under FIRREA, which authorizes transfers “without any assignment” | Held: Federal law (FIRREA) authorizes transfer without state-formal assignment; Supremacy Clause prevents state rule from defeating FDIC-authorized transfer — foreclosure valid |
Key Cases Cited
- Marquis v. FDIC, 965 F.2d 1148 (1st Cir.) (describing FIRREA's streamlined, mandatory claims-processing regime)
- Simon v. FDIC, 48 F.3d 53 (1st Cir.) (applying FIRREA jurisdictional bar to claims related to acts of failed institution)
- Acosta-Ramírez v. Banco Popular de P.R., 712 F.3d 14 (1st Cir.) (affirming FIRREA bar post-receivership)
- Tellado v. IndyMac Mortg. Servs., 707 F.3d 275 (3d Cir.) (holding FIRREA exhaustion applies to consumer-protection claims)
- U.S. Bank Nat'l Ass'n v. Ibañez, 941 N.E.2d 40 (Mass.) (Massachusetts decision on written assignment requirement for mortgage assignments)
- Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir.) (rule that foreclosure sale does not moot claims for damages)