860 F. Supp. 2d 574
E.D. Tenn.2012Background
- Plaintiffs entered into a 2003 loan with Washington Mutual Bank for $525,000 to purchase property in Knoxville, TN; WAMU held a deed of trust securing the loan.
- FDIC closed WAMU in 2008 and transferred its assets to Chase; plaintiffs allege the loan was assigned to the 2003-AR3 Trust before closure.
- Plaintiffs filed Chapter 7 petitions in Feb 2011 listing Chase as a secured creditor and alleging Chase held a First Mortgage or security interest in the Property.
- Chase moved to lift the automatic stay and for abandonment, arguing it had a valid, perfected security interest and sought relief under §362(d).
- Bankruptcy Court granted relief from stay on April 28, 2011, noting Chase’s valid security interest and grounds to terminate the stay for cause.
- On Oct 17, 2011, plaintiffs filed a state-court action asserting misrepresentations about standing to foreclose, predatory lending, FDCPA/RESPA violations, unfair practices, and a quiet title claim; Chase removed the case to federal court and moved to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether WAMU/Chase liability is barred by res judicata or collateral estoppel | Grella/Lebbos compel not bar plaintiffs’ claims | PAA precludes liability for pre-2008 WAMU actions | Res judicata/collateral estoppel do not bar first/fifth actions |
| Whether second, third, and fourth claims are barred by the PAA | Claims relate to WAMU origination; not precluded | Chase did not assume WAMU borrower claims under PAA | Second, third, and fourth claims dismissed |
| Whether the PAA precludes liability for actions arising before September 25, 2008 | Plaintiffs’ claims involve Chase’s standing to foreclose, not WAMU | PAA excludes liability for borrower claims related to WAMU actions | PAA does not bar first/fifth claims; they may proceed |
Key Cases Cited
- Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26 (1st Cir. 1994) (issue preclusion limits in relief-from-stay context; not broad liability)
- Lebbos v. Lebbos, 455 B.R. 607 (Bankr. E.D. Mich. 2011) (limited scope of §362(d) relief; no broad res judicata effect)
- Gossen v. JPMorgan Chase Bank, 819 F.Supp.2d 1162 (W.D. Wash. 2011) (PAA; no liability for pre-2008 borrower claims)
- McCann v. Quality Loan Serv. Corp., 729 F.Supp.2d 1238 (W.D. Wash. 2010) (pre-2008 origination-related claims not liability for Chase)