MEMORANDUM OPINION
The primary matter before the Court is Defendant JPMorgan Chase Bank, N.A.’s
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).
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).
At some point the Debtors defaulted on their mortgage obligation to JPMorgan. (Doe. # 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.
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
• 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. § 1601 et seq. (“TILA”). (Complaint, ¶¶ 45-62).
• Count II is asserted against JPMor-gan 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 JPMor-gan for various alleged violations of the Fair Debt Collection Practices Act (“FDCPA”). (Id. ¶¶ 74-82).
• Count IV is asserted against JPMor-gan 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 JPMor-gan and Archer for “civil conspiracy/fraud.”
• 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, JPMor-gan moves to dismiss all counts with the exception of Count III
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 Bank
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 Debtors lack standing to pursue an avoidance action alleged under Chapter 5 of the Bankruptcy Code. In support, both parties assert that in a chapter 13 case the plain language of the Bankruptcy Code prohibits any party other than the Trustee from exercising the various “strong arm” powers outline in Chapter 5. The Trustee also argues that the Debtors have failed to articulate a cause of action for avoidance under either §§ 544, 547 or 548 of the Bankruptcy Code.
II. Jurisdiction
To the extent this Court has jurisdiction over this adversary proceeding, it has such jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (K) and (O).
III. Standards and Order of Evaluation
A. Motion to Dismiss Under 12(b)(1)
A motion to dismiss under Fed.R.Civ.P. 12(b)(1) “may present either a facial or a factual challenge to the court’s jurisdiction.” PennEnvironment v. RRI Energy Northeast Management Co.,
B. Motion to Dismiss Under 12(b)(6)
The Supreme Court has recently clarified the pleading standard for evaluating a motion to dismiss under Fed.R.Civ.P. 12(b)(6). See Ashcroft v. Iqbal,
The United States Court of Appeals for the Third Circuit has instructed district courts to incorporate two “working principles” when presented with a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Fowler v. UPMC Shadyside,
C. Order of Evaluation
At the July 29, 2011 hearing on the Motion to Dismiss, the arguments of the parties closely echoed their briefs and primarily concerned whether this Court had subject-matter jurisdiction over the majority of the claims alleged in the Complaint. This also marked the start of the evolution of the Debtors’ arguments concerning Count IV and the order in which this Court should consider the counts alleged in the Complaint. In essence, the Debtors’ contend that the Court should consider the merits of the Debtors’ Complaint, specifically Count IV of the Complaint, first before any consideration should be had of the subject-matter jurisdiction of this Court. The Court, however, declines the Debtors’ invitation and instead determines that it must consider its subject-matter jurisdiction as a threshold determination before it can consider the merit of the allegations contained within the Complaint.
Further confusing the Debtors’ position as to Count IV, was the Debtors’ new-found insistence that the only way they could get “back to” the merits of the other counts in the Complaint, would be if they were successful in avoiding the foreclosure judgment under Count IV. (See Audio Recording of Hearing Held in Courtroom D, September 7, 2011 (11:05-11:07)). Implicitly here, the Debtors’ concede that absent a successful preference claim under 11 U.S.C. § 547, the Debtors’ other claims are without merit. Once again, this contradicted the Debtors’ argument proffered at the July 29 hearing that Count IV was “essentially inseparable” from their argument that the Loan was effectively rescinded under TILA. (See Audio Recording of Hearing Held in Courtroom D, July 29, 2011 (12:23-12:25 PM)). While the Debtors’ position as to what they were alleging in Count IV continued to evolve, the Trustee and JPMorgan were steadfast in their opposition to the Debtors’ attempt to exercise the avoidance powers of the Trustee. (See Doc. #49; see also Audio Recording of Hearing Held in Courtroom D, September 7, 2011 (11:08-11:10 AM)).
As the Debtors were unclear regarding the level of interdependency between Count IV and the other counts alleged in the Complaint, the Court provided the parties with the opportunity to brief, inter alia, the issue as to what order this Court should consider the allegations in the Complaint. (See Audio Recording of Hearing Held in Courtroom D, September 7, 2011 (11:33-11:35 AM)). In the supplemental briefing filed by the Trustee and JPMor-gan on the issue of derivative standing, neither party addressed this issue. (See Doc. ## 57, 58, 60). The Debtors also did not address this issue in their -reply to the supplemental briefing filed in the main case on February 19, 2012. (See Case No. 10-26939, Debtors’ Brief in Reply to the Trustee’s Supplemental Brief Opposing
IV. FIRREA Jurisdictional Bar
JPMorgan alleges that the mandatory administrative claims process outlined in FIRREA bars this Court from exercising subject-matter jurisdiction over the first category of claims asserted in Counts I, II, V, VI and VII. FIRREA is a statute that creates a procedure for administering claims filed against failed depository institutions. See Praxis Properties, Inc. v. Colonial Sav. Bank, S.L.A.,
Pursuant to FIRREA, when the FDIC is appointed as receiver of a closed depository institution, it succeeds to “all rights, titles, powers and privileges of the insured depository institution.... ” 12 U.S.C. § 1821 (d)(2)(A)(i). The FDIC may subsequently “transfer any asset or liability of the institution....” 12 U.S.C. § 182 1 (d) (2) (G) (i) (II).
To create an efficient process for the handling of claims against a failed lending institution, FIRREA requires the FDIC to provide notice of the institution’s failure to the creditors of the institution and such notice directs those creditors to present their claims by a bar date specified on the notice. 12 U.S.C. § 1821(d)(3)(B). Claims that are not filed with the FDIC by the bar date are generally disallowed. 12 U.S.C. § 1821(d)(5)(C)®. As to timely filed claims, the FDIC has 180 days from the date a claim is filed to either allow or disallow it. 12 U.S.C. § 1821(d)(5)(A). If the claim is not ruled upon within this time frame, or is denied, the claimant has 60 days to seek an administrative review or file an action in the district court. 12 U.S.C. § 1821(d)(6)(A). If the claimant fails to exercise either option, the “claimant shall have no further rights or remedies with respect to such claim.” 12 U.S.C. § 1821(d)(6)(B).
As the result of the availability of this administrative process, FIRREA bars any court from exercising 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 Corporation has been appointed receiver, including assets which the Corporation may acquire from itself as such receiver; or
(ii) any claim relating to any act or omission of such institution or the Corporation as receiver.
12 U.S.C. § 1821(d)(13)(D).
A
By and large, Counts I, II, V, VI and VII of the Complaint, are based solely on the conduct of WaMu and its alleged affiliates during the Refinancing. As the bulk of allegations in each of the respective counts relate to “any act of omission of [WaMu] or the Corporation as a receiver ...” they are subject to the jurisdictional bar imposed by FIRREA. See 12 U.S.C. § 1821(d)(13)(D). Because FIRREA prohibits all courts from hearing any such claims, JPMorgan’s Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(1) will be granted as to the first category of claims alleged.
Count I avers that WaMu violated various provisions of TILA by calculating a yield spread premium as part of the “amount financed” rather than as a finance charge, and by failing to disclose the cost of private mortgage insurance as part of the HUD-1. (Complaint, ¶¶ 48-52). The Debtors also aver through Count I that ‘WAMU or other unknown parties or entities” violated RE SPA by allegedly providing a “kickback” to Ace in the form of the yield-spread premium in question. (Id. ¶ 58). Finally, the Debtors allege that through the Refinancing, WaMu and Ace engaged in a “churning” of the Debtors’ account “to secure unnecessary and spurious brokerage fees and interest charges.” (Id. ¶ 54).
Even if the allegations in Count I were sufficiently plead, they only relate to the alleged “act[s] or omissionfs]” of WaMu and other parties to the Refinancing. It is undisputed that the Refinancing was concluded prior to the time that JPMorgan acquired the assets of WaMu from the FDIC. (See, e.g., Complaint, ¶¶ 13, 21; Doc. # 40, p. 3). Therefore, the claims for damages asserted in Count I may only be resolved through the administrative claims procedure required by FIRREA.
Count II alleges that, among other things, the yield spread premium was used as a “kickback” to fund the loan and pay closing costs. (See Complaint, ¶ 67). Count II also alleges that the Debtor’s were required to purchase title insurance from WaMu’s alleged title insurer in violation of RESPA. (Id. ¶¶ 67-73). Once again, these allegations concern only the acts of WaMu and its alleged affiliates in connection with the Refinancing. Thus this Court lacks subject-matter jurisdiction to hear these claims pursuant to FIRREA. See 12 U.S.C. § 1821(d)(18)(D).
In Count V the Debtors allege that the UTPCPL was violated because of inaccurate disclosures in the HUD-1, RESPA was not complied with, a “kickback” was paid, and JPMorgan “as the successor to WAMU” was “lying to the [Debtors] for its own material benefit ...” in relation to the Refinancing. (Complaint, ¶ 91). Count VI alleges that in addition to all of the acts alleged in Count V, JPMorgan breached
As with the great majority of the claims alleged in Counts I and II, the claims in Counts V, VI and VII concern acts that occurred during the Refinancing. As a result, the alleged “act[s] and omissionfs]” complained of could have only occurred at the behest of WaMu and/or its alleged affiliates and not JPMorgan. Thus, these claims fall squarely into the jurisdictional bar imposed by FIRREA in § 1821(d)(13)(D), and must be asserted through FIRREA’s administrative claims process.
Throughout the Complaint, the Debtors refer to JPMorgan as the “successor” to WaMu (Id. ¶¶ 96, 100), “successor in interest” to WaMu (Id. ¶ 67), WaMu’s “alter-ego” (Id. ¶¶ 92), and use WaMu and JPMorgan interchangeably because JPMorgan acquired the WaMu assets. (Id. ¶¶ 60, 97). These characterizations are not enough to foist liability upon JPMorgan outside of the claims process set forth in FIRREA. The fact remains that the jurisdictional bar outlined by FIR-REA applies not only to the receiver of a failed institution’s assets, but also to third-party purchasers of the assets of the failed institution. See Aber-Shukofsky v. JPMorgan Chase & Co.,
B.
Though the Debtors admit that “the Administrative Courts of the FDIC have broad powers to determine the liabilities of the failed bank, WAMU,” they proffer two arguments in support of their position that this Court maintains subject-matter jurisdiction over the first category of claims in Counts I, II, V, VI and VII. (Doc. # 40, p. 7). First, the Debtors allege that this Court may adjudicate the first category of claims because JPMorgan “waived” its FIRREA jurisdictional protections by filing a proof of claim in the Debtors’ bankruptcy case. (See id. at pp. 8-10). Second, the Debtors argue that because JPMorgan “never asserted that FIRREA applied to the [Debtors’] mortgage” prior to filing its Motion to Dismiss, JPMorgan is collaterally and/or equitably estopped from asserting FIRREA jurisdictional provisions.
1.
As an initial matter, this Court must deny the alternate relief sought by the Debtors. Generally, courts that do not maintain subject-matter jurisdiction over an action do not have the authority to transfer that action pursuant to 28 U.S.C. § 1406. Atlantic Ship Rigging Co. v. McLellan,
This Court does recognize, however, that courts lacking jurisdiction maintain the ability to transfer an “action or appeal to any other such court in which the action or appeal could have been brought ...” if such a transfer is in the interest of justice. 28 U.S.C. § 1631. Nevertheless, even if the Debtors sought relief under this seemingly more appropriate statutory provision, a transfer would not be available under these circumstances. Section 1631 of title 28 only enables a transfer to “courts,” and administrative bodies such as the FDIC are not “courts” under the applicable statutory definition. Schafer v. DOI,
2.
The Debtors’ second argument, averring that JPMorgan is “estopped” from asserting a lack of subject-matter jurisdiction, is equally without merit. The Debtors assert that by not raising FIR-REA while rejecting the Debtors’ request to rescind the Loan, JPMorgan is somehow estopped from relying on the FIR-REA jurisdictional bar. (Doc. # 40, p. 11). The Debtors do not cite, and the Court cannot find, any authority to support this theory. To the contrary, it is well-settled that subject-matter jurisdiction may be challenged at any time.
3.
Finally, the Debtors’ waiver argument, based upon JPMorgan’s filing of a proof of claim, must also be rejected. Specifically, the Debtors assert that by filing a proof of claim in the Debtors’ bankruptcy case, JPMorgan waived “its FIRREA protections” thereby allowing this bankruptcy court to exercise subject-matter jurisdiction over the Debtors’ “counterclaims” to the proof of claim filed by JPMorgan. (See Doc. #40, pp. 8-10). In support of this proposition the Debtors cite three case from the Supreme Court: Langenkamp v. Culp,
As an initial matter, the Debtors’ position that the cases cited concern the waiver of a bar to the exercise of subject-matter jurisdiction is misguided. Each of the cases cited concerns limitations contained in Article III of the United States Constitution regarding the ability of bankruptcy courts to finally adjudicate certain cases and controversies. See Katchen v. Landy,
This Court has previously held that parties may consent (or waive their ability to object) to the final adjudication of certain cases or controversies by the bankruptcy court. See Ardi Limited P’ship v. The Buncher Co. (In re River Entertainment Co.), Bankr.No. 07-024515, Adv. No. 10-2495,
Moreover, the Supreme Court’s holding in Stem directly contradicts the premise for which the Debtors appear to cite the case. Stem held that bankruptcy courts lack the constitutional authority to enter a final judgment on a state-law tort counterclaim, when the adjudication of that counterclaim would not “necessarily be resolved in the claims allowances process.” Stem,
Just because JPMorgan has filed a proof of claim in the Debtors’ bankruptcy does not mean it has consented to resolution of all matters between itself and the Debtors in this Court. Nor does it mean that JPMorgan has, or could have, waived the jurisdictional bar imposed by the FIRREA exhaustion requirement. As noted in Stem, to infer consent from the mere filing of a claim would be inappropriate, as those parties holding claims against a debtor in bankruptcy do not have a forum outside of the bankruptcy court where they may seek to recover from the debtor’s estate. Id. at 2614. Concluding otherwise would leave JPMorgan with the Hobson’s choice of either: (1) forgoing the FIRREA’s statutory procedure for resolving disputes, or (2) abandoning its claim against the Debtors entirely. This Court simply does not believe that Congress intended such a result
In sum, the claims for damages in Counts I, II, V, VI and VII, concern only the “act[s] or omission[s]” of WaMu and other entities allegedly involved in the Refinancing prior to the execution of the Purchase Agreement. As a result, 12 U.S.C. § 1821(d)(13)(D) bars any court from exercising jurisdiction over these claims until the Debtors have exhausted the FIRREA administrative process. The Debtors’ contentions that JPMorgan has somehow created subject-matter jurisdiction in the bankruptcy court through waiver or estoppel are without merit. Additionally, the Debtors have failed to establish a right to have the claims transferred to an administrative body. As the Debtors do not allege that they have exhausted their administrative remedies as required by FIRREA, this Court does not have subject-matter jurisdiction over the first category of claims asserted.
Being that this Court does not maintain subject-matter jurisdiction over the first category of claims alleged in the Complaint, there is no need to address the other grounds for dismissal put forward in the Motion to Dismiss. Therefore, this Court will enter an order dismissing the claims for damages alleged in Count I, II, V, VI and VII, without prejudice to the Debtors’ ability to re-file the claims in a proper forum.
C.
Though the majority of the Debtors’ claims in Counts I, II, V, VI and VII are subject the FIRREA jurisdictional bar, FIRREA does not preclude this Court from exercising subject-matter jurisdiction over claims that are “true” defenses to the proof of claim asserted by JPMorgan in the Debtors’ case.
The United States Court of Appeals for the Third Circuit was careful to stress that the defenses asserted must be “true” defenses and not just counterclaims camouflaged as defenses for the purpose of skirting the FIRREA jurisdictional bar. Id. at 394. In distinguishing between a “claim” and a “defense” the Third Circuit Court of Appeals states that a “defense” is a “response to the claims of the other party setting forth reasons why the claims should not be granted” and an “affirmative defense” “attacks the plaintiffs [legal] right to bring an action.... ” Id. at 393 (citing Black’s Law Dictionary 419, 60 (6th ed. 1990)). Alternatively, the Court defined a “claim” as “essentially an action which asserts a right to payment.” Id. at 394.
It is clear that the first category of claims asserted by the Debtors are not affirmative defenses but are “claims” subject the FIRREA jurisdictional bar. See Rundgren v. Washington Mut. Bank, F.A., No. 09-00495,
The Debtors’ have inaccurately characterized all of the claims in the Complaint as “counterclaim[s] against [JPMor-gan’s] proof of claim_” (See Doc. # 40, p. 10). This characterization is contrary to the Debtors’ own interests as “counterclaims” are expressly barred by FIRREA. See National Union,
The United States Court of Appeals for the Third Circuit has identified rescission as an “affirmative defense” and not a claim. See id. Additionally, without reaching the substantive issue of what affect the Purchase Agreement between the FDIC and JPMorgan might have on the validity of the Debtors claim, a TILA claim for rescission may be lodged against “any assignee of the obligation.” See 15 U.S.C. § 1641(c). Therefore, as JPMorgan remains the assignee of the Debtors’ mortgage, rescission under TILA is a defense that the Debtors may assert against JPMorgan’s claim filed in the Debtors’ bankruptcy case. See Rundgren,
V. Rooker-Feldman Doctrine
As described above, FIRREA does not bar this Court from exercising jurisdiction over the Debtors’ TILA claim for rescission. However, review is barred by the Rooker-Feldman doctrine.
A.
The Rooker-Feldman doctrine states that federal courts, other than the U.S. Supreme Court, are prohibited “from exercising appellate jurisdiction over final state-court judgments.” Lance v. Dennis,
According to the United States Court of Appeals for the Third Circuit, there are now four elements that must be satisfied for the Rooker-Feldman doctrine to apply: “(1) the federal plaintiff lost in state court; (2) the plaintiff ‘complaints] of injuries caused by [the] state-court judgments’; (3) those judgments were rendered before the federal suit was filed; and (4) the plaintiff is inviting the district court to review and reject the state judgments.” Great Western Mining & Mineral Co. v. Fox Rothschild LLP,
The Debtors concede that both the first and third elements of the Great Western test are satisfied. (See Doc. # 40, p. 15). The Court reaches this conclusion because the Debtors admit that they “lost” at the state court level as a result of the foreclosure judgment entered against them on August 6, 2010. (See id.). The Debtors also admit that the judgment in mortgage
The Debtors, however, insist that they are not complaining of any injury caused by the state court judgment and are not inviting this court to review or reject the judgment. (See id. pp. 15-16). Instead, the Debtors insist that they are only complaining of the actions of WaMu in consummating the Refinancing and JPMorgan’s alleged failure to respect the Debtors’ rescission request. (See id. at p. 15). Additionally, the Debtors insist that they are only challenging the validity of JPMorgan’s claim, not seeking a review or rejection of the state court judgment. (See id.). This Court is not persuaded.
It would be impossible for this Court to hold that JPMorgan does not have a claim secured by the Property or that the Debtors have a right to rescind the Loan, without reviewing or rejecting the state court foreclosure judgment. This Court has previously concluded that actions in mortgage foreclosure in Pennsylvania depend upon the existence of a valid mortgage. Calabria v. CIT Consumer Group (In re Calabria),
This Court recently arrived at the same conclusion in a similar case involving Debt- or’s counsel, In re Washington, Bankr.No. 08-24389, Adv. No. 11-2460,
The Debtors also appear to allege that the TILA provision concerning the expiration of a debtor’s right to rescind a transaction, somehow trumps the bar to this Court’s review of a state-court judgment imposed by the Rooker-Feldman doctrine. (Doc. #40, pp. 12-14).
Furthermore, the Debtors’ argument has repeatedly been considered and rejected within the Third Circuit in other cases. See, e.g., In re Cooley,
For example, in Cooley, the United States Bankruptcy Court for the Eastern District of Pennsylvania explained that the Rooker-Feldman analysis did not “hinge” on a debtor’s alleged an “independent” right to rescission. Cooley,
In addition to Cooley and Stuart there exists substantial precedent within the Third Circuit that the Rooker-Feldman doctrine prevents federal courts from granting rescission after the entry of a state-court judgment in mortgage foreclosure has been entered. See, e.g., Madera v. Ameriquest Mortg. Co. (In re Madera),
In the instant matter the mortgage foreclosure was entered on August 6, 2010 and the Debtors admit that the alleged rescission request was drafted and submitted on or around August 8, 2010.
The Debtors also argue that the standard articulated in Great Western supports their right to rescission by rejecting a broad application of the “inextricably intertwined” prong of Rooker-Feldman. (See Doc. #40, pp. 14-17). Though each of the precedential decisions listed above were decided under the “inextricably inter
In Great Western the Third Circuit Court of Appeals cautioned that reliance on the “inextricably intertwined” prong “has caused lower federal courts to apply Rooker-Feldman too broadly.” Great Western,
In seeking rescission of the Loan through the Complaint, it is clear that the Debtors are challenging the effect of a state court judgment and seeking its reversal regardless of the verbiage used to describe their attempt. This Court has already described how all four elements outlined in Great Western have been satisfied. Moreover, the United States District Court for the Western District of Pennsylvania has reached the identical conclusion under a similar set of facts when applying the same four factors from Great Western. See In re Iannini, No. 10-55,
Thus, the second category of claims seeking rescission of the Loan fit squarely within the type of actions barred by Rook-er-Feldman. This Court is barred from exercising jurisdiction over the Debtors’ request to unwind the default judgment in mortgage foreclosure entered in the State court. As a result, the Debtors’ cause of action for rescission of the Loan must be dismissed.
VI. Failure to State a Claim Under Rule 12(b)(6)
This Court does maintain subject-matter jurisdiction over the third category of claims asserted in Counts I, II, Y, VI and VII. This category consists of claims asserted against JPMorgan for the alleged acts of JPMorgan occurring after the execution of the Purchase Agreement. As a result of the terms of the Purchase Agreement, JPMorgan is the assignee of WaMu’s mortgage obligations and is thus responsible for the servicing of the mortgage loan created by the Refinancing. (See Doc. # 19, Exhibit “B”, Article II, Section 2.1) (“the Assuming Bank [JPMor-gan] specifically assumes all mortgage servicing rights and obligation of the Failed Bank [WaMu].”). This category of claims is not barred by the FIRREA exhaustion
As a result of the convoluted nature of the Debtors’ Complaint, it was originally difficult for this Court to discern exactly what claims are being asserted against JPMorgan directly. From a fair reading of the Complaint, however, it appears that in Count I, the Debtors are alleging they suffered harm based on JPMorgan’s failure to recognize and/or respect their rescission request. (See Complaint, ¶¶ GO-62). In Count II, the Debtors appear to allege that JPMorgan violated RE SPA by failing “to provide proper corrections to the [Debtors’] mortgage” and by failing to produce eleven requested documents in response to their alleged QWR.
The Debtors’ have failed to state a claim based on JPMorgan’s alleged failure to respect the Debtor’s rescission request under TILA. The TILA provisions clearly provide that a mortgagor’s right to rescind a loan is not impacted by the assignment of the loan. See 15 U.S.C. § 1641(c). Conversely, TILA does not provide for an award of damages against an assignee for failing to honor a mortgagor’s rescission request. See, e.g., Dougal,
While § 1641(c) [of TILA] provides that the right to rescind exists even against a creditor’s assignee, § 1640(a) permits only a “creditor” to be held hable for a monetary penalty or an award of attorney’s fees for a TILA violation. Neither § 1641 nor any other section provides for a statutory penalty or an award of attorney’s fees to a plaintiff should anassignee fail to respond to a valid rescission notice.
Brodo,
Under RESPA (Count II), the Debtors claim that they suffered harm because JPMorgan intentionally “failed to provide proper corrections to the [Debtors’] mortgage” and failed to produce eleven documents requested the Debtors’ alleged QWR. (Complaint, ¶¶ 64, 66). Akin to the Debtors’ third category claims asserted in Count I, the Debtors have failed to state a claim for relief as to the alleged RESPA violations. Though the Complaint generally alleges that the Debtors “lost an ascertainable amount of money” as a result of WaMu’s conduct during the Refinancing, the Debtor’s do not allege any pecuniary loss as a result of JPMorgan’s conduct. This omission is fatal because to state a claim under RE SPA, the Debtors must allege that JPMorgan’s breach resulted in actual damages. See Jobe v. Bank of America, N.A., No. 10-cv-1710,
VII. Derivative Standing to Assert Avoidance Actions
As previously discussed, the Debtors appear to argue two distinct theories of recovery in Count IV. At the July 29, 2011 hearing on the Motion to Dismiss, the Debtors argued that their “544” claim was simply an alternate way of describing their right to avoid JPMorgan’s security interest in the Property if they were successful in rescinding the Loan under TILA. (See Audio Recording of Hearing Held in Courtroom D, July 29, 2011 (12:21-12:24 PM)). In a later argument (only fully developed at the hearing on the Motion for Derivative Standing), the Debtors insisted that in the event that their TILA request for rescission was not successful, the avoidance action(s) alleged in Count IV would allow them to get “back to” the merits of the other counts in the Complaint. (See Audio Recording of Hearing Held in Courtroom D September 7, 2011 (11:05-11:07 AM)). Stated differently, the Debtors’ revised theory appears to propose that if the Debtors are permitted to “step into the shoes” of the Trustee, they may be able to avoid the foreclosure judgment based on the cause of action alleged in Count IV (either §§ 544, 547 or 548), and once the foreclosure judgment avoided, the Debtors may pursue their non-bankruptcy causes of action.
The Trustee and JPMorgan argue that the plain language of the Bankruptcy Code limits the ability to chapter 13 debtors to exercise the trustee’s “strong arm” powers. Specifically, both parties argue that 11 U.S.C. §§ 544, 547 and 548 permit only the trustee to exercise avoidance powers. {See Doc. #18, p. 16, Doc. #57, p. 7). The Trustee and JPMorgan further argue that in contrast to similar provisions governing cases filed under chapter 11 and chapter 12, 11 U.S.C. § 1303 does not confer the chapter 13 trustee’s avoidance powers on the debtor. {See id.). Both JPMorgan and the Trustee also explain that no courts within the Third Circuit have ever recognized the ability of a chapter 13 debtor to exercise the trustee’s “strong-arm” powers under 11 U.S.C. § 544. {See Doc. # 57, p. 3; Doc. # 58, pp. 2-3).
In her Supplemental Brief in Support of the Trustee’s Response to Debtors’ Motion to Request Derivative Standing to Exercise Trustee’s Powers, the Trustee further insists that in a prior case involving Debt- or’s Counsel, In re Weyandt, the United States District Court for the Western District of Pennsylvania ruled “that previous Third Circuit precedent foreclosed the debtor’s attempt to use the Trustee’s avoidance power.” (Doc. # 60, unnumbered pp. 2-3).
A.
This Court stops short of the concluding that there exists a per se rule in chapter 13 cases against any party other than a trustee from exercising the Chapter 5 avoidance powers on a derivative basis. The Court reaches this conclusion because the Third Circuit in In re Knapper,
The Third Circuit Court of Appeals has had the occasion to weigh-in on the issue of derivative standing in bankruptcy. In Official Comm. of Unsecured Creditors of Cybergenics Corp. ex rel. Cybergenics Corp. v. Chinery (In re Cybergenics),
Because Knapper did not address the concept of derivative standing, this Court concludes that the Third Circuit’s opinion in Cybergenics, and not Knapper, governs the analysis of whether or not the Debtors in the instant matter should be able to pursue Chapter 5 claims on behalf of the estate when the Trustee refuses to do so.
Based on the theory that Cybergenics can be applied in the chapter 13 context, the Debtors encourage this Court to apply a three part test from Official Comm. of Unsecured Creditors v. Clark (In re National Forge Co.),
In the instant matter, it appears to the Court that the Debtors have failed at the first element set forth in National Forge. Even accepting as true the averments of the Debtors in support of their § 544(a)(3) and/or “preference” action, the Debtors have not asserted a “colorable claim,” let alone demonstrated how such claim would benefit the creditors of the estate as a whole.
1.
Section 544(a)(3) of the Bankruptcy Code provides that a trustee “may avoid any transfer of property of the debtor” that would be avoidable by a “bona fide purchaser of real property ... at the time of the commencement of the case....” 11 U.S.C. § 544. A generous reading of the Complaint reveals that the Debtors allege they may avoid JPMorgan’s claim against the estate because JPMorgan “does not hold any interest in either the [Debtors’] note or the [Debtors’] mortgage.” (Complaint, ¶ 84). Beyond the fact that the Complaint does not make it clear what, if any, “transfer” the Debtors are seeking to avoid, the allegations in Count IV do not
Moreover, this allegation is directly contradicted by judicially noticed exhibits and the statements of Debtors’ Counsel at the hearing in the Motion to Dismiss. The Debtors’ repeated acknowledgment that the state court judgment in mortgage foreclosure was entered in favor of JPMorgan prior to the filing of their bankruptcy case is uncontroverted evidence that JPMorgan absolutely had an “interest” in the Property “as of the commencement of the case....” 11 U.S.C. § 544. (See also Doc. #18, Exhibit “A”, Doc. #40, pp. 3-4).
Additionally, Counsel for the Debtors expressly stated at the July 29, 2011 hearing on the Motion to Dismiss that “we’re not debating whether, for example, JPMorgan is the holder of the Debtors’ note [and presumably the mortgage as well], ... we’re not debating that. That’s, there is no allegations here that JPMorgan does not hold the Debtors’ note because they purchased it and the Purchase Agreement speaks for itself.” (See Audio Recording of Hearing Held in Courtroom D, July 29, 2011 (12:21-12:23 PM)). Aside from directly contracting the allegations in the Debtors’ Complaint>
2.
While titled as a 544(a)(3) action, the Debtors later appear to assert that the judgement in mortgage foreclosure can be avoided as a “preference.” (See Audio Recording of Hearing Held in Courtroom D, September 7, 2011 (11:06-11:08 AM)). Pursuant to § 547 of the Bankruptcy Code the trustee may avoid a transfer of an interest of the debtor in property: (1) made to or for the benefit of a creditor, (2) on account of an antecedent debt, (3) made while the debtors was insolvent, (4) within ninety (90) days prior to the filing, (5) that enabled the alleged recipient of the preferential transfer to receive more than it would have received in a hypothetical chapter 7 liquidation. See 11 U.S.C. § 547(b). Looking only at the language in the Complaint, the Debtors have failed to allege any of the elements of a “preference” action and, therefore, the Debtors have failed to state a colorable claim under 11 U.S.C. § 547.
As the Debtors’ “544(A)(3) PREFERENCE” claim appears to be entirely void of merit, this Court cannot find that the Trustee has “unjustifiably refused” to pursue the claim.
B.
As a final matter, in the Supplemental Brief in Support of Trustee’s Response to Debtors’ Motion to Request Derivative Standing to Exercise Trustee’s Powers, the Trustee requests that Counsel to the Debtors be found to be in violation of Pennsylvania Rule of Professional Conduct 3.3. (See Doc. # 60, unnumbered p. 6). This rule states, in pertinent part, that a lawyer shall not knowingly “fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel.... ” Rules of Prof. Conduct, Rule 3.3(a)(2), 42 Pa.C.S.A.
In support of its request, the Trustee points to Counsel’s failure to disclose legal authority contrary to his position with regard to the derivative standing issue. (See id. at unnumbered pp. 2-5).
A review of the record, however, reveals that both Knapper and Iannini were cited by JPMorgan and the Trustee (see Doc. # 18 p. 5; Doc. # 57, pp. 4-6; Doc. # 58, pp. 2-5), and were therefore known to opposing counsel. In addition, the chapter 13 trustee was well aware of Weyandt as she was the chapter 13 trustee in that case, and that case was decided by the District Court after the instant case was briefed by the parties. These circumstances militate against sanctioning Debtors’ counsel at this time. The Court nonetheless reminds Counsel of his duty to supplement the record and disclose potentially adverse authority. The Court also cautions Counsel to be more candid in the future or sanctions may be imposed.
In addition to raising Rule 3.3(a)(2) issues, the Trustee’s remaining concerns regarding Counsel’s quixotic pursuit of this adversary proceeding are well taken. As stated by the Untied States Court of Appeals for the Third Circuit in Cybergenics, the policy reason for channeling avoidance actions through the trustee is so that the trustee may act as a “gatekeeper” to prevent “independent avoidance actions ... that might prejudice the estate.... ” Cy-bergenics,
This Court is also concerned about several other issues arising from Counsel’s prosecution of the instant adversary proceeding. For example, Counsel advanced several theories in both the Complaint and during subsequent hearings that do not appear to have any adequate basis. The Court is also troubled by Counsel’s shifting theories of recovery, which have resulted in conflicting averments from Counsel concerning the action plead in Count IV — that is, the “544(a)(3) PREFERENCE” cause of action. The Complaint itself generally reflects a “shotgun” approach to pleading which, as set forth above in this Memorandum Opinion, made it extremely difficult for the named defendants (and this Court) to decipher the allegations contained therein. Finally, another deficiency by Counsel was his decision to omit from the Complaint the fact that a default judgment in mortgage foreclosure had been entered prior to the filing of the Debtors’ chapter 13 case. Certainly this is a fact that is very germane and dispositive to the outcome of this lawsuit.
This Court cautions Counsel against repeating some of the behaviors and habits displayed thus far in this adversary proceeding. The Court reminds Counsel of his continuing ethical obligations under Fed. R. Bankr.P. 9011(b) and of the penalties under 28 U.S.C. § 1927 for “unreasonably” and “vexatiously” multiplying proceedings in a case. See In re Anctil Plumbing & Mech. Contrs., Inc.,
VIII. Conclusion
The Debtors’ claims for damages in Counts I, II, V, VI and VII against JPMorgan for the acts and/or omissions of WaMu or other entities occurring prior to the execution of the Purchase Agreement are subject to the FIRREA exhaustion requirement. As the Debtors have not exhausted the administrative remedies under FIRREA, this Court does not have subject-matter jurisdiction over this first group of claims. Similarly, pursuant to the Rooker-Feldman doctrine, this Court may not exercise subject-matter jurisdiction over the Debtors’ TILA claim of rescission following the entry of the judgment in mortgage foreclosure by the state court.
This Court does maintain subject-matter jurisdiction over the remaining claims under Counts I, II, V and VI for the alleged acts of JPMorgan in its capacity as a servicer of the Debtors’ mortgage. However, the Debtors have failed to state a viable cause of action for each of the claims alleged, and, thus, these claims will be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) (applicable in adversary proceedings though Fed. R. Bankr.P. 7012). Finally, as the Debtors lack standing to exercise the avoidance powers of the Trustee, Count IV of the Complaint must also be dismissed.
As a result, this Court will enter an order granting Defendant JPMorgan Chase Bank, N.A.’s Motion to Dismiss Plaintiffs’ Complaint. The Court will also enter an order granting Defendant JP Morgan Chase Bank, N.A.’s Request for Judicial Notice in Support of Motion to Dismiss Plaintiff’s Complaint.
The Court will also deny the Debtors’ Motion to Request Derivative Standing to Exercise Trustee’s Powers Under §§ 544, 547, and 548 Nunc Pro Tunc filed at Doc. # 65 in the main case, and grant the Trustee’s Motion to Strike Debtors’ Motion to Request Derivative Standing to Exercise Trustee’s Powers Under §§ 544, 547, 548 Nunc Pro Tunc as the Debtors’ incorrectly filed a duplicate copy of their Motion for Derivative Standing in the Adversary Proceeding at Doc. # 39.
Notes
. All future docket citations refer to Adversary Number 10-02654-JAD, unless otherwise specifically noted.
. The Debtors Complaint states that WaMu "was taken over by the FDIC on September 28, 2008 and its assets sold through an insolvency proceeding.” (Complaint, ¶ 13). Because this Court will take judicial notice of the documents relating the FDIC receivership of WaMu and the subsequent purchase of WaMu's assets by JPMorgan Chase Bank, N.A., this Court relates the accurate as opposed to alleged version of the events described. See infra, p. 4, note 3.
. The Debtors have consented to this Court taking judicial notice of: (a) the Office of Thrift Supervision Order directing the Federal Deposit Insurance Corporation to act as Receiver of Washington Mutual Bank; and (b) the Purchase and Assumption Agreement between the FDIC and JPMorgan pursuant to Fed.R.Evid. 201. (See Audio Recording of Hearing Held in Courtroom D, July 29, 2011 (11:36-11:38 AM)). See also Javaheri v. JPMorgan Chase Bank, N.A., Civ. No. 10-08185 ODW (FFMx),
.The Debtor's Complaint makes no mention of the Debtors’ default or the judgment in mortgage foreclosure. However, the Debtors admit that both of these events occurred in their Brief in Opposition to Motion to Dismiss. (See Doc. # 40, p. 3). The Debtors have also consented to this Court taking judicial notice of the documents evidencing the entry of a judgment in mortgage foreclosure attached as Exhibit "A” to Defendant JPMorgan Chase Bank, N.A.’s Brief in Support of Motion to Dismiss Plaintiff s Complaint. (See Audio Recording of Hearing Held in Courtroom Do, July 29, 2012 (11:37-11:38 AM)).
. While paragraph 102 of the Complaint states that "Plaintiffs demand judgment against the Plaintiffs ...” this Court will assume that the Debtors are seeking judgment against the named defendants in Count VII.
. JPMorgan has not addressed Count III in its Motion to Dismiss. This fact is acknowledged in footnote number 3 of Defendant JPMorgan Chase Bank, N.A.'s Brief in Support of Motion to Dismiss Plaintiffs’ Complaint. (See Doc. #18, p. 2 n. 3). Thus, Count III shall go forward and this Court will order JPMorgan to file an Answer to Count III of the Complaint.
. JPMorgan argues in the alternative that all of the Debtors’ claims under Counts I, II, V, VI and VII, should be dismissed because the Debtors have not sufficiently alleged any wrongdoing by JPMorgan. (See Doc. #18, pp. 10-12, 14, 17-21). JPMorgan also alleges that the Debtors’ claims for damages linked to the Refinancing under TILA (Count I) and RESPA (Count II) are barred by each applicable statute of limitations (see id. at pp. 12-13, 15), and the Debtors' claims asserted under the "catch-all” provision of the UTPCPL (Count V) alleging fraud or deceit are defective as they fail to allege fraud with particularity as required by Fed.R.Civ.P. 9(b). (See id. at pp. 18-19). It is not necessary for this Court to reach the merits of these arguments because, as set forth above, this Court finds that FIRREA bars this Court from exercising subject-matter jurisdiction over all of the Debtors' claims for damages alleged in Counts I, II, V, VI and VII.
. JPMorgan argues in the alternative that the Debtors’ rescission claim is barred by res judi-cata. (Doc. #18, pp. 5-7).
. This revised characterization is further complicated by the Debtors' initial insistence at the September 7 hearing that the “TILA claims stand on their own.” (See Audio Recording of Hearing Held in Courtroom D, September 7, 2011 (11:06-11:07 AM)).
. In FIRREA's statutory provisions, "Corporation” is used to refer to the Federal Deposit Insurance Corporation, or "FDIC.” See 12 U.S.C. § 1811(a).
. It is not entirely clear what theory of es-toppel the Debtors are asserting. While the Complaint recites the elements of equitable estoppel, the Debtors’ conclude their estoppel discussion by referring to the preclusive doctrine of "collateral estoppel.” (See Doc. # 40, p. 11).
. Moreover, equitable estoppel cannot be used to confer subject-matter jurisdiction on a federal court. See Doe v. FDIC, No. 11 Civ. 307(BSJ)(RLE),
. The ability of debtors to assert defenses to claims of the FDIC (and acquiring entities) is an essential component of why there is no "debtor in bankruptcy” exception to the FIR-REA exhaustion requirement. Though several Circuit courts have concluded that FIRREA applies to debtors as well as creditors, these courts have stopped just short of holding that FIRREA applies to debtors in bankruptcy. See e.g., Tri-State Hotels, 79 F.3d at 714 n. 11; Freeman v. FDIC,
. Some courts have concluded that “rescission” is an equitable remedy barred by the section 1821 (j) of FIRREA. See, Shirk v. JPMorgan Chase Bank, N.A. (In re Shirk),
(j) Limitation on court action Except as provided in this section, no court may take any action, except at the request of the Board of Directors by regulation or order, to restrain or affect the exercise of powers or functions of the Corporation as a conservator or a receiver.
12 U.S.C. § 1821 (j). Several courts have found that requests for injunctions, rescission and declaratory relief are among the various types of equitable relief barred under § 1821 (j). See Radian Ins., Inc. v. Deutsche Bank Nat’l Trust Co., Civ. No. 08-2993,
. While averred as a separate form of relief, the Debtors' attempt to "annul" the security interest maintained by JPMorgan in the Debtors' Property appears to be just a simple consequence of rescission under TILA. See 12 C.F.R. § 226.23(d)(1) ("When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer shall not be liable for any amount, including any finance charge.”). Thus, the "defenses” asserted shall be collectively referred to as "rescission” for the remainder of this Memorandum Opinion.
. The provision in question states that assuming the material disclosure requirements of the TILA are not satisfied, the "right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first....” 15 U.S.C. § 1635(f).
. In their Complaint the Debtors alleged that they “wrote both Chase and WAMU and attempted to rescind the obligation.’’ (Complaint, V 60). In support, the Debtors allege that "[a] true and correct copy of the rescission letter is attached and incorporated herein as Exhibit AH.” (id. ¶ 60). However, upon examining Exhibit "AH”, the Court finds an unsigned rescission request dated December 21, 2010. (See Complaint, Exhibit “AH”). This letter is dated more than four months after the judgment in mortgage foreclosure was entered against the Debtors in State court. The Court assumes the date on this letter must be in error as JPMorgan sent a response dated August 19, 2010, recognizing receipt of some correspondence from Counsel for the Debtors on August 16, 2010. In any event there is no indication that the Debtors’ alleged rescission request was drafted or submitted prior to the August 6, 2010 entry of a judgment in mortgage foreclosure.
. The Debtors also allege that they are entitled to recover for the alleged TILA and RES-PA violations under the UTPCPL (Count 5) and that these alleged violations constitute a "breach of the implied covenant of fair dealing” (Count VI). (See Complaint, ¶¶ 91, 95). Both of the Debtors' allegation in Count V and Count VI are entirely without merit. The United States Court of Appeals for the Third Circuit has held that assignees, who have not committed any direct wrongdoing, cannot be held liable under the UTPCPL. Murphy v. FDIC,
. Moreover, the alleged QWR may not actually be a “qualified written request” pursuant to 12 U.S.C. § 2605(e), as the alleged QWR does not identify any purported errors regarding JPMorgan's servicing of the Loan. (See Complaint, Exhibit "AH”). See also Ward v. Security Atlantic Mortgage Electronic Registration Systems, Inc., No. 5:10-CV-119-F,
. This Court is also not convinced that the pursuit of Count IV would benefit the bankruptcy estate. Even if the Debtor were permitted to use the trustee’s powers to avoid the judgment in mortgage foreclosure, JPMorgan would still have a lien on the Property. Therefore, the Debtors would need to pursue their TILA claim for rescission. The Debtors claim that "avoiding” their mortgage in this manner would allow for substantial repayment to unsecured creditors because of the requirements of the liquidation alternative test, or through the creation of an unencumbered asset (the Property) that could be liquidated for the benefit of creditors. (See Doc. #39, ¶21). Each of these contemplated "benefits” hinges on the assumption that the Debtors would hold the Property free and clear following rescission of the Loan under TILA. Contrary to the Debtors’ stated belief, TILA would require that the Debtors either tender the Property or the "reasonable value” of the Property to JPMorgan following a successful request to rescind. See 15 U.S.C. § 1635(b). Thus, even ignoring litigation costs, this Court does not see how pursuit for the avoidance action with the ultimate objective of rescinding the Loan would benefit the bankruptcy estate.
.Paragraphs 84 and 85 of the Debtors' Complaint expressly state in pertinent part: "Chase is not a true party in interest as Chase does not hold any interest in either the Plaintiffs’ note or the Plaintiffs’ mortgage. Because Chase does not own the Debtor's [sic] note it cannot hold a perfected security interest in the Debtors' property and it may not have a claim against the Debtors’ estate.” (Complaint, ¶¶ 84-85).
. Similarly, the Complaint does not allege a "fraudulent transfer” pursuant to 11 U.S.C. § 548.
. The Debtors' preference claim also appears to fail because the Debtors’ cannot allege that JPMorgan has received more than it would have under a hypothetical chapter 7 liquidation. Indeed, it appears that JPMor-gan has not yet received any assets in satisfaction of its lien solely as the result of the
. In other words, the Debtors retain their "right to redeem” pursuant to 41 P.S. § 404 until a sheriffs sale of the Property occurs. See, e.g., In re Townsville,
. Additionally, the Debtors admit that they never made any formal request that the Trustee pursue this cause of action. (See Doc. # 40, pp. 26-28).