IN RE: LAURA SHEEDY, Debtor. LAURA SHEEDY, Plaintiff, Appellant,
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee; and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, Defendants, Appellees
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. George A. O'Toole, U.S. District Judge.
David G. Baker, for appellant.
Donn A. Randall, with whom Carol E. Kamm, Jamie L. Kessler and Bulkley, Richardson and Gelinas, LLP, were on brief, for appellees.
Before Howard, Chief Judge, Torruella and Kayatta, Circuit Judges.
TORRUELLA, Circuit Judge.
This case involves an attempt by a Chapter 13 debtor to avoid foreclosure on her residential mortgage through a lender liability suit in an adversary proceeding within her bankruptcy case. Agreeing with the bankruptcy court, we find all claims to be either time-barred or without merit, and therefore affirm its grant of summary judgment in favor of the creditors.
A. The Loan and Mortgage
We review the facts in the light most favorable to Debtor-Appellant Laura Sheedy, the party opposing summary judgment. See Rosaura Bldg. Corp. v. Municipality of Mayagüez, 778 F.3d 55, 58 (1st Cir. 2015) (citing Agusty--Reyes v. Dep't of Educ. of P.R., 601 F.3d 45, 48 (1st Cir. 2010)); In re Iannochino, 242 F.3d 36, 39 (1st Cir. 2001) (applying the same standard in a bankruptcy appeal). Sheedy and her husband are self-employed and have worked in various real estate businesses. She considers herself " relatively sophisticated in real estate matters (but not finance)," and she has held a real estate broker license since the early 1980s.
In 1987, Sheedy and her husband purchased a residence in Lexington, Massachusetts. Over the years, the couple continually transferred the property's title amongst themselves and the Cardinal Trust (the " Trust" ) -- in which Sheedy holds a beneficial interest and is also the trustee -- with the purpose of refinancing or using loan proceeds for other legitimate purposes. In one such transaction in 2003, she conveyed title from the Trust to herself. Then, in 2004, she refinanced the property (the " 2004 Transaction" ). For the 2004 Transaction, Sheedy executed a promissory note (the " Note" ) for $810,000 in favor of Washington Mutual Bank (" WAMU" ). A mortgage corresponding to the 2004 Transaction (the " Mortgage" ) was also given to WAMU and was properly recorded on April 21, 2004.
The Note provided for an interest rate of 3.625% for five years. Then, the interest rate was set to change annually by adding 2.75% to the weekly average yield on United States Treasury securities adjusted to a constant maturity of one year, based on an index issued by the Federal Reserve Board. Whatever the resulting rate was under that formula, the terms of the Note required that it be between 2.75% and 8.625%. Additionally, after the first adjustment following the initial five-year period, all other changes could not be by increments of more than 2%. The initial monthly payment under the Note was $4,109.56, but the terms of the Note were amended in an addendum so that Sheedy would only pay interest during the first five years. This resulted in Sheedy only having to pay $2,446.87 monthly for the first five years.
In 2008, federal regulators closed WAMU and the Federal Deposit Insurance Corporation (" FDIC" ) was named receiver. JPMorgan Chase National Association (" Chase" ) acquired certain WAMU assets from the FDIC, including an assignment of the Mortgage. Chase then assigned the Mortgage to Deutsche Bank National Trust Company (" Deutsche Bank," and, together with Chase, the " Secured Creditors" ), as Trustee for WAMU Mortgage Pass-Through Certificates Series 2004-AR4 (the " Securitized Trust" ). Chase continued servicing the loan.
In 2009, by the time the first adjustment in payment was scheduled, Sheedy was current in her loan but faced a decline in business as the recession began. The monthly payment jumped to $4,055.05 -- an amount slightly less than the number provided by the terms of the Note, ignoring the initial interest-only period granted under the addendum. Sheedy could not meet the new payments and she fell into default.
Sheedy retained MFI-Miami -- a mortgage fraud investigation firm that does not engage in the practice of law -- to analyze her loan documents and determine whether she had been misled as to the terms of the Note and Mortgage. MFI-Miami provided her with a " comprehensive analysis"
of the 2004 Transaction. The report stated that " [t]here are serious problems with the way this loan was originated . . . which were committed by the lender. It contains elements of illegal bait and switch and deception practices." For example, the report mentioned that the Truth in Lending statement differs from the terms of the Note because it stated that the payment beginning on the sixty-first month, i.e., at the time of the first adjustment, would be $4,331.44. Thus, Sheedy had been told by WAMU that the first payment due after the adjustment would in fact be higher than what the Note itself reflected, and even higher than what she was actually required to pay when the adjustment occurred. Also, the Truth in Lending statement did not disclose that the payments for the first five years would only include interest and no principal would amortize.
B. The Bankruptcy Case
On June 8, 2010, after Deutsche Bank commenced foreclosure proceedings, Sheedy filed for protection under Chapter 13 of the Bankruptcy Code, 11 U.S.C. § 1301 et seq. Then, on July 20, 2010, she filed a Chapter 13 plan pursuant to 11 U.S.C. § 1321. As part of her plan, Sheedy raised a series of allegations of lender liability, including that the Mortgage was rescindable under the Truth in Lending Act, 15 U.S.C. § § 1601-1667f (" TILA" ), and that the Secured Creditors violated Massachusetts General Laws Chapter 93A, § § 1-11 (" Chapter 93A" ), as well as " general principles of equity under Massachusetts law" as stated by the Massachusetts Supreme Judicial Court in Commonwealth v. Fremont Inv. & Loan, NO. 07-4373, 2008 WL 517279 (Mass. Super. Feb. 26, 2008), aff'd as modified, 452 Mass. 733, 897 N.E.2d 548 (Mass. 2008). The plan also proposed that, after rescission, the principal owed under the Mortgage be treated as an unsecured claim of Sheedy's. That is, instead of tendering the full amount of the loan in exchange for the Mortgage as if the 2004 Transaction had never occurred, Sheedy would only pay a fraction, as she would for all other unsecured claims.
Deutsche Bank filed a proof of claim (the " Secured Claim" ) preserving its status as a secured creditor in the amount of $842,908.47 due under the Mortgage, and objecting to the confirmation of the plan. On April 26, 2011, Sheedy filed the instant adversary proceeding to have the bankruptcy court resolve her lender liability claims, adding that Deutsche Bank and Chase were also liable for fraud, deceit, and misrepresentation on the basis that WAMU provided her with inaccurate or false information concerning the terms of the Note and the Mortgage. Sheedy also objected to the Secured Claim and challenged Deutsche Bank's standing as her creditor. The Secured Creditors denied the allegations and, following discovery, filed a motion for summary judgment.
C. The Bankruptcy Court Judgment
The bankruptcy court granted summary judgment in favor of the Secured Creditors and issued a memorandum explaining the bases for its decision. In re Sheedy,480 B.R. 204 (Bankr. D. Mass. 2012). As to the TILA claim, the bankruptcy court held that it was ...