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Are We closer To “Checkmate?” – Kim v. JPMorgan Chase Bank, N.A.

If all other states come to the same conclusion as the MI Supreme Court, then Chase has nowhere left to go. This is because both Chase and the FDIC have both stated under oath that no specific schedule of assets was ever produced by the FDIC, or by Chase, per the requirements of the “Purchase & Assumption Agreement.” There is no way of knowing what “certain (WaMu) assets” the FDIC sold to Chase. Therefore, if the assets weren’t acquired by “operation of law,” and there is no proof or evidence specifically showing what WaMu assets were purchased by Chase, how can Chase proceed to foreclose on any WaMu loans as the beneficiary? The only argument left for Chase, as I see it, is “trust us your Honor, we own it.” Call me an optomist, but I don’t think this argument can hold water in a court of law.

KIM v JPMORGAN CHASE BANK, NA Docket No. 144690.

Michigan Supreme Court, 2012 MIch. LEXIS 2220, Kim v JP Morgan Chase, NA., 20121221

Two transfers of plaintiffs’ mortgage occurred on September 25, 2008. The first, between WaMu and the FDIC, was consummated when the Office of Thrift Management closed WaMu and appointed the FDIC as its receiver. This transfer took place pursuant to 12 USC 1821(d)(2)(A)(i) and (ii), which provide that the FDIC “shall, as conservator or receiver, and by operation of law, succeed to . . . all rights, titles, powers, and privileges of the insured depository institution . . . and title to the books, records, and assets of any previous conservator or other legal custodian of such institution.” (Emphasis added.) Thus, when the FDIC succeeded to WaMu’s assets, which included plaintiffs’ mortgage, it did so by clear operation of a statutory provision—12 USC 1821(d)(2)(A). With respect to this transfer, the FDIC acquired plaintiffs’ mortgage by operation of law.

But the FDIC only briefly possessed WaMu’s assets, including plaintiffs’ mortgage. It immediately transferred those assets to defendant. The dispositive question in this case is whether the second transfer of WaMu’s assets—the [*11] transfer from the FDIC to defendant—took place by operation of law.

The seminal case discussing the term “operation of law” in the context of foreclosures by advertisement is Miller v Clark.16 In Miller, a mortgagee died intestate. The Court considered whether the guardian of his heirs was obliged to record an assignment of the mortgage before foreclosing on it by advertisement. The Court held:

The authority to foreclose such mortgages by advertisement is purely statutory, and all the requirements of the statute must be substantially complied with. To entitle a party to foreclose in this manner it is required, among other things, that the mortgage containing such power of sale has been duly recorded; and if it shall have been assigned, that all the assignments thereof shall have been recorded. And also that the notice shall specify the names of the mortgagor and the mortgagee, and of the assignee of the mortgage, if any.

Applying this proposition, we hold that the transfer of WaMu’s assets from the FDIC to Chase did not take place by operation of law. Defendant acquired WaMu’s assets from the FDIC in a voluntary transaction; defendant was not forced to acquire them. Instead, defendant took the affirmative action of voluntarily paying for them. Had defendant not willingly purchased them, it would not have come into possession of plaintiffs’ mortgage. WaMu’s [*14] assets did not pass to defendant “without any act of [defendant’s] own”20 or “regardless of [defendant’s] actual intent.”21Accordingly, the Court of Appeals correctly concluded that defendant did not acquire WaMu’s assets by operation of law.

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