GASH Associates v. Village of Rosemont, Ill.

• Decision Date: 07 July 1993
• Docket Number: No. 92-3481,92-3481
• Citation: 995 F.2d 726
• Parties: GASH ASSOCIATES, Plaintiff-Appellant, v. VILLAGE OF ROSEMONT, ILLINOIS, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 726

995 F.2d 726

GASH ASSOCIATES, Plaintiff-Appellant, v. VILLAGE OF ROSEMONT, ILLINOIS, Defendant-Appellee.

No. 92-3481.

United States Court of Appeals Seventh Circuit.

Argued May 5, 1993.

Decided June 8, 1993.

Rehearing and Rehearing En Banc Denied July 7, 1993.

Gary L. Starkman (argued), Steven B. Rissman, Ross & Hardies, Chicago, IL, for plaintiff-appellant.

Arthur N. Christie (argued), William E. Ryan, Burke & Ryan, Chicago, IL, for defendant-appellee.

Before EASTERBROOK and ROVNER, Circuit Judges, and WILLIAMS, Senior District Judge. ^*

EASTERBROOK, Circuit Judge.

A partnership called GASH Associates owned an office building in Rosemont, Illinois. The building was encumbered by three mortgages. GASH created a fourth when it sold the building, taking the buyer's non-recourse note. The buyer did not pay, and GASH decided to foreclose on its interest. This led to a sale at auction, which realized $4,005,000, not enough to pay off the senior lenders, to which GASH owed almost $6 million. GASH was stuck with a hefty deficiency judgment. The senior lenders asked the court to confirm the sale. It did, over GASH's vigorous objection. Lyons Savings & Loan Ass'n v. GASH Associates, 189 Ill.App.3d 684, 136 Ill.Dec. 888, 545 N.E.2d 412 (1st Dist.1989), leave to appeal denied, 129 Ill.2d 564, 140 Ill.Dec. 672, 550 N.E.2d 557 (1990). See also Superior Bank fsb v. Golding, 152 Ill.2d 480, 178 Ill.Dec. 720, 605 N.E.2d 514 (1992) (discussing the partners' efforts to avoid paying GASH's debts).

Dissatisfied with the outcome in state court, GASH commenced this action in federal court under 42 U.S.C. § 1983 against the Village of Rosemont, the winning bidder. GASH believes that Rosemont winkled it out of full value for the property by commencing a condemnation action in state court while the foreclosure action was pending, thus "taking" its property. It styled this as an inverse condemnation action. By tendering only $3.8 million in the condemnation action, Rosemont scared away rival bidders, GASH believes. Anyone outbidding Rosemont faced a risk that it would have to surrender the building to the Village for less than it paid; that prospect depressed the price below what GASH says is the fair market price of the building, some $5.8 million. Rosemont replied that any condemnation action may discourage other potential buyers, and the process cannot itself be a "taking"; nothing is special about condemnation while the owner prefers to sell at auction. The Village contended that it cannot be liable for "taking" what it bought in the market, and cannot be required to pay more than the high bid in a competitive auction. Rosemont insists that its bid did nothing but drive up the price at the auction. Had it remained on the sidelines, someone else would have bought for less than $4 million, and GASH's deficiency judgment would have been greater. GASH or a third party could have topped the $4 million bid had it believed that the condemnation action would lead to a higher award. The district court accepted Rosemont's arguments and dismissed the action under Fed.R.Civ.P. 12(b)(6).

Dominating this case is a simple fact: GASH objects to the outcome of a judicial proceeding and filed a separate suit to get around it. This runs headlong into Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923), and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983), which hold that carrying out a judicial decision does not independently violate the Constitution. See also In re Chicago, Milwaukee, St. Paul & Pacific Ry., 799 F.2d 317, 324-28 (7th Cir.1986) (judicial valuation of property sold at auction, even if grossly erroneous, is not a taking). Litigants cannot file collateral attacks on civil judgments; instead they must seek review in the Supreme Court. The Rooker- Feldman doctrine creates a jurisdictional obstacle to collateral review, one we must respect even if the parties do not present the issue for decision.

Rosemont invoked the Rooker- Feldman doctrine in the district court. Judge Nordberg, presiding in the case before its transfer to Judge Andersen, concluded that this doctrine is coterminous with principles of claim preclusion (res judicata). Because Illinois would allow litigation in its own courts raising the possibility that a judicially-approved sale is a taking, Judge Nordberg concluded, the litigation may proceed in federal court. Both sides appear to accept this disposition, for neither mentioned it in the appellate briefs.

Equating the Rooker- Feldman doctrine with preclusion is natural; both sets of principles define the respect one court owes to an earlier judgment. But the two are not coextensive. Preclusion in federal litigation following a judgment in state court depends on the Full Faith and Credit Statute, 28 U.S.C. § 1738, which requires the federal court to give the judgment the same effect as the rendering state would. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 84 L.Ed.2d 274 (1985). When the state judgment would not preclude litigation in state court of an issue that turns out to be important to a federal case, the federal court may proceed; otherwise not. Harris Trust & Savings Bank v. Ellis, 810 F.2d 700, 704-06 (7th Cir.1987). The Rooker- Feldman doctrine, by contrast, has nothing to do with § 1738. It rests on the principle that district courts have only original jurisdiction; the full appellate jurisdiction over judgments of state courts in civil cases lies in the Supreme Court of the United States, and parties have only a short time to invoke that jurisdiction. The Rooker- Feldman doctrine asks: is the federal plaint...