In re Cooley

• Decision Date: 13 March 2007
• Docket Number: Bankruptcy No. 06-11586 (JKF).,Adversary No. 06-0279.
• Citation: 365 B.R. 464
• Parties: In re Robert R. COOLEY, Debtor. Robert R. Cooley, Plaintiff, v. Wachovia Mortgage Company, Chase Manhattan Mortgage Corporation, and First Financial Mortgage Group, Incorporated, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

365 B.R. 464

In re Robert R. COOLEY, Debtor.

Robert R. Cooley, Plaintiff, v. Wachovia Mortgage Company, Chase Manhattan Mortgage Corporation, and First Financial Mortgage Group, Incorporated, Defendants.

Bankruptcy No. 06-11586 (JKF).

Adversary No. 06-0279.

United States Bankruptcy Court, E.D. Pennsylvania.

March 13, 2007.

David A. Scholl, Newtown Square, PA, for plaintiff/debtor.

Joseph Riga, McDowell Riga, Bryn Mawr, PA, for defendants.

William C. Miller, Philadelphia, PA, Chapter 13 Trustee.

MEMORANDUM OPINION

JEAN K. FITZSIMON, Bankruptcy Judge.

Chase Manhattan Mortgage Company and Wachovia Bank, N.A., as Trustee and successor in interest to First Financial Mortgage Group, Inc., moved to dismiss the complaint filed by debtor/plaintiff, Robert R. Cooley, in the above-captioned proceeding.¹ The Complaint contains two counts. Count I asserts a claim for rescission and related damages under the Truth-in-Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq.; Count II alleges a claim for damages under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601 et seq.

The major thrust of the Motion is that Debtor's claims should be dismissed based on the Rooker-Feldman doctrine because a mortgage foreclosure judgment was entered against him in state court. This particular argument for dismissal with regard to rescission claims recently was presented to and addressed by three other bankruptcy judges in this district with regard to rescission claims. See Madera v. Ameriquest Mortgage Co. (In re Madera), 363 B.R. 718, 723-726 (Bankr.E.D.Pa.2007) (Sigmund, J.) (TILA); Randall v. Bank One National Association (In re Randall), 358 B.R. 145, 152-163 (Bankr.E.D.Pa.2006) (Fox, J.) (TILA); Faust v. Deutsche Bank National Trust Company (In re Faust), 353 B.R. 94, 100 (Bankr.E.D.Pa.2006) (Raslavich, J.) (the Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq.). All three judges applied the Rooker-Feldman doctrine in favor of the mortgagee defendants in their cases.

Judge Raslavich issued his published decision in Faust shortly after my hearing on the Motion. In light of Judge Raslavich's decision, Debtor requested permission for the parties herein to file supplemental memoranda on the Rooker-Feldman doctrine. This Court granted the request and the parties filed their supplemental memoranda. Consequently, in rendering our decision, the Court has the benefit of the parties' additional views on this issue.

For the reasons set forth below, the Motion shall be granted in part. Count I of the Complaint shall be dismissed based on the Rooker-Feldman doctrine.² The Motion shall be denied as to Count II since it states a' claim upon which relief may be granted.

BACKGROUND

On October 20, 2003, Debtor obtained a loan from First Financial to refinance the outstanding mortgage secured by his residence. See Complaint ¶ 5. The loan was secured by a mortgage on Debtor's residence. Id. ¶¶ 3, 10-16. Wachovia is the current holder of this mortgage and loan. Id. ¶¶ 4, 10.

On October 1, 2004, Wachovia filed a mortgage foreclosure action in the state court, captioned Wachovia Bank, N.A. v. Cooley, No. 04-07858. See Exhibit "A" to Defendants' Memorandum.³ On January 21, 2005, the State Court entered a default judgment against Debtor in the amount of $160,760.18. See Exhibits A & B to Defendants' Memorandum.

On April 19, 2006, Debtor filed the above-captioned bankruptcy case under Chapter 13 of the Bankruptcy Code. On May 5, 2006, Chase filed a proof of claim on behalf of Wachovia. Chase listed the principal balance owed on the secured claim as $140,892.50 and the arrearage, as of the date upon which Debtor filed his petition, as $51,963.65. See Exhibit F to the Complaint.

On May 22, 2006, Debtor commenced the instant adversary proceeding by filing the Complaint against Wachovia, Chase and First Financial Mortgage Group (the original lender on the loan). See Complaint ¶¶ 4-5. Count I of the Complaint asserts a claim against defendants for rescission and related damages under TILA. Count II asserts a claim for damages, solely against Chase, for failing to respond to Debtor's alleged "qualified written request" ("QWR") for information regarding the loan as required by RESPA.

In the Complaint, Debtor alleges, among other things, that:

(i) The loan papers contained inaccurate disclosures and material non-disclosures in violation of TILA entitling him to rescind the loan, see Complaint ¶¶ 6-7, 13-16;

(ii) Debtor's counsel forwarded a letter to Wachovia and Chase on or about May 1, 2006, rescinding the loan under TILA, see id. ¶ 8; and

(iii) The rescission letter constituted a QWR under RESPA requesting information regarding the loan, see id.

In the Complaint, Debtor made no mention of, or reference to, the foreclosure action or judgment.

On June 22, 2006, Chase and Wachovia filed their Motion, arguing that:

(i) Counts I (TILA) and II (RESPA) should be dismissed for lack of subject matter jurisdiction based on the Rooker-Feldman doctrine;⁴

(ii) Debtor's claim for rescission in Count I is precluded by collateral estoppel; and

(iii) Count II should be dismissed because Chase responded to Debtor's alleged QWR.

See Memorandum.

DISCUSSION

I. STANDARD OF REVIEW

In the Motion, defendants seek to have the Complaint dismissed pursuant to Rule 12 of the Federal Rules of Civil Procedure based on lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. See Fed.R.Civ.P. 12(b)(1) & (b)(6).⁵ Courts distinguish between "facial" and "factual" attacks on subject matter jurisdiction. United States v. Pennsylvania Shipbuilding Co., 473 F.3d 506, 514 (3d Cir.2007). Courts review a "facial" attack based on the parties' pleadings but may look beyond the pleadings and consider affidavits and other evidence submitted by the parties in determining whether jurisdiction exists when ruling upon a "factual" attack. Taylor v. Whyy, Inc., 2006 WL 2711748, at *2 (E.D.Pa. Sept.20, 2006). This court shall treat the. Motion as raising a "facial" attack. In ruling on defendants' motion to dismiss for lack of subject matter jurisdiction, we shall accept the allegations of the Complaint as true and view them in the light most favorable to the Debtor. Peregrine Surgical, Ltd. v. Synergetics, USA, Inc., 2006 WL 3857492, at *2 (E.D.Pa. Dec. 29, 2006). We may also consider the exhibits incorporated by reference into defendants' Motion since they are matters of public record. Id.⁶ As noted above, Debtor has not objected to our consideration of these exhibits.

In ruling upon the, defendants' request for dismissal pursuant to 12(b)(6), the Court shall consider the same material mentioned above. See Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 256 n. 5 (3d Cir.2006) (quoting Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group, Ltd., 181 F.3d 410, 426 (3d Cir.1999)) (to resolve a motion to dismiss, "a court may properly look at public records, including judicial proceedings, in addition to the allegations of the complaint."); Crisomia v. Parkway Mortgage, Inc. (In re Crisomia), 2002 WL 31202722, at *2 n. 8 (Bankr.E.D.Pa. Sept. 13, 2002) (observing that court documents which are a matter of public record "are proper for judicial notice."). As required on a motion to dismiss, the allegations of the Complaint shall be accepted as true and viewed in the light most favorable to the Debtor. Buck v. The Hampton Township School District, 452 F.3d 256, 260 (3d Cir.2006). The request for dismissal shall be granted only if there is no reasonable reading upon which Debtor would be entitled to relief. Stanley v. International Brotherhood of Electrical Workers, FLOCIO CLC, 207 Fed.Appx. 185, 2006 WL 3090128, at *1 (3d Cir. Nov. 1, 2006); Taliaferro v. Darby Township Zoning. Board, 458 F.3d 181, 188 (3d Cir.2006).

II. WHETHER COUNTS I AND II ARE BARRED BY THE ROOKER-FELDMAN DOCTRINE

Pursuant to 28 U.S.C. § 1257, the Supreme Court of the United States is the only federal court vested with jurisdiction over appeals from final state court judgments. Lance v. Dennis, 546 U.S. 459, 126 S.Ct. 1198, 1200, 163 L.Ed.2d 1059 (2006). Lower federal courts are precluded under the Rooker-Feldman doctrine from "exercising appellate jurisdiction over final state-court judgments."⁷ Id. at 1200-01, 126 S.Ct. 1198; see also Knapper v. Bankers Trust Co. (In re Knapper), 407 F.3d 573, 580 (3d Cir.2005) (reasoning that the purpose of Rooker-Feldman doctrine, is to prevent "`inferior' federal courts from sitting as appellate courts for state court judgments.").

A. THE SCOPE OF THE ROOKER-FELDMAN DOCTRINE

In Exxon Mobil Corporation v. Saudi Basic Industries Corporation, 544 U.S. 280, 282, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005), the Supreme Court addressed the scope of the Rooker-Feldman doctrine and reversed the Third Circuit which had held that the doctrine barred the plaintiff's federal action. See Exxon Mobil Corporation v. Saudi Basic Industries Corporation, 364 F.3d 102 (2004). At issue in Exxon was a dispute over royalties between the plaintiff, Saudi Basic Industries Corp. ("SABIC"), and the defendants, which were Exxon Mobil and two joint venture entities (the "Joint Ventures") formed by SABIC and Exxon. Id. at 103.

The legal saga which led to the Supreme Court's decision in Exxon began when SABIC sued the Joint Ventures in state court. Id. Exxon and the Joint Ventures responded to the state court action by filing a countersuit in federal court. Id.⁸ The Joint Ventures answered SABIC's state court complaint and asserted, as counterclaims, the same claims they had filed in their federal action. Id. SABIC moved to dismiss the federal action on the ground of sovereign immunity, but the district court denied its motion. Id. SABIC appealed to the Third Circuit. Id. While SABIC's appeal to the Third Circuit was pending, a trial verdict was rendered in the Joint Venture's favor in the state...