Johnson v. Lasalle Bank Nat. Ass'n
| Decision Date | 30 September 2009 |
| Docket Number | Civil No. 08-5127 (JRT/RLE). |
| Citation | 663 F.Supp.2d 747 |
| Parties | Carrie A. JOHNSON, Plaintiff, v. LASALLE BANK NATIONAL ASSOCIATION, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Carrie A. Johnson, Livingston, MT, plaintiff pro se.
Eldon J. Spencer, Jr., Leonard, O'brien, Spencer, Gayle & Sayre, Ltd., Minneapolis, MN, for defendant.
ORDER ADOPTING THE REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE
This case is before the Court on plaintiff Carrie Johnson's motion to remand after defendant LaSalle Bank National Association ("LaSalle") removed the case to federal court. In a Report and Recommendation filed on April 14, 2009, United States Magistrate Judge Raymond L. Erickson recommended that the Court grant Johnson's motion to remand. LaSalle and Johnson filed objections to the Report and Recommendation, which the Court reviews de novo. 28 U.S.C. § 636(b)(1)(C); D. Minn. LR 72.2. For the reasons that follow, the Court overrules those objections and grants Johnson's motion to remand.
On March 26, 2004, Johnson and her husband executed a promissory note in connection with the purchase of a home. The note was secured by a mortgage on the property in favor of Aames Funding Corporation DBA Aames Home Loans ("Aames"). Aames later assigned the note and mortgage to another party, EMC Mortgage Corporation ("EMC"), and EMC subsequently sold the mortgage to Bear Stearns Asset Backed Securities I LLC Asset Backed Certificates, Series 2004-2 (the "Trust"). EMC, however, retained servicing responsibilities. Defendant LaSalle is the trustee for the Trust.
In October 2005, the Johnsons filed for bankruptcy protection and listed the promissory note as a secured debt. The note was discharged in the bankruptcy, but that discharge also forfeited the Johnsons' right to the property. EMC thereafter gave notice of its intent to foreclose the property, and in February 2007, EMC commenced foreclosure proceedings by advertisement. After EMC published notice of the foreclosure sale in the local newspaper for six consecutive weeks, LaSalle successfully bid on the property. See Minn.Stat. § 580.03 ().
On February 15, 2008, Johnson, her husband, and a third individual filed an action in Minnesota state court against EMC, the Trust, and LaSalle. Johnson v. EMC Mortgage Corp. (Johnson I), No. 08-686, 2008 WL 2437434, at *1 (D.Minn. June 12, 2008). The plaintiffs sought to quiet title to the foreclosed property and alleged, inter alia, violations of their constitutional rights and intentional infliction of emotional distress resulting from EMC's foreclosure action. Id. at *1-2. The defendants removed the case to the United States District Court for the District of Minnesota and filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and a motion for summary judgment under Rule 12(d) and Rule 56.
The district court, however, raised sua sponte the issue of subject matter jurisdiction and dismissed the case with prejudice after holding that the Rooker-Feldman doctrine barred the exercise of federal subject matter jurisdiction over the case. Under that doctrine, federal courts do not have subject matter jurisdiction over challenges to state court decisions in judicial proceedings. D.C. Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fid. Trust Co., 263 U.S. 413, 416, 44 S.Ct. 149, 68 L.Ed. 362 (1923); see also Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005). The Supreme Court recently clarified Rooker-Feldman's limits, noting that the doctrine is confined to "cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments." Exxon Mobil, 544 U.S. at 284, 125 S.Ct. 1517.
In Johnson I, the district court found that "[i]n February 2007, Defendant commenced a foreclosure action in state court to foreclose the mortgage on the Johnsons' home." Johnson I, 2008 WL 2437434, at *1. Based on that finding, the district court held:
The claims asserted by Plaintiffs in this case are barred by Rooker-Feldman because the Plaintiffs' suit is a de facto appeal of the state court foreclosure action. The nature of the relief requested is clear on the face of the Plaintiffs' Complaint, in that it seeks to quiet title to the property, a declaratory judgment that the Plaintiffs own the property, a reconveyance of the property to them, and an injunction preventing Defendant from exercising the rights it obtained through foreclosing on the property in state court. The Plaintiffs could succeed in this suit only if this Court overturned the state court judgment, voided the mortgage, and restored Plaintiffs' rights in the property.
Id. at *3. As a result, the district court held that it was "barred entirely by Rooker-Feldman from granting this relief," and the court dismissed the case with prejudice. Id. at *3-4.
On August 13, 2008, Johnson filed the instant action in Minnesota state court alleging similar claims to those brought in Johnson I, but as the sole plaintiff. On September 8, 2008, LaSalle removed the case. Johnson filed a motion to remand, arguing that Rooker-Feldman bars federal subject matter jurisdiction over the case.
In a Report and Recommendation, the Magistrate Judge concluded that the district court erred in finding that Rooker-Feldman applied in Johnson I because the district court mistakenly found that the defendants foreclosed the Johnsons' property through a state court foreclosure action. (Report and Recommendation, Docket No. 31 at 761-63.) Indeed, it is undisputed that defendants foreclosed the property by advertisement, which is a non-judicial action. See Norwest Bank Hastings Nat'l Ass'n v. Franzmeier, 355 N.W.2d 431, 433 (Minn.Ct.App.1984) ( ). As a consequence, the Magistrate Judge determined that Rooker-Feldman did not bar the Court's subject matter jurisdiction in this case or in Johnson I because Johnson did not allege in her complaint any injury from a state court judgment. (Report and Recommendation, Docket No. 31 at 763.)
The Magistrate Judge then turned to a consideration of Johnson I's preclusive effect on the claims and issues in the present case. First, the Magistrate Judge looked to Federal Rule of Civil Procedure 41(b), which states that "[u]nless the dismissal order states otherwise, a dismissal under this subdivision (b) and any dismissal not under this rule—except one for lack of jurisdiction ... —operates as an adjudication on the merits." Based on that Rule, the Magistrate Judge concluded that Johnson I did not operate as an adjudication on the merits of the plaintiffs' claims and res judicata accordingly did not bar the instant claims.2 (Report and Recommendation, Docket No. 31 at 767.). The Magistrate Judge concluded, however, that the district court's holding in Johnson I precluded the parties' re-litigation of subject matter jurisdiction in this case. (Id.) As a result, the Magistrate Judge recommended that the Court grant Johnson's motion to remand for lack of subject matter jurisdiction.
LaSalle filed objections to the Report and Recommendation, arguing that the district court's dismissal with prejudice in Johnson I should be given determinative effect in the present case; that the district court's order in Johnson I should not preclude resolution of the instant action in this Court; and, in the alternative, that principles of fairness favor permitting LaSalle to defend the action in federal court. (LaSalle's Objections, Docket No. 33 at 3-10.) Johnson also filed objections, seeking sanctions for LaSalle's "improper removal of the case." (Johnson's Objections, Docket No. 35 at 1.)
Following removal pursuant to 28 U.S.C. § 1441(a), a district court will remand an action to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c). "In reviewing a Motion to Remand, the District Court must resolve all doubts in favor of a remand to State Court, and the party opposing a remand bears the burden of establishing Federal jurisdiction." Peterson v. BASF Corp., 12 F.Supp.2d 964, 968 (D.Minn.1998).
As an initial matter, the Court notes that the procedural posture in Johnson I is different than the procedural posture in the present case. In Johnson I, the defendants moved to dismiss the case and, after concluding that it lacked subject matter jurisdiction under Rooker-Feldman, the court granted the defendants' motion and dismissed the case. Here, the Magistrate Judge determined that the parties are estopped from re-litigating the issue of Rooker-Feldman subject matter jurisdiction, notwithstanding the district court's mistaken factual finding. As a consequence, the Magistrate Judge recommended remanding the case for lack of subject matter jurisdiction. Indeed, Johnson I and the Magistrate Judge arrive at the same legal conclusion—that Rooker-Feldman bars subject matter jurisdiction over Johnson's case—albeit through different analyses and with different ultimate dispositions.
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