Morgan v. Bank of Am., N.A., CIVIL ACTION No. 18-3671

• Decision Date: 25 March 2019
• Docket Number: CIVIL ACTION No. 18-3671
• Parties: KATHLEEN MORGAN, Plaintiff, v. BANK OF AMERICA, N.A., COUNTRYWIDE BANK, F.S.B.; COUNTRYWIDE HOME LOANS SERVICING, LP; CWALT, INC.; THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK; ISSUING ENTITY TRUST ALTERNATIVE LOAN TRUST 2007-OA11; AND DOES 1-100 inclusive, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

KATHLEEN MORGAN, Plaintiff, v. BANK OF AMERICA, N.A., COUNTRYWIDE BANK, F.S.B.; COUNTRYWIDE HOME LOANS SERVICING, LP; CWALT, INC.;

THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK; ISSUING ENTITY TRUST ALTERNATIVE LOAN TRUST 2007-OA11;

AND DOES 1-100 inclusive, Defendants.

CIVIL ACTION No. 18-3671

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

March 25, 2019

McHUGH, J.

MEMORANDUM

This is an action brought by a homeowner who unfortunately lost her home in foreclosure. She defended the foreclosure action vigorously in state court, and the central question in this case is whether the state court adjudication against Plaintiff bars her claims here. I conclude that it does with respect to the majority of Plaintiff's claims, and the remainder fail for other reasons. I therefore grant Defendants' Motion to Dismiss.

I. Factual and Procedural Background

Plaintiff Kathleen Morgan formerly owned a home in Landenberg, Pennsylvania ("Property"). She lost that Property in a state court foreclosure action brought by Bank of America—Defendant here—in the Chester County Court of Common Pleas. Order of Tunnell, J., Chester Cty. Ct. of Common Pleas, Defs.' Mot. Dismiss, Ex. E, ECF No. 12-8. The state court determined that Bank of America was the lawful mortgagee on the Property and that Plaintiff was in default on the mortgage. Id. Specifically, the state court determined that Bank of America was the mortgagee because it possessed (1) a promissory note executed by Plaintiff containing her promise to repay the amount borrowed to purchase the Property and (2) a properly recorded assignment of mortgage. Id. Plaintiff "fail[ed] to identify, let alone offer any record evidence, that [Bank of America] [was] not the holder of the mortgage and in possession of the promissory note." Id. Plaintiff also "admitted that she defaulted under the terms of the mortgage" due to her failure to make principal and interest payments "and admitted the amount alleged to be due and owing." Id. The state court found no factual support in the record for any of Plaintiff's other defenses and therefore granted summary judgment for Bank of America, finding that it had "establishe[d] a prima facie cause of action in mortgage foreclosure." Id. The court later denied reconsideration of its summary judgment order.

Subsequently, Plaintiff filed this complaint against Bank of America and other banks and mortgage loan servicers, asserting sixteen claims related to that Property: (1) breach of contract, (2) unconscionable contract, (3) rescission, (4) breach of fiduciary duty, (5) unjust enrichment, (6) fraud in the concealment, (7) fraud in the inducement, (8) violation of the Fair Credit Extension Uniformity Act (FCEUA), (9) violation of the Fair Debt Collection Practices Act (FDCPA), (10) violation of the Truth in Lending Act (TILA) and the Home Ownership and Equity Protection Act (HOEPA), (11) violation of the Real Estate Settlement Procedures Act (RESPA), (12) RICO/racketeering; (13) lack of standing/wrongful foreclosure, (14) quiet title, (15) slander of title, and (16) the negligent and intentional infliction of emotional distress. Compl. ¶¶ 83-200. She seeks a declaratory judgment, injunctive relief, and damages. Id. ¶¶ 200-205. She also seeks to quiet title to the property in her name. Id. ¶¶ 183-190. Significantly, these claims were asserted as defenses to the state court foreclosure action. Here, Defendants responded to Plaintiff's complaint by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

II. Standard of Review

Defendants' Fed. R. Civ. P. 12(b)(6) motion is governed by the well-established standard set forth in Fowler v. UPMC Shadyside, 578 F.3d 203 (3d Cir. 2009).

III. Discussion

A. Plaintiff's claims are barred by collateral estoppel.

I must apply Pennsylvania law in determining the preclusive effect of a state court judgment. See Metro. Edison Co. v. Pa. Pub. Util. Comm'n, 767 F.3d 335, 350-51 (3d Cir. 2014). Under Pennsylvania law, "[t]he doctrine of collateral estoppel precludes relitigation of an issue determined in a previous action if: (1) the issue decided in the prior case is identical to the one presented in the later action; (2) there was a final adjudication on the merits; (3) the party against whom the plea is asserted was a party or in privity with a party in the prior case; (4) the party or person privy to the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issue in the prior proceeding; and (5) the determination in the prior proceeding was essential to the judgment." Office of Disciplinary Counsel v. Kiesewetter, 889 A.2d 47, 50-51 (Pa. 2005).

First, the issue underlying all of Plaintiff's claims here is that Defendants engaged in some sort of fraud or misrepresentation and therefore lack legal authority to foreclose on the Property. Pl.'s Resp. Defs' Mot. Dismiss 2, ECF No. 17 ("Defendants are foreclosing on a fraudulently originated mortgage for which they cannot produce legitimate documents . . . Defendants submitted forged and fraudulent documents.").

The issue of Bank of America's legal authority to foreclose on the Property due to lack of fraud or misrepresentation is identical to that presented and decided by Judge Tunnell in the state court foreclosure action: "Plaintiff's motion establishes a prima facie cause of action in mortgage foreclosure. First, Plaintiff has standing to maintain this action. The evidence of record demonstrates that Plaintiff is the mortgagee by virtue of an assignment of mortgage . . . In addition, Plaintiff's motion includes a copy of a promissory note executed by Defendant." Defs.' Mot. Dismiss, Ex. E, ECF No. 12-8.

Second, there was a final adjudication on the merits in the state court action when that court granted summary judgment in Bank of America's favor and later denied reconsideration of its order.

Third, Plaintiff was party to the state court judgment.

Fourth, Plaintiff had a full and fair opportunity to litigate this issue in the prior state court proceeding. Plaintiff submitted briefs in the state court proceeding which included a response to Bank of America's summary judgment motion. Id. She also sought reconsideration of the state court's judgment against her. Opinion of Tunell, J., (Chester Cty. Ct. Common Pleas Dec. 8, 2017).

Fifth, the determinations that Bank of America did not engage in fraud or misrepresentation, had legal authority to foreclose on the property, and should therefore prevail were essential to the state court's judgment for Bank of America. I recently addressed similar facts in Doughty v. Wells Fargo Bank, N.A., 2018 WL 1784159 (E.D. Pa. Apr. 13, 2018) and concluded that principles of collateral estoppel applied because the state court necessarily determined the right of the lender to proceed to foreclosure. Accord Humphreys v. McCabe, Weisberg & Conway, P.C., 2016 WL 9024599, at *4 (E.D. Pa. Feb. 4, 2016), aff'd, 686 F. App'x 95 (3d Cir. 2017).

In the underlying state foreclosure case, the Chester County Court of Common Pleas granted mortgagee Bank of America's summary judgment motion and—given the broad array of defenses asserted by Ms. Morgan—necessarily determined that the bank did not engage in fraud. That court had to consider the validity of the mortgage agreement, the validity of the assignment, and the validity of the title to the Property and found for Bank of America. That court, having found no fraudulently originated mortgage or other fraud, also determined that Bank of America could lawfully foreclose on the Property. Such matters may therefore not be relitigated by Plaintiff here.

B. Plaintiff's claims are barred by the Rooker-Feldman doctrine and for other reasons.

To the extent Plaintiff seeks review of the state court proceedings by filing her wrongful foreclosure claim and seeking a declaratory judgment, the Rooker-Feldman doctrine, though it has been significantly narrowed, remains viable to bar her claims. See Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010) (citing Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)). The Rooker-Feldman doctrine applies when: "(1) the federal plaintiff lost in state court; (2) the plaintiff 'complain[s] of injuries caused by [the] state-court judgments'; (3) those judgments were rendered before the federal suit was filed; and (4) the plaintiff is inviting the district court to review and reject the state judgments." Id. The first three Rooker-Feldman criteria are clearly met here. As for the fourth, by asserting a wrongful foreclosure claim and seeking a declaratory judgment, Plaintiff in effect asks me to reject the state court's judgment—that Bank of America could proceed with a lawful foreclose on the Property—as improper. That I cannot do because the federal courts do not sit to review and reject state court judgments. See Blank v. Optimum Fin. Servs., LLC, 2017 WL 1508990, at *6 (E.D. Pa. Apr. 27, 2017), (dismissing wrongful foreclosure and declaratory relief claims for lack of subject-matter jurisdiction), appeal dismissed, 2017 WL 5634297 (3d Cir. 2017).¹

Plaintiff's contractual claims and defenses from the state court action, which are reframed as affirmative claims here—including breach of contract, unconscionable contract, rescission, breach of fiduciary duty, unjust enrichment, fraud in the concealment, and fraud in the inducement—effectively seek to undermine the state court's determination that a valid mortgage agreement existed and that Plaintiff defaulted under it. The application of these general principles of law and deficits in Plaintiff's other claims are specifically addressed below.

Breach of contract: Plaintiff's breach of contract claim hinges on an assertion that Defendants were required to relinquish to Plaintiff the note and deed to the Property because she paid her obligations in full. Compl. ¶ 86. But the state court...