Otto v. Wells Fargo Bank, N.A.
| Decision Date | 15 July 2016 |
| Docket Number | Civ. No. 15-cv-8240 (KM)( MAH) |
| Court | U.S. District Court — District of New Jersey |
| Parties | DENISE OTTO, Plaintiff, v. WELLS FARGO BANK, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; U.S. BANK, N.A., AS TRUSTEE FOR BNC MORTGAGE LOAN TRUST 2006-2; PHELAN HALLINAN, LLP A/K/A PHELAN HALLINANDIAMOND & JONES, P.C. A/K/A PHELAN HALLINAN DIAMOND, P.C. A/K/A PHELAN HALLINAN & SCHMIEG, P.C., Defendants. |
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I. Introduction
This federal court action, filed on November 24, 2015, arises from a state court mortgage foreclosure action which went to final judgment on August 12, 2014. Denise Otto, as borrower and property owner, sues her mortgagee, U.S. Bank. In essence, her causes of action seek to undo the state court judgment of foreclosure. She also sues the attorneys who represented the mortgagee in the foreclosure and others. Now before the court are motions of U.S. Bank and the attorneys to dismiss the complaint. (ECF nos. 3, 14) Because this action is barred by the Rooker-Feldman doctrine and principles of res judicata, because the statute of limitations has run, and because the complaint otherwise fails to state a claim, the motions are granted, and the complaint will be dismissed with prejudice.
On November 13, 2012, U.S. Bank filed a foreclosure action in the Superior Court of New Jersey, Chancery Division, Essex County. (U.S. Bank, etc. v. Otto, No. F-026230-12. (ECF no. 3-3) U.S. Bank was represented in the foreclosure by Phelan Hallin & Diamond, PC.
The complaint in foreclosure alleged as follows: On August 30, 2006, Denise Otto and Eugene I. Otto entered into a $160,000 note and mortgage with BNC Mortgage, Inc., secured by their property at 139-141 Western Parkway in Irvington. On January 16, 2009, the mortgage was assigned to U.S. Bank National Association, as Trustee for BNC Mortgage Loan Trust 2006-2. On September 18, 2012, it was again assigned to U.S. Bank National Association, as Trustee for BNC Mortgage Loan Trust 2006-2, Mortgage Pass-Through Certificates, Series 2006-2. Otto failed to make the monthly mortgage payment due on June 1, 2011, and all payments thereafter, and the mortgage went into default. Due notice of default was given. (See ECF no. 3-3)
On August 12, 2014, the court entered a final judgment of foreclosure in the amount of $236,762.78, plus interest and counsel fees. A sheriff's sale was ordered. (ECF nos. 3-4, 35) The record does not disclose whether the sale has been held.
Ms. Otto filed this federal court action on November 24, 2015, some 15 months after the entry of final judgment in the state foreclosure action.
Count 1 seeks rescission under the Truth in Lending Act ("TILA"), 15 U.S.C. § 1635, because adequate disclosures were not given in connection with the loan in 2006. Otto alleges that "no consummation of the transaction between BNC and Plaintiff took place as one part to the transaction, the actual lender, is not disclosed to Plaintiff." The reference is apparently to U.S. Bank'ssubsequent assignment of the mortgage. Ms. Otto alleges that she sent a notice of rescission on August 15, 2015.
Count 2 seeks enforcement of rescission under 15 U.S.C. § 1638(a)(1). Count 3 seeks enforcement of rescission under 12 C.F.R. § 226.23. Count 4 asserts that the transaction was never consummated, and that therefore the three-year deadline on the right to rescind was never set in motion.
Count 5 asserts that Wells Fargo, as servicer, and the Phelan firm, as attorneys, violated a criminal statute, 15 U.S.C. § 1611, by pursuing the foreclosure and seeking a sheriff's sale on a loan that they knew had been validly rescinded.
Count 6 seeks restitution under 12 C.F.R. § 1026.23 based on the rescission.
II. Standard on a motion to dismiss
Defendants have moved to dismiss the Complaint for lack of jurisdiction, citing, inter alia, the Rooker-Feldman doctrine (see infra). Rule 12(b)(1) governs jurisdictional challenges to a complaint. These may be either facial or factual attacks. See 2 Moore's Federal Practice § 12.30[4] (3d ed. 2007); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). A facial challenge asserts that the complaint does not allege sufficient grounds to establish subject matter jurisdiction. Iwanowa v. Ford Motor Co., 67 F. Supp. 2d 424, 438 (D.N.J. 1999). A court considering such a facial challenge assumes that the allegations in the complaint are true, and may dismiss the complaint only if it nevertheless appears that the plaintiff will not be able to assert a colorable claim of subject matter jurisdiction. Cardio-Med. Assoc., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir. 1983); Iwanowa, 67 F. Supp. 2d at 438.
Defendants have also moved to dismiss the Complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if it fails to state a claim uponwhich relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a Rule 12(b)(6) motion, a court must take the allegations of the complaint as true and draw reasonable inferences in the light most favorable to the plaintiff. Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) ().
Federal Rule of Civil Procedure 8(a) does not require that a complaint contain detailed factual allegations. Nevertheless, "a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the complaint's factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). That facial-plausibility standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a 'probability requirement' . . . it asks for more than a sheer possibility." Iqbal, 556 U.S. at 678.
In connection with the motions, defendants have attached records of the state court foreclosure proceeding. These are cited, not for the facts contained therein, but only in order to establish the nature and scope of prior proceedings between the parties, and the rulings of the state court. Such records are subject to judicial notice:
[O]n a motion to dismiss, we may take judicial notice of another court's opinion—not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity. See Kramer v. Time Warner Inc., 937 F.2d 767, 774 (2d Cir. 1991); United States v. Wood, 925 F.2d 1580, 1582 (7th Cir. 1991); seealso Funk v. Commissioner, 163F.2d 796, 800-01 (3d Cir. 1947) ().
S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Grp. Ltd., 181 F.3d 410, 426-27 (3d Cir. 1999). See generally Fed. R. Evid. 201.
Where the plaintiff is proceeding pro se, the complaint is "to be liberally construed," and, "however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). Nevertheless, "pro se litigants still must allege sufficient facts in their complaints to support a claim." Mala v. Crown Bay Marina, Inc., 704 F.3d 239, 245 (3d Cir. 2013). "While a litigant's pro se status requires a court to construe the allegations in the complaint liberally, a litigant is not absolved from complying with Twombly and the federal pleading requirements merely because s/he proceeds pro se." Thakar v. Tan, 372 F. App'x 325, 328 (3d Cir. 2010) (citation omitted).
Defendants first move, pursuant to Fed. R. Civ. P. 12(b)(1), to dismiss the complaint for lack of jurisdiction under the Rooker-Feldman doctrine. See District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 416 (1923).
A federal district court does not sit to hear appeals from state court judgments. Rooker-Feldman operates to prevent a disgruntled party in state court litigation from collaterally attacking the results of that litigation in federal court, claiming constitutional or other error. See also B.S. v. Somerset County, 704 F.3d 250 (3d Cir. 2013). To put it another way, Rooker-Feldman bars "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." ExxonMobil Corp. v. Saudi Basic Indus., Inc., 544 U.S. 280, 284, 125 S.Ct. 1517 (2005).
The Rooker-Feldman doctrine applies when, "in order to grant the federal plaintiff the relief sought, the federal court must determine that the state court judgment was erroneously entered or must take action that would render that judgment ineffectual." FOCUS v. Allegheny County Court of Common Pleas, 75 F.3d 834, 840 (3d Cir. 1996). Thus Rooker-Feldman holds that lower federal courts cannot entertain federal claims that (1) were previously adjudicated in state court or (2) are inextricably intertwined with a prior state court decision. Feldman, supra; Rooker, supra; Guarino v. Larsen, 11 F.3d 1151, 1156-57 (3d Cir. 19...
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