Spencer v. Fed. Home Loan Mortg. Corp. (In re Spencer)
| Decision Date | 15 May 2015 |
| Docket Number | Adv. No. 15–00060–cjf,Case No. 15–11204–13–cjf |
| Citation | 532 B.R. 303 |
| Parties | In re: Sheila Marie Spencer, Debtor. Sheila Marie Spencer, Plaintiff, v. Federal Home Loan Mortgage Corporation a/k/a Freddie Mac; PNC Bank, N.A.; Federal Housing Finance Agency (FHFA) ; United States Treasury; Jacob Lew; Melvin L. Watt; Donald H. Layton; PNC Financial Services Group, Inc.; William S. Demchak; Joseph C. Guyaux; Damien Judkins; Thomas Riechert ; Quentin Ellis; Gray & Associates, LLP; Unidentified Beneficiaries of a Securitized Trust Created by Freddie Mac; John Does and Jane Does 1–100; Corporations, Partnerships and Trusts ABC–XYZ; and Jon Anderson, Defendants. |
| Court | U.S. Bankruptcy Court — Western District of Wisconsin |
Wendy Alison Nora, Access Legal Services, Minneapolis, MN, for Debtor.
Sheila Marie Spencer (“Spencer”), the Debtor and Plaintiff in this adversary proceeding, filed a Chapter 13 bankruptcy on April 3, 2015. PNC Bank, N.A. (“PNC”), one of the Defendants, filed a Motion for Relief From Stay With In Rem Relief on April 16, 2015. Spencer filed a Chapter 13 Plan and an offer of adequate protection on April 17, 2015.
In this adversary proceeding, Spencer contends that PNC participated in a fraud that resulted in the foreclosure of her residence. Spencer further contends that the identity of the person entitled to payment of the Note and Mortgage and of any adequate protection is presently unknown. Finally, she contends the Mortgage is null and void. These assertions have been raised as defenses or factors Spencer argues should be considered by the Court in a determination on the Motion for Relief From Stay. Her arguments appear to require the conclusion that until a determination is reached in the adversary proceeding, it is impossible to determine whether PNC has standing to seek relief from stay. The arguments also appear to indicate that determination is a material consideration in connection with confirmation of any plan. Thus, a review of the complaint is appropriate.
After a review of Spencer's complaint suggested she was challenging the validity of the state court's judgment of foreclosure, the Court ordered that she explain why the Rooker–Feldman doctrine would not bar the claims and gave the Plaintiff the opportunity to respond. The Court did so without prejudice to the rights of the Defendants to respond or otherwise file any appropriate motions because, at the time the Court issued the order to respond, there was no evidence that Spencer had yet served the complaint on any of the Defendants nor had the time to answer or otherwise plead expired.
Spencer timely filed her response to the order. After the Court's review of Spencer's response, the complaint, and the Plaintiff's other submissions, the Court concludes the complaint must be dismissed because the Rooker–Feldman doctrine bars this Court from hearing Plaintiff's claims. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 125 S.Ct. 1517, 161 L.Ed.2d 454 (2005) ; District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983) ; Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923).
The Court also notes that Spencer has filed a previous Chapter 7 bankruptcy case, a prior Chapter 13 case, a Notice of Removal of the foreclosure to the District Court, and various appeals. The pleadings in those proceedings are public records, as are the state court pleadings, and pursuant to Fed. R. Evid. 201(b), the Court is taking judicial notice of those pleadings.1
Spencer alleges in her complaint that PNC is not entitled to enforce the Note and Mortgage. She asserts she attempted to make a payment that was refused because National City Mortgage, the original lender, had merged with National City Bank and refused the payment in order to obtain TARP funds. She also alleges the Note and Mortgage were sold to Federal Home Loan Mortgage Corporation (“Freddie Mac”) without her knowledge or consent. She further claims there were fraudulent sales of the Note and Mortgage, concealment of the real party in interest, and a failure in the assignment of the Note. Finally, numerous alleged violations of procedure by PNC in connection with the state court foreclosure are asserted as grounds for challenging the state court foreclosure judgment and the subsequent sheriff sale.
Spencer alleges that there is a better offer for her residence than the amount bid at the sheriff sale. Specifically, she says that her son is willing to pay approximately $10,000 more than was offered at the sheriff sale. This offer is evidenced by a one-page document offering $175,000 contingent on his obtaining financing at a rate of less than 5% per annum. Spencer has impleaded various government agencies and officials and demanded that they identify the real party in interest, that they take action to declare the recorded mortgage void, and that the Defendants be enjoined from taking action to sell the real property, to gain possession of the property, or to receive any payments in the Chapter 13 case except as may be declared by a judgment in this adversary proceeding.
OpinionUnder the Rooker–Feldman doctrine, lower federal courts lack subject-matter jurisdiction to hear cases that require them to review or set aside a state court judgment. Skinner v. Switzer, 562 U.S. 521, 131 S.Ct. 1289, 1297, 179 L.Ed.2d 233 (2011). The doctrine applies to “cases brought by state-court losers ... inviting district court review and rejection of [the state court's] judgments.” Id. quoting Exxon Mobil Corp., 544 U.S. at 284, 125 S.Ct. 1517 ; Johnson v. Orr, 551 F.3d 564, 568 (7th Cir.2008). The doctrine is rooted in our system of federalism, which respects the authority of state courts to decide the cases before them. It applies in adversary proceedings in bankruptcy court as well as in the lower federal courts. See, e.g., Fischer v. Bank of Am., N.A. (In re Fischer), 483 B.R. 877, 883 (Bankr.E.D.Wis.2012) ().
State court judgments may be reversed only by higher courts within the state judicial structure or, after all appeals within the state system have been exhausted, by the Supreme Court of the United States. 28 U.S.C. § 1257. Bankruptcy courts, district courts, and courts of appeals play no role in the state court system and lack jurisdiction to reverse a state court judgment. Rooker, 263 U.S. at 416, 44 S.Ct. 149.
In her response to the Court's order, Spencer cites 28 U.S.C. § 157(b)(2)(K) as a potential basis for this Court's jurisdiction over her complaint. Admittedly, Title 28 grants bankruptcy courts jurisdiction over “determinations of the validity, extent, or priority of liens” by way of the reference from the district court. 28 U.S.C. §§ 1334 and 157(a), (b)(1), and (b)(2)(K). However, Spencer's citation misapprehends the import of the Rooker–Feldman doctrine. The doctrine represents the limited circumstances in which 28 U.S.C. § 1257 precludes a federal court “from exercising subject-matter jurisdiction in an action it would otherwise be empowered to adjudicate under a congressional grant of authority ....” Exxon Mobil Corp., 544 U.S. at 291, 125 S.Ct. 1517 (emphasis added).
Here, Spencer initiated an appeal within the state system but then chose to file a bankruptcy which had the effect of staying any review of the judgment in the state courts. Although she asserts she is not a “state court loser” because the judgment entered in the state court action “is not a final judgment under Wisconsin law for purposes of the essential determination that a final order has been entered ...,” in Wisconsin, a judgment of foreclosure and sale is in fact a final judgment appealable as a matter of right within the state court system. Shuput v. Lauer, 109 Wis.2d 164, 172, 325 N.W.2d 321, 326 (1982) ; see Mehta v. Attorney Registration & Disciplinary Comm'n of the Supreme Court of Illinois, 681 F.3d 885, 887 (7th Cir.2012) ().
Looking at the caption of the complaint and the named Defendants, it might appear the adversary proceeding is materially different from the claims in the foreclosure. This seeming difference is illusory. At every turn in the prior Chapter 13 case, the removal to District Court, and in the various appeals, Spencer has claimed that PNC is not the real party in interest, that Freddie Mac is the “true owner” of the Note, and that PNC has no standing to enforce the Note and Mortgage. Although Spencer describes her claims in terms of fraud and of violations of the Racketeer Influenced and Corrupt Organizations Act, the Wisconsin Organized Crime Control Act, and various breaches of contract or Wisconsin Rules of Civil Procedure (), all of the claims center on the assertion that the acts of PNC and others resulted in the wrongful foreclosure of Spencer's residence. In other words, the claims are intertwined inextricably with the state court's judgment in the foreclosure action.
The principle of respect for the autonomy of state courts “applies not only to claims that were actually raised before the state court, but also to claims that are inextricably intertwined with state court determinations.” Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir.1999). “Intertwined claims” are those that require the federal court to review or “indirectly set aside” the state court judgment. Taylor v. Fed. Nat'l Mortg. Ass'n, 374 F.3d 529, 532–33 (7th Cir.2004). Moreover, a plaintiff “may not attempt to circumvent the effect of Rooker–Feldman ” by casting her complaint in the form of federal claims. Long, 182 F.3d at 557.
Courts within the Seventh Circuit have consistently applied the Rooker–Feldman...
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Downs v. Fed. Nat'l Mortg. Ass'n, Case No. 16-CV-0007-NJR
...of Appeals v. Feldman, 460 U.S. 462, 476 (1983) (citing Rooker v. Fidelity Trust Co., 263 U.S. 413(1923)); see also In re Spencer, 532 B.R. 303, 307 (Bankr. W.D. Wisc. 2015) ("Courts within the Seventh Circuit have consistently applied the Rooker-Feldman doctrine to cases in which plaintiff......