Anne Easley v. New Century Mortgage Corp. ( 2010 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-4053
ANNE EASLEY,
Appellant
v.
NEW CENTURY MORTGAGE CORPORATION;
DEUTSCHE BANK NATIONAL TRUST CO.;
JOHN DOES 1-10
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
(D.C. Civil No. 08-cv-04283)
District Judge: Honorable Edmund V. Ludwig
Submitted Under Third Circuit LAR 34.1(a)
September 17, 2010
Before: SLOVITER, BARRY and SMITH, Circuit Judges
(Opinion Filed: September 20, 2010)
OPINION
BARRY, Circuit Judge
Anne Easley sued Deutsche Bank National Trust Company (“Deutsche Bank”) and
other entities after Deutsche Bank foreclosed on the mortgage it held on Easley’s
Pennsylvania home. The District Court dismissed the complaint under Fed. R. Civ. P.
12(b)(1) and (6), and Easley timely appealed. She seeks review of the dismissal of her
claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73
Pa. Stat. Ann. §§ 201-1 et seq. (the “CPL”)1 against Deutsche Bank,2 seeking, inter alia,
compensation for damage to her credit rating.
I. Background
Easley purchased a home in August 2004 with a loan secured by a home mortgage.
Thirteen months after she bought the home, she filed a Chapter 13 bankruptcy petition. In
August 2006, she entered into a stipulation with New Century Mortgage Corporation
(“New Century”), under which New Century was to remain bound by the automatic stay
and Easley was to make monthly payments of $2,409.98.
According to New Century, Easley failed to make her required payments in
February and March 2007. Easley denies this and claims that she made all the payments
1
The complaint also included claims under the Fair Debt Collection Practices Act, the
federal Bankruptcy Code, the Pennsylvania Fair Credit Extension Uniformity Act and
other statutes, along with Pennsylvania common law claims. These claims are not at issue
in the appeal.
2
The complaint also named the original mortgagee, New Century Mortgage
Corporation, and “John Does 1-10.”
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on time. She did not, however, dispute New Century’s certification of default or oppose
New Century’s April 2007 motion for relief from the automatic stay. The Bankruptcy
Court granted New Century’s motion and gave it permission to foreclose on the
mortgage.
Around that same time, New Century assigned the mortgage to Deutsche Bank,
and the latter commenced a mortgage foreclosure action against Easley in the
Philadelphia Court of Common Pleas in August 2007. Easley did not answer or defend
the action, and the court entered a default judgment against her. In June 2008, the
property was sold to Deutsche Bank at a sheriff’s sale.
Easley then brought this rather sweeping federal action, accusing New Century and
Deutsche Bank of misrepresentation, deception, unfair trade practices, wrongful use of
the foreclosure process, and a host of other wrongs related to the mortgage and
foreclosure. The District Court dismissed the complaint for lack of subject matter
jurisdiction, citing the Rooker-Feldman doctrine, and for failure to state a claim, citing res
judicata.
II. Jurisdiction and Standard of Review
The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1367. We have
jurisdiction under 28 U.S.C. § 1291. We exercise plenary review, and, regardless of
“[w]hether the order of the District Court is more appropriately viewed as having
dismissed the complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1),
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or for failure to state a claim pursuant to Rule 12(b)(6), our standard of review is the
same: we accept as true [plaintiff’s] material allegations, and construe the complaint in
the light most favorable to [her].” Alston v. Countrywide Fin. Corp., 585 F.3d 753, 758
(3d Cir. 2009).
III. Discussion
Easley argues that the District Court erred in concluding that it lacked jurisdiction
over her CPL claim, and that the Rooker-Feldman doctrine does not apply because she
sought damages which she was not entitled to seek in the Pennsylvania foreclosure action.
“The Rooker-Feldman doctrine precludes lower federal courts from exercising
appellate jurisdiction over final state-court judgments because such appellate jurisdiction
rests solely with the United States Supreme Court.” In re Madera, 586 F.3d 228, 232 (3d
Cir.2009) (quotation marks omitted). “The Rooker-Feldman doctrine is implicated 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.” Id. (quotation marks omitted). Thus, “a claim is
barred by Rooker-Feldman . . . if the federal claim is inextricably intertwined with the
state adjudication, meaning that federal relief can only be predicated upon a conviction
that the state court was wrong.” Id. at 232 (quotation marks omitted).
The doctrine applies only when a plaintiff seeks redress for an injury caused by the
state court judgment itself, not when a plaintiff merely seeks to relitigate a claim or issue
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already litigated in state court. See Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544
U.S. 280, 292-93 (2005). Here, at least in part, Easley seeks damages stemming directly
from the state court's judgment in the foreclosure action. For example, she seeks
compensation for, inter alia, the damage to her credit rating caused by the foreclosure.
That part of her CPL claim was properly dismissed for lack of subject matter jurisdiction
under Rooker-Feldman.
Easley’s CPL claim is also based on allegations of fraud, deception and other
wrongs which pre-dated the foreclosure action. The Rooker-Feldman doctrine will only
bar that part of the CPL claim to the extent that adjudicating it would mean that “(1) the
federal court must determine that the state court judgment was erroneously entered in
order to grant the requested relief, or (2) the federal court must take an action that would
negate the state court’s judgment . . . .” In re Knapper, 407 F.3d 573, 580 (3d Cir. 2005).
The allegations of fraud and other pre-foreclosure wrongs were not presented to the state
court (which granted default judgment), and the state court’s judgment would not be
implicated by a finding that Deutsche Bank was liable under the CPL for fraud and/or
other pre-foreclosure wrongs. We explained in Turner v. Crawford Square Apts. III, L.P.,
449 F.3d 542, 543 (3d Cir. 2006), that “courts have applied [the Rooker-Feldman
doctrine] beyond its appropriate boundaries.” Just as in Turner, where we refused to
apply Rooker-Feldman because the plaintiff’s damages were caused by conduct which
was not at issue before the state court, here, the pre-foreclosure part of Easley’s CPL
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claim “did not complain of injuries ‘caused by the state-court judgment.’” Id. at 547
(quoting Exxon, 544 U.S. at 291). Thus, Rooker-Feldman does not apply to that part of
Easley’s CPL claim.
To the limited extent that the District Court is not barred from hearing Easley’s
CPL claim under the Rooker-Feldman doctrine, the claim itself is barred under res
judicata. In Pennsylvania,3 a claim is barred under res judicata if it shares four conditions
in common with an earlier claim: “(1) the thing sued upon or for; (2) the cause of action;
(3) the persons and parties to the action; and (4) the capacity of the parties to sue or be
sued.” Turner, 449 F.3d at 548. Easley’s CPL claim is based on allegations related to her
mortgage, including events leading up to its execution, and events leading up to and
including the foreclosure. The “thing sued upon” is therefore the same, as are the parties,
whose capacities to sue and be sued are not in dispute.
The only contentious issue is the cause of action. Easley did not assert a CPL
counterclaim (or any counterclaim at all) in the mortgage foreclosure action, and she did
not make a CPL claim in her bankruptcy case. In Pennsylvania, res judicata bars “claims
that were or could have been raised,” Turner, 449 F.3d at 550 n.13 (quoting Balent v.
City of Wilkes-Barre, 669 A.2d 309, 315 (Pa. 1995) (emphasis in original)).
Easley argues that Pennsylvania law would not have permitted her to assert a CPL
3
Federal courts are required to give state court judgments the same preclusive effect
that the issuing state courts would give them. See Rycoline Prods., Inc. v. C & W
Unlimited, 109 F.3d 883, 887 (3d Cir.1997).
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counterclaim in response to a foreclosure action. She cites several cases in support of this
argument, but none is persuasive. For example, in Cunningham v. McWilliams, 714 A.2d
1054, 1057 (Pa. Super. 1998), the court rejected a counterclaim based on a sales contract
which was separate from the mortgage, and held that a counterclaim could be brought as
long as it was “incident to the creation of the mortgage relationship itself.” Nothing in
that case leads to the conclusion that a CPL claim based on fraud and deception in the
creation of a mortgage and wrongful foreclosure of that mortgage would not be a viable
counterclaim in a foreclosure action. Likewise, in Green Tree Consumer Disc. Co. v.
Newton, 909 A.2d 811, 814-15 (Pa. Super. 2006), the court explained that “the general
rule is that a recoupment claim is an improper defense to a mortgage foreclosure”
(apparently because most claims for recoupment implicate tangential transactions, such as
the sale of the property itself, rather than the creation of the mortgage), but held that
counterclaims related to the mortgage itself are “clearly . . . permissible.” The CPL claim
before us is intimately tied to the creation of the mortgage and subsequent foreclosure
(and not the sale of the home, or any other tangential transaction), and, thus, Easley could
have brought it as a counterclaim in the foreclosure proceeding. Therefore, the CPL
claim is barred by virtue of res judicata.4
4
Parenthetically, we reject Easley’s argument that she is not collaterally estopped
from raising the issues decided in the mortgage foreclosure proceeding because the
judgment was entered based on her default and the issues were not litigated. See Fox v.
Gabler, 626 A.2d 1141, 1143 (Pa. 1993) (“[W]e long ago concluded that the judgment by
default is res judicata and quite as conclusive as one rendered on a verdict after litigation
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Easley is also precluded under res judicata from raising the CPL claim if she could
have brought the claim in the bankruptcy proceeding. In Eastern Minerals & Chemicals
Co. v. Mahan , 225 F.3d 330, 337-38 (3d Cir. 2000), we held that “[c]laim preclusion
[does not bar] every conceivable claim that could have been brought in the context of a
bankruptcy case,” and that “a claim should not be barred unless the factual underpinnings,
theory of the case, and relief sought against the parties to the proceeding are so close to a
claim actually litigated in the bankruptcy that it would be unreasonable not to have
brought them both at the same time in the bankruptcy forum.” We cannot imagine how
her claim could be any more closely related to New Century’s assertions in the
bankruptcy case that it held the mortgage and that payments were due.
Finally, Easley argues that she should have been given leave to file an amended
complaint. We need not address this argument because, regardless of how Easley phrases
her claims and allegations, amendment of the complaint would be futile given that the
Rooker-Feldman doctrine and res judicata would require dismissal of the CPL claim.
IV. Conclusion
We will affirm the order of the District Court.
insofar as a defaulting defendant is concerned.”).
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