William B. Butler v. Federal National Mortgage ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-2081
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William B. Butler
lllllllllllllllllllll Plaintiff - Appellant
v.
Federal National Mortgage Association
lllllllllllllllllllll Defendant - Appellee
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: September 4, 2013
Filed: February 12, 2014
[Unpublished]
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Before MURPHY, SHEPHERD, and KELLY, Circuit Judges.
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PER CURIAM.
William Butler is an attorney who has filed more than 70 lawsuits on behalf of
himself and an expanding, sometimes revolving, circle of plaintiffs seeking to
invalidate residential mortgage foreclosures based on theories the federal courts have
consistently rejected. This is the second lawsuit Butler has filed to forestall eviction
from his home after he and his wife defaulted on their loan. The first was dismissed
for failure to state a claim, and we affirmed. We also affirm the district court's1
dismissal in this case.
In October 2006 Butler and his wife Mary Butler signed a note promising to
repay $280,000 they borrowed from Marshall & Isley Bank to buy a home in
Minneapolis, Minnesota. They secured the note with a mortgage on the property held
by Mortgage Electronic Registration Systems, Inc. (MERS). The note and mortgage
were serviced by BAC Home Loan Servicing (BAC), an arm of Bank of America.
BAC informed the Butlers in February 2010 that they were in default on their
loan and had one month to cure their default before a foreclosure on their home would
commence by advertisement. The Butlers made no additional payment. In April
2010 MERS assigned the mortgage to BAC. As soon as the assignment was recorded
on May 19, 2010, BAC informed the Butlers that it would be initiating foreclosure
proceedings by advertisement on the mortgage. BAC then purchased the mortgage
at a sheriff’s sale on July 23, 2010 and assigned the property to the Federal National
Mortgage Association (Fannie Mae) in a quit claim deed on September 7, 2010.
In January 2011 the Butlers filed a lawsuit in Minnesota state court against
BAC, Bank of America, and their law firm, challenging the foreclosure under a
previously invalidated “show me the actual note” theory. A week later, Fannie Mae
commenced eviction proceedings in state court against Butler (eviction action). Bank
of America then removed the Butlers’ case to the federal district court, which
dismissed all their claims on July 2011. The state court granted judgment for Fannie
Mae in the eviction action two months later, but stayed its eviction order pending
appeal.
1
The Honorable Susan Richard Nelson, United States District Judge for the
District of Minnesota.
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This court affirmed the dismissal of Butler’s claims on August 27, 2012,
concluding that "[u]nder Minnesota law, BAC Home Loan Servicing, as the legal and
record holder title of the mortgage, could undeniably initiate foreclosure proceedings
on the property upon the Butlers' failure to repay the loan, as promised in the note."
Butler v. Bank of America, N.A., 690 F.3d 959, 962 (8th Cir. 2012) (citing Minn.
Stat. § 580.02; Jackson v. Mortg. Electronic Registration Sys., Inc., 770 N.W.2d 487,
500 (Minn. 2009); Stein v. Chase Home Finance LLC, 662 F.3d 976, 980 (8th Cir.
2011)). On October 3, 2012, the state court granted Fannie Mae a writ of recovery
in the eviction action and ordered the Butlers to vacate.
Acting alone, Butler filed this new action against Fannie Mae in state court on
October 5, 2012, requesting and receiving a temporary restraining order against his
family's eviction. Fannie Mae removed the case to federal court and filed a motion
to dismiss under Fed. R. Civ. P. 12(b)(6). Butler now seeks a determination of
adverse interest under Minnesota’s quiet title statute, Minn. Stat. § 559.01, as well as
a judgment declaring that the sheriff's sale and quit claim deed are void and that he
possesses sole title to the mortgaged property. He asserts that Fannie Mae's interest
in the mortgage at the time of the foreclosure invalidated both the foreclosure and the
subsequent quitclaim deed from BAC. Butler’s only support for this assertion is a
picture from the MERS loan finder website taken on October 3, 2012, showing
Fannie Mae to be an investor in Butler’s mortgage.
The federal district court determined that Butler’s quiet title claim was
precluded by res judicata and collateral estoppel and that his claim that Fannie Mae
had a preexisting interest in his mortgage was both implausible and irrelevant to his
quiet title action. It granted Fannie Mae's motion, dismissed Butler's claim, and
declined to grant the requested declaratory judgment. Butler appeals, and we review
de novo the dismissal of a claim on the grounds of res judicata or for failure to state
a claim. Yankton Sioux Tribe v. U.S. Dep’t of Health & Human Servs., 533 F.3d
634, 639 (8th Cir. 2008).
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Butler argues the district court erred in dismissing his claim on grounds of res
judicata. A federal court sitting in diversity applies state law when determining
whether a claim is barred by res judicata. C.H. Robinson Worldwide, Inc. v. Lobrano,
695 F.3d 758, 764 (8th Cir. 2012). Minnesota bars a plaintiff from bringing a second
claim if “(1) the earlier claim involved the same set of factual circumstances; (2) the
earlier claim involved the same parties or their privies; (3) there was final judgment
on the merits; (4) the estopped party had a full and fair opportunity to litigate the
matter.” Hauschildt v. Beckingham, 686 N.W.2d 829, 840 (Minn. 2004). A privy
is one who is “so connected with the parties [of a prior suit] in estate or in blood or
in law as to be identified with them in interest, and consequently to be affected with
them by the litigation.” Rucker v. Schmidt, 794 N.W.2d 114, 118 (Minn. 2011)
(internal quotation marks omitted). Privity exists for “successors in interest to those
having derivative claims.” Id. Res judicata bars not only "all claims actually
litigated, but . . . all claims that could have been litigated in the earlier action." Id.
It is not applied if it would result in manifest injustice. AFSCME Council 96 v.
Arrowhead Reg’l Corr. Bd., 356 N.W.2d 295, 299 (Minn. 1984).
Butler's first claim challenged the foreclosure of his home following his
mortgage default. His current claim challenges the same foreclosure. The first claim
against BAC was dismissed, and the dismissal was affirmed on the merits. Butler
now sues Fannie Mae, which succeeded to BAC’s interest in the mortgage after
acquiring it by quitclaim deed following the foreclosure. Butler does not challenge
the validity of that quitclaim deed, but argues that BAC lacked the authority to initiate
the original foreclosure because of an alleged, undocumented prior assignment of the
mortgage interest from BAC to Fannie Mae.
Butler tries to claim that the factual circumstances here differ from his earlier
claim, but his argument is based on unsupported assertions. He first suggests that
Fannie Mae’s status on October 3, 2012 as an investor in his mortgage is evidence
that it acquired its interest before the July 2010 foreclosure and October 2010
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quitclaim deed. He asserts that the absence of any evidence of this assignment proves
that it was not recorded, thus invalidating the foreclosure sale and the quitclaim deed.
Butler's repeated unsupported allegations deserve short shrift. Even if the
alleged assignment had actually occurred, Butler had ample opportunity to amend his
complaint or to join Fannie Mae as a party in his prior claim. Barring his asserted
claim would not result in manifest injustice because Butler caused the foreclosure by
defaulting on his loan. We conclude that the district court did not err in determining
that Butler is barred by res judicata from raising his current claim.
Butler's baseless argument that the district court was bound under the Rooker-
Feldman doctrine by the state grant of a temporary restraining order also deserves
little discussion. A temporary restraining order is just that; it merely preserves the
status quo for a short time. The district court dismissed Butler's claim both on
procedural grounds and the merits, and it was not required to take the temporary order
issued by a state court into account. See Patterson v. Masem, 774 F.2d 251, 254 (8th
Cir. 1985). Because we conclude that res judicata bars Butler's current claim, we
need not discuss any new peripheral issues he seeks to raise.
The judgment of the district court is affirmed.
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