Pope v. Federal Home Loan Mortgage Corp.

United States Court of Appeals
For the Eighth Circuit
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No. 13-2412
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Paul V. Pope; Gretchen A. Pope
lllllllllllllllllllll Plaintiffs - Appellants
v.
Federal Home Loan Mortgage Corporation; Wells Fargo Bank, N.A.; Reiter &
Schiller, P.A.
lllllllllllllllllllll Defendants - Appellees
Wilford, Geske & Cook, P.A.; Caitlin Dowling
lllllllllllllllllllll Defendants
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Appeal from United States District Court
for the District of Minnesota - Minneapolis
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Submitted: December 16, 2013
Filed: April 9, 2014
[Unpublished]
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Before MURPHY, SHEPHERD, and KELLY, Circuit Judges.
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PER CURIAM.
Paul and Gretchen Pope are homeowners fighting foreclosure. This is the third
lawsuit that the Popes have filed challenging the foreclosure of their home. In this
case, the Popes filed suit in state court, and Federal Home Loan Mortgage Corporation
(“Freddie Mac”) removed the case to federal court, invoking 12 U.S.C. § 1452(f)
subject matter jurisdiction. The district court1 dismissed the Popes’ complaint for
failure to state a claim and also held that the Popes are precluded, by both claim
preclusion and issue preclusion, from further challenging the foreclosure. Having
jurisdiction under 28 U.S.C. § 1291, we affirm.
On July 19, 2007, the Popes obtained a loan from Wells Fargo and granted
Wells Fargo a mortgage on their home. Shortly thereafter, on August 14, 2007, Wells
Fargo sold the loan to Freddie Mac. Subsequently, the Popes defaulted on the loan
by failing to make the payments. In 2010, Wells Fargo, acting as Freddie Mac’s loan
servicer, started foreclosure by advertisement. After Wells Fargo received the
Sheriff’s certificate of sale, Wells Fargo quitclaimed the property to Freddie Mac.
As the district court noted, this is at least the third action the Popes have
brought to challenge the foreclosure of their home. While the first action was
dismissed voluntarily by the plaintiffs, the second action reached a final decision. In
Pope v. Wells Fargo Bank, N.A., No. 11-02496, 2012 WL 1886493 (D. Minn. May
23, 2012), the Popes challenged the right of Wells Fargo to foreclose on their
property, asserting multiple reasons that foreclosure was improper. The district court
rejected the Popes’ arguments and granted Wells Fargo’s motion to dismiss. The
Popes did not appeal the judgment.2
1
The Honorable Susan R. Nelson, United States District Judge for the District
of Minnesota.
2
While the Popes initially filed an appeal, they then moved to voluntarily
dismiss the appeal under Fed. R. App. P. 42(b).
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The Popes now seek to challenge Freddie Mac’s ownership of the property.
The Popes filed a new action in state court, and Freddie Mac removed the case to
federal court, invoking 12 U.S.C. § 1452, which provides the district courts federal
subject matter jurisdiction over cases involving Freddie Mac. The district court
dismissed the Popes’ complaint for failure to state a claim, citing recent cases
dismissing similar claims. In addition, the district court also held that the Popes’
complaint should be dismissed based on the doctrines of both claim and issue
preclusion. The Popes appeal the district court’s ruling.
Because claim preclusion and issue preclusion would prevent this litigation
from proceeding on the merits, we will address those issues first. “We review de novo
the dismissal of a claim on the grounds of res judicata.” Yankton Sioux Tribe v. U.S.
Dep’t of Health & Human Servs., 533 F.3d 634, 639 (8th Cir. 2008) (citation omitted).
“The preclusive effect of a judgment is defined by claim preclusion and issue
preclusion, which are collectively referred to as ‘res judicata.’” Taylor v. Sturgell,
553 U.S. 880, 892 (2008). This action involves both claim preclusion and issue
preclusion. “Under the doctrine of claim preclusion, a final judgment forecloses
‘successive litigation of the very same claim, whether or not relitigation of the claim
raises the same issues as the earlier suit.’” Id. (quoting New Hampshire v. Maine, 532
U.S. 742, 748 (2001)). “Issue preclusion, in contrast, bars ‘successive litigation of an
issue of fact or law actually litigated and resolved in a valid court determination
essential to the prior judgment,’ even if the issue recurs in the context of a different
claim.” Id. (quoting New Hampshire, 532 U.S. at 748–49).
“For judgments in diversity cases, federal law incorporates the rules of
preclusion applied by the State in which the rendering court sits.” Taylor, 553 U.S.
at 891 n.4 (citing Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497, 507–08
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(2001)); see also C.H. Robinson Worldwide, Inc. v. Lobrano, 695 F.3d 758, 764 (8th
Cir. 2012). Judgment in the previous Pope litigation was entered by the United States
District Court for the District of Minnesota sitting in diversity jurisdiction and
applying Minnesota state law. Therefore, we will look to Minnesota law to determine
the preclusive effect of the earlier case.
In Minnesota, “[t]he principles of [claim preclusion] operate where a
subsequent action or suit is predicated on the same cause of action which has been
determined by a judgment, no matter what issues were raised or litigated in the
original cause of action.” Brown-Wilbert, Inc. v. Copeland Buhl & Co., P.L.L.P., 732
N.W.2d 209, 224 (Minn. 2007) (quotation omitted). “[Claim preclusion] applies as
an absolute bar to a subsequent claim when: (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 a final judgment on the merits; and (4) the estopped party had
a full and fair opportunity to litigate the matter.” Rucker v. Schmidt, 794 N.W.2d 114,
117 (Minn. 2011) (citation omitted). “Privity ‘expresses the idea that as to certain
matters and in certain circumstances persons who are not parties to an action but who
are connected with it in their interests are affected by the judgment with reference to
interests involved in the action, as if they were parties.’” Id. at 118 (quotation
omitted). “Privies to a judgment are those who are so connected with the parties 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.” Id. (quotation omitted).
We find all the factors present such that, under Minnesota law, the Popes are
barred by claim preclusion from challenging the foreclosure of their residence. First,
the earlier action involved the same circumstances. As noted by the district court, this
is at least the third action that the Popes have brought challenging the foreclosure on
their home—the first two simply did not include Freddie Mac as a named party. The
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earlier actions and the present action are about redressing a possible wrongful
foreclosure. While the Popes have pursued a new theory as to why Wells Fargo
lacked the power to foreclose—alleging the existence of an unrecorded assignment
of the mortgage between Wells Fargo and Freddie Mac—this suit is still
fundamentally about whether the foreclosure was valid and complied with all the
statutory requirements. Second, the Popes’ claim also involves the same parties or
their privies. Freddie Mac and Wells Fargo are in privity in at least one of two ways:
(1) Wells Fargo gave Freddie Mac a quitclaim deed, thus Wells Fargo and Freddie
Mac have a grantor-grantee relationship; and (2) while Wells Fargo was the legal
assignee of the mortgage—with the power of foreclosure—the legal assignee was
acting as a loan servicer foreclosing on behalf of the true owner of the debt, Freddie
Mac, the equitable owner of the mortgage.3 Either of these relationships makes the
interests of Wells Fargo and Freddie Mac sufficiently aligned to hold that the two
were in privity as to the foreclosure. Cf. Taylor, 553 U.S. at 894–95. Third, there was
a final judgment on the merits. And fourth, the Popes had a full and fair opportunity
to challenge the foreclosure in the earlier actions. Therefore, we find the doctrine of
claim preclusion precludes the Popes from bringing the same cause of action again.
3
Minnesota allows the legal and equitable interests in a mortgage to be
separated. Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487 (Minn.
2009). Freddie Mac purchased the underlying loan from Wells Fargo—and received
the equitable interest in the mortgage—years before Wells Fargo’s foreclosure.
During the foreclosure process, Wells Fargo was merely acting as a servicer. While
Wells Fargo was the legal mortgagee with the power to foreclose, Wells Fargo was
not, in fact, entitled to the property. Thus, as in other recent, similar cases, once the
foreclosure was effectuated in the name of the legal mortgagee, the property was
deeded to the equitable mortgagee.
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We also find the Popes should be estopped from further challenging Wells
Fargo’s power to foreclose under the doctrine of issue preclusion, or collateral
estoppel. Once again, we turn to Minnesota law to determine the preclusive effect of
the prior judgment:
Collateral estoppel, sometimes referred to as issue preclusion, precludes
parties from relitigating issues which are identical to issues previously
litigated and which were necessary and essential to the former resulting
judgment. Ellis v. Minneapolis Comm’n on Civil Rights, 319 N.W.2d
702, 704 (Minn. 1982). Although some jurisdictions require “mutuality”
of parties in cases involving previously determined litigation as a
predicate to the invocation of collateral estoppel, Minnesota does not.
Even though a defendant in the proceeding before the court was not a
party to the earlier proceeding, Minnesota permits a defendant to invoke
collateral estoppel in the subsequent litigation commenced by a plaintiff
who also had been the claimant in the earlier proceeding provided four
requirements have been established:
(1) the issue was identical to one in a prior adjudication; (2)
there was a final judgment on the merits; (3) the estopped
party was a party or in privity with a party to the prior
adjudication; and (4) the estopped party was given a full
and fair opportunity to be heard on the adjudicated issue.
Aufderhar v. Data Dispatch, Inc., 452 N.W.2d 648, 650 (Minn. 1990) (quotation
omitted). These factors are very similar to those addressed for claim preclusion. As
above, we find the four factors for issue preclusion are present: (1) this case raises the
same issue as to whether the foreclosure is valid; (2) there was a final judgment; (3)
the estopped party, the Popes, were a party to the prior adjudication; and (4) the
estopped party was given a full and fair opportunity to be heard on the adjudicated
issue. Therefore, under Minnesota law, Freddie Mac may invoke the doctrine of issue
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preclusion for issues on which the Popes have previously fully litigated and lost, such
as Wells Fargo’s power to foreclose, even though Freddie Mac was not a party to the
prior litigation. The Popes are estopped from challenging the foreclosure.
Even if we were to hold the Popes were not precluded from challenging the
foreclosure, we would still find the district court was correct to dismiss the complaint
for failure to state a claim. “We review de novo the district court’s grant of a motion
to dismiss under Rule 12(b)(6), construing all reasonable inferences in favor of the
nonmoving party.” Dunbar v. Wells Fargo Bank, N.A., 709 F.3d 1254, 1256 (8th Cir.
2013) (quotation omitted). The Popes claim there was an unrecorded assignment of
the mortgage executed by Wells Fargo to Freddie Mac prior to foreclosure. The Popes
now argue this unrecorded assignment renders the foreclosure void because
Minnesota’s foreclosure by advertisement statute requires strict compliance. Ruiz v.
1st Fidelity Loan Servicing, LLC, 829 N.W.2d 53, 57–59 (Minn. 2013).
As in other recent, similar foreclosure cases, we find the Popes’ complaint fails
to include sufficient factual material to state a plausible claim on which relief can be
granted. Dunbar, 709 F.3d at 1259; Karnatcheva v. JPMorgan Chase Bank, N.A., 704
F.3d 545, 548 (8th Cir. 2013). The Popes rely upon “information and belief” to claim
that an unrecorded assignment existed between Freddie Mac and Wells Fargo. While
plaintiffs may at times plead upon information and belief, we emphasize that
“‘[i]nformation and belief’ does not mean pure speculation.” Menard v. CSX,
698 F.3d 40, 44 (1st Cir. 2012). While the Popes suggest that an unrecorded
assignment might exist, they provide no facts that would lead to the plausible
inference that an unrecorded assignment does exist. We have recently held that nearly
identical claims amount to mere conclusory allegations based solely on speculation.
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See Vollmer v. Fed. Home Loan Mortg. Corp., No. 13-2617, ___ F. App’x ___, 2014
WL 642423 (8th Cir. Feb. 20, 2014) (unpublished per curiam). As in previous cases,
we find this pleading to be insufficient under Federal Rules of Civil Procedure 8 and
12.
The judgment of the district court is affirmed.
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