Ron Canen, et al v. Meritage Mortgage Corporation, et al

Filing

Filed Nonprecedential Disposition PER CURIAM. The judgment of the district court is affirmed, except to the extent that it dismissed the Truth-in-Lending and fraudulent-inducement claims for lack of subject-matter jurisdiction. With respect to these two claims, we modify the judgment to be on the merits (that is, dismissal with prejudice), and affirm it as so modified. Richard D. Cudahy, Circuit Judge; Frank H. Easterbrook, Circuit Judge and Diane S. Sykes, Circuit Judge. [6554420-1] [6554420] [13-2777]

Case: 13-2777

Document: 23

Filed: 02/24/2014

NONPRECEDENTIAL  DISPOSITION  

Pages: 3

To  be  cited  only  in  accordance  with  Fed.  R.  App.  P.  32.1

United States Court of Appeals
For  the  Seventh  Circuit
Chicago,  Illinois  60604  
Submitted  February  21,  2014*  
Decided  February  24,  2014  

Before  

No.  13-­‐‑2777  

RICHARD  D.  CUDAHY,  Circuit  Judge  
FRANK  H.  EASTERBROOK,  Circuit  Judge  
DIANE  S.  SYKES,  Circuit  Judge  

Appeal   from   the   United  
States   District   Court   for   the  
Northern   District   of   Indiana,  
South  Bend  Division.  

No.  3:10-­‐‑cv-­‐‑0081-­‐‑PPS-­‐‑CAN  
Philip  P.  Simon,  Chief  Judge.  

RONALD  W.  CANEN  and  LOTTE  CANEN,  

Plaintiffs-­‐‑Appellants,  

v.  

US  BANK  NATIONAL  ASSOCIATION,  et  al.,  

Defendants-­‐‑Appellees.  

Order  

In  2004  Ronald  and  Lotte  Canen  refinanced  their  home  with  a  mortgage  loan.  They  
did  not  pay  what  they  owed,  and  the  lender  filed  foreclosure  proceedings  in  Indiana  
court.  The  Canens  ignored  that  suit,  and  the  state  judge  entered  a  default  judgment  in  
the  lenders’  favor.  The  Canens  then  filed  a  series  of  bankruptcy  cases  and  used  the  au-­‐‑
tomatic  stay  to  prevent  enforcement  of  the  adverse  judgment.  In  2009,  after  the  last  

*   After   examining   the   briefs   and   the   record,   we   have   concluded   that   oral   argument   is   unnecessary.  

See  Fed.  R.  App.  P.  34(a);  Cir.  R.  34(f).  

Case: 13-2777
No.  13-­‐‑2777  

Document: 23

Filed: 02/24/2014

Pages: 3

Page  2  

bankruptcy  proceeding  ended,  they  asked  a  state  court  to  set  aside  the  foreclosure  or-­‐‑
der.  When  the  state  judge  declined,  the  Canens  filed  this  suit  in  federal  court.  The  com-­‐‑
plaint  presents  claims  under  both  federal  and  state  law.  

The  district  court  dismissed  some  of  the  claims  as  outside  federal  jurisdiction  be-­‐‑
cause  they  conflict  with  the  state’s  judgment.  913  F.  Supp.  2d  657  (N.D.  Ind.  2012).  The  
judge  viewed  this  suit  as  a  disguised  collateral  attack  and  observed  that  only  the  Su-­‐‑
preme  Court  of  the  United  States  is  entitled  to  review  the  decisions  of  state  courts  in  
civil  litigation.  See  District  of  Columbia  Court  of  Appeals  v.  Feldman,  460  U.S.  462  (1983);  
Rooker  v.  Fidelity  Trust  Co.,  263  U.S.  413  (1923).  The  judge  dismissed  the  remaining  
claims  as  barred  by  judicial  estoppel.  See  Cannon–Stokes  v.  Potter,  453  F.3d  446  (7th  Cir.  
2006).  In  the  bankruptcy  proceedings,  the  Canens  represented  that  they  had  no  valuable  
legal  claims.  Once  they  prevailed  in  the  final  bankruptcy  case  (the  judge  discharged  
their  remaining  debts  in  2009),  they  were  barred  from  taking  a  contradictory  position  
later.  The  claims  made  in  this  suit  represent  such  self-­‐‑contradiction,  the  judge  conclud-­‐‑
ed,  because  the  Canens  maintain  that  they  are  entitled  to  money,  yet  they  told  the  bank-­‐‑
ruptcy  court  (plus  the  bankruptcy  trustee  and  their  creditors)  that  they  had  no  such  
monetary  entitlements.  Indeed,  the  judge  thought  that  the  Canens  have  committed  
bankruptcy  fraud,  because  the  record  shows  that  they  were  contemplating  the  current  
suit  while  the  bankruptcies  were  pending,  yet  lied  to  the  court  to  prevent  the  trustee  
from  learning  about  (and  taking  over)  the  opportunity  to  litigate.  

The  Canens’  appeal  does  not  contest  the  district  court’s  application  of  judicial  estop-­‐‑
pel  but  does  contend  that  the  Rooker–Feldman  doctrine  does  not  affect  those  claims  that  
the  court  dismissed  on  that  ground.  The  principal  basis  of  this  argument  appears  to  be  
that,  because  they  presented  different  legal  theories  in  the  state  and  federal  actions,  the  
Rooker–Feldman  doctrine  drops  out.  That  is  not  correct.  The  Rooker–Feldman  doctrine  is  
not  just  another  name  for  the  doctrine  of  claim  preclusion  (collateral  estoppel),  which  is  
issue-­‐‑specific.  Instead  the  Rooker–Feldman  doctrine  establishes  that  district  courts  lack  
subject-­‐‑matter  jurisdiction  to  set  aside  judgments  that  state  courts  have  entered  in  civil  
cases;  the  reason  the  plaintiff  gives  for  seeking  this  relief  is  irrelevant.  

To  the  extent  that  the  Canens  want  the  federal  court  to  quiet  title  in  their  favor,  that  
relief  would  directly  upset  the  judgment  of  foreclosure  and  is  barred  by  the  Rooker–
Feldman  doctrine.  (We  have  considered  all  of  the  Canens’  other  objections  to  the  applica-­‐‑
tion  of  that  doctrine,  but  none  covers  the  quiet-­‐‑title  claim;  state  law  entitled  them  to  
hearings,  but  they  spurned  their  opportunity.)  But  for  two  other  claims—one  under  the  
parts  of  the  Truth  in  Lending  Act,  15  U.S.C.  §1631–51,  that  concern  real-­‐‑estate  loans,  and  
a  state  tort  claim  for  fraudulent  inducement  in  making  the  2004  loan—the  district  judge  
erred  in  thinking  the  Rooker–Feldman  doctrine  dispositive.  It  is  possible  to  provide  relief  

Case: 13-2777
No.  13-­‐‑2777  

Document: 23

Filed: 02/24/2014

Pages: 3

Page  3  

on  these  claims  via  awards  of  damages  without  disturbing  the  state  court’s  judgment.  
The  Canens  allege  an  injury  that  predates  the  state  court’s  action;  when  a  “federal  plain-­‐‑
tiff  ‘presents  some  independent  claim,  albeit  one  that  denies  a  legal  conclusion  that  a  
state  court  has  reached  in  a  case  to  which  he  was  a  party  …  ,  then  there  is  jurisdiction  
and  state  law  determines  whether  the  defendant  prevails  under  principles  of  preclu-­‐‑
sion’.”  Exxon  Mobil  Corp.  v.  Saudi  Basic  Industries  Corp.,  544  U.S.  280,  293  (2005),  quoting  
from  GASH  Associates  v.  Village  of  Rosemont,  995  F.2d  726,  728  (7th  Cir.  1993).  

This  conclusion  does  not  help  the  Canens,  however.  The  district  court  rejected  their  
claims  without  prejudice  to  the  extent  it  thought  the  Rooker–Feldman  doctrine  applicable,  
and  with  prejudice  otherwise.  By  insisting  that  the  Rooker–Feldman  doctrine  does  not  
apply  to  the  Truth-­‐‑in-­‐‑Lending  and  fraudulent-­‐‑inducement  claims,  the  Canens  have  
shown  only  that  these  claims  must  be  dismissed  with  prejudice—for  the  doctrine  of  ju-­‐‑
dicial  estoppel  extinguishes  every  claim  for  damages  that  the  Canens  concealed  from  
the  bankruptcy  court  and  their  creditors.  

The  judgment  of  the  district  court  is  affirmed,  except  to  the  extent  that  it  dismissed  
the  Truth-­‐‑in-­‐‑Lending  and  fraudulent-­‐‑inducement  claims  for  lack  of  subject-­‐‑matter  ju-­‐‑
risdiction.  With  respect  to  these  two  claims,  we  modify  the  judgment  to  be  on  the  merits  
(that  is,  dismissal  with  prejudice),  and  affirm  it  as  so  modified.