Orton v. Caliber Home Loans et al
MEMORANDUM OPINION. Signed by Magistrate Judge T Michael Putnam on 12/13/16. (MRR, )
2016 Dec-13 PM 02:46
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
CALIBER HOME LOANS, et al.,
Case No. 7:16-cv-01479-TMP
On September 9, 2016, defendants Caliber Home Loans (“Caliber”) and
U.S. Bank Trust, N.A. (“U.S. Bank”) filed a Motion to Dismiss the Complaint in
the instant action. (Doc. 4). The motion has been fully briefed, and the parties
have consented to dispositive jurisdiction by the undersigned magistrate judge
pursuant to 28 U.S.C. § 636(c).
Accordingly, the court enters the following
The above-styled case arises out of the Ed Orton’s (“plaintiff”) dispute of the
validity of his mortgage. On July 12, 2007, the plaintiff and his spouse executed a
promissory note (“the Note”) in the amount of $364,000.00 to First Federal Bank.
The Note was secured by a mortgage on property located at 16095 Highway 17,
Aliceville, Alabama 35442 (“the Property”). First Federal Bank indorsed the Note
to Countrywide Bank, FSB, and Countrywide Bank, FSB, then indorsed the Note
to Countrywide Home Loans, Inc. (“Countrywide”). The mortgage was recorded
in the Pickens County Property Records on July 23, 2007.
The mortgage named Mortgage Electronic Registration Systems, Inc.
(“MERS”) as the nominee for First Federal Bank. On September 2, 2011, MERS
assigned the mortgage to Countrywide.
September 29, 2011.
The assignment was recorded on
On July 24, 2015, the mortgage was assigned from
Countrywide to U.S. Bank Trust, N.A., stating, in pertinent part:
FOR VALUE RECEIVED, the undersigned BANK OF AMERICA,
N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS
SERVICING, LP F/K/A COUNTRYWIDE HOME LOANS
SERVICING, L.P. . . . hereby grants, assigns and transfers to U.S.
BANK TRUST, N.A., AS TRUSTEE FOR ISF9 MASTER
PARTICIPATION TRUST . . . all beneficial interest under that
certain mortgage/Deed of Trust/Security Deed dated 07/12/2007
executed by PATRICIA ANN ORTON and ED ORTON to
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
AS NOMINEE FOR FIRST FEDERAL BANK, ITS SUCCESSORS
AND ASSIGNS in the amount of $364,000.00 and recorded on
7/23/2007. . .
(Doc. 1-1, p. 44). The mortgage was recorded on August 31, 2015. At some point
thereafter, the defendants began foreclosure proceedings under the mortgage.
On January 9, 2013, the plaintiff filed a Complaint in the Circuit Court of
Pickens County, Alabama, which was removed to this court on March 18, 2013, by
defendant Bank of America. The lawsuit was styled Orton v. Mathews, et al., Case
No. 7:13-cv-00515-RDP (“Orton I”). Orton I was dismissed as to defendant Bank
of America on November 1, 2013, for reasons set out infra. (Orton I, docs. 21, 22).
Orton I was dismissed as to defendant Sandy Matthews 1 for failure to serve on
November 13, 2013. (Orton I, doc. 25). The plaintiff filed the instant case in the
Circuit Court of Pickens County, Alabama on August 9, 2016. 2 (Doc. 1-1, p. 5). It
was removed to this court on September 8, 2016, on the basis of federal diversity
The defendants allege in the Motion to Dismiss that the Complaint is due to be
dismissed because it is barred by either the doctrine of res judicata or collateral
estoppel. Alternatively, the defendants argue that the Complaint does not satisfy
In the case styling of Orton I, defendant Sandy Mathews’ name is spelled with a single “t.”
However, in other orders in the case, her name is spelled “Matthews.” The court is unsure which
spelling is correct. However, any misspelling has no effect on the instant case.
In the Notice of Removal, defendants indicate that the case was filed in state court on August 9,
2015. (Doc. 1, p. 1). This appears merely to be a typographical error because the state court
records indicate that the case actually was filed on August 9, 2016. (Doc. 1-1, p. 5).
minimum pleadings standards, is based upon a discredited legal theory, and
conflicts with the defendant’s right to enforce the note and mortgage.
a. Res Judicata and Collateral Estoppel
First, the defendants argue that the Complaint is barred by either res judicata or
collateral estoppel due to the litigation and dismissal on the merits of Orton I. The
doctrine of res judicata prevents a party from re-litigating a claim that already has
been litigated to a conclusion. There are four elements that must be established by
the movant for res judicata to apply: “(1) the prior decision must have been
rendered by a court of competent jurisdiction; (2) there must have been a final
judgment on the merits; (3) both cases must involve the same parties or their
privies; and (4) both cases must involve the same causes of action.” Lobo v.
Celebrity Cruises, Inc., 704 F.3d 882, 892 (11th Cir. 2013), citing In re Piper
Aircraft Corp., 244 F.3d 1289, 1296 (11th Cir. 2001).
The purpose of the doctrine is to protect litigants from having to re-litigate
matters that already have been adjudicated or that could have been adjudicated in a
previous lawsuit. See, e.g., Lee L. Saad Construction Co. v. DPF Architects, P.C.,
851 So.2d 507 (Ala. 2002). The rationale behind the doctrine is to “mandate that
there be an end to litigation; that those who have contested an issue shall be bound
by the ruling of the court; and that issues once tried shall be considered forever
settled between those same parties and their privies.” Id. at 516-17, quoting
Hughes v. Martin, 533 So.2d 188, 190 (Ala. 1998). Res judicata not only bars the
filing of claims that were raised in a prior proceeding, but also bars claims that the
litigant had the “opportunity” to raise in the earlier proceeding. Id. at 517. Even
though a claim may be labeled differently in a subsequent action, it is barred by res
judicata if it arises from the same “nucleus of operative fact” as the prior claims.
In Orton I the plaintiff filed suit against Bank of America, N.A., and Sandy
Mathews. The suit was presented as an attempt to quiet title to the same property
at issue in the instant case. The plaintiff argued that because “First Federal Bank
kept the note and MERS held the mortgage security instrument[,] . . . the note was
separated[,] nullifying the security instrument.” (Orton I, Doc. 21, p. 4). As in the
instant case, the plaintiff asked for the note, secured by a mortgage, to be voided or
set aside. Id. Orton I was dismissed as to defendant Bank of America because: 1)
“Plaintiff’s Amended Complaint Fails to Evince the Factual Allegations Necessary
to Satisfy the Elements of a Quiet Title Action,” and 2) “The Fundamental Theory
of Plaintiff’s Amended Complaint Directly Contradicts Established Alabama
Law.” (Orton I, Doc. 21, pp. 5, 6). The instant lawsuit is not framed as a quiet
However, “two cases involve the same causes of action for res
judicata purposes when the causes of action arise out of the same nucleus of
operative fact, or are based upon the same factual predicate. It is the substance of
the actions, not their form, that is important.” McCulley v. Bank of America,
N.A., 605 Fed. Appx. 875, 877 (11th Cir. 2015). The instant lawsuit concerns the
same note and mortgage on the same property and is based on the same “splitnote” theory that the plaintiff addressed in his first lawsuit. The plaintiff also asks
for the same relief, that the note on the property be voided. Accordingly, three of
the four elements of res judicata have been established: there has been a prior
judgment on the merits by a court of competent jurisdiction with the same cause of
action presented in the previous action that is presented in the current action.
However, the defendants in the instant case are not the same as those in the
plaintiff’s previous case decided by this court. Therefore, it must be determined
whether Caliber and U.S. Bank Trust are “in privity” with the parties in Orton I for
purposes of res judicata application. The issue of parties in privity was discussed
by the Eleventh Circuit in McCulley v. Bank of America, N.A., stating, in relevant
Generally, “one is not bound by a judgment in personam in a
litigation in which he is not designated as a party or to which he has
not been made a party by service of process.” Taylor v. Sturgell, 533
U.S. 880, 884, 128 S. Ct. 2161, 2166-67, 171 L. Ed. 2d 155 (2008)
(quotation omitted). However, a nonparty is bound by a judgment if
he was in privity with a party to that judgment. Griswold v. Cnty. of
Hillsborough, 598 F.3d 1289, 1292 (11th Cir. 2010). Specifically,
there are six circumstances in which a court can find privity for
purposes of res judicata: (1) the nonparty agreed to be bound by the
litigation of others; (2) a “substantive legal relationship” existed
between the person to be bound and a party to the first suit; (3) the
nonparty was represented adequately by someone who was a party to
the first suit; (4) the nonparty assumed control over the prior
litigation; (5) a party attempted to relitigate issues through a proxy;
and (6) a statutory scheme foreclosed successive litigation by
605 Fed. Appx. 875, 877 (11th Cir. 2015). In McCulley, the Eleventh Circuit
determined that the district court correctly dismissed the case on the grounds of res
judicata, partially because the defendant, Bank of America, was in privity with the
party to the first suit. 605 Fed. Appx. at 878. In McCulley, Bank of America was
the successor mortgage-holder to the defendant in the plaintiff’s first suit regarding
the same mortgage. The same can be said of the instant case. Defendants Caliber
Home Loans and US Bank Trust NA were the successor mortgage-holders of the
initial Note made in favor of First Federal Bank. This creates a substantive legal
relationship as required by the doctrine of res judicata. All requirements for
dismissal on the grounds of res judicata have been met and, therefore, the
plaintiff’s Complaint is due to be dismissed on those grounds.
However, even if the court were to determine that the plaintiff’s action was
not precluded by res judicata, it still would be barred under collateral estoppel. In
this circuit, the doctrine of collateral estoppel may be applied when the party
asserting collateral estoppel establishes that “(1) the issue at stake is identical to the
one involved in the earlier proceeding; (2) the issue was actually litigated in the
early proceeding; (3) the determination of the issue [was] a critical and necessary
part of the earlier judgment; and (4) the party against whom collateral estoppel is
asserted . . . had a full and fair opportunity to litigate the issue.” Tampa Bay Water
v. HDR Engineering, Inc., 731 F.3d 1171, 1180 (11th Cir. 2013) (internal citation
omitted). Unlike res judicata, the doctrine of collateral estoppel is not limited to
identical parties or parties in privity, as collateral estoppel deals only with issue
preclusion. Hart v. Yamaha-Parts Distributors, Inc., 787 F.2d 1468, 1473 (11th
Cir. 1986). As set-out above, the issue at stake in the instant case – the validity of
this very plaintiff’s mortgage under the “split-note” theory – already has been fully
litigated in a court of competent jurisdiction. See Orton I, Doc. 21, pp. 6-8.
Accordingly, even presuming that the instant case does not fall within the doctrine
of res judicata, it still is due to be dismissed under collateral estoppel.
b. Defendants’ Alternative Theories
The defendant alternatively asserts that the plaintiff fails to meet the
minimum standards of pleading set out in Bell Atlantic v. Twombly, 550 U.S. 544,
127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662,
129 S. Ct. 1937, 1949-50, 173 L. Ed. 2d 868 (2009) and, therefore, the complaint is
due to be dismissed for failure to state a claim on which relief can be granted under
Rule 12(b) (6) of the Federal Rules of Civil Procedure and that the plaintiff’s use
of the “split-note” theory is discredited under Alabama law. Because this action is
due to be dismissed pursuant to the doctrines of res judicata and collateral
estoppel, the court need not address the sufficiency of the Complaint or the merits
of the plaintiff’s legal theory.
For the reasons set forth herein, the defendant’s Motion to Dismiss is due to
be GRANTED, and the above-styled case is due to be dismissed. A final order
will be entered contemporaneously herewith.
DONE and ORDERED on December 13, 2016.
T. MICHAEL PUTNAM
UNITED STATES MAGISTRATE JUDGE
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