Medrano v. Ocwen Loan Sericing, LLC et al
MEMORANDUM OPINION AND ORDER. Signed by the Honorable Harry D. Leinenweber on 1/31/2017:Civil case terminated. Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
GUILLERMO R. MEDRANO,
Case No. 16 C 898
OCWEN LOAN SERVICING, LLC,
BAYVIEW LOAN SERVICING, LLC,
MRF ILLINOIS, ONE LLC, and
BAYVIEW ASSET MANAGEMENT LLC,
Judge Harry D. Leinenweber
MEMORANDUM OPINION AND ORDER
Before the Court are the Defendants’ Motions to Dismiss
[ECF Nos. 44 and 46].
For the reasons stated herein, the Court
Plaintiff Guillermo Medrano (“Medrano”) filed this lawsuit
in early 2016, complaining of conduct that took place after the
against him in the Circuit Court of Cook County.
Medrano, the Defendants – Bayview Asset Management, LLC (“BAM”),
(“Bayview”), MRF Illinois One, LLC, Ocwen Financial Corporation
(“Ocwen Financial”), and its wholly-owned subsidiary, Ocwen Loan
Servicing, LLC (“Ocwen”) – engaged in a series of “fraudulent
assignments” of Medrano’s mortgage loan.
Compl.) ¶¶ 37-68, 95-97, 108, and 121.
See, ECF No. 30 (Am.
They also charged him
“bogus” property inspection fees while he was in default.
¶¶ 51, 54, 65-68, 95, 109, 121, and 133-34.
To benefit from
their alleged fraudulent assignments and assessment of fees, the
Defendants refused to “properly review and approve Plaintiff for
a loan modification.”
Id. ¶¶ 67-70.
Instead, they foreclosed
on and sold Medrano’s mortgaged property.
Medrano contends that the Defendants’ conduct runs afoul of
both federal and state law.
In particular, he alleges that the
Organizations Act (“RICO”) by fraudulently assigning his loan
Settlement Procedures Act (“RESPA”) by obtaining a foreclosure
judgment against him while he was being reviewed for a loan
modification; and that Ocwen and Bayview discriminated against
him, a Hispanic, by failing to review his application for a loan
modification, thus violating the Equal Credit Opportunity Act
Medrano also brings two causes of action predicated
on state law.
At bottom, the gravamen of Medrano’s Complaint is that the
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Am. Compl. ¶¶ 65, 67.
Medrano’s alleged injuries
stem from this foreclosure and the subsequent sale of his home
pursuant to the judgment.
For example, Medrano complains that
he has been harmed “because he has to incur attorney fees to
defend the Foreclosure, his home has been sold, and he has had
scheme to defraud and he has loss [sic] equity in his home.”
Id. ¶ 99.
Medrano is at least correct in stating that the Defendants
obtained a foreclosure judgment against him.
On November 24,
2014 – more than a year before Medrano filed his current lawsuit
– the Circuit Court entered a default judgment of foreclosure
The court characterized its judgment
including Medrano, and found that the creditors, Defendants in
this case, were owed $199,188.67.
Id. ¶ 2.
In accordance with
the Circuit Court’s order, the mortgaged property was then sold
to satisfy the debt.
On October 28, 2016, while the case before
this Court was pending, the Circuit Court entered a final order
confirming the sale and approving of the distribution of the
See, ECF No. 67, Ex. A (“Order Confirming Sale”).
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appealed the Order Confirming Sale.
Instead, he complains of
the actions of the parties involved in his mortgage foreclosure
by bringing this federal suit.
jurisdictional limitation imposed by Rooker-Feldman.
finds that Medrano’s federal claims are barred by res judicata
as a result of the judgment rendered against him in the state
It therefore relinquishes jurisdiction over
his state-law claims and dismisses the case in its entirety.
See, Groce v. Eli Lilly & Co., 193 F.3d 496, 501 (7th Cir.
federal appellate courts are divested of their power to address
any issue related to that claim, including res judicata.
Garry v. Geils, 82 F.3d 1362, 1365 (7th Cir. 1996).
thus first looks to see if Rooker-Feldman bars it from hearing
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Simply put, Rooker-Feldman precludes lower federal courts
from deciding claims that seek review of state-court judgments.
See, e.g., Brown v. Bowman, 668 F.3d 437, 442 (7th Cir. 2012).
As the Supreme Court said in the cases from which the doctrine
derived its name, the United States Supreme Court is the only
federal court that may review such judgments.
See, Rooker v.
Fid. Tr. Co., 263 U.S. 413, 415-16 (1923); D.C. Court of Appeals
v. Feldman, 460 U.S. 462, 482 n.16 (1983).
However, as the
Supreme Court has also explained, Rooker-Feldman is a narrow
See, Exxon Mobil Corp. v. Saudi Basic Indus. Corp.,
544 U.S. 280, 284 (2005).
It strips lower federal courts of
their jurisdiction only where “state-court losers” bring suits
rendered before the district court proceedings commenced.”
Moreover, the “state-court losers” must be “inviting district
court review and rejection of those [state-court] judgments” in
their federal suits.
Such invitations are extended both when a plaintiff seeks
to set aside a state-court judgment and when his claims are
Brown, 668 F.3d at 442.
“The determination of whether a federal
claim is ‘inextricably intertwined’ hinges on whether it alleges
that the supposed injury was caused by the state court judgment
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independent prior injury that the state court failed to remedy.”
opportunity to raise the issue in state-court proceedings.
id.; Long v. Shorebank Dev. Corp., 182 F.3d 548, 557-58 (7th
Cir. 1999) (“[A]n issue cannot be inextricably intertwined with
In this case, Medrano does not contest that his claims are
“inextricably intertwined” with the Circuit Court’s foreclosure
This is because the injuries Medrano complains of –
the attorney fees expended to defend the foreclosure suit, the
debt deemed owing to the Defendants, and the sale of the home to
satisfy that debt – all flow from the court’s judgment.
The Circuit Court determined the amount of the debt and
ordered the sale of the home.
The debt assessment and the loss
of the property are thus injuries caused by the court.
Schuh v. Druckman & Sinel, L.L.P., 2008 U.S. Dist. LEXIS 15079,
at *19-22 (S.D.N.Y. Feb. 29, 2008) (noting that the plaintiffs
“do not allege that the defendants unilaterally commandeered the
title to their home [or] put the property up for auction. . . .
Rather, these events occurred as a result of the judgment of
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Mortg. Acceptance Corp., No. 05 C 356, 2006 U.S. Dist. LEXIS
31668, at *12-15 (N.D. Ill. May 4, 2006) (concluding that the
plaintiff’s claims arose from the foreclosure judgment entered
against her because “her claimed injury in the present matter is
the loss of the Property at a judicial sale”).
As for the attorney’s fees, the Seventh Circuit has said
that in circumstances like these, “[t]he need to litigate was
not a loss independent of the state court’s decision.”
v. Steel, 773 F.3d 884, 886-87 (7th Cir. 2014).
alleged that the Defendants “fraudulently assigned” his loan,
implying that they did not own the loan when they instituted the
foreclosure suit against him.
If the allegation is true, then
decision in his favor.”
Therefore, “[n]o injury occurred
until the state judge ruled against [the plaintiff].”
judgment subsume other wrongs Medrano alleged.
the amount of money that the Circuit Court determined was owed
to the Defendants presumably included the property inspection
Similarly, the foreclosure sale that the court ordered mooted
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Medrano’s application for a loan modification and extinguished
any equity he had in the property.
Medrano also had reasonable opportunity to raise the issues
in state court.
For example, Illinois law allows for fraud to
be pleaded as a defense in a foreclosure action.
See, Henry v.
Farmer City State Bank, 808 F.2d 1228, 1235 (7th Cir. 1986)
foreclosure proceedings.”); Bartucci v. Wells Fargo Bank N.A.,
No. 14 CV 5302, 2016 U.S. Dist. LEXIS 38864, at *11 (N.D. Ill.
Mar. 24, 2016) (“Plaintiff was entitled to raise any claims as
to fraud in the state foreclosure action.”).
Medrano thus was
able to bring his claim of fraudulent assignments to fight the
See, e.g., Sheikhani v. Wells Fargo Bank, 526 F.
App’x 705, 707 (7th Cir. 2013) (“[N]o state law prevented a
challenge in the foreclosure proceedings to the validity of the
assignment to Wells Fargo.”).
He did not and instead complains
circumstances, the first prong of Rooker-Feldman – invitation to
review and reject a state-court judgment – is satisfied.
apply because he “filed the present action while the statecourt proceedings were still pending” and Plaintiff “still ha[s]
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an appeal pending.”
Medrano’s contention that he has a pending
appeal in state court is puzzling.
There is no appeal on the
record of Medrano’s foreclosure case, pending or otherwise.
is true, however, that Medrano commenced this lawsuit before the
state court issued its Order Confirming Sale, even if the suit
was filed after the Foreclosure Judgment.
language, a judgment of foreclosure is an interlocutory order
that cannot be appealed.
See, EMC Mortg. Corp. v. Kemp, 367
Ill. Dec. 474, 476 (2012).
This is because “although a judgment
of foreclosure is final as to the matters it adjudicates, a
judgment foreclosing a mortgage, or a lien, determines fewer
than all the rights and liabilities in issue.” Id.
foreclosure judgment is issued, a mortgagor like Medrano still
has the opportunity to redeem the property from the foreclosure
or reinstate the mortgage by “curing all defaults.”
735 ILCS 5/15-1602, 5/15-1603; HSBC Bank USA, N.A. v. Townsend,
793 F.3d 771, 775 (7th Cir. 2015).
Even after the property has
been sold, the state court still may “vacate the judicial sale
(quoting Wells Fargo Bank, N.A. v. McCluskey, 376 Ill. Dec. 438,
However, the law is not as clear on whether
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interlocutory, nonappealable rulings like foreclosure judgments
are outside of the scope of Rooker-Feldman.
Two Seventh Circuit opinions are in tension with each other
when it comes to this question.
In TruServ Corp. v. Flegles,
Inc., 419 F.3d 584, 591 (7th Cir. 2005), the court held that “an
doctrine or preclude federal jurisdiction.”
The holding has
been questioned elsewhere in this circuit, albeit only in dicta.
As Judge Easterbrook said in writing for the court in Harold,
773 F.3d at 885-86, “[t]he principle that only the Supreme Court
litigation is as applicable to interlocutory as to final statecourt decisions.”
Id. at 886.
Courts relying on either TruServ or Harold have come to
exercise jurisdiction in a case like Medrano’s.
A vast majority
of courts in our district have leaned on TruServ and found that
Rooker-Feldman does not apply when the federal suits commenced
before the state courts issued the orders confirming sale.
Hodges v. CIT Grp. (In re Hodges), 350 B.R. 796, 801-03 (Bankr.
N.D. Ill. 2006) (“Rooker-Feldman does not deprive this court of
jurisdiction. . . .
The state court had entered a judgment of
foreclosure, true enough. But a judgment of foreclosure does not
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end a mortgage foreclosure case in Illinois.”); Vangsness v.
Deutsche Bank Nat’l Tr. Co., No. 12 C 50003, 2012 U.S. Dist.
LEXIS 169388, at *3-5, *8 (N.D. Ill. Nov. 29, 2012); Garavito v.
Suntrust Mortg., Inc., No. 11 C 6056, 2013 U.S. Dist. LEXIS
CitiMortgage, Inc., No. 13 C 8513, 2014 U.S. Dist. LEXIS 77114,
at *2-3 (N.D. Ill. June 6, 2014) (Leinenweber, J.); Vazquez v.
J.P. Morgan Chase Bank, N.A., No. 13-cv-04749, 2014 U.S. Dist.
LEXIS 124802, at *10-11 (N.D. Ill. Sep. 8, 2014); Bolden v.
Wells Fargo Bank, N.A., No. 14 C 403, 2014 U.S. Dist. LEXIS
Wholesale Lender, No. 14 C 4097, 2015 U.S. Dist. LEXIS 119464,
at *6 (N.D. Ill. Sep. 9, 2015); Berry v. Wells Fargo Bank N.A.,
No. 15 C 5269, 2015 U.S. Dist. LEXIS 166660, at *6-7 (N.D. Ill.
Dec. 14, 2015); Lihter v. Pierce & Assocs., No. 16 C 50080, 2016
U.S. Dist. LEXIS 123788, at *5-6 (N.D. Ill. Sep. 13, 2016).
But adherence to Truserv has not been uniform.
have found that district courts have no jurisdiction to hear a
case where a foreclosure judgment was issued before the filing
of the federal suit.
See, Carpenter v. PNC Bank, N.A., 633 F.
App’x 346, 347 (7th Cir. 2016); Taylor v. Fannie Mae, 374 F.3d
529, 532-36 (7th Cir. 2004); Byrd v. Homecomings Fin. Network,
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example, in Carpenter, 633 F. App’x at 347, the appellate court
recognized that “Carpenter’s [foreclosure] judgment may not yet
be appealable under state law.”
But relying on Harold, the
court concluded that “that distinction does not help Carpenter
here” and applied Rooker-Feldman to bar her federal suit.
(reasoning that “the purposes behind the Rooker-Feldman doctrine
would be served by allowing an Illinois foreclosure judgment to
satisfy the finality requirement” but declining to apply RookerFeldman because of TruServ).
It appears then that whether Rooker-Feldman applies in a
Arguments can be made on both sides, but in this Court’s best
judgment, Rooker-Feldman bars the lawsuit here.
directly on point.
Moreover, the Court is persuaded by the
reasoning behind Judge Easterbrook’s dictum that Rooker-Feldman
should apply to interlocutory and final orders alike:
interlocutory decision should not be subject to review in any
court; review is deferred until the decision is final.”
773 F.3d at 886 (emphasis in original).
The Court recognizes that it has taken a contrary position
See, Andrews, 2014 U.S. Dist. LEXIS 77114, at *2-3.
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However, that ruling preceded the issuance of Harold.
agreement with Judge Easterbrook on this issue.
the Court stated in its oral ruling in Frencher v. Caliber Home
Loans, No. 16 C 01550, Dec. 7, 2016, that the disputed issue was
doctrine . . . because
interlocutory and not subject to review in any court.”
In short, the Court finds that Rooker-Fedlman bars it from
Medrano’s Complaint with prejudice on FED. R. CIV. P. 12(b)(1)
Although the Court concludes that it does not have subject
Seventh Circuit case law surrounding the issue, the Court next
considers whether Medrano’s claims are barred by res judicata as
a result of the foreclosure judgment.
Since an Illinois state
court rendered the judgment against Medrano, the Court consults
the preclusion law of Illinois to determine whether res judicata
See, Arlin-Golf, LLC v. Vill. of Arlington Heights,
631 F.3d 818, 821 (7th Cir. 2011).
Under Illinois law, the
doctrine acts as a bar to subsequent claims when:
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competent jurisdiction, (2) there is an identity of cause of
River Park v. City of Highland Park, 184 Ill. 2d 290,
defendant in the foreclosure action, and he is the Plaintiff
The Defendants he sues in this case – Bayview, BAM,
plaintiffs or plaintiffs’ privies in Medrano’s foreclosure case.
Bayview, a wholly-owned subsidiary of BAM, filed the complaint
Bayview then transferred the right to service the loan to Ocwen,
Ocwen subsequently requested that MRF Illinois One be
substituted as a party plaintiff in Medrano’s foreclosure case.
The parties in this case thus are identical to those in the
In addition, the Circuit Court of Cook County, a court of
rendered a final judgment on the merits when it entered the
Order Confirming Sale.
See, Kemp, 367 Ill. Dec. at 476 (holding
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that the order confirming sale is a “final and appealable order
in a foreclosure case”).
The fact that the Order Confirming
Sale was issued after Medrano commenced his federal suit does
not put his action outside the scope of res judicata, unlike the
situation with Rooker-Feldman.
See, GASH Assocs. v. Rosemont,
995 F.2d 726, 728 (7th Cir. 1993) (“Equating the Rooker-Feldman
doctrine with preclusion is natural. . . .
But the two are not
coextensive.”); Exxon Mobil, 544 U.S. at 284 (“Rooker-Feldman
doctrine . . .”).
A court may decline to apply Rooker-Feldman
and yet find that res judicata precludes a case like Medrano’s
district court makes its ruling.
Lihter, a case decided in this
district just last year, did exactly that.
See, Lihter, 2016
U.S. Dist. LEXIS 123788, at *5-7.
Medrano nonetheless argues that “there has been no final
judgment on the merits in the Foreclosure Action because the
The time for an appeal ended on November 28 of last
year, 30 days from the date of the entry of the Order Confirming
See, 735 ILCS 5/2-1401.
There was no appeal filed within
the permissible 30-day period; in fact, there has been no appeal
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filed at all by the writing of this memorandum opinion.
however unsettled “the law of Illinois [may be] on the question
of whether a pending appeal destroys the claim preclusive effect
of a judgment,” the issue matters not one bit for Plaintiff’s
Rogers v. Desiderio, 58 F.3d 299, 302 (7th Cir. 1995).
In this case, the Order Confirming Sale is the final judgment.
Accordingly, Medrano’s claims are barred by res judicata if
there is an identity of cause of action between those claims and
his foreclosure lawsuit.
To determine whether there is such an
identity, this Court employs the transactional analysis used in
Illinois whereby “separate claims will be considered the same
cause of action for purposes of res judicata if they arise from
a single group of operative facts, regardless of whether they
assert different theories of relief.”
River Park, 184 Ill. 2d
The claims so considered include those “based on facts
prior proceeding if the successful prosecution of the second
action would nullify the initial judgment or would impair rights
established in the initial action.”
(internal quotation marks omitted).
Henry, 808 F.2d at 1232
In short, “the law of claim
preclusion in Illinois . . . precludes the sequential pursuit
not only of claims actually litigated, but of those that could
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have been litigated.”
Dookeran v. Cty. of Cook, 719 F.3d 570,
576 (7th Cir. 2013) (internal quotation marks omitted).
centered on the allegations that the Defendants committed fraud
in handling his mortgage loan.
See, Am. Compl. ¶¶ 65-70 (tiled
“RICO Allegations, Scheme to Defraud”).
But, as evidenced by
the default foreclosure judgment entered against him, Medrano
did not raise any such allegations of fraud in state court.
Under such circumstance, the Seventh Circuit has found that the
plaintiff’s RICO claim is precluded by res judicata.
The bank sued for foreclosure and won. Id.
Medrano, they alleged that the bank and others “had engaged in a
 scheme of racketeering activity to defraud . . . through use
of the mails and interstate wires”.
Id. at 1231; Am. Compl.
Their case was dismissed, and the Henrys appealed.
On appeal, the Seventh Circuit found that the district court
plaintiffs stated a cause of action under RICO.
Henry, 808 F.2d
The Henrys’ RICO claims, held the court, “are barred
by the doctrine of res judicata because they failed to raise
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their fraud claims as a defense in the state court mortgage
foreclosure proceedings initiated by the Bank.”
The Seventh Circuit found the reasoning of Henry equally
action and consequently, had a default judgment entered against
See, Whitaker v. Ameritech Corp., 129 F.3d 952, 957 (7th
Cir. 1997) (“The fact that Whitaker failed to defend her case
judgment in Illinois is a judgment on the merits and has the
allegations of fraud “go to the heart” of a previously decided
case and yet the plaintiff did not raise them, the plaintiff is
thereafter precluded from bringing a RICO claim based on such
These two cases control here.
In his RICO claim, Medrano
complains that the Defendants “fraudulently procured a foreclose
[sic] judgment” against him.
Such allegations “go to the heart
of what was decided in the state court,” namely that far from
committing fraud, the Defendants were legitimately owed a sum of
money and that Medrano’s house properly was sold to satisfy that
Whitaker, 129 F.3d at 957.
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Any cognizable argument to
fraud in pursuing foreclosure against Medrano, should have been
raised in the foreclosure action.
Medrano cannot be allowed to
bring such arguments now “in the disguise of civil RICO claims
in federal court.”
Henry, 808 F.2d at 1237.
Defendants failed to “properly review” Medrano’s application for
a loan modification and instead foreclosed on and sold his home.
See, Am. Compl. ¶¶ 101-03, 152-53.
However, Medrano should have
clearly affected whether the Defendants may foreclose on his
He did not.
His claims now are barred by his failure
See, e.g., Bartucci, 2016 U.S. Dist. LEXIS 38864, at *9
(dismissing an ECOA claim when “Plaintiff was entitled to raise
state court but did not); Ruffino v. Bank of Am., N.A., No. 13
C 50124, 2013 U.S. Dist. LEXIS 143151, at *1-4, *10-11 (N.D.
Ill. Oct. 3, 2013) (dismissing a RESPA claim when the plaintiff
alleged that the bank “did not have a right to initiate the
allegations in Downs’s lawsuit against the Bank were that the
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She could have presented (and logically should have
during the foreclosure action. . . .
However, Downs did not
doctrine of res judicata clearly barred her lawsuit.”).
For the reasons stated herein, the Defendants’ Motions to
Dismiss [ECF Nos. 44 and 46] are granted.
is dismissed with prejudice.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: January 31, 2017
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