Bell v. Countrywide Home Loans, Inc. et al

Filing 13

MEMORANDUM OPINION AND ORDER granting 4 Motion to Dismiss for Failure to State a Claim; granting 4 Motion to Dismiss; granting 4 Motion to Dismiss for Lack of Jurisdiction. Signed by Chief Judge Joseph H. McKinley, Jr on 6/12/14. cc:counsel (DJT)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
PADUCAH DIVISION
JHM
CIVIL ACTION NO. 5:13-CV-00165-TBR
DENNIS BELL

PLAINTIFF

v.
COUNTRYWIDE HOME LOANS, INC., et al.

DEFENDANTS

M EMORANDUM O PINION AND O RDER
This matter is before the Court on the Motion to Dismiss [DN 4] of Countrywide Home
Loans, Inc., Bank of America Corporation, and BAC Home Loans Servicing, LP (collectively,
the “Defendants”). Plaintiff Bell has responded [DN 5]. Thus, this matter is ripe for decision. For
the following reasons, the Defendants’ motion to dismiss [DN 4] is GRANTED.
I. BACKGROUND
In this action, Plaintiff Bell challenges the Defendants’ standing to foreclose on his three
rental properties. Plaintiff generally alleges that fraud was perpetrated by the Defendants in the
parties’ prior state-court foreclosure proceeding, preventing him from obtaining “a fair and just
result.” (Compl. [DN 1] ¶ 6.) In specific, Plaintiff alleges fraud as to the ownership of the subject
mortgages. According to Plaintiff, the Defendants “asserted that they were the owners of the
mortgages” when, in fact, the mortgages had not been assigned to them. (Id. ¶ 9.) Plaintiff also
alleges that the Defendants later attempted to cure the problem of not owning the mortgages by
getting fraudulent assignments via the Mortgage Electronic Registration System. (Id. ¶ 14.)
The Defendants argue that the Court should dismiss Plaintiff Bell’s complaint because:
(1) he has not effected proper service under Fed. R. Civ. P. 12(b)(5); (2) pursuant to the RookerFeldman doctrine, the Court lacks subject-matter jurisdiction over Plaintiff’s attempt to challenge

the state-court judgment; (3) Plaintiff’s claims are barred by the doctrine of res judicata; and (4)
in any event, Plaintiff has failed to state a claim upon which relief can be granted. (See Mem. in
Supp. of Defs.’ Mot. to Dismiss [DN 4-1] 10.)
II. PROCEDURAL BACKGROUND
In early 2006, Countrywide declared three mortgages in default and foreclosed against
Plaintiff Bell in the McCracken Circuit Court. The actions were consolidated into a single action
in October 2006. (See Mem. Op. & Order [DN 4-2] 2.) Bell counterclaimed against Countrywide
alleging several claims, including a fraud claim as to Countrywide’s ownership of the mortgages.
(State-Ct. Ans. & Countercl. [DN 4-3].) Bell also sought declaratory relief and punitive damages.
(Id.) Subsequently, Bell obtained a default judgment on his counterclaims. This judgment was
later set aside by the McCracken Circuit Court. (State-Ct. Order Vacating Default J. [DN 4-7].)
In the midst of this state-court litigation, Bell filed a lengthy complaint in this Court.
Among other claims, Bell alleged a fraud claim premised on the accusation that Countrywide did
not hold an actual interest in the mortgages. (Bell v. Countrywide Home Loans, Inc., No. 5:08cv-00167-JHM [DN 1] 17-18.) In a February 4, 2009 stay order, this Court noted that the claims
and issues asserted by Bell in the federal action were “virtually identical” to those already at
issue in the state-court foreclosure action. (See id. [DN 48] at 4.) Accordingly, this Court stayed
the federal action pending resolution of the parallel, ongoing state-court proceedings. (Id. at 9.)
In an order entered on September 1, 2009, the McCracken Circuit Court dismissed Bell’s
counterclaims and found that Countrywide was entitled to summary judgment. (Order [DN 412].) In that order, the McCracken Circuit Court expressly stated that Countrywide “certainly has
standing to bring the action” and denied Bell’s “Motion to Dismiss Challenging Standing.” (Id. at

2

3.) On November 13, 2009, the McCracken Circuit Court entered judgment in favor of
Countrywide and directed the sale of the mortgaged property.1 (J. & Order of Sale [DN 4-14].)
Bell appealed the McCracken Circuit Court judgment to the Kentucky Court of Appeals.
The Kentucky Court of Appeals affirmed the judgment, stating that “Countrywide established its
standing” to bring the action and that, in any event, Bell waived its objection to Countrywide’s
standing by “his prior admissions and through his misconduct in this action.” (Ky. Ct. of Appeals
Order [DN 4-20] 3.) On March 13, 2013, the Kentucky Supreme Court denied Bell’s motion for
discretionary review. (Ky. Sup. Ct. Order [DN 4-21].)
After the final resolution of the state-court action, Countrywide renewed its motion to
dismiss in this Court. Countrywide mainly argued that Bell’s claims were barred by the doctrine
of res judicata because they were fully and finally resolved by the Kentucky courts. (See Bell v.
Countrywide Home Loans, Inc., No. 5:08-cv-00167-JHM [DN 52].) On May 16, 2013, the Court
granted this motion to dismiss. (Id. [DN 54].) Bell did not appeal that order. On September 24,
2013, however, Bell filed the instant action. (See Compl. [DN 1].)
III. DISCUSSION
Plaintiff Bell’s claims in this case are premised on the allegation that the Defendants
perpetrated fraud as to their ownership of the mortgages and, therefore, did not have standing to
bring the state-court foreclosure action. (See Compl. [DN 1].) As should be apparent from the
background above, this issue was already fully litigated and resolved in state-court proceedings,
in both the McCracken Circuit Court and the Kentucky Court of Appeals. Accordingly, the Court
does not have jurisdiction over Plaintiff Bell’s complaint under the Rooker-Feldman doctrine.

1

Bell was also involved in two other related bankruptcy proceedings, as well as a brief removal of the McCracken
Circuit Court action to this Court. The Court finds it unnecessary to reproduce the details of those proceedings here,
but notes that it appears the standing/fraud issue was also litigated in the bankruptcy proceedings.

3

The Rooker-Feldman doctrine deprives federal courts of jurisdiction over “cases brought
by state-court losers complaining of injuries caused by state-court judgments rendered before the
district court proceedings commenced and inviting district court review and rejection of those
judgments.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005); see also
Dist. of Columbia Ct. of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust
Co., 263 U.S. 413, 415-16 (1923). Therefore, the Rooker-Feldman doctrine requires the dismissal
of Plaintiff Bell’s complaint. In essence, Bell is asking this Court to sit as a quasi-appellate court
and enter an order which will circumvent the state court’s final judgment and previous ruling on
Countrywide’s standing. This is simply impermissible. See, e.g., Givens v. Homecomings Fin.,
278 Fed. App’x 607, 608-09 (6th Cir. 2008) (finding that a district court’s dismissal under the
Rooker-Feldman doctrine was proper because the plaintiff was “effectively attempting to appeal
from the state order granting possession to JP Morgan Chase”); McCroy v. N.Y. Bank & Trust
Co., 2008 WL 2714116, at *1 (E.D. Mich. July 7, 2008) (dismissing a case under the RookerFeldman doctrine when “the issues raised in the complaint are inextricably intertwined with the
state court action such that plaintiffs are effectively asking this Court to invalidate the state court
foreclosure judgment”).
Additionally, the Court finds that the doctrine of res judicata requires dismissal of this
case, as Plaintiff Bell’s claims have already been fully litigated and resolved. Notably, as was
discussed above, this Court has previously dismissed these same claims based on the doctrine of
res judicata. Kentucky courts have held the following with respect to preclusion:
Claim preclusion bars a party from re-litigating a previously adjudicated cause of
action and entirely bars a new lawsuit on the same cause of action. Issue
preclusion bars the parties from relitigating any issue actually litigated and finally
decided in an earlier action. The issues in the former and latter actions must be
identical. The key inquiry in deciding whether the lawsuits concern the same
controversy is whether they both arise from the same transactional nucleus of
4

facts. If the two suits concern the same controversy, then the previous suit is
deemed to have adjudicated every matter which was or could have been brought
in support of the cause of action.
Yeoman v. Com. Health Policy Bd., 983 S.W.2d 459, 465 (Ky. 1998) (citations omitted). Under
Kentucky law, “a final judgment precludes subsequent litigation not only of those issues upon
which the court was required to form an opinion and pronounce judgment but also of matters
included with those issues and matters that, with the exercise of reasonable diligence, might have
been raised at the time.” Whittaker v. Cecil, 69 S.W.3d 69, 72 (Ky. 2002).
In this case, both claim preclusion and issue preclusion bar re-litigation of Plaintiff Bell’s
claim that Countrywide lacked standing and/or engaged in fraud. Bell challenged Countrywide’s
standing to enforce the mortgages in the McCracken Circuit Court—and it explicitly found that
Countrywide “certainly has standing to bring the action.” (Order [DN 4-12] 3.) That holding was
affirmed by the Kentucky Court of Appeals. (Ky. Ct. of Appeals Order [DN 4-20] 3.) Further,
this Court has already dismissed these same claims with prejudice on May 15, 2013. (Dismissal
Order [DN 4-24].) Even assuming arguendo that Bell was making a new claim in this case, there
is no indication he could not have raised this claim in the previous state- or federal-court
proceedings. The doctrine of res judicata also requires dismissal of Plaintiff Bell’s complaint.
Plaintiff Bell argues that the Rooker-Feldman doctrine and the res judicata doctrine do
not apply when a plaintiff alleges that a state-court judgment was procured by fraud, deception,
accident, or mistake. (Pl.’s Resp. to Def.’s Mot. to Dismiss [DN 5].) In support of this argument,
he cites In re Sun Valley Foods Co., in which the Sixth Circuit held there is “an exception to the
general rule that precludes a lower federal court from reviewing a state’s judicial proceedings,”
as a federal court “may entertain a collateral attack on a state court judgment which is alleged to
have been procured through fraud, deception, accident, or mistake.” 801 F.2d 186, 189 (6th Cir.
5

1986) (quotation omitted). Plaintiff Bell also cites Riehle v. Margolies, where the Supreme Court
noted that the res judicata doctrine applies “in the absence of fraud or collusion.” 279 U.S. 218,
225 (1929). These cases, however, do not apply here. The “fraud” claim which Bell argues gives
this Court jurisdiction was already fully-litigated and resolved in state and federal proceedings.
This is not a case where the fraud allegation is a “new” claim that was not previously litigated in
prior proceedings. There is no claim of fraud which deceived the state court into a wrong decree.
In other words, Plaintiff Bell is not newly asserting that the state-court judgment was procured
through fraud; instead, he is again asserting that the Defendants perpetrated fraud as to their
ownership of the mortgages and, therefore, did not have standing to bring the state foreclosure
action. The Rooker-Feldman doctrine and the res judicata doctrine bar Plaintiff from re-litigating
this standing/fraud issue.
Because this Court finds that dismissal is required under the Rooker-Feldman and res
judicata doctrines, it will not address the Defendants’ other arguments that Plaintiff Bell’s claims
are meritless and that his failure to properly serve them requires dismissal of this action.
IV. C ONCLUSION
For these reasons, and consistent with the Court’s conclusions above, IT IS HEREBY
ORDERED that the Defendants’ Motion to Dismiss [DN 4] is GRANTED.

June 12, 2014

cc:

counsel of record

6