Theune v. U.S. Bank, N.A. et al

Filing 30

MEMORANDUM AND ORDER DENYING W/OUT PREJUDICE 22 Motion to Dismiss for Failure to State a Claim, or in the Alternative, MOTION for Declaratory Judgment that Title to the Property is Vested in the Foreclosure Purchaser. Signed by Judge Marvin J. Garbis on 11/1/13. (hmls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ANNE THEUNE

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Plaintiff
vs.

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U.S. BANK, N.A. AS TRUSTEE
FOR J.P. MORGAN ALTERNATIVE
LOAN TRUST 2007-S1, et al.

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Defendants

CIVIL ACTION NO. MJG-13-1015

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MEMORANDUM AND ORDER RE: MOTION TO DISMISS
The Court has before it Defendant U.S. Bank, N.A., a/k/a
U.S. Bank National Association, as Trustee for J.P. Morgan
Alternative Loan Trust 2007-S1's Motion to Dismiss or, in the
Alternative, for Declaration that Title to the Property Is
Vested in the Foreclosure Purchaser [Document 22] and the
materials submitted relating thereto.

The Court finds a hearing

unnecessary.

I.

BACKGROUND1
Three people, Plaintiff Anne Theune ("Plaintiff"), her

husband Peter Theune, and Paul Sweatman ("Sweatman") became
joint tenants on a Deed for the property located at 302
Goldenrod Drive, Pasadena, Maryland 21122 ("the Property").
1

In

The "facts" herein are as alleged by Plaintiff and are not
necessarily agreed upon by the Defendant.

2006, Sweatman – without the knowledge of Plaintiff or her
husband – signed two loan notes and two corresponding deeds of
trust that purported to use the property as security for the
debts ("DOT 1" and "DOT 2").

However, DOT 1 and DOT 2 contained

the forged signatures of Plaintiff and her husband.2
In November 2007, the substitute trustees on DOT 1
initiated state foreclosure proceedings against the Property in
the Circuit Court for Anne Arundel County, Maryland.
2010, Peter Theune passed away.

In June

On October 7, 2010, the

substitute trustees conducted a foreclosure sale and sold the
Property to Defendant U.S. Bank, N.A. a/k/a U.S. Bank National
Association, as Trustee for J.P. Morgan Alternative Loan Trust
2007-S1 ("USB").3

As reflected in the state foreclosure docket

attached to both parties' briefs, the state court issued a final
order ratifying the foreclosure sale on February 1, 2011
("Ratification Order").
On November 13, 2012, Plaintiff filed the instant Complaint
for Quiet Title and Declaratory Judgment [Document 2] in the
Circuit Court for Anne Arundel County, Maryland against USB, MD

2

While not material, the Complaint contains no specific
allegations as to the identity of the forger.
3
The Complaint makes reference to an action filed by the
Plaintiff against the DOT 1 substitute trustees in state court
in October 2010 related to the forged signatures. As alleged in
the Complaint, the state court ultimately dismissed that case
without prejudice. That state suit appears immaterial to the
instant dismissal motion.
2

TL, LLC ("MDTL"),4 and "[a]ll persons unknown, claiming any legal
or equitable right, title estate, lien or interest in the
[P]roperty."

Compl. at 1.

On April 5, 2013, USB removed the

action to this Court on the basis of diversity jurisdiction.

In

the Complaint, Plaintiff seeks a judicial declaration that her
signature and her husband's signature were forged on DOT 1 and
DOT 2, rendering such instruments invalid as to Plaintiff and
her husband, and that title to the Property is vested in
Plaintiff and USB as joint tenants.
By the instant motion, USB seeks dismissal of all claims
against it or, alternatively, a declaratory judgment that the
foreclosure sale conveyed fee simple title in the Property to
USB as the foreclosure purchaser.

USB seeks dismissal pursuant

to Federal Rule of Civil Procedure 12(b)(6)5 and relies upon the
affirmative defense of res judicata and/or collateral estoppel.

II.

DISCUSSION
As reflected in the state foreclosure docket and the

various documents filed and issued therein, Plaintiff actively
participated in the state foreclosure proceeding against the

4

MDTL purchased a tax certificate at a tax sale based on
delinquent taxes due on the Property. Prior to removal to
federal court, the state court dismissed all claims against MDTL
[Document 17].
5
All "Rule" references herein are to the Federal Rules of
Civil Procedure.
3

Property ("Foreclosure Proceeding") and, on several occasions,
sought to preliminarily and/or permanently enjoin the
foreclosure sale based upon, inter alia, the alleged forgery of
Plaintiff's and her husband's signatures on DOT 1.6

The first of

such complaints for injunctive relief was initially granted, but
later dissolved through a consent order entered by the state
court on November 12, 2008 ("Consent Order").

The preliminary

injunctive relief requested in the second complaint was set
aside on October 28, 2009.

A third complaint for injunctive

relief was denied outright by the state court in a one-sentence
order on March 26, 2010.

The foreclosure sale took place on

October 7, 2010, and the Circuit Court for Anne Arundel County
issued the Ratification Order on February 1, 2011.

Plaintiff

has not appealed or otherwise moved to set aside the
Ratification Order.
Based upon Plaintiff's participation in the Foreclosure
Proceeding and upon the Ratification Order, USB asserts the
forgery-related claims in the Complaint are barred by res
judicata and/or collateral estoppel.

According to USB,

Plaintiff did, and/or should have, raised her forgery claims in
the Foreclosure Proceeding, and thus should not be permitted to

6

The parties agree that the foreclosure of DOT 1
extinguished DOT 2, so that Plaintiff's forgery claims as to DOT
2 are moot.
4

re-litigate rights to title over the Property, an issue finally
resolved in the Foreclosure Proceeding.

A.

Res Judicata and Collateral Estoppel

Under Maryland law,7 "[t]he doctrine of res judicata
provides that a judgment on the merits in a previous suit
between the same parties or their privies precludes a second
suit predicated upon the same cause of action."

Seminary

Galleria, LLC v. Dulaney Valley Improvement Ass'n, Inc., 995
A.2d 1068, 1077 (Md. Ct. Spec. App. 2010) (internal quotation
marks omitted).
[T]he elements of
preclusion, are:

res

judicata,

or

claim

(1)

that
the
parties
in
the
present
litigation are the same or in privity
with
the
parties
to
the
earlier
dispute;

(2)

that the claim presented in the current
action
is
identical
to
the
one
determined in the prior adjudication;
and

(3)

that there has been a final judgment on
the merits.

Anne Arundel Cnty. Bd. of Educ. v. Norville, 887 A.2d 1029, 1037
(Md. 2005) (emphasis added).

Under Maryland law, "whether

claims are the same is to be determined by the 'transaction
7

Maryland law is controlling because the Court's
jurisdiction is based on diversity of citizenship. See Graves
v. Associated Transp., Inc., 344 F.2d 894, 896 (4th Cir. 1965).
5

test.'"

Boyd v. Bowen, 806 A.2d 314, 325 (Md. Ct. Spec. App.

2002).
Because [under the transaction test] a
"claim" encompasses all rights the plaintiff
has
to
remedies
against
the
defendant
respecting
all
or
any
part
of
the
transaction
or
series
of
connected
transactions out of which the claim arises,
the doctrine of res judicata bars subsequent
litigation not only of what was decided in
the original litigation of the claim but
also of what could have been decided in that
original litigation.
Id. at 326
Distinct from res judicata is the doctrine of collateral
estoppel, or issue preclusion.

"Under the doctrine, '[w]hen an

issue of fact or law is actually litigated and determined by a
valid and final judgment, and the determination is essential to
the judgment, the determination is conclusive in a subsequent
action between the parties, whether on the same or a different
claim.'"

Cosby v. Dep't of Human Res., 42 A.3d 596, 602 (Md.

2012) (quoting Murray Int'l Freight Corp. v. Graham, 555 A.2d
502, 504 (Md. 1989)).

Thus, a party seeking to establish

collateral estoppel, or issue preclusion, must satisfy the
following four elements:
1.

Was the issue decided in the prior
adjudication identical with the one
presented in the action in question?

2.

Was there
merits?

a

final

6

judgment

on

the

3.

Was the party against whom the plea is
asserted a party or in privity with a
party to the prior adjudication?

4.

Was the party against whom the plea is
asserted given a fair opportunity to be
heard on the issue?

Colandrea v. Wilde Lake Cmty. Ass'n, Inc., 761 A.2d 899, 909
(Md. 2000).
Maryland courts have stated that "the law is firmly
established in Maryland that the final ratification of the sale
of property in foreclosure proceedings is res judicata as to the
validity of such sale, except in case of fraud or illegality,
and hence its regularity cannot be attacked in collateral
proceedings."

Ed Jacobsen, Jr., Inc. v. Barrick, 250 A.2d 646,

648 (Md. 1969) (emphasis added) (internal quotation marks
omitted); Manigan v. Burson, 862 A.2d 1037, 1041 (Md. Ct. Spec.
App. 2004).

B.

Plaintiff's Extrinsic Fraud Position

In her Memorandum in Support of Opposition to Defendant
USB's Motion to Dismiss [Document 26-1], Plaintiff appears to
concede that ordinarily the claims in the Complaint would be
barred by res judicata and/or collateral estoppel as a
consequence of her participation in the Foreclosure Proceeding
and the Ratification Order.

However, she contends that her

claims are not subject to dismissal because the Foreclosure

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Proceeding – including the Ratification Order – was tainted by
extrinsic fraud.
In an affidavit attached to her Opposition [Document 26-3],
Plaintiff represents that her former lawyer entered into the
Consent Order dissolving the initial preliminary injunction
without her permission.8

Based upon this alleged extrinsic

fraud, Plaintiff argues, inter alia, that the Ratification Order
cannot be considered a final judgment on the merits, and thus is
incapable of having any res judicata or collateral estoppel
effect on the instant action.

Plaintiff did not plead the facts

underlying her extrinsic fraud position in the Complaint.
In its Reply [Document 28], USB raises no objection to the
Court's consideration of Plaintiff's affidavit in regard to the
instant motion.

However, USB contends that the fraud complained

of is irrelevant because the Consent Order did not prevent
Plaintiff from subsequently contesting the validity of the
allegedly forged signatures in the Foreclosure Proceeding and
because Plaintiff failed to pursue other means of challenging

8

On the date of issuance of this Order, the Court has
received a letter from Plaintiff's counsel dated October 31,
2013 that includes an affidavit of Plaintiff's former counsel
stating that his signature on the Consent Order was also forged.
Inasmuch as the instant motion is denied on procedural grounds,
the aforesaid affidavit, even if considered with regard to the
instant motion, would not change the Court's decision.
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the validity of those signatures in the course of the
Foreclosure Proceeding.9

C.

Resolution of Affirmative Defenses on a 12(b)(6)
Motion

A motion to dismiss filed pursuant to Rule 12(b)(6) tests
the legal sufficiency of a complaint.

A complaint need only

contain "a short and plain statement of the claim showing that
the pleader is entitled to relief, in order to give the
defendant fair notice of what the . . . claim is and the grounds
upon which it rests."

Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555 (2007) (alteration in original) (internal quotation marks
omitted).
The burden of establishing an affirmative defense such as
res judicata or collateral estoppel rests on the defendant.
Consequently, "a motion to dismiss filed under Federal Rule of
Procedure 12(b)(6), . . . generally cannot reach the merits of
an affirmative defense[, except] in the relatively rare
circumstances where facts sufficient to rule on an affirmative
defense are alleged in the complaint."

Goodman v. Praxair,

Inc., 494 F.3d 458, 464 (4th Cir. 2007).

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In other words, "[i]n

Because the extrinsic fraud defense was asserted in
Plaintiff's Opposition, Plaintiff has not had the opportunity to
address USB's argument that any fraud surrounding the Consent
Order is immaterial in light of Plaintiff's subsequent
actions/inactions during the Foreclosure Proceeding.
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the limited circumstances where the allegations of the complaint
give rise to an affirmative defense, the defense may be raised
under Rule 12(b)(6), but only if it clearly appears on the face
of the complaint" and the documents proper for consideration
therewith.

Richmond, Fredericksburg & Potomac R.R. Co. v.

Forst, 4 F.3d 244, 250 (4th Cir. 1993).

As to consideration of

materials extraneous to the complaint, "when entertaining a
motion to dismiss on the ground of res judicata, a court may
take judicial notice of facts from a prior judicial proceeding
when the res judicata defense raises no disputed issue of fact."
Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000) (emphasis
added).

However, a court generally cannot consider the

substance of an affidavit submitted in connection with a
12(b)(6) motion without converting the motion into one for
summary judgment.

Cf. Wilson-Cook Med., Inc. v. Wilson, 942

F.2d 247, 252 (4th Cir. 1991) (considering affidavits submitted
by Defendants in support of their motion to dismiss and noting
that "[h]ad the district court accepted and considered the
affidavits relevant to the 12(b)(6) motion, the motion to
dismiss for failure to state a claim would have been converted
to a motion for summary judgment").
When a defendant requests resolution of an affirmative
defense on a Rule 12(b)(6) motion, factual allegations in the
complaint related to the viability of the affirmative defense or
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an exception thereto become pertinent for consideration.10
However, a Plaintiff is not required to plead in a complaint
facts that avoid or rebut an affirmative defense.

See Goodman,

494 F.3d at 466 (explaining that a plaintiff is not required "to
plead affirmatively in his complaint matters that might be
responsive to affirmative defenses even before the affirmative
defenses are raised");11 Bausch v. Stryker Corp., 630 F.3d 546,
561 (7th Cir. 2010) ("[P]leadings need not anticipate or attempt
to circumvent affirmative defenses.").
An affirmative defense must be pleaded and proven by the
defendant in responding to a pleading.
8(c).

See Fed. R. Civ. P.

Thus, a plaintiff generally need not plead an exception

10

For example, if a defendant moves for dismissal of a
complaint on grounds of laches, the motion would be properly
denied if the factual allegations in the complaint do not
clearly indicate the claim was brought with unreasonable delay.
See Powell v. Bank of Am., N.A., 842 F. Supp. 2d 966, 979 (S.D.
W. Va. 2012).
11
However, the Fourth Circuit noted in Goodman v. Praxair
that "perhaps, in the unusual case," a plaintiff might be
required to plead such matters affirmatively in the complaint
"where a claim is filed clearly beyond the applicable
limitations period and the plaintiff seeks to forestall its
dismissal by alleging the facts of discovery." 494 F.3d 458,
466 (4th Cir. 2007). Here, there is certainly an argument that
absent the extrinsic fraud claim, Plaintiff's claims are
"clearly" barred by res judicata and/or collateral estoppel.
Even if that were the case, the Court would invite Plaintiff to
file a motion to amend the Complaint, which USB would presumably
oppose on futility grounds, and the Court would then be required
to resolve the affirmative defense in that procedural context.
Instead, as discussed herein, under the circumstances the Court
concludes the proper route is to direct USB to file a summary
judgment motion and then to resolve USB's affirmative defense
under Rule 56.
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to an affirmative defense in the complaint.

See Com. of Va. by

Rosenthal v. Meadow Gold Dairies, Inc., No. 93-276-R, 1993 WL
476633, at *2 (W.D. Va. Aug. 19, 1993) (concluding that Rule
9(b) did not require Plaintiffs to plead the facts of their
fraudulent concealment position in the complaint when Defendants
raised affirmative defense based on statute of limitations).

Of

course, "[a]lthough a complaint is not required to rebut
potential affirmative defenses, where the complaint itself sets
forth facts that would support such a defense, a court may
consider them in determining whether a meritorious claim has
been presented."

In re Allen, No. 10-20094-SSM, 2011 WL

2261295, at *1 (Bankr. E.D. Va. June 6, 2011).
USB may well be entitled to summary judgment on its
affirmative defenses of res judicata and/or collateral estoppel.
However, on procedural grounds USB is not entitled to dismissal
pursuant to Rule 12(b)(6).

See Richmond, 4 F.3d at 250

("Because neither of the asserted defenses [of res judicata or
collateral estoppel] appears on the face of the complaint, it is
inappropriate to address them in the current posture of the
case.

These defenses are more properly reserved for

consideration on a motion for summary judgment.").

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Therefore, the Court will not convert the instant motion to
one for summary judgment and provide for further submissions.12
Rather, the Court finds it most efficient to deny dismissal and
allow USB to file a Motion for Summary Judgment.13

IV.

CONCLUSION
For the foregoing reasons:
1.

Defendant U.S. Bank, N.A., a/k/a U.S. Bank
National Association, as Trustee for J.P. Morgan
Alternative Loan Trust 2007-S1's Motion to
Dismiss or, in the Alternative, for Declaration
that Title to the Property Is Vested in the
Foreclosure Purchaser [Document 22] is DENIED.

2.

This action is without prejudice as to the right
of Defendant U.S. Bank, N.A., a/k/a U.S. Bank
National Association, as Trustee for J.P. Morgan
Alternative Loan Trust 2007-S1 to file a Motion

12

Because Plaintiff submitted materials extraneous to the
Complaint and improper for consideration on a 12(b)(6) motion,
the Court could consider these materials and thereby convert the
instant motion into one for summary judgment. See Fed. R. Civ.
P. 12(d). However, such action would only be proper if the
parties are "on notice that a Rule 12(b)(6) motion may be
treated as a motion for summary judgment" and are "afforded a
reasonable opportunity for discovery." Gay v. Wall, 761 F.2d
175, 177–78 (4th Cir. 1985) (internal quotation marks omitted);
see also Fed. R. Civ. P. 12(d).
13
In the alternative to its dismissal contention, USB states
that "if the Court determines that dismissal of the Complaint is
not appropriate because the Plaintiff has requested declaratory
relief, U.S. Bank is requesting a declaration that title in the
Property is vested in U.S. Bank, as the foreclosure purchaser."
[Document 22-1] at 2. Because the Court has determined
dismissal is improper on procedural grounds, the basis of the
declaratory judgment request is improper. However, USB may
assert this request in the summary judgment motion.
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for Summary Judgment on any affirmative defense
presented in its Answer.
3.

By December 2, 2013, said Defendant shall either
file a Motion for Summary Judgment on an
affirmative defense presented in its Answer or
arrange a telephone conference call to discuss
the scheduling of further proceedings.

SO ORDERED, on Friday, November 1, 2013.

/s/__________
Marvin J. Garbis
United States District Judge

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