MCCUE v. EMIGRANT MORTGAGE COMPANY, INC. et al

Filing 30

OPINION. Signed by Judge Jerome B. Simandle on 7/24/2017. (rtm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

THOMAS J. McCUE,

HONORABLE JEROME B. SIMANDLE

Plaintiff,
Civil Action
No. 16-960 (JBS/JS)

v.
EMIGRANT MORTGAGE COMPANY,
INC., and EMIGRANT SAVINGS
BANK,

MEMORANDUM OPINION

Defendants.

SIMANDLE, District Judge:
Plaintiff Thomas J. McCue’s residence was foreclosed due to
his mortgage indebtedness to Defendants Emigrant Mortgage
Company, Inc. and Emigrant Savings Bank by the Superior Court of
New Jersey in 2013 and it was sold by Sheriff’s sale in 2015. He
now seeks in this new federal case to raise additional claims
and defenses against foreclosure, including claims under the
Truth-in-Lending Act and Fair Debt Collections Practices Act.
This matter comes before the Court upon Defendants’ motion to
dismiss the Amended Complaint pursuant to Rules 12(b)(1) and
12(b)(6), Fed. R. Civ. P. [Docket Item 27.] The principal issue
to be decided is whether Plaintiff’s current suit is barred by
New Jersey’s entire controversy doctrine and N.J. Ct. R. 4:65-5
(requiring that all “germane” claims be joined in the

foreclosure action or they are forever barred.) This Court finds
as follows:
1.

Plaintiff Thomas J. McCue alleges that he obtained a

home equity loan from Emigrant Mortgage Company, Inc.
(“Emigrant” or “Defendant”) in 2007 in order to improve a home
he owned in Cinnaminson, New Jersey. According to Plaintiff, his
$40,000 escrow was to be held in an interest-bearing account,
which 4-6% interest rate would offset the 10% interest he owed
on the mortgage note. Plaintiff and Defendant appear to have had
a misunderstanding over the nature of the escrow account and the
amount ultimately due on his mortgage note. Plaintiff contends
that Defendant never kept his money in the interest-bearing
account his mortgage contract required. Defendant ultimately
foreclosed on Plaintiff’s home, which final judgment was entered
on July 24, 2013. Plaintiff now avers that the bank’s conduct
regarding the loan and during the foreclosure proceedings
constitutes fraud, unjust enrichment, a violation of the Truthin-Lending Act, and a violation of the Fair Debt Collection
Practices Act.
2.

Specifically, Plaintiff avers that Emigrant withheld

documentation about his mortgage and the existence of the
savings account for his “escrow/pledge account.”1 (Amended

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For purposes of the pending motions, the Court accepts as true
the version of events set forth in Plaintiff’s Complaint,
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Complaint ¶¶ 15-19, 22-23, 26-27.) Plaintiff avers that he made
payments on his mortgage until February 2009, when he
“purposefully withheld payments to force Emigrant Mortgage to
find the $40,000 savings account that Mr. McCue was paying
interest on.” (Id. ¶ 25.) When Emigrant threatened foreclosure
proceedings against Plaintiff, Plaintiff wired the full amount
due on his mortgage according to his last account statement,
which Defendant refused to accept and returned to him the next
day. (Id. ¶¶ 29-34.)
3.

Defendant filed a foreclosure complaint against

Plaintiff on June 15, 2009, in the Superior Court of New Jersey,
Burlington County, Docket No. F-31562-09. (Id. ¶ 32.) Plaintiff
filed an answer and separate defenses to the foreclosure
complaint. (Id. ¶ 36.) While Defendant’s motion for summary
judgment was pending before the Superior Court, Plaintiff filed
a request for reinstatement of his mortgage and produced the
exact amount of money required; Defendant refused to accept
payment on account of a provision allegedly inserted by Emigrant
into the mortgage by which Plaintiff agreed to waive his right

documents explicitly relied upon in the Complaint, and matters
of public record. See Schmidt v. Skolas, 770 F.3d 241, 249 (3d
Cir. 2014). The Court may consider these documents on a motion
to dismiss without converting the motion to one for summary
judgment. Id. All of the documents attached to Defendants’
motion to dismiss are documents relied upon in the Complaint
and/or matters of public record.
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to request reinstatement of the note and mortgage once
acceleration of payment was requested. (Id. ¶¶ 38-49.)
4.

Emigrant obtained summary judgment in its favor on May

28, 2010 and applied for final judgment on April 24, 2012. (Id.
¶ 54, 58.) Plaintiff objected to the amount due, contending that
the $40,000 escrow should have been used to pay down the
principal amount on his loan. (Id. ¶ 59.) The Superior Court
overruled Plaintiff’s objection, but ordered Defendant to credit
Plaintiff for “interest actually earned on the $40,000 escrow
from the time of deposit to February 8, 2013.” (Exhibit A to
Defendants’ Motion.)
5.

The Superior Court entered final judgment on

Defendant’s foreclosure action on July 24, 2013. (Ex. B to Def.
Mot.) Plaintiff avers that he never received an account
statement or an acknowledgment from Emigrant about the interest
accrued on his escrow account in accordance with the Superior
Court’s order. (Am. Compl. ¶ 65.) On or about October 7, 2013,
Plaintiff filed a motion to vacate the final judgment and an
emergency petition to stay the Sheriff’s sale scheduled for
October 10, 2013. (Id. ¶¶ 71-75.) The Superior Court denied
Plaintiff’s motions, finding, inter alia, that “the interest
ordered has been given to” Plaintiff and that Plaintiff’s
mortgage was valid. (Ex. C. to Def. Mot.)

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6.

Plaintiff twice filed for bankruptcy in order “to

attempt to get Emigrant to review the accounting and acknowledge
their mistake.” (Am. Compl. ¶¶ 81, 83-87.) Between the two
bankruptcy cases, Plaintiff filed another motion to vacate the
final judgment and stay the Sheriff’s sale. The Superior Court
denied Plaintiff’s motions by orders dated June 11, 2014 and
July 11, 2014, finding again that Plaintiff had been credited
with the interest and that there was no other basis on which to
vacate the final judgment. (Ex. D & E to Def. Mot.) Ultimately,
after both of Plaintiff’s bankruptcy petitions were adjudicated,
Plaintiff’s property was sold at Sheriff’s sale on July 24,
2015. (Ex. F to Def. Mot.) Plaintiff was evicted from the
property on or about February 22, 2016. (Ex. G to Def. Mot.)
This case, and emergency motions to cancel Plaintiff’s eviction,
were filed on the same day. [Docket Items 1, 4, 5 & 6.]2
7.

For the reasons now discussed, the Court will grant

Defendants’ motion to dismiss, finding that New Jersey’s entire
controversy doctrine bars Plaintiff’s claims in this case.
8.

As an initial matter, the Court recognizes that it

“must give to a state-court judgment the same preclusive effect

2

On February 26, 2016, this Court denied Plaintiff’s motions for
emergency relief, finding that the motions were procedurally
deficient for failing to comply with L. Civ. R. 65.1(a) and
expressing doubt that the Court had jurisdiction to review
Plaintiff’s claims under the Rooker-Feldman doctrine. [Docket
Items 9 & 10.]
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as would be given that judgment under the law of the State in
which the judgment was rendered.” Walker v. Horn, 385 F.3d 321,
337 (3d Cir. 2004) (citation omitted). New Jersey’s entire
controversy doctrine “is essentially New Jersey’s specific, and
idiosyncratic, application of traditional res judicata
principles.” Rycoline Prods., Inc. v. C&W Unlimited, 109 F.3d
883, 886 (3d Cir. 1997).
The Entire Controversy Doctrine embodies the notion that
the adjudication of a legal controversy should occur in
one litigation in only one court; accordingly, all
parties involved in a litigation should at the very least
present in that proceeding all of their claims and
defenses that are related to the underlying controversy.
The Doctrine thus requires a party to bring in one action
all affirmative claims that it might have against
another party, including counterclaims and cross-claims
. . . or be forever barred from bringing a subsequent
action involving the same underlying facts.
Id. at 885.
9.

The application of the entire controversy doctrine

turns on three criteria: “(1) the judgment in the prior action
must be valid, final, and on the merits; (2) the parties in the
later action must be identical to or in privity with those in
the prior action; and (3) the claim in the later action must
grow out of the same transaction or occurrence as the claim in
the earlier one.” Venner v. Bank of America, Civil No. 07-4040,
2009 WL 1416043, at *2 (D.N.J. May 19, 2009) (quoting Watkins v.
Resorts Int’l Hotel and Casino, Inc., 591 A.2d 592, 599 (N.J.
1991)). “It is [a] commonality of facts, rather than the
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commonality of issues, parties or remedies that defines the
scope of the controversy and implicates the joinder requirements
of the entire controversy doctrine.” DiTrolio v. Antiles, 662
A.2d 494, 504 (N.J. 1995). Importantly, the doctrine “bars not
only claims that were brought in the previous action, but also
claims that could have been brought.” In re Mullarkey, 536 F.3d
215, 225 (3d Cir. 2008).
10.

With respect to foreclosure actions specifically, the

entire controversy doctrine requires that all “germane” claims
must be joined in the first action or they are forever barred.
N.J. Ct. R. 4:64-5. “The use of the word ‘germane’ in the
language of the rule undoubtedly was intended to limit
counterclaims in foreclosure actions to claims arising out of
the mortgage transaction which is the subject matter of the
foreclosure action.” In re Mullarkey, 536 F.3d at 229. In other
words, any claim challenging the foreclosure-plaintiff’s “right
to foreclose” is “germane” to a foreclosure action and must be
raised there. Sun NLF Ltd. v. Sasso, 713 A.2d 538, 540 (N.J.
App. Div. 1988). Thus, this Court recently held in Bembry v.
Twp. of Mullica that N.J. Ct. R. 4:65-5 and the entire
controversy doctrine encompass all statutory, common law, and
constitutional claims relating to a foreclosure action and the
underlying mortgage or tax transaction that led to the

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foreclosure. Civil No. 16-5734, 2017 WL 3033126, at *3 (D.N.J.
July 17, 2017).
11.

The entire controversy doctrine bars Plaintiff’s

claims against Defendants because the same facts form the basis
of his claims both in this Court and in the underlying
foreclosure action, and because the crux of his claims in both
cases assert impropriety and misrepresentation with respect to
his “escrow/pledge” account, the interest accrued thereon, and
the mortgage instrument itself. In other words, even if
Plaintiff’s claims are styled as fraud, unjust enrichment, or
federal Truth-in-Lending Act or Fair Debt Collection Practices
Act causes of action, where they were differently labeled before
the Superior Court, he cannot escape the fact that they share
the same essence in both courts: that Emigrant miscalculated the
amount due on the mortgage and that the mortgage instrument
itself, and the foreclosure proceeding, is invalid. Each of the
current claims was available and could have been raised by
Plaintiff when litigating the foreclosure case in Superior Court
years ago.
12.

The Court has no doubt that these claims are “germane”

for two reasons. First, N.J. Ct. R. 4:64-5 permits that only
germane claims may be litigated in a foreclosure action without
leave of court, and the Superior Court adjudicated Plaintiff’s
arguments about the validity of the mortgage and the amount due
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thereunder without hesitation. Second, even if the Court were to
assume that Plaintiff’s precise Truth-in-Lending or Fair Debt
Collections Practices Act claims were not actually raised before
and decided by the Superior Court, these claims challenge
Emigrant’s “right to foreclose” and could have been raised
before the Superior Court. Sun NLF, 713 A.2d at 540. Because the
entire controversy doctrine operates to bar “not only claims
that were brought in the previous action, but also claims that
could have been brought,” In re Mullarkey, 536 F.3d at 225,
Plaintiff is not permitted to relitigate these questions in this
Court, even with new labels attached.
13.

Accordingly, the Court will grant Defendants’ motion

and will dismiss the Amended Complaint with prejudice. A court
may deny leave to amend a complaint where it is apparent that
“(1) the moving party has demonstrated undue delay, bad faith or
dilatory motives, (2) the amendment would be futile, or (3) the
amendment would prejudice the other party.” United States ex
rel. Schumann v. AstraZeneca Pharma. L.P., 769 F.3d 837, 849 (3d
Cir. 2014) (citing Lake v. Arnold, 232 F.3d 360, 373 (3d Cir.
2000)). In this case, because the Plaintiff’s Amended Complaint
is legally insufficient, and not merely factually insufficient,
any amendment would be futile.

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14.

An accompanying Order will be entered granting

Defendants’ motion to dismiss with prejudice.

July 24, 2017
Date

s/ Jerome B. Simandle
JEROME B. SIMANDLE
U.S. District Judge

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