BARRETT v. WASHINGTON MUTUAL BANK, FA et al

Filing 32

OPINION. Signed by Judge Kevin McNulty on 7/16/2018. (sm)

Case 2:17-cv-07942-KM-SCM Document 32 Filed 07/16/18 Page 1 of 16 PageID: 1043

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
STARR BARRETT,
Civ. No. 17-cv-7942 (KM)

Plaintiff,
V.

OPINION

WASHINGTON MUTUAL BANK, FA;
FANNIE MAE, FANNIE MAE AS
TRUSTEEE FOR SECURITIZED
TRUST FANNIE MAE GUARANTEED
REMIC PASS-THROUGH
CERTIFICATES REMIC 2003-128
TRUST, WELLS FARGO HOME
MORTGAGE, AND DOES 1
THROUGH 100 INCLUSIVE, et aL,
Defendants
KEVIN MCNULTY, U.S.D.J.;
I.

Introduction

This action arises from a state court mortgage foreclosure action which
went to final judgment on July 31, 2017. Starr Barrett, as mortgagor/borrower,
brings this action against Washington Mutual Bank, PA (“WaMu”), whose
successor is JPMorgan Chase Bank, N.A. (“Chase”); Fannie Mae; Fannie Mae as
Trustee for Securitized Trust Fannie Mae Guaranteed REMIC Pass-Through
Certificates REMIC 2003-128 Trust; and Wells Fargo Home Mortgage.
Defendants move under Fed. R. Civ. P. 12(b)(1) to dismiss the complaint on
jurisdictional grounds, and under Rule 12(b)(6) to dismiss it for failure to state
a claim. (ECF nos. 19, 20) For the reasons stated below, the motion will be
granted and the complaint will be dismissed without prejudice.

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INTRODUCTION
A. The Mortgage and State Foreclosure Action

On November 10, 2003, Washington Mutual Bank, PA (“WaMu”) made a
residential loan to the plaintiff, Ms. Barrett. The note is secured by a mortgage
on the property, 1472A Liberty Avenue, Hillside, New Jersey. On September 25,
2008, JPMorgan Chase Bank, N.A. (“Chase”) purchased certain assets of WaMu
from the Federal Deposit Insurance Corporation (“FDIC”) as receiver. The
mortgage was assigned to Chase. (Declaration of Richard P. Haber (“Haber
Decl.”), ECF no. 20-2, ¶3) Barrett entered into a loan modification agreement
with Chase on November 5, 2011. (Id.

¶

4) Although the complaint alleges that

the loan was sold to Fannie Mae and securitized, Morgan remains the
mortgagee of record. (Id.

¶

3) Barrett defaulted under the note and mortgage by

failing to make the payment due on September 1, 2016. (Id.

¶

5, 7)

On February 22, 2017, Chase filed a complaint in foreclosure in the
Superior Court of New Jersey, Chancery Division, Union County. (Docket No.
F-4449-17) (Haber Decl. ¶5 & Ex. D) The Superior Court entered a final
judgment of foreclosure on July 31, 2017. (Id.

¶

6 & Ex. E)

B. This Action
On October 6, 2017, Barrett filed this action in federal court. The
Complaint (“Cplt.”, ECF no. 1) asserts nine causes of action:
1. Lack of standing to foreclose and wrongful foreclosure
2. Fraud in the concealment
3. Fraud in the inducement
4. Unconscionable contract
5. Breach of contract
6. Breach of fiduciary duty
7. Quiet title
8. Injunctive relief as to sheriffs sale
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9. Declaratory relief as to sheriff’s sale
A separate motion to dismiss was filed on behalf of defendant Wells
Fargo. (ECF no. 19) A motion to dismiss was also filed on behalf of all
remaining defendants (including Chase as successor to WaMu). (ECF no. 20)
(“Defendants,” as used herein, will refer to those remaining defendants.)
C. Standard on a motion to dismiss
Defendants have moved to dismiss the Complaint for lack of jurisdiction,
citing the Rooker-Feidman doctrine (see infra). Rule 12(b)(1) governs
jurisdictional challenges to a complaint. These may be either facial or factual
attacks. See 2 Moore’s Federal Practice § 12.3014] (3d ed. 2007); Mortensen v.
First Fed. Say. & LoanAss’n, 549 F.2d 884, 891 (3d Cir. 1977). A facial
challenge asserts that the complaint does not allege sufficient grounds to
establish subject matter jurisdiction. Iwanowa v. Ford Motor Co., 67 F. Supp.
2d 424, 438 (D.N.J. 1999). A court considering such a facial challenge assumes
that the allegations in the complaint are true, and may dismiss the complaint
only if it nevertheless appears that the plaintiff will not be able to assert a
colorable claim of subject matter jurisdiction. Cardio—Med. Assoc., Ltd. v.
Crozer—Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir. 1983); Iwanowa, 67 F.
Supp. 2d at 438.
Defendants and Wells Fargo have also moved to dismiss the Complaint
for failure to state a claim, pursuant to Fed. I?. Civ. P. 12(b)(6). Rule l2(b)(6)
provides for the dismissal of a complaint, in whole or in part, if it fails to state a
claim upon which relief can be granted. The defendant, as the moving party,
bears the burden of showing that no claim has been stated. Hedges v. United
States, 404 F.3d 744, 750 (3d Cit. 2005). In deciding a Rule 12(b)(6) motion, a
court must take the allegations of the complaint as true and draw reasonable
inferences in the light most favorable to the plaintiff. Phillips v. County of
Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (traditional “reasonable inferences”
principle not undermined by Twornbly, see infra).
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Federal Rule of Civil Procedure 8(a) does not require that a complaint
contain detailed factual allegations. Nevertheless, “a plaintiffs obligation to
provide the ‘grounds’ of his ‘entitlement to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Bell Atl. Corp. v. Twombly, 550 U.s. 544, 555 (2007). Thus, the
complaint’s factual allegations must be sufficient to raise a plaintiffs right to
relief above a speculative level, so that a claim is “plausible on its face.” Id. at
570; see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008).
That facial-plausibility standard is met “when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (citing Twombly, 550 U.S. at 556). While “[t]he plausibility standard
is not akin to a ‘probability requirement’.

.

.

it asks for more than a sheer

possibility.” Iqhal, 556 U.S. at 678.
In connection with the motions, defendants have attached records of the
state court foreclosure proceeding. These are cited, not for the facts contained
therein, but only in order to establish the nature and scope of prior
proceedings between the parties, and the rulings of the state court. Such
records are subject to judicial notice:
[Ojn a motion to dismiss, we may take judicial notice of another
court’s opinion—not for the truth of the facts recited therein, but
for the existence of the opinion, which is not subject to reasonable
dispute over its authenticity. See Kramer v. Time Warner Inc., 937
F.2d 767, 774 (2d Cir. 1991); United States v. Wood, 925 F.2d
1580, 1582 (7th Cir. 1991); see also Funk v. Commissioner, 163
F.2d 796, 800—0 1 (3d Cir. 1947) (whether a court may judicially
notice other proceedings depends on what the court is asked to
notice and on the circumstances of the instant case).
S. Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Qip. Ltd., 181 F.3d
410, 426-27 (3d Cir. 1999). See generally Fed. R. Evid. 201.
Defendants have also attached the underlying mortgage documents.
Such documents, as well as the records of the foreclosure action, may be
considered without converting a facial Rule 12(b)(1) challenge into a factual
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one, or a Rule 12(b)(6) motion into one for summary judgment. See Schmidt

i,’.

Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (“However, an exception to the general
rule is that a ‘document integral to or explicitly relied upon in the complaint’
may be considered ‘without converting the motion to dismiss into one for
summary judgment.’

“)

(quoting In re Burlington Coat Factory Sec. Litig., 114

F.3d 1410, 1426 (3d Cir. 1997)); Pension Ben. Guar. Corp. v. White Consol.
Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993).
Where a complaint is based on particular documents, a defendant may
submit and rely on such documents in its motion to dismiss. The reasons for
the rule are (1) that the plaintiff, having relied on the document, cannot claim
unfair surprise; and (2) the plaintiff cannot base a claim on a document while
shielding the document itself from view:
What the rule seeks to prevent is the situation in which a plaintiff
is able to maintain a claim of fraud by extracting an isolated
statement from a document and placing it in the complaint, even
though if the statement were examined in the full context of the
document, it would be clear that the statement was not fraudulent.
Burlington, 114 F.3d at 1426 (on 12(b)(6) motion to dismiss securities fraud
complaint alleging misstatements in annual report, court may examine the
report itself).
The very substance of this complaint is based on the mortgage and note
and the alleged illegality of the state foreclosure proceedings. The mortgage and
note, and the publicly filed pleadings and rulings of the court in those
foreclosure proceedings may therefore be considered.
Where the plaintiff is proceeding pro se, the complaint is “to be liberally
construed,” and, “however inartfully pleaded, must be held to less stringent
standards than formal pleadings drafted by lawyers.” Erickson v. Pardus, 551
U.S. 89, 93-4 (2007). Nevertheless, “pro se litigants still must allege sufficient
facts in their complaints to support a claim.” Mala

t’.

Crown Bay Marina, Inc.,

704 F.3d 239, 245 (3d Cir. 2013). “While a litigant’s pro se status requires a
court to construe the allegations in the complaint liberally, a litigant is not
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absolved from complying with Twombly and the federal pleading requirements
merely because s/he proceeds pro se.” Thakar v. Tan, 372 F. App’x 325, 328
(3d Cir. 2010) (citation omitted).
ANALYSIS
A. Rule 12(b)(1) motion
1.

Defendant Wells Fargo

Wells Fargo Home Mortgage is named in the caption of the Complaint.
The body of the complaint contains no factual allegations against Wells Fargo,
which is not so much as mentioned. In its brief, Wells Fargo states that it had
nothing to do with this loan. That statement is confirmed by a review of the
loan documents and the rulings in the state foreclosure proceedings.
Barrett’s Response (ECF no. 25) offers nothing but a statement that
Wells Fargo “is included in the suit because they may be a qualified securitized
trust and must be searched for discovery of actual loan level detail.” Even
assuming that I may consider these statements in a brief,’ a bare statement
that something might turn up in discovery is not sufficient to state a claim.
Where there are no factual allegations against a defendant, it is possible
to quibble over whether dismissal would be more appropriate for lack of
jurisdiction or for failure to state a claim. Either way, the complaint is
dismissed as against Wells Fargo.
2.

Rooker-Feidman

Defendants move, pursuant to Fed. I?. Civ. P. 12(b)(1), to dismiss the
complaint for lack of jurisdiction under the Rooker-Feldman doctrine.
A federal district court does not sit to hear appeals from state court
judgments. Thus Rooker-Feidman holds that lower federal courts cannot
entertain federal claims that (1)

were

previously adjudicated in state court or

(2) are inextricably intertwined with a prior state court decision. See District of
“It is axiomatic that the complaint may not be amended by the briefs in
opposition to a motion to dismiss.” Commonwealth of Pa. ex rd. Zimmerman v.
PepsiCo., Inc., 836 F.2d 173, 181 (3d Cir. 1988) (internal citations and quotations
omitted). I nevertheless consider those statements in light of Barrett’s pro se status.
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Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker i-c
Fidelity Trust Co., 263 U.S. 413, 416 (1923); Guarino i-c Larsen, 11 F.3d 1151,
1156—57 (3d Cir. 1993); Port Auth. Police Benev. Ass’n i-c Port Auth., 973 F.2d
169, 178 (3d Cir. 1992). The first alternative, actual adjudication, requires little
explication. As for the second, a federal claim is “inextricably intertwined” with
a prior state court decision if “granting the relief requested in the federal action
requires determining that the state court’s decision is wrong or would void the
state court’s ruling.” FOCUS v. Allegheny County Court of Common Pleas., 75
F.3d 834, 839-40 (3d Cir. 1996).
Rooker-Feldman thus operates to prevent a disgruntled party in state
court litigation from collaterally attacking the results of that litigation in federal
court, claiming constitutional or other error. See also B.S. i-c Somerset County,
704 F.3d 250 (3d Cir. 2013). To put it another way, Rooker-Feldman bars
“cases brought by state-court losers complaining of injuries caused by statecourt 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., Inc., 544 U.S. 280, 284 (2005).
A final judgment of foreclosure was entered in New Jersey Superior Court
on July 31, 2017. That state court judgment preceded the filing of this action
on October 6, 2017.2

Even if steps such as a sheriff’s sale remain to be taken, a state court
foreclosure judgment is final for purposes of New Jersey law and Rooker-Feldman:
That the foreclosure judgment had been entered is sufficient to invoke
Rooker—Feidman. Under New Jersey law, a mortgage foreclosure suit
determines the right to foreclose and the amount due on the mortgage.
Sheereru. Lpprnan&Lowy, 125 N.J.Eq. 93, 4A.2d 273 (E. &A.1939);
Central Penn Nat? Bank u. Stonebridge, Ltd., 185 N.J.Super. 289, 302,
448 A.2d 498 (Ch.Div. 1982). See generally 30A N.J. Prac. Law of
Mortgages § 31.25. The foreclosure judgment also entitles the mortgagee
to recover, by way of Sheriffs sale, the amount due from the land subject
to the mortgage. See N.J.S.A. 2A:50—36; First Union Nat’l Bank u. Penn
Salem Marina, Inc., 383 N.J.Super. 562, 570, 893 A.2d 1 (App.Div.2006)
rev’d on other grounds by 190 N.J. 342, 921 A.2d 417 (2007). Indeed, the
terms of a mortgage foreclosure judgment will include “an order to sell so
much of the mortgaged premises as will be sufficient to satisfy the
2

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The question now is whether the claims in this federal court action are
“inextricably intertwined” with that state foreclosure proceeding. The state
foreclosure action and judgment necessarily involved the following essential
elements: the validity of the note and mortgage; the alleged default; and the
plaintiffs right to foreclose (which would include plaintiffs standing by
assignment or otherwise). See Great Falls Bank v. Pardo, 263 N.J. Super. 388,
394, 622 A.2d 1353, 1356 (Ch. Div. 1993). “If the relief requested in the federal
action requires determining that the state court’s decision is wrong or would
void the state court’s ruling, then the issues are inextricably intertwined and
the district court has no subject matter jurisdiction to hear the suit.” FOCUS,
75 F.3d at 840. As to federal actions following mortgage foreclosures, the case
law gives some guidance.
In i-c Madera, 586 F.3d 228, 232 (3d Cir. 2009), for example, considered

a post-foreclosure federal claim for rescission of the mortgage. A finding that no
valid mortgage existed, the Court held, would eliminate the basis for the prior
foreclosure judgment. Such a claim is an easy case for application of Rooker
Feldman. A federal claim that the state foreclosure court entered its judgment
in the absence of personal jurisdiction is likewise barred by Rooker-Feldman.
Because such a plaintiff “can only prevail if a federal court concludes that the
state courts default judgments were improperly obtained,” his claim is
inextricably intertwined with the state proceedings. In re Knapper, 407 F.3d
573, 581 (3d Cir. 2005). See also Ayres-Fountain v. E. Say. Bank, 153 F. App’x

91, 92 (3d Cir. 2005) (barring post-foreclosure federal claim for rescission of
mortgage and damages); Moncrief v. Chase Manhattan Mortgage Corp., 275 F.

App’x 149, 153 (3d Cir. 2008) (barring a claim for “redress” of state court
judgment in a foreclosure action).
and that an execution issue
mortgage and subordinate liens
commanding the [sheriff] to make sale....” 30A N.J. Prac. Law of
Mortgages § 31.25.
*7 (D.N.J.
Patetta v. Wells Fargo Bank, NA, Civ. No. 09-2848, 2010 WL 1931256, at
May 13, 2010) (Wolfson, J.).
...

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Under these precedents, Barrett’s causes of action are barred. (See list of
counts, p. 2, supra) They share a central feature: all seek a declaration, or rely
on the premise, that the mortgage and foreclosure judgment were invalid. They
implicate the validity of the mortgage, the procedures leading to the
foreclosure, and the foreclosure proceeding itself. They require a finding that
Chase was not the true holder of the secured interest in question, and was not
entitled to pursue the foreclosure. In short, this complaint is fatally intertwined
with the forfeiture judgment. It is dismissed for lack of jurisdiction.
B. Rule 12(b)(6) motion
On the chance that some claims may pass the jurisdictional bar, I briefly
consider i-es judicata as alternative grounds for dismissal.
Claims that survive scrutiny under Rooker-Feidman may nevertheless be
barred by doctrines of resjudicata.3 See Ayres-Fountain, 153 F. Appx at 93
reven if review of the complaint were not barred by Rooker—Feldman, we agree
with the District Court that Ayres—Fountain’s claims were barred by res
judicata9. I find that to be the case here. Although res judicata is an affirmative

Where the federal plaintiff presents “some independent claim,” i.e., one that
does not implicate the validity of the state court judgment, the doctrine does not
apply. Kaon Mobil Corp. u. Saudi Basic industries Corp., 544 U.S. 280, 292, 125 S.Ct.
1517, 161 L.Ed.2d 454 (2005) quoted in Turner ii. Crawford Scpiare Apartments HI,
L.P., 449 F.3d 542, 547—48 (3d Cir. 2006)). In such an instance, jurisdiction is
confirmed and the court should then consider “whether the defendant prevails under
principles of preclusion.” Exzon Mobil, 544 U.S. at 292.
This Circuit has adopted that stepwise approach. Madera, for example, after
applying Rooker-Feldman to bar a claim for rescission, then considered a cause of
action for damages based on the title insurer’s alleged failure to disclose the correct
title insurance charge, in violation of the Truth in Lending Act (“TILA”). As to that
claim, Madera did not apply Rooker-Feidman, but proceeded to the merits of the
bankruptcy court’s grant of summary judgment. 586 F.3d at 232. In Easley v. New
Century Mortgage Corp., 394 F. Appx 946 (3d Cir. 2010), the Court upheld the
application of Rocker-Feldman to claims that, if granted, would imply that the
foreclosure judgment was invalid. Other claims, however, were not decided by the
state court and were based on “allegations of fraud, deception and other wrongs which
pre-dated the foreclosure action,” as to which plaintiff sought consequential damages.
Id. at 948. These were not so clearly intertwined with the foreclosure judgment as to
be barred by Rocker-Feldman. (Easley held, however, that the claims not barred by
Rooker-Feidman were barred by resjudicata.)
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defense, it may be considered on a motion to dismiss if its applicability can be
determined from the face of the complaint and documents properly considered
on a Rule 12(b)(6) motion. If there were jurisdiction, the New Jersey doctrines
of claim preclusion and the entire controversy rule would furnish alternative
grounds for dismissal.
1. New Jersey doctrine of claim preclusion and the entire
controversy rule
Whether a state court judgment should have a preclusive effect in a
subsequent federal action depends on the law of the state that adjudicated the
original action. See Oreenleaf v. Oarlock, Inc., 174 F.3d 352, 357 (3d Cir. 1999)
(“To determine the preclusive effect of [the plaintiffs] prior state action we must
look to the law of the adjudicating state.”). See also Allen

xi.

McCurry, 449 U.s.

90, 96, 101 5. Ct. 411, 415 (1980) (“Congress has specifically required all
federal courts to give preclusive effect to state-court judgments whenever the
courts of the State from which the judgments emerged would do so.”). Here,
that State is New Jersey.
New Jersey claim preclusion law, like federal law, has three essential
elements: (1) a final judgment on the merits; (2) the prior suit involved the
same parties or their privies; and (3) the subsequent suit is based on the same
transaction or occurrence. Watkins

xi.

Resorts Int’l Hotel and Casino, Inc., 124

N.J. 398, 412, 591 A.2d 592, 599 (1991) (state law); United States

xi.

Athlone

Indus., Inc., 746 F.2d 977, 983 (3d Cir. 1984) (federal law). If those three
requirements are met, then the doctrine bars “the parties or their privies from
relitigating issues that were or could have been raised in that action.” Allen,
449 U.S. at 94, 101 S. Ct. at 414; Watkins, 124 N.J. at 412, 591 A.2d at 599
(“Claim preclusion applies not only to matters actually determined in an earlier
action, but to all relevant matters that could have been so determined.”)
Claim preclusion in the traditional sense tends to be subsumed by New
Jersey’s “entire controversy” rule. The entire controversy rule emphasizes, not
just claims within the scope of the prior judgment, but all claims and parties
that a party could have joined in a prior case based on the same transaction or
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occurrence. The entire controversy 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,’ and to join in that action ‘all parties
with a material interest in the controversy,’ or be forever barred from bringing a
subsequent action involving the same underlying facts.” Rycoline Prods., Inc. v.
C & W Unlimited, 109 F.3d 883, 885 (3d Cir. 1997) (quoting Circle Chevrolet Co.
v. Giordano, Halleran & Ciesla, 142 N.J. 280, 662 A.2d 509, 513 (1995)).
We have described the entire controversy doctrine as “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). A mainstay of New Jersey civil procedure, the
doctrine encapsulates the state’s longstanding policy judgment
that “the adjudication of a legal controversy should occur in one
litigation in only one court[.]” Cogdefl v. Hosp. Ctr. at Orange, 560
A.2d 1169, 1172 (N.J. 1989); see also N.J. Const. art. VT, § 3, ¶ 4
(“[L]egal and equitable relief shall be granted in any cause so that
all matters in controversy between the parties may be completely
determined.”); Smith v. Red Top Taxicab Corp., 168 A. 796, 797
(N.J. 1933) (“No principle of law is more firmly established than
that a single or entire cause of action cannot be subdivided into
several claims, and separate actions maintained thereon.”)...
Ricketti v. Bat-nj, 775 F.3d 611, 613 (3d Cir. 2014).
Like traditional res judicata, the state entire controversy doctrine applies
in federal court “when there was a previous state-court action involving the
same transaction.” Bennun v. Rutgers State Univ., 941 F.2d 154, 163 (3d Cir.
1991). It extinguishes any subsequent federal-court claim that could have been
joined, but was not raised in the prior state action:
Under the entire controversy doctrine, a party cannot withhold
part of a controversy for separate later litigation even when the
withheld component is a separate and independently cognizable
cause of action. The doctrine has three purposes: (1) complete and
final disposition of cases through avoidance of piecemeal decisions;
(2) fairness to parties to an action and to others with a material
interest in it; and (3) efficiency and avoidance of waste and delay.
See DiTrolio v. Antiles, 142 N.J. 253, 662 A.2d 494, 502 (N.J. 1995).
As an equitable doctrine, its application is flexible, with a case-bycase appreciation for fairness to the parties.
Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 137 (3d Cir. 1999).
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The preclusive effect of the rule is explicit: “Non-joinder of claims or
parties required to be joined by the entire controversy doctrine shall result in
the preclusion of the omitted claims to the extent required by the entire
controversy doctrine....” N.J. Ct. R. 4:30A. But the rule applies only to claims
that could have been permissibly joined in the prior proceeding. And the entire
controversy rule itself notes the limitations on claims in a foreclosure
proceeding:

“...

except as otherwise provided by R. 4:64-5 (foreclosure actions)

The upshot is that only claims germane to the prior mortgage foreclosure
will be precluded in a later action. The cited rule, N.J. Ct. R. 4:64-5, limits
permissible claims in mortgage foreclosure actions to those which are
“germane” to the foreclosure.4 For both traditional claim preclusion and the
entire controversy rule, then, it is critical to determine what claims or defenses
could permissibly have been asserted in the prior proceeding. If claims were
not “germane” to the foreclosure, then they could not have been brought in that
action. And if the litigant had no opportunity to present them in the prior
action, then they cannot be precluded by the prior judgment.
4

4:64-5. Joinder of Claims in Foreclosure
Unless the court otherwise orders on notice and for good cause shown,
claims for foreclosure of mortgages shall not be joined with non-germane
claims against the mortgagor or other persons liable on the debt. Only
germane counterclaims and cross-claims may be pleaded in foreclosure
actions without leave of court. Non-germane claims shall include, but not
be limited to, claims on the instrument of obligation evidencing the
mortgage debt, assumption agreements and guarantees. A defendant
who chooses to contest the validity, priority or amount of any alleged
prior encumbrance shall do so by filing a cross-claim against that
encumbrancer, if a co-defendant, and the issues raised by the crossclaim shall be determined upon application for surplus money pursuant
to 1?. 4:64-3, unless the court otherwise directs.

Claims that could not have been brought in the first proceeding also include
those that were “unknown, unarisen, or unaccmed” at the time. Mystic Isle Deu. Corp.
u. Perskie & Nehmad, 142 N.J. 310, 662 A.2d 523, 530 (1995) (citations omitted).
Those exceptions are not implicated here.
The entire controversy rule applies to parties, as well as claims, that were not
joined in the prior action. That aspect of the rule, too, is not relevant here. See Ricketti,
supra (requiring particular safeguards as to absent parties).
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As to what claims are “germane,” the seminal case is Leisure Technology—
Northeast v. Klingbeil Holding Co., 137 N.J. Super. 353, 349 A.2d 96 (App. Div.
1975). “The use of the word ‘germane’ in the language of the rule,” said the
Appellate Division, “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.” 349 A.2d at 98—99 (emphasis
added). There, the foreclosure defendant/borrower had pled an affirmative
defense and counterclaim. The Appellate Division held that “the thrust of the
counterclaim is the assertion that plaintiff had breached the underlying
agreement in relation to which the mortgage was executed and interfered with
defendants’ rights under that agreement. In the usually understood sense of
the word, these claims were germane to the foreclosure action.” 349 A.2d at 99.
Post-Leisure Technology, the germaneness rule has solidified thus:
Indeed, the Appellate Division has been “clear that any conduct of
a mortgagee known to the mortgagor prior to the institution of a
foreclosure that could be the basis of an independent action for
damages by reason of the mortgagee having brought the
foreclosure could be raised as an equitable defense in the
foreclosure.” Sun NLF Ltd. Partnership v. Sasso, 313 N.J. Super.
546, 713 A.2d 538, 540 (N.J. Super. Ct. App. Div. 1998).
Zebrowski v. Wells Fargo Bank, N.A., No. CIV.1:07CV05236JHR, 2010 WL
2595237, at *6 (D.N.J. June 21, 2010) (Rodriguez, J.); see also Joan Ryno, Inc.
u. First Nat Bank of S. Jersey, 208 N.J. Super. 562, 570, 506 A.2d 762, 766
(App. Div. 1986).
A Third Circuit case persuasively penned by Judge Fuentes (himself a
product of the New Jersey bench and bar) illustrates the “germaneness” issue
as it bears on the entire controversy doctrine. In Coleman v. Chase Home Fin.,
LLC ex rel. Chase Manhattan Mortgage Corp., 446 F. Appx 469 (3d Cir. 2011), a
foreclosure action went to final judgment. After bankruptcy-related delays that
staved off a sheriffs sale, the borrower/owner paid a reinstatement fee and
obtained a dismissal of the foreclosure. The borrower then brought a putative
class action in federal court, claiming that the lender had charged excessive

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fees in connection with reinstatement.5 The district court, applying the entire
controversy doctrine, dismissed the case on a Rule 12(b)(6) motion. The Third
Circuit affirmed.
Judge Fuentes found that the borrower’s claims could have been brought
in the foreclosure under New Jersey practice:
Claims are considered to be germane to a foreclosure action if they
arise out of the mortgage that is the basis of the foreclosure action.
Leisure Technology—Northeast, Inc. v. Klingbeil Holding Co., 137 N.J.
Super. 353, 349 A.2d 96, 98 (1975). Here, Coleman’s claims arose
directly out of a reinstatement quote that was provided to her as
an alternative to a foreclosure sale, and the excessive fees allegedly
charged by Chase would not have been charged but for the
foreclosure action. Accordingly, Coleman’s causes of action arose
out of and were germane to the original foreclosure action.
446 F. App’x at 472. Because the claims would have been “germane” in the
sense that they arose from the relevant mortgage transaction, they were now
barred by the entire controversy doctrine. See also Dennis u. MERS/Merscorp

Mortgage Elec. Registration .Sys., Inc., No. CIV.A. 11-4821 JLL, 2011 WL
4905711, at*1 (D.N.J. Oct. 13, 2011) (barring claims by plaintiff who had
defaulted in state foreclosure action that “as a result of defective assignments
of her mortgage, all claims to the property are void”) 6

2. Application of entire controversy and claim preclusion to
this case
The entire controversy rule applies here. The state court mortgage
foreclosure was “a previous state-court action involving the same transaction,”
The federal court causes of action asserted in Coleman included (1) breach of
contract; (2) intentional misrepresentation; (3) negligence; (4) breach of duty of good
faith and fair dealing; (5) unjust enrichment; (6) unfair and deceptive assessment and
collection of fees; (7) violation of the Fair Foreclosure Act (“FFA”); (8) excessive fees in
violation of New Jersey Court Rule R 4:42—9(a)(4); (9) excessive taxed costs in violation
of various state statutes; (10) violation of New Jersey’s Consumer Fraud Act (“CPA”);
(11) forfeiture of interest; and (12) violation of the Truth—In Consumer Contract,
Warranty and Notice Act.
6
A case reaching the opposite result is In re Mullarkey, 536 F.3d 215, 229-30 (3d
Cir. 2008). There, however, the court determined that the plaintiffs federal cause of
action truly arose, not from the foreclosure, but from alleged misrepresentations in
related bankruptcy proceedings.
5

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i.e., the mortgage, the default, and the foreclosure itself. Bennun, 941 F.2d at
163 (3d Cir. 1991). The subject matter of that prior action necessarily
embraced the claims and parties in this federal action. The parties were the
same or in privity. Thus, Count 1 claims that the mortgagee did not properly
possess standing to foreclose. Count 2 claims that the mortgage was not valid
because WaMu concealed the fact that it was not a federal reserve depository
bank. Count 3 alleges fraud, again with the object of demonstrating that WaMu
did not possess the kind of secured interest that would permit it to foreclose.
Count 4 alleges unconscionable conduct in connection with the origination of
the mortgage. Counts 5 and 6 allege breach of contract and breach of fiduciary
duty, again with the object of demonstrating that WaMu did not have the kind
of secured interest that would permit it to foreclose. Count 7 seeks to “quiet
title,” and Counts 8 and 9 seek injunctive and declaratory relief, based on the
same allegations. Barrett points to no reason why she could not have joined all
of her federal-court claims and parties in the state action.
In the alternative, the three prerequisites to claim preclusion apply here.
(1) There was a final judgment on the merits. A final judgment of
foreclosure was entered in New Jersey Superior Court on July 31, 2017, in the
amount of

$

102,526.48, and a sheriffs sale was ordered.

(2) The prior suit involved the same parties or their privies.
(3) The subsequent suit (i.e., this one) is based on the same transaction
or occurrence. ft grows out, and is based on, the mortgage and the mortgage
foreclosure. Watkins, 124 N.J. at 412, 591 A.2d at 599.

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It follows, then, that claim preclusion and the entire controversy doctrine
extinguish any subsequent federal-court claim that either was decided, or else
could have been joined but was not raised in the prior foreclosure action. As to
any claims that survive Rooker-Feldman, the 12(b)(6) motion to dismiss on
grounds of res judicata and the entire controversy rule is granted.7
CONCLUSION
Defendant Wells Fargo’s motion to dismiss the complaint (ECF no. 19) is
GRANTED. The remaining defendants’ motion to dismiss the complaint (ECF
no. 20) pursuant to Fed. R. Civ. P. 12(b)(1), for lack ofjurisdiction under the

Rooker-Feidman doctrine is GRANTED. To the extent that this court might have
jurisdiction of any claims or parts of claims, they are nevertheless dismissed
pursuant to Fed. R. Civ. P. 12(b)(6) on grounds of resjudicata and the entire
controversy rule.

Dated: July 16, 2018

KEVIN MCNULTY
United States District Judge

Defendants’ motions cite additional grounds, many of which appear to have
merit. These include the Anti-Injunction Act, 28 U.S.C. § 2283; failure to exhaust
administrative remedies as to claims arising from the origination of the loan by a bank
taken over by FDIC as receiver, see 12 U.S.C. §1821(d) (FJRREA); the statute of
limitations; and general failure to state a claim under the pleading standards of Fed.
R. Civ. P. 8. I do not reach them.
7

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