FARRINGTON et al v. US. BANK TRUST, N.A. et al

Filing 17

OPINION. Signed by Chief Judge Jose L. Linares on 3/11/2019. (sm)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

IN RE: ROBYN JILL fARRINGTON,
Debtor.

Bankruptcy No. 17-2650) (JkS)
Adv. No. 17-1775 (JKS)

ROBYN JiLL FARRINGTON,
Appellant,
V.

Civil Action No. 1 8-8573 (JLL)

OPINION

U.S. BANK TRUST, N.A., as trustee for LSF9
il’fctstei Pctrticipcttion 1)ttst, et al..
Appellees.

LINARES, Chief District Judge.

This matter comes before the Court by way of Appellant Robyn Jill Faiiington’s Notice of
Appeal of the Bankruptcy Court’s Order granting the Motion to Dismiss Appellant’s Adversary
Complaint with prejudice. (ECF No. 1). Appellees U.S. Bank Trust, N.A., as trustee for LSF9
Master Participation Trust (“US Bank”), LSF9 Master Participation Trust (“LSF9”), and Caliber
Home Loans Inc. (“Caliber”) submitted opposition to the appeal. (ECF No. 16). Appellant did
not

file a reply within the time provided by this Court, (see ECF Nos. 7, 11), the Federal Rules of

Civil Procedure, the Local Civil Rules, or the Federal Rules of Bankruptcy Procedure. The Court
has considered the parties’ submissions and decides this matter without oral argument. pursuant to
Federal Rule of Civil Procedure 7$. For the reasons set forth below, the Court denies Appellant’s
appeal and affirms the Bankruptcy Court’s Order.

I.

BACKGROUND’

A. The Mortgage ancL Assignments
On July 7, 2006, Appellant obtained a $637,500 loan from Washington Mutual Bank, FA

(“Washington”), which was secured by way of a mortgage on the property located at 530 Summit
Avenue. Westfield. New Jersey 07090.

(ECF No. 12-6 at Ex. A).

On July 19, 2006, this

transaction was recorded with the Office of the Clerk of Union County. (Id.).
On approximately December 23, 2014, the federal Deposit Insurance Corporation, as a
receiver of Washington, conducted the “First Assignment” by assigning the mortgage to JPMorgan
Chase Bank. N.A. (“Chase”). (IcL at Ex. B). On or around the same date as the First Assignment,
Chase conducted the “Second Assignment” by assigning the mortgage to Appellee LSF9. (Id. at
Ex. C). Both the first and Second Assignments were recorded with the Office of the Clerk of
Union County on May 28, 2015. (Id. at Exs. B, C). On or about November 19, 2015, Appellee
LSF9 conducted the “Third Assignment” by assigning the mortgage to Appellee US Bank. (Id. at
Ex. D). On December 8, 2015, the Third Assignment was recorded with the Office of the Clerk
of Union County. (Id.). Appellee Caliber serviced the loan for Appellee US Bank. (ECF No. 123 atEx.Al3).
B. The State Court foreclosure Action

On January 12, 2016, Appellee US Bank brought a foreclosure action in the Superior Court
of New Jersey, Union County, due to Appellant’s failure to make payments on the loan. (ECF No.
12-6 at Ex. E). Appellant did not respond to the foreclosure Action, and the Superior Court entered
default against Appellant. (Id. at Ex. F). On September 7, 2016, Appellee US Bank moved for
final judgment. (Id. at Ex. G). On September 23, 2016, Appellant filed a cross-motion opposing

This background is derived from the Bankruptcy Record which the parties have designated and submitted to this
Court. (ECFNos. 6. 12-2 12-]4).
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the entry of final judgment and requesting that the default be vacated. (ECF No. 12-7 at Ex. H).
After hearing oral

argument on

the motion for final judgment and cross-motion in opposition, the

Superior Court adjourned said motions until May 2017 and allowed Appellant to submit additional
support for her arguments. (ECF No. 12-6

¶

14).

Appellant filed an additional certification in opposition to the entry of final judgment in
May 2017. (ECf No. 12-7 at Ex. J). In her certification, Appellant argued, among other things,
that Appellee US Bank lacked standing to bring the Foreclosure Action becatise the mortgage was
allegedly sold by Washington before the first Assignment, thereby invalidating all of the
abovernentioned assignments, including the Third Assignment to Appellee US Bank.

¶J 6—12).

(id.

at Ex. J

In May 2017, upon receiving this certification and Appellee US Bank’s response, the

Superior Court issued an order denying Plaintiffs cross-motion and a separate order entering final

judgment in favor ofAppellees. (Id. at Exs. L, M). In entering final judgment, the Superior Court
ordered that: (1) Appellee US Bank was entitled to payment out of the mortgaged property; (2) the
mortgaged property would be sold to satisfy the money due to Appellee US Bank; and (3)
Appellant was “absolutely debaned and foreclosed of and from all equity of redemption of in, and
to” the mortgaged property. (Id. at Ex. M, p. 4).
In June 2017, Appellant filed with the Superior Court a motion to stay and/or vacate the
final judgment, and again raised the argument that Appellee US Bank did not have standing to
bring the Foreclosure Action because Washington sold the loan prior to the First Assignment. (Id.
at Ex. P

¶ 25).

The Superior Court heard oral argument on Plaintiffs motion and, on or around

June 23, 2017, denied same. (id. at Ex.

Q).

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C. The Underlying Bankruptcy Action

On August 14, 2017, Appellant filed a Chapter 13 petition with the Bankruptcy Court.
(ECF No. 12-3 at Ex. A

¶

50). On December 18, 2017, Appellant commenced an adversary

proceeding in Bankruptcy Court, which sought:
(a) [a] declaratory judgment determining that Defendants lack
standing to assert and/or enforce liens against any property in
Plaintiffs bankruptcy estate and/or debts against Plaintiff; (b) to
invalidate Defendants’ actual and/or purported liens against
property in Plaintiffs bankruptcy estate; and (c) to disallow and/or
preemptively disallow Defendants’ filed and/or unfiled claims.
(Id. at Ex.AJ 1).
In her request for declaratory judgment, Appellant again alleged that Washington sold the
mortgage and loan prior to the time of the First Assignment, and that Appellees therefore did not
have a valid claim of entitlement or standing to collect on the mortgage and loan. (Id. at Ex. A

¶

59).
On February 23, 2018, Appellees moved to dismiss Appellant’s Adversary Complaint,
pursuant to Federal Rules of Civil Procedure 12(b)(l) and 12(b)(6). (ECF No. 12-5). In their
Motion to Dismiss, Appellees argued among other things that Appellant’s claims are precluded
under the Rooker-fetdman doctrine, because final judgment was already entered in favor of
Appellees during the Foreclosure Action on the claims being asserted by Appellant. (Id. at 7—11).
Specifically, Appellees argued that Appellant was seeking to undo the Superior Court’s final
judgment by having the Bankruptcy Court invalidate Appellees’ lien on the property and claim of
entitlement to collect on the mortgage and loan. (Id. at 10). Appellees also argued, among other
things, that Appellant’s claims were barred by the entire controversy doctrine and res jttdicata.
(See generally id.). On April 12, 2018, the Bankruptcy Court issued an Order granting Appellees’
Motion and dismissing Appellant’s Adversary Complaint with prejudice. (ECF No. 12-13).
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D. This Appeal

Accordingly, on or around April 26, 2018, Appellant filed this appeal of the Bankruptcy
Court’s Order granting Appellees’ Motion to Dismiss Appellant’s Adversary Complaint with
prejudice. (ECF No. 1). Appellant argues that the Bankruptcy Court misapplied the law and
abused its discretion when it determined that Appellant’s Adversary Complaint was barred by,
among other things, the Rooker-Feldmctn doctrine and yes judicata. (See generally ECF No. 12).
II.

LEGAL STANDARD

A. Standard of Review

“The proper standard of review to be applied by a district court when reviewing a ruling of
a bankruptcy court is determined by the nature of the issues presented on appeal.” In re Beers,
No. 09-1666, 2009 WL 4282270. at *3 (D.N.J. Nov. 30, 2009) (quoting

Baron

& Budd, P.C. v.

Unsecured Asbestos Claimants Comm.. 321 B.R. 147, 157 (D.N.J. 2005)). a/i’d. 399 F. App’x 748
(3d Cir. 2010). Specifically, this Court “review[s] the bankruptcy court’s legal determinations

dc

novo, its factual findings for clear error and its exercise of discretion for abuse thereof.” In re

UnitedHealthcare Svs., Inc., 396 F.3d 247, 249 (3d Cir. 2005) (quoting In re Trctns WorklAirlines,
Inc., 145 F.3d 124, 130-31 (3d Cir. 1998)).
In the appeal currently before this Court, there does not appear to be any dispute regarding
the factual record relied on by the Bankruptcy Court. Instead, Appellant takes issue with the legal
conclusions reached by the Bankruptcy Court in granting Appellees’ Motion to Dismiss, which
the Court shall review dc nrn’o. See In re JOL Advisors, Inc.. No. 15-79 12, 2017 WL 772912. at
*7 (D.N.J. Feb. 28, 2017) (applying a de novo standard of review to a bankruptcy court’s grant of
a motion to dismiss).

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B. Subject Matter Jurisdiction
Under Federal Rule of Civil Procedure 12(b)(l), a defendant may move to dismiss a
complaint for lack of subject matterjurisdiction. The plaintiff, as the party asserting jurisdiction,
bears the burden of establishing that a federal court has authority to hear the matter. Packard v.
Provident Nat’! Bank, 994 F2d 1039, 1045 (3d Cir. 1993). An attack under Federal Rule of Civil

Procedure 12(b)( 1) may assert either a factual or facial challenge to the Couft’s jurisdiction. See
Taliqferro v. Darby flip. Zoning Bd., 458 F.3d 181, 188 (3d Cir. 2006); Gould Elecs. Inc. v. United
States, 220 F.3d 169, 176 (3d Cir. 2000).

When a defendant facially attacks the Court’s

jurisdiction, this type of challenge contests the adequacy of the language used in the pleading.
Gould Elecs. Inc., 220 F.3d at 176. Therefore, the Court must construe the pleadings in the light
most favorable to the plaintiff and presume all well-pleaded factual allegations in the complaint as
true. IS Alternatively, when bringing a factual attack, the defendant contends that the facts on
which the plaintiff’s allegations rely are not true, and therefore the plaintiff’s allegations do not
benefit from a presumption of truthfulness. Id.
Here, Appellees are asserting a facial attack on the Bankruptcy Court’s subject matter

jurisdiction, and the Court shall therefore consider the allegations in the light most favorable to
Appellant See JOL Advisors, Inc., 2017 WL 772912, at ‘7 (determining that a challenge under
the Rooker-Feldman doctrine was a facial attack); see also Frame v. Lowe, No. 09-2673,2010 WL
503024, at ‘5—6 (D.NJ. Feb. 8, 2010) (same).
C. FaliuretoStateaCblm
To withstand a motion to dismiss for failure to state a claim, a “complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Ati Corp. v. Thvmbly, 550 U.S. 544,

6

570(2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Id. (citing Thsvmbtv, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Id. (quoting Tuvrnbly, 550 U.S. at 556).
To detennine the sufficiency of a complaint under Twombly and lqbal in the Third Circuit,
the Court must: (1) “tak[e] note of the elements [the] plaintiff must plead to state a claim”; (2)

“identify allegations that, because they are no more than conclusions, are not entitled to the
assumption oftruth”; and (3) “[w]hen there are well-pleaded factual allegations, [the] court should
assume their veracity and then determine whether they plausibly give rise to an entitlement to
relief” Connellv i Lane Constr. Coq,., 809 F.3d 780,727 (3d Cir. 2016) (quotations and citations
omitted). “In deciding a Rule I 2(bX6) motion, a court must consider only the complaint, exhibits
attached to the complaint, matters of public record, as well as undisputedly authentic documents
if the complainant’s claims are based upon these documents.” Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010).
IlL

ANALYSIS

A. The Rocker-Feldman Doctrine
In their Motion to Dismiss filed before the Bankruptcy Court and in their opposition to this
appeal, Appellees argued that Appellant’s Adversary Complaint is barred by the Rooker-Feldman
doctrine. (ECF No. 12-5 at 7—il; ECF No. 16 at 11—22).

Under the Rookcr-Feldrnan docthne a federal district court is barred from hearing cases
“that are essentially appeals from state-court judgments.” Great W Mining & Mineral Co. v. Fat
Rothschild LLP, 615 F.3d 159, 165 (3d Cir. 2010). Put another way, a suit is barred under

7

the Rooker-Feidman doctrine where “a fivorable decision in federal court would require negating
or reversing the state-court decision.” Id. at 170 n.4 (citations omitted). The Third Circuit has

repeatedly and explicitly held that federal courts are barred by the Rooker-Feldnwn doctrine from
providing relief that would overturn a state court foreclosure decision. See, ag., Gage

i

Wells

Faiso Bank NA AS, 521 F. App’x 49,51 (3d Cit 2013); Mann v. Nati (‘fly Bank oflnd., 471 F.

App’x 101, 105 (3d Cir. 2012); Moncflef ‘ chase Manhattan Mortg. Corp., 275 F. App’x 149,
152—53 (3d Cir. 2008);Ayres-Fountain v. E. Sat Bank, 153 F. App’x 91,92 (3d Cir. 2005).
In order for the Rooker-FeWman doctrine to apply, four requirements must be met: “(I) the
federal plaintiff lost in state court; (2) the plaintiff ‘complain[s] of injuries caused by [the] state-

court judgments’; (3) those judgments were rendered before the federal suit was filed; and (4) the
plaintiff is inviting the district court to review and reject the state judgments.” Gnat W. Mining
& Mineral Co., 615 F.3d at 166 (quoting Exxon Mobil Corp.

t

Saudi Basic Indus. Corp., 544 U.S.

280, 224 (2005)). “The second and fourth requirements are the key to determining whether a

federal suit presents an independent non-barred claim” and these requirements are “closely
related.” Id. at 166, 168.
The first and third prongs are clearly met in the instant action. In or around May 2017,
Appellant was the losing party in the Foreclosure Action in the Superior Court of New Jersey.
Appellant did not file the Bankruptcy Action until August 2017 and did not file her Adversary
Complaint in the Bankruptcy Court until December 2017, i.e., several months after the Superior
Court entered final judgment against Appellant. (See ECF No. 12-3 at Ex. A; ECF No.12-i at Ex.
M).

The second and fourth prongs are also satisfied here. The Third Circuit previously

addressed a case that is informative to the Court’s current decision. In Gage, 521 F. App’x at 50,

8

the plaintiff “defaulted on his mortgage. and [the defendant] Wells Fargo subsequently filed a
foreclosure complaint in state court” which ruled in Wells Fargo’s favor. The plaintiff in Gctge
scibsequently filed a complaint in federal court, claiming in part that the foreclosurejudgment was
invalid because Wells Fargo “had no right to foreclose on the property.” Id. The District Court
granted Wells Fargo’s motion to dismiss and held that the claims were barred under the Rooker—
Feldman doctrine. Id. at 50—51. In affirming the District Court’s decision, the Third Circuit held
that all four prongs of the Rooker-Feidman test were satisfied and stated that.
Gage cannot evade Rooker-Feldman by arguing on appeal that he
was not injured by the foreclosure judgment, but rather by Wells
Fargo’s purportedly fiaudulent actions. The complaint reveals the
nature of Gage’s claims against Wells Fargo: that the bank had no
right to foreclose on the property and therefore committed “criminal
acts” by enforcing the foreclosure judgment (Counts I and IV).
These claims are in essence an attack on the state court judgment of
foreclosure. Furthermore, an aspect of the relief that Gage
requests—to have the deed to the property restored to him—makes
it abundantly clear that he seeks to overturn the foreclosure
judgment. Accordingly, the claims against Wells Fargo were
properly dismissed under the Rookcr-Feldmcm doctrine.
Id. at 5 1.
The Cout-t reaches a similar conclusion here. As to the second prong, even when viewed
in a light most favorable to Appellant, the Adversary Complaint effectively alleges injuries caused
by the Superior Court’s entry of final judgment in the Foreclosure Action. Specifically, Appellant
alleges that: (1) Appellees did not have any entitlement to collect on the mortgage; (2) Appellees
therefore did not have standing to collect on the mortgage and loan: (3) Appellees nevertheless
enforced a false claim of entitlement and attempted to collect on the mortgage and loan; and (4)
Appellees’ attempt to collect on the mortgage and loan deprived Appellant of title to her property.
Despite Appellant’s argument to the contrary, (ECE No. 12 at 2 1—29), the Court finds that these
allegations relating to Appellees’ entitlement and standing to collect on the mortgage and loan
9

cannot be viewed independently ofthe Foreclosure Action, because said allegations “are in essence
an attack on the state courtjudgment offoreclosure.” Gage, 521 F. App’x at 51 (concluding same).
Moreover, as relevant to the fourth prong, adjudicating Appellant’s claims would require
this Court to impennissibly engage in appellate review of the Foreclosure Action. In particular,
granting Appellant’s request for a declaratory judgment that Appellees do not have entitlement or
standing to collect on the mortgage and loan would necessarily challenge the validity of the
Superior Court’s entry of final judgment ordering that Appellees are entitled to collect on the loan
of the mortgaged property. “This type of action is exactly what Rooker-Feldman is meant to
prevent: an attempt to invalidate the final judgment of foreclosure and various other orders from a
state court action in a separate federal court action.” WIlloughby t Zucker, Goldberg & Ackerman,
LLC, No. 13-7062.2014 WL 2711177, at 4 (D.N.J. June 16,2014). Accordingly, the Court finds
that the Bankruptcy Court correctly held that Appellant’s Adversary Complaint is barred by the
Rooke,1’eldman doctrine, and hereby affirms the Bankruptcy Court’s Order dismissing same.
B. Res Judkata
The Court finds in the alternative that res judicata precludes Appellant’s claims. Res
judicata, or claim preclusion, bars all claims that were brought, or that could have been brought,
in a prior proceeding. In re Midlarkey, 536 F.3d 215, 225 (3d Cir. 2008). Resjudicata requires
“(1) a final judgment on the merits in a prior suit involving; (2) the same parties or their vities;
and (3) a subsequent suit based on the same cause of action.” Bd. of Trs. qfTrucking Emps. qfN
Jersey We(fare Fund. Inc.

—

Pension Fund v. Centm. 983 F.2d 495, 504 (3d Cir. 1992) (citing

United States i Athlone Indus., Inc., 746 F.2d 977,923 (3d Cir. 1984)).

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I. First and Second Element
The first and second elements of res jitdicata are easily met in this case. As to the first
element, the Superior Court entered final judgment against Appellant in the Foreclosure Action
after both parties had an opportunity to litigate the questions of whether or not Appellant were
entitled to collect on the mortgage and had standing to bring the case. Specifically, the Superior
Court considered the issue of Appellees’ entitlement and standing to collect on the mortgage and
loan on at least two occasions: (1) in Appellant’s May 2017 certification in opposition to final
judgment; and (2) in Appellant’s subsequent motion to stay and/or vacate the final judgment. As
to the second element, Appellant and Appellees concede that they were parties to both the
Foreclosure and Bankruptcy Actions. (ECF No. 12 at 33; ECF No. 16 at 24).
2. Third Element
The Court also finds that the third element of resjttdicctta is met in this case. To show that
two cases arise from the same cause of action, the Court must find “an essential similarity of the
underlying events” of both cases. Athione Inc/us., Inc., 746 F.2d at 984. In order to make this
determination, the Court looks for similarities in the acts complained of and the facts alleged, the
relief being sought, the theory of recovery, and the evidence necessary for trial. Id. (citations
omitted).

In applying these factors, the Court has compared the Bankruptcy Action with the
Foreclosure Action and finds that the underlying events of the cases are substantially similar. In
particular, both actions sought to resolve the issue of Appellees’ ability to collect on the mortgage

and loan. Moreover, Appellant relied on the same argument in both the Foreclosure Action and
Bankruptcy Action, i.e., that Appellees were not entitled to collect on the mortgage and loan, and
therefore did not have standing to collect on same. This argument was necessarily rejected by the

11

Superior Court when it denied Appellant’s Cross—Motion and entered final

judgment in favor of

Appellees. Accordingly, the Court finds that all three elements of resjucl/ccttct are met in this case
and therefore shall affirm the Bankruptcy Court’s Order alternatively dismissing Appellant’s
Adversary Complaint on this basis.2
IV.

CONCLUSiON

For the aforementioned reasons, the Court denies Appellant’s appeal and affirms the Order
of the Bankruptcy Court granting Appellees’ Motion to Dismiss Appellanfs Adversary Complaint.
An appropriate Order follows this Opinion.

Dated: March

//O 19.

J9E L. LINARES
hief Judge, United States District Court

2

As the Court has determined that Appellant’s Adversary Complaint is barred by the Rookc’r—fre/thnm doctrine and
res/uclicata. the Court need not address Appellant and Appellees’ remaining arguments.

12