DUFFY et al v. WELLS FARGO BANK, NA

Filing 14

OPINION. Signed by Judge Freda L. Wolfson on 5/31/2017. (seb)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
____________________________________
JOHN DUFFY AND KAREN DUFFY,
:
:
Plaintiffs,
:
:
Civ. Action No. 16-4453 (FLW)
v.
:
:
WELLS FARGO BANK, N.A.,
:
OPINION
:
Defendant.
:
____________________________________:
WOLFSON, United States District Judge:
Plaintiffs John Duffy (“Mr. Duffy”) and his wife, Karen Duffy (“Karen” or “Ms. Duffy”)
(collectively, “Plaintiffs”), filed this Complaint against Wells Fargo Bank, N.A. (“Defendant” or
“Wells Fargo”), in which they assert various state and federal claims arising from an underlying
state foreclosure proceeding that resulted in a final judgment issued against Plaintiffs. In lieu of an
answer, Defendant moves for dismissal, under both Federal Rule of Civil Procedure 12(b)(1) and
12(b)(6), arguing that Plaintiffs’ claims are precluded by, inter alia, the Rooker-Feldman doctrine.
Alternatively, Defendant moves to dismiss the Complaint on the basis that Plaintiffs have failed to
sufficiently plead facts in support of their claims. For the reasons set forth below, Defendant’s
Motion to Dismiss is GRANTED with respect to Counts Four through Eight, as these claims are
precluded by Rooker-Feldman; however, the Motion is DENIED with respect to Counts One and
Two.
BACKGROUND
On June 30, 2010, Mr. Duffy and his sister, Catherine Duffy (collectively the “Duffys”),
entered into a $309,320.00 Note with WCS Lending, LLC (“WCS”), a Florida Limited Liability
Company. Certification of Aaron M. Bender, Esq. (“Bender Cert.”), Ex. A. The Duffys, on that

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same day, also entered into a Purchase Money Mortgage (the “Mortgage”) with Mortgage
Electronic Registrations Systems, Inc. (“MERS”), as nominee for WCS. Bender Cert., Ex. B. The
Mortgage was secured by the property located at 134 Waterworks Road, Freehold, New Jersey
07728 (the “Property”), which was co-owned by the Duffys. Bender Cert., Ex. B.
On March 23, 2012, MERS assigned the Mortgage to Wells Fargo, and the transaction was
recorded in the Monmouth County Clerk’s Office. Bender Cert., Ex. C. As a result of encountering
financial difficulties, the Duffys were unable to make payments on the Mortgage, thereby causing
it to enter default. Bender Cert., Ex. D. In turn, on November 19, 2012, Wells Fargo filed a
foreclosure complaint against the Duffys in the Monmouth County Superior Court, wherein Wells
Fargo sought to repossess and sell the Property in an attempt to satisfy the remaining balance due
on the Mortgage. Bender Cert., Ex. D. These facts are not in dispute.
On September 23, 2013, Catherine Duffy purportedly transferred her entire interest in the
Property to Mr. Duffy through a Quitclaim Deed. Compl. ¶ 18, Ex. B. According to Plaintiffs,
Catherine Duffy became estranged from her brother. Shortly thereafter, on October 11, 2013,
Plaintiffs, Mr. Duffy and his wife, Karen, filed a loss mitigation application (the “Application”),
in which Plaintiffs solely provided their own personal and financial information; however, Wells
Fargo denied the Application, as it did not include Catherine Duffy’s signature. Compl. ¶¶ 19-22.
On February 24, 2014, Plaintiffs appealed the denial, on the basis that Catherine Duffy was
“estranged, unemployed, and residing in Mexico,” and requested that Wells Fargo approve their
loss mitigation application, despite the absence of Catherine Duffy’s signature. Compl. ¶ 23, Ex.
C.
Thereafter, on April 1, 2014, Wells Fargo, in a letter addressed to “JOHN DUFFY” and
“CATHERINE V DUFFY,” informed the Duffys that they were approved for a Home Affordable

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Modification (“HAMP”) Trial Period Plan (the “TPP”): “Based on our telephone conversation and
the financial information you provided, we would like to offer you an [FHA HAMP TPP].”
Compl., ¶ 25, Ex. D.1 In order to accept the terms and conditions of the TPP, the letter instructed
that the Duffys must comply with the instructions provided therein: “To accept this offer . . . please
send in your first monthly trial period payment. 2 Also, please sign and return a copy of the ‘FHA
HAMP Trial Plan Terms and Conditions’ document that is enclosed in this package.” Compl., ¶
25, Ex. D. Plaintiffs assert that they agreed to be bound by the TPP, because they performed its
terms by submitting the monthly trial payments thereunder. Compl., ¶ 28.
On August 20, 2014, Wells Fargo sent Plaintiffs a Loan Modification Agreement (“Final
Agreement 1”). Compl., ¶ 29. The Final Agreement was intended to amend and supplement the
Mortgage, and it contained various signature lines under which the names “John Duffy” and
“Karen Duffy” were displayed. Compl. ¶ 29, Ex. E. The Final Agreement was signed by Plaintiffs,
and allegedly returned to Wells Fargo; however, Wells Fargo maintains that there was an error in
the execution of Final Agreement 1. As a result, on January 12, 2015, Plaintiffs signed an identical
Agreement (“Final Agreement 2”), which, according to Wells Fargo, was also executed
incorrectly. Compl. ¶¶ 32-36. Plaintiffs allege that they were then presented with a new agreement

1

Plaintiffs, in their Complaint, inconsistently assert that they—John and Karen—were
approved for a HAMP TPP, “notwithstanding the absence of Catherine from their application . . .
.” Compl. ¶ 25. As explained above, the letter, in which Wells Fargo offered Plaintiffs a HAMP
TPP, was explicitly addressed to both John Duffy and Catherine Duffy, and required them to return
documentation with both their signatures. Compl., ¶ 25, Ex. D. Despite this discrepancy, the
Court’s decision does not hinge upon this fact.
2

Pursuant to the terms of the TPP, the Duffys were required to submit three monthly trial
period payments for the months of May, June, and July of 2014. Compl., ¶ 25, Ex. D. Plaintiffs
maintain that they complied with these requirements, and continued to submit monthly payments
in accordance with the TPP until August 1, 2015. Compl. ¶ 50.

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requiring, for the first time, the signature of Catherine Duffy (“Final Agreement 3”). Compl. ¶¶
38-39. However, Plaintiffs did not return Final Agreement 3 because it required the signature of
Catherine.
On July 28, 2015, in a letter addressed to the Duffys, Wells Fargo denied the Loan
Modification Agreement, because it was not signed by Catherine: “At this time, you do not meet
the requirements of this program because . . . we have not received your signed modification
agreement.” Compl. ¶ 52, Ex. F. On August 17, 2015, Plaintiffs, once again, filed an appeal of
denial, wherein they maintained that Plaintiffs performed under the TPP, and entered into a Final
Agreement with Wells Fargo. Compl., ¶¶ 53-54. Thereafter, on May 12, 2016, Wells Fargo
informed Plaintiffs that the appeal was still under investigation. According to Plaintiffs, Wells
Fargo did not render a decision in response to the appeal; rather, they were instructed by Wells
Fargo to file a new loss mitigation application. On May 17, 2016, Plaintiffs resubmitted a loss
mitigation application, which Wells Fargo denied on the following day. Compl. ¶¶ 58, 61, Ex. I.
During the pendency of Plaintiffs’ last appeal to Wells Fargo, the State Court, on November 19,
2015, granted Wells Fargo’s application for final judgment in the foreclosure action. Bender Cert.,
Ex. F. On July 25, 2016, after the initiation of this suit, Plaintiffs filed a motion to stay the state
court’s final judgment of foreclosure, in which they claimed: “Wells Fargo has refused to honor
the agreed-upon terms of a signed loan modification agreement. [Plaintiffs] have filed a federal
lawsuit against Wells Fargo in the District Court of New Jersey and are requesting a stay of the
sale to provide an opportunity to have the matter settled.” Supplemental Certification of Aaron M.
Bender, Esq., Ex. A. 3

3

The Court is not aware of whether Plaintiffs succeeded in staying the foreclosure
proceeding; indeed, neither party included the state court’s decision in this regard. Nevertheless,
4

On July 22, 2016, Plaintiffs filed this instant eight-count Complaint 4 against Wells Fargo.
Under the first two Counts of the Complaint, Plaintiffs assert claims under the Real Estate
Settlement Procedure Act (“RESPA”). Specifically, in Count One, Plaintiffs allege that Wells
Fargo acted in violation of 12 C.F.R. § 1024.41(e) by “unilaterally and wrongfully deem[ing
Plaintiffs] to have rejected the HAMP permanent modification agreement . . . despite the fact that
[Plaintiffs] had made any necessary payments in compliance with the terms of the TPP and
properly executed and returned [Final Agreement 1 and Final Agreement 2] . . . . ” Compl. ¶ 8081. In Count Two, Plaintiffs also allege that Wells Fargo acted in violation of 12 C.F.R. §
1024.41(h) by failing “to provide a response to [Plaintiffs’] Appeal within the thirty (30) day
timeframe,” as is required under RESPA. ¶ 98.
In Count Four, Plaintiffs bring a claim under the New Jersey Consumer Fraud Act
(“NJCFA”). Specifically, Plaintiffs allege that Wells Fargo acted in violation of the NJCFA “by
engaging in an unfair and deceptive act or practice by using fraud, deception, and
misrepresentation . . . . ” Compl. ¶ 110. As an example of such fraudulent behavior, Plaintiffs
assert that Wells Fargo “wrongfully denied the HAMP Final Modification to which [Plaintiffs]
were entitled and under which they had dutifully performed so as to move towards foreclosure on
[Plaintiff’s] home, or in the alternative to collect payments under the trial plan under false
pretense.” Compl., ¶ 110.
In Count Five, Plaintiffs assert a claim for breach of contract. In that claim, Plaintiffs allege
that Wells Fargo “offered [Plaintiffs] a final HAMP loan modification by and through the issuance

even if Plaintiffs’ motion to stay were granted, the state court’s judgment of foreclosure in favor
of Defendant would remain valid and final for the purposes of this motion.
4

Although Plaintiffs assert eight causes of action against Wells Fargo, the Complaint does
not contain a Count Three.
5

of Final Agreement #1,” which [Plaintiffs] accepted by signing and returning the Agreement to
Wells Fargo. Compl. ¶¶ 122-123. However, Plaintiffs claim the Agreement was breached when
Wells Fargo “sought to alter the terms of Final Agreement #1, and #2 for that matter, by requiring
[, for the first time,] Catherine’s signature.” Compl. ¶ 124. Relatedly, in Count Six, Plaintiffs allege
a violation of the covenant of good faith and fair dealing, because, in breaching the terms of the
Agreement, Wells Fargo “acted in bad faith, dishonestly, and with improper motive to injure the
rights of Plaintiffs.” Compl. ¶ 131.
In Count Seven, Plaintiffs bring a claim of estoppel, alleging that because Wells Fargo
“voluntarily engaged in conduct with the intention that it would be acted upon by [Plaintiffs] or
under such circumstances that a reasonably prudent person would suppose that it was intended to
be acted upon as true.” Compl., ¶ 135. In support, Plaintiffs allege that Wells Fargo “induced
[Plaintiffs] into making temporary modification payments while [Wells Fargo] had no intention of
accepting and engaging [Plaintiffs] in long term loss mitigation plan and without any good faith
efforts to reach a permanent loan modification.” Compl., ¶ 138.
Finally, in Count Eight, Plaintiffs assert a claim of common law fraud against Wells Fargo.
Specifically, Plaintiffs allege that “[t]he misrepresentation knowingly made by [Wells Fargo],
namely that Catherine’s signature would not be needed on the HAMP permanent agreement,
caused [Plaintiffs] to make TPP payments to [Wells Fargo],” and, as a result, Plaintiffs suffered
damages. Compl., ¶ 144-147.
On December 11, 2016, Defendant filed the instant motion to dismiss, in which they argue
that Plaintiffs’ Complaint is barred by the Rooker-Feldman Doctrine, Younger Abstention
Doctrine, Colorado River Abstention Doctrine, the New Jersey Entire Controversy Doctrine, res
judicata, and collateral estoppel. According to Defendants, Plaintiffs bring this action in an attempt

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to re-litigate the foreclosure action in state court, which was already decided in favor of Defendant.
In the alternative, Defendants seek to dismiss the Complaint on the basis that Plaintiffs have failed
to allege facts in support of their claims. In their Opposition, Plaintiffs argue that their claims are
not barred, because they are not requesting this Court to overturn the validity of the foreclosure
action; rather, Plaintiffs seek an award of damages, which, if granted, would not undermine the
state court judgment. In that regard, Plaintiffs argue that the aforementioned doctrines are
inapplicable, because the complained-of conduct by Defendant occurred after the state court
entered its foreclosure judgment.
DISCUSSION
I.

Standard of Review
When reviewing a motion to dismiss on the pleadings, courts “accept all factual allegations

as true, construe the complaint in the light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may be entitled to relief.” Phillips v.
Cnty. of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal quotation marks omitted). Under
such a standard, the factual allegations set forth in a complaint “must be enough to raise a right to
relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct.
1955, 167 L. Ed. 2d 929 (2007). Indeed, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556
U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). “[A] complaint must do more than allege
the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts.”
Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
However, Rule 12(b)(6) only requires 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

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is and the grounds upon which it rests.” Twombly, 550 U.S. at 555. The complaint must include
“enough factual matter (taken as true) to suggest the required element. This does not impose a
probability requirement at the pleading stage, but instead simply calls for enough facts to raise a
reasonable expectation that discovery will reveal evidence of the necessary element.” Phillips, 515
F.3d at 234 (internal quotation marks and citation omitted); Covington v. Int’l Ass’n of Approved
Basketball Officials, 710 F.3d 114, 118 (3d Cir. 2013) (“[A] claimant does not have to set out in
detail the facts upon which he bases his claim. The pleading standard is not akin to a probability
requirement; to survive a motion to dismiss, a complaint merely has to state a plausible claim for
relief.”) (internal quotation marks and citation omitted).
In sum, under the current pleading regime, when a court considers a dismissal motion, three
sequential steps must be taken: first, “it must take note of the elements the plaintiff must plead to
state a claim.” Connelly v. Lane Constr. Corp., 809 F.3d 780, 787 (3d Cir. 2016) (internal
quotations marks and brackets omitted). Next, the court “should identify allegations that, because
they are no more than conclusions, are not entitled to the assumption of truth.” Id. (internal
quotation marks omitted). Lastly, “when 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.” Id. (internal quotation marks and brackets omitted).
II.

The Rooker-Feldman Doctrine
First, Defendant argues that the Court lacks subject matter jurisdiction over Plaintiffs’

claims under the Rooker-Feldman Doctrine, because “this Court cannot conduct an appellate-like
review over the state court ruling.” Defendant’s Motion to Dismiss Plaintiffs’ Complaint (“Def.’s
Motion to Dismiss”), at 11.

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“The Rooker-Feldman doctrine strips federal courts of jurisdiction over controversies that
are essentially appeals from state-court judgments.” Williams v. BASF Catalysts LLC, 765 F.3d
306, 315 (3d Cir. 2014) (internal quotation marks and citation omitted). Stated differently,
“Rooker-Feldman . . . is a narrow doctrine, confined to 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.” Id.
(internal quotation marks and citation omitted); see Exxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284, 125 S. Ct. 1517, 161 L. Ed. 2d 454 (2005).
In order for the Rooker-Feldman doctrine to deprive a federal court of subject matter
jurisdiction, the Third Circuit has held that four requirements must be satisfied: “(1) 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.” Great W. Mining &
Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 166 (3d Cir. 2010) (alterations in original)
(citing Exxon Mobil Corp., 544 U.S. at 284). The Third Circuit has explained that “[t]he second
and fourth requirements are the key to determining whether a federal suit presents an independent,
non-barred claim, or whether the newly raised claims are so inextricably intertwined that a
“favorable decision in federal court would require negating or reversing the state-court decision.”
Great W. Mining & Mineral Co., 615 F.3d at 165, 170 n.4; see In re Madera, 586 F.3d 228, 232
(3d Cir. 2009); In re Knapper, 407 F.3d 573, 581 (3d Cir. 2005).
Here, at the outset, the Court finds that the first and third requirements of Rooker-Feldman
are easily satisfied. For instance, Mr. Duffy’s interest in the Property was relinquished on
November 19, 2015, when the state court entered a final judgment of foreclosure against him.

9

Instead of filing an appeal to the Appellate Division, Plaintiffs, in response, brought this action
against Wells Fargo on July 22, 2016, approximately eight months after the state court rendered a
decision. Accordingly, the state court judgment was clearly issued prior to the filing of this suit in
federal court, and, because Defendants obtained a judgment of foreclosure, Plaintiffs are state court
losers. See Great W. Mining & Mineral Co., 615 F.3d at 166.
Before turning to the remaining elements of Rooker-Feldman, the Court will address a
threshold argument that Plaintiffs raise in their Opposition. Specifically, Plaintiffs contend that
Rooker-Feldman is inapplicable here, because they are not attacking the validity of the state court’s
foreclosure judgment; instead, Plaintiffs maintain that they are seeking an award of damages.
Plaintiffs’ Memorandum in Opposition to Defendant’s Motion to Dismiss (“Pls.’ Opp’n”), at 10.
According to Plaintiffs, the Court may grant such an award, because it would not conflict with or
overturn the state court’s foreclosure decision. Pls. Opp’n, at 10. This argument, however, is
without any merit.
Although Plaintiffs seek an award of monetary damages, this does not necessarily preclude
an application of the Rooker-Feldman doctrine. See Laychock v. Wells Fargo Home Mortg., 399
Fed. Appx. 716, 718 (3d Cir. 2010) (affirming the district court’s conclusion that claims for money
damages, which were predicated on an alleged wrongful foreclosure, should be dismissed under
the Rooker-Feldman doctrine because the requested relief required the district court to determine
that the state court erroneously entered judgment); see also Zoglauer v. Smith, 182 F.3d 923 (7th
Cir. 1999) (stating that “the Rooker-Feldman doctrine applies equally to claims for monetary
damages and requests for injunctive relief.”); Willoughby v. Zucker, Goldberg & Ackerman, LLC,
No. 13-7062, 2014 U.S. Dist. LEXIS 81976, 2014 WL 2711177, at *6 (D.N.J. Jun. 16, 2014)
(stating that “the form of relief is not dispositive to the application of the Rooker-Feldman

10

Doctrine.”). Rather, because certain of Plaintiffs’ claims, in which they seek an award of monetary
damages against Wells Fargo, can be construed as an implicit attack on the state court foreclosure
judgment, the Court finds that the Rooker-Feldman doctrine is applicable without regard to the
type of relief sought. See Great W. Mining & Mineral Co., 615 F.3d at 166.
With respect to the second and fourth requirements, the Third Circuit has found that the
Rooker-Feldman doctrine applies when a mortgagor challenges the judgment in his or her New
Jersey foreclosure action. See In re Madera, 586 F.3d 228, 232 (3rd Cir. 2009) (when confronted
with a post-foreclosure federal claim for rescission of a mortgage, the Third Circuit held that the
rescission claim was inextricably intertwined with the state court’s foreclosure judgment, since “a
favorable decision for the [plaintiff] in the federal courts would prevent the [state court] from
enforcing its order to foreclose the mortgage.”); In re Knapper, 407 F.3d at 581 (a federal claim
for absence of personal jurisdiction in the underlying state court action is barred by RookerFeldman because plaintiff “can only prevail if a federal court concludes that the state courts’
default judgments were improperly obtained.”); see also Great W. Mining & Mineral Co., 615
F.3d at 170 n.4.
The Third Circuit has explained that a court must examine the gravamen of the complaint
to determine whether the “claims are in essence an attack on the state court judgment of
foreclosure.” Gage v. Wells Fargo Bank, N.A., 521 Fed. Appx. 49, 51 (3d Cir. 2013) (concluding
that the plaintiff cannot evade the Rooker-Feldman doctrine, since the “complaint reveals the
nature of [the plaintiff’s] claims against Wells Fargo: the bank had no right to foreclose on the
property and therefore committed ‘criminal acts’ by enforcing the foreclosure judgment . . . .”);
see In re Madera, 586 F.3d at 232. In fact, courts in this district have consistently found that the
Rooker-Feldman doctrine prohibits claims in a federal action that challenge the validity of the

11

mortgage or the right to foreclose, since such claims effectively seek to negate or reverse the state
court judgment of foreclosure. See Dunbar v. Nationstar Mortg., LLC, No. 16-4259, 2016 U.S.
Dist. LEXIS 158350, 2016 WL 6804874, at *2 (D.N.J. Nov. 16, 2016) (holding that the court
lacked subject matter jurisdiction, since “Rooker-Feldman prohibits the Court from exercising
jurisdiction over Plaintiff’s statutory and common law claims challenging the validity of the loan
agreement and Defendants’ right to foreclose.”); Lewis v. PennyMac Corp., No. 16-1514, 2016
U.S. Dist. LEXIS 65329, 2016 WL 2901707, at *3 (D.N.J. May 18, 2016) (concluding that the
court did not have jurisdiction, under the Rooker-Feldman doctrine, because “[t]he gravamen of
Plaintiff”s Complaint is that Defendants had no right or standing to foreclose on the Property.”);
Siljee v. Atl. Stewardship Bank, No. 15-1762, 2016 U.S. Dist. LEXIS 63257, 2016 WL 2770806,
at *5 (D.N.J. May 12, 2016) (holding that the Rooker-Feldman doctrine barred a breach of contract
claim because “[i]ts essence . . . is that the mortgage is invalid or that Atlantic had no standing to
assert it.”).
Significantly, Plaintiffs, on this motion, do not contend that they were unaware of the fact
that Wells Fargo filed a foreclosure action to take possession of the Property on November 19,
2012, or that they never received notice of the foreclosure action, prior to the state court’s entry of
final judgment three years later on November 19, 2015. Nor do Plaintiffs argue that they were
prevented from participating or raising any affirmative defenses or counterclaims against Wells
Fargo, during the course of state court foreclosure proceeding. To the contrary, the record indicates
that Plaintiffs were capable of participating in state court, as they were represented by counsel
around the time the foreclosure action was pending, but inexplicably, Plaintiffs did not participate

12

in the action. 5 Rather, here, Plaintiffs argue that the Rooker-Feldman doctrine is inapplicable,
because the complained-of conduct occurred “after Wells Fargo had obtained its final foreclosure
judgment against Plaintiffs.” Pls.’ Opp’n, at 10. And, tellingly, Plaintiffs’ arguments as to why
their federal Complaint does not collaterally attack the state court’s final foreclosure judgment are
solely confined to their RESPA claims. Pls. Opp’n, at 17-20. Indeed, Plaintiffs do not address why
the remainder of the counts asserted in the Complaint are not barred by Rooker-Feldman except
for the RESPA-related claims.
In the instant mater, the Court finds that the majority of Plaintiffs’ claims, except for those
asserted under RESPA, solely arise from Defendant’s conduct that occurred during the course of
the three-year foreclosure proceeding, and should have been raised in that action. 6 See Compl.
Indeed, those claims are “inextricably intertwined” with the state court adjudication such that
Rooker-Feldman bars them here. For instance, under New Jersey law, a final judgment in a
foreclosure action cannot be issued, unless each of the following requirements are satisfied: (1) the
note and mortgage are valid; (2) a default occurred; and (3) the defendant has the right to foreclose

5

Indeed, counsel assisted Plaintiffs in appealing Defendant’s denial of loss mitigation. For
reasons unbeknownst to the Court, however, Plaintiffs’ counsel never made an appearance in the
underlying state foreclosure action.
6

Admittedly, Wells Fargo denied Plaintiffs’ appeal of denial on May 18, 2016,
approximately six months after the state court issued a final judgment of foreclosure. However,
the timing of this denial does not preclude the application of the Rooker-Feldman doctrine on this
motion. Indeed, the complained-of conduct attributable to Defendant, which forms the basis of this
federal action, occurred during the pendency of the foreclosure action in state court. Stated
differently, the wrongful acts allegedly committed by Wells Fargo took place significantly before
Wells Fargo obtained its final foreclosure judgment against Plaintiffs in state court. Therefore,
Plaintiffs were not precluded from asserting those defenses before the state court prior to the
issuance of that judgment.

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(which would include its standing by assignment or otherwise). Siljee, 2016 U.S. Dist. LEXIS
63257, 2016 WL 2770806, at *6 (citing Great Falls Bank v. Pardo, 263 N.J. Super. 388, 622 A.2d
1353, 1356 (N.J. Super. Ct. Ch. Div. 1993)). In light of these foreclosure requirements, Counts
Four through Eight, brought in this case, are barred, because they undermine the state court’s
judgment, i.e., that a default occurred, and that Wells Fargo had the right to foreclose on the
Property.
Beginning with Count Four, Plaintiffs bring an NJCFA claim, under which they allege that
Wells Fargo engaged in deceptive conduct by wrongfully repudiating Final Agreement 1, so that
Wells Fargo could foreclose on the Property. Compl., ¶ 110. However, Plaintiffs’ allegations with
regard to Defendant’s alleged fraudulent conduct essentially challenge the state court’s findings,
because they assert that Defendants fraudulently obtained the foreclosure judgment. See Leisure
Technology-Northeast, Inc. v. Klingbeil Holding Co., 137 N.J. Super. 353, 356, 349 A.2d 96 (App.
Div. 1975). Stated differently, Plaintiffs claim that Defendants do not have the right to foreclosure,
despite the fact that the state court has held that Wells Fargo may legally take possession of the
Property. Plaintiffs’ NJCFA claim, therefore, is inextricably intertwined with the state court
judgment, and is barred by Rooker-Feldman. Similarly, Plaintiffs’ claim of common law fraud in
Count Eight is also barred, for the same reasons that Plaintiffs’ NJCFA claim fails. Specifically,
Plaintiffs’ allegations in this count—mainly, that Defendant fraudulently induced Plaintiffs to
submit monthly trial period payments by falsely representing that Catherine’s signature was not
required in Final Agreement 1—also attack Defendant’s entitlement to the foreclosure judgment
in state court. Therefore, Count Eight is precluded by Rooker-Feldman.
Moreover, in Counts Five and Six respectively, Plaintiffs assert a breach of contract claim,
and a violation of the covenant of good faith and fair dealing, because Wells Fargo allegedly failed

14

to comply with Final Agreement 1. However, both Counts are barred, as a finding under either one
would undermine the state court judgment. Indeed, Plaintiffs, in their Complaint, assert that they
accepted the Agreement when they signed and submitted it to Wells Fargo. Compl., ¶ 123.
Plaintiffs contend that the parties entered into a valid and enforceable contract to modify the
Mortgage terms, which Defendant breached in bad faith by attempting to subsequently change its
terms and conditions. However, Plaintiffs assertions in Counts Five and Six are inextricably
intertwined with the state court decision, because if these allegations were true, they would
overturn the state court foreclosure judgment. Therefore, Counts Five and Six also fail under
Rooker-Feldman.
With regard to the estoppel claim in Count Seven, Plaintiffs allege that Defendant “should
be precluded from asserting rights against the Duffys which might have otherwise existed at law
and in equity,” because Wells Fargo wrongfully induced Plaintiffs into submitting monthly trial
period payments. Compl., ¶ 141. Count Eight, however, is also inextricably intertwined with the
state court’s judgment, because the state court already determined that Defendant has the right to
foreclose on the Property. Accordingly, Plaintiffs are precluded from proceeding against Wells
Fargo under Count Eight. 7

7

To the extent that Rooker-Feldman does not divest the Court of subject matter jurisdiction,
the Court notes that Counts Four through Eight are barred by the New Jersey entire controversy
doctrine. Specifically, the doctrine “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) (internal quotation marks and citation omitted)
(alteration in original). In the instant matter, Plaintiffs could have raised their claims against Wells
Fargo in the state foreclosure action. For instance, the record indicates that, despite being
represented by counsel, who assisted Plaintiffs in filing an appeal of denial, Plaintiffs voluntarily
chose not to raise any defenses or counterclaims in the state action. Accordingly, the entire
controversy doctrine operates to preclude Plaintiffs from asserting Counts Four through Eight in
the federal Complaint.
15

Finally, in Counts One and Two, Plaintiffs assert that Wells Fargo wrongfully determined
that Plaintiffs rejected Final Agreement 1, in violation of 12 C.F.R. §1024.41(e)(2)(i), and Wells
Fargo failed to respond to Plaintiffs’ second appeal within 30 days, as is required under 12 C.F.R.
§ 1024.41(h), respectively. In these counts, Plaintiffs challenge the manner in which Defendant
conducted itself during the foreclosure proceeding. Unlike the previously discussed counts,
Plaintiffs RESPA claims do not challenge the validity of the state court judgment. See Great W.
Mining & Mineral Co., 615 F.3d at 166 (stating that the Rooker-Feldman doctrine does not bar
claims where the source of the injury is the defendant’s action, not the state court judgment); see
also Siljee v. Atl. Stewardship Bank, 2016 U.S. Dist. LEXIS 63257, 2016 WL 2770806, at *5
(concluding that the Rooker-Feldman doctrine did not bar the RESPA claim because
“noncompliance with RESPA does not implicate the validity of the mortgage or Atlantic’s
standing. It is not inconsistent with the existence of a final judgment of foreclosure.”). Therefore,
Plaintiffs’ RESPA claims are not barred by the Rooker-Feldman doctrine because a finding that
Defendant violated RESPA would not overturn the state court judgment.
III.

Motion to Dismiss
Alternatively, Defendant argues for dismissal of Counts One and Two, because Plaintiffs

have failed to adequately allege their claims under RESPA. Def.’s Motion to Dismiss, at 20-21.
Defendant reasons that a violation of RESPA could not have occurred prior to the final judgment,
since Catherine Duffy, who “had a vested interest in any modification of [the Mortgage],
regardless of whether she signed a quit claim deed or not,” failed to sign Final Agreement 1, as
was required. Defs.’ Motion to Dismiss, at 21 (“It is not a violation of 12 C.F.R. § 1024.41 for
Wells Fargo to require all the signatories of the Note and Mortgage to sign the modification
agreement.”). In arguing for dismissal, however, Defendants do not address Plaintiffs’ additional

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claim under RESPA, under which they assert that Wells Fargo did not submit a timely response to
Plaintiffs’ appeal of denial.
RESPA is “a consumer protection statute that regulates the real estate settlement process.”
Jones v. ABN Amro Mortg. Grp., Inc., 606 F.3d 119, 124 (3d Cir. 2010). Congress enacted RESPA
to “insure that consumers throughout the Nation are provided with greater and more timely
information on the nature and costs of the settlement process and are protected from . . . certain
abusive practices . . . .” 12 U.S.C. § 2601(a). In the instant matter, Plaintiffs have alleged a violation
of 12 C.F.R. § 1024.41(e) and 12 C.F.R. § 1024.41(h), which govern the rejection of a loss
mitigation application, and the appeals process of a servicer’s denial, respectively.
Under 12 C.F.R. § 1024.41(e)(2)(i), “a servicer may deem a borrower that has not accepted
an offer of a loss mitigation option within the deadline established pursuant to paragraph (e)(1) of
this section to have rejected the offer of a loss mitigation option.” Here, Plaintiffs have adequately
pled a claim under § 1024.41(e) of RESPA. In their Complaint, Plaintiffs specifically allege that
Wells Fargo “extended [Plaintiffs] a HAMP permanent modification agreement,” which they then
“accepted and executed” on multiple occasions, i.e., both John Duffy and Karen Duffy signed and
returned Final Agreements 1 and 2. Compl., ¶¶ 75-76. Nevertheless, as pled by Plaintiffs,
Defendant erroneously “deemed the Duffys to have rejected the HAMP permanent modification
pursuant to 12 C.F.R. 1024.41(e)(2)(i).” Compl., ¶ 80. While Defendant argues that Catherine did
not sign Final Agreement 3, which was issued, according to Defendant, because of purported errors
in the execution of the aforementioned Agreements, neither Final Agreement 1 nor 2 appear to
have required Catherine’s signature; indeed, the signature lines on those two agreements solely
provide for the signatures of “John Duffy” and “Karen Duffy.” An explanation for the discrepancy
between the various versions of the agreements has not been provided by Defendant. But, at this

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pleading stage, Plaintiffs’ allegations, if taken as true, are sufficient to establish that Defendant
abused its discretion under 12 C.F.R. § 1024.41(e). See Covington, 710 F.3d at 118 (“[A] claimant
does not have to set out in detail the facts upon which he bases his claim. The pleading standard is
not akin to a probability requirement; to survive a motion to dismiss, a complaint merely has to
state a plausible claim for relief.”). Accordingly, Plaintiffs may proceed under Count One of the
Complaint.
Moreover, 12 C.F.R. § 1024.41(h)(4), provides as follows:
Within 30 days of a borrower making an appeal [of denial], the servicer shall
provide a notice to the borrower stating the servicer’s determination of whether the
servicer will offer the borrower a loss mitigation option based upon the appeal and,
if applicable, how long the borrower has to accept or reject such an offer or a prior
offer of a loss mitigation option.
12 C.F.R. § 1024.41(h)(4). Plaintiffs have also sufficiently pled a claim under this provision of
RESPA. Plaintiffs assert that Wells Fargo denied the final modification agreement on or around
August 3, 2015. Compl., ¶ 92. In response to the denial, Plaintiffs allege that “[o]n or around
August 17, 2015, within thirty (30) days of the date of the Denial, [Plaintiffs], through their
attorney Scunziano, faxed an appeal and complaint to [Wells Fargo.]” Compl., ¶ 97. However,
Plaintiffs assert that Defendant “did not provide a response to Appeal within the thirty (30) day
timeframe required by §1024.41(h).” Compl., ¶ 98. In fact, Plaintiffs aver that Wells Fargo “did
not perform an independent review of [its] denial . . . , or if such a review was performed, [Wells
Fargo] never stated their determination of such to [Plaintiffs].” Compl., ¶ 99. When construed in
the light most favorable to Plaintiff, these allegations adequately establish a violation of 12 C.F.R.
§ 1024.41(h)(4). Thus, Plaintiffs may also proceed under Count Two of the Complaint.

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CONCLUSION
For the reasons set forth above, Defendant’s Motion to Dismiss is GRANTED in part and
DENIED in part. Counts Four through Eight are barred by Rooker-Feldman and dismissed. On
the other hand, Counts One and Two, which Plaintiffs have sufficiently pled, are not barred by the
doctrine, and accordingly, are not dismissed.

Date: May 31, 2017

/s/ Freda L. Wolfson
Hon. Freda L. Wolfson
United States District Judge

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