PETRAGLIA v. U.S. BANK N.A. et al

Filing 35

OPINION filed. Signed by Judge Anne E. Thompson on 1/9/2018. (mmh)

NOT FOR PUBLICATION

JAN 09 2018

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

AT 8:30
WILLIAM T. WALSH
CLERK

1111

EDWARD G .. PETRAGLIA,
Plaintiff,

Civ. No. 17-6325

v.
U.S. BANK, N.A., in its direct capacity as a
debt collector; SELECT PORTFOLIO
SERVICING, INC., in its direct capacity as a
debt collector, and as agent for U.S. Bank,
N.A.; MILSTEAD & ASSOCIATES, INC., in
its direct capacity as a debt collector;

OPINION

GREGORY J. TENCZA; 314 ATLANTIC
AVENUE - SPRING LAKE, LLC; ABC
CORP. DEFENDANTS I - X; and JOHN
DOE DEFENDANTS I - X,
Defendants.
THOMPSON, U.S.D.J.

INTRODUCTION
This matter comes before the Court on a motion to dismiss brought by Defendants U.S.
Bank, N.A. ("U.S. Bank") and Select Portfolio Servicing, Inc. ("SPS") (collectively,
"Defendants"). (ECF No. 26.) The Motion is unopposed. The Court has decided the Motion after
considering the written submissions without oral argument pursuant to Local Civil Rule 78.1 (b ).
For the following reasons, Defendants' Motion is granted.

BACKGROUND
Plaintiff brings this action under the Fair Debt Collection Practices Act ("FDCPA"), 15
U.S.C. § 1692 et seq., for claims of "abusive, deceptive, and unfair" conduct by various actors
related to the foreclosure of Plaintiffs home. (Compl. <)[ 1, ECF No. 1.) Plaintiff was in default

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on his home mortgage, original!y owed to W amu Mortgage Pass-Through Certificates Series
2006-AR9, and U.S. Bank initiated foreclosure proceedings in state court as successor trustee to
the mortgage. (Id. 'J[ 2.) SPS was the mortgage sub-servicer on behalf of U.S. Bank. (Id. 'J[ 24.)
Defendant Milstead & Associates, LLC ("Milstead") was the law firm representing U.S. Bank in
the foreclosure action. (Id. <Jr)[ 28-32.)
Plaintiff alleges that after a foreclosure judgment had been entered, SPS provided a
reinstatement quote which served as a "written offer of contract," that he subsequently "was
prevented from performing on the contract," and that he thereby "suffered injury." (Id 'J['J[ 4-5.)
On March 28, 2017, in response to Plaintiff's request for a current offer of reinstatement,
Milstead sent Plaintiff's foreclosure attorney a cover letter and enclosed mortgage loan
reinstatement letter from SPS. (Id. 'J[ 59.) The form letter suggested it was an offer that could be
accepted by performance. (Id. <Jr)[ 62-63.) The letter advised Plaintiff that the mortgage could be
reinstated if Plaintiff paid the Total Reinstatement Amount of $608,420.25 before the "Good to"
date of April 14, 2017, at 5:00 PM Eastern Time. (Id. 'J[ 68.) Plaintiff alleges this time period for
performance was intentionally short, designed to expire imminently upon the letter's
transmission. (Id. TJ[ 67-68.) Plaintiff attempted to secure funding from a third party, but he
could not accept the offer before its expiration. (Id. <Jr)[ 69-71.)
On April 28, 2017, the state court denied Plaintiffs motion to vacate the foreclosure
judgment and to adjourn the sheriff's sale scheduled for Monday, May 8, 2017. (Id. 'J[ 71.)
However, having secured sufficient funding, on May 2, 2017, Plaintiff called SPS and requested
a new reinstatement letter with a "Good to" date of Friday, May 5th at 5:00 PM-before the
scheduled sherifrs sale of his property. (Id. <Jr)[ 72, 75.) Thereafter, SPS failed to timely transmit
such a letter, then faxed a letter with an erroneous "Good to" date of May 4, moved up the

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••

deadline to 2:00 PM, and ultimately refused to make a reinstatement offer in writing without
Plaintiff offering proof of funds, thus changing the terms of the standard reinstatement practice.
(Id.')[')[ 76-117.) Without a concrete contractual offer, Plaintiff's third party funding source
withdrew, and Plaintiff was unable to reinstate in the time allotted. (Id.')[')[ 118-20.)
On Monday, May 8, 2017, Plaintiff sought to stay the sheriffs sale scheduled for 2:00
PM. (Id.')[ 127.) Plaintiff presented the state court with a letter from his cousin dated May 7,
2017, offering to provide the funds to reinstate Plaintiff's loan or, in the alternative, pay off the
loan in its entirety within a few days. (Id. 'fJ[ 128-38.) Nelson Diaz, an attorney with Milstead,
appeared in court by phone. (Id. ')[ 139.) Arguing on behalf of U.S. Bank, Mr. Diaz objected to
the stay on the grounds that the original default occurred in January 2009, Plaintiff had ample
opportunities to reinstate, U.S. Bank had repeatedly offered reinstatement but would not adjourn
the sale without proof of funds, and U.S. Bank wished to pursue the sale. (Id. ')[ 140.)
Plaintiff alleges that Mr. Diaz's argument was an untruthful representation (id.')[ 146) that
failed to capture "the cacophony of mixed messages and signals, false leads and misdirection ...
[that] amount quintessentially to ... abusive, deceptive, and unfair debt collection practices" on
the part of SPS and U.S. Bank (id.'][ 145). The judge declined to stay the sheriffs sale,
acknowledging that Plaintiff had no right to reinstate and that the bank would not agree to
reinstate. (Id. ')[ 157.) The sale went forward as scheduled on May 8th and the property was sold
to defendant Gregory J. Tencza. (Id. ')[ 164.)
On May 18, 2017, Plaintiff filed a motion to vacate the sheriffs sale and an order to
show cause to enjoin the sheriff from delivering the deed, which the state court denied on May
30, 2017. (Parker Deel., Ex. D, ECF No. 26-6.) On July 5, 2017, Plaintiff filed a Notice of
Appeal in the foreclosure action. (Id., Ex. E, ECF No. 26-7.) He then filed a motion for a stay of

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ejectment pending appeal, which the state court denied on September 28, 2017. (Id., Ex. F, ECF
No. 26-8.) On October 23, 2017, Plaintiff filed a motion with the Superior Court of New Jersey,
Appellate Division, seeking a stay of ejectment pending appeal, which the Appellate Division
denied on October 31, 2017. (Id., Ex. G, ECF No. 26-9.) Plaintiff then filed an emergent
application to the New Jersey Supreme Court for a stay of ejectment pending appeal, which the
Supreme Court denied on November 3, 2017. (Id., Ex. H, ECF No. 26-10.)
Plaintiff filed his federal Complaint on August 22, 2017. (ECF No. 1.) Plaintiffs
Complaint contains three Counts: (I) violation of the FDCPA (Compl. 'fJ[ 47-204); (TI) violation
of the New Jersey Consumer Fraud Act ("NJCFA") (id. 'fJ[ 205-09); and (III) common law fraud
and false accusation (id. 'fJ[ 210-16). Plaintiff pleads common law false accusation exclusively
against Defendant Tencza, the buyer of the foreclosed property. (Id. <J[ 14.)
After stipulating with Plaintiffs counsel to extensions of time to respond to Plaintiffs
Complaint (ECF Nos. 13, 25), Defendants U.S. Bank and SPS filed a joint Motion to Dismiss for
lack of subject matter jurisdiction and for failure to state a claim on December 1, 2017. 1 (ECF
No. 26.) On December 11, 2017, the Court adjourned the Motion one cycle to January 16, 2018.
(ECF No. 30.) Plaintiff has not filed opposition, and the time to respond has expired.
On December 20, 2017, the Court granted Defendant Milstead's Motion to Dismiss (ECF
No. 23), dismissing with prejudice Counts Two and Three as to Milstead but giving Plaintiff
leave to amend Count Orte of his Complaint within 20 days. (ECF Nos. 31, 32.) Milstead has
joined sections II, ill, and IV(C)-(E) of Defendants' presently pending Motion to Dismiss. (ECF
No. 28.) However, because Plaintiff may yet amend the claims against Milstead, the Court will

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Pursuant to the latest stipulation of counsel, Defendants' deadline for responding to Plaintiffs
Complaint was November 30, 2017. (ECF No. 25.) Defendants' Motion was filed December 1,
2017. (ECF No. 26.) In its discretion, the Court nonetheless considers the Motion.
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not at this time consider Milstead's invocation of Defendants' arguments. The Court now
considers Defendants' Motion.

LEGAL STANDARDS
I.

Federal Rule of Civil Procedure 12(b)( 1)
A defendant may move at any time to dismiss a complaint for lack of subject matter

jurisdiction on either facial or factual grounds. Fed. R. Civ. P. 12(b)(l); Gould Elecs. Inc. v.
United States, 220 F.3d 169, 176 (3d Cir. 2000) (citing Mortensen v. First Fed. Sav. & Loan
Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)). In analyzing a facial challenge, a court ~'must consider
only the allegations of the complaint and documents attached thereto, in the light most favorable
to the plaintiff." Id. (citing Mortensen, 549 F.2d at 891). The plaintiff bears the "burden of
proving that the court has subject matter jurisdiction." Cottrell v. Heritages Dairy Stores, Inc.,
2010 WL 3908567, at *2 (D.N.J. Sept. 30, 2010) (citing Mortensen, 549 F.2d at 891).
II.

Federal Rule of Civil Procedure 12(b)(6)
A motion under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a

complaint. Kost v. Kozakiewicz, 1F.3d176, 183 (3d Cir. 1993). The defendant bears the burden
of showing that no claim has been presented. Hedges v. United States, 404 F.3d 744, 750 (3d Cir.
2005). When considering a Rule 12(b)(6) motion, a district court should conduct a three-part

analysis. See Malleus v. George, 641F.3d560, 563 (3d Cir. 2011). "First, the court must 'take
note of the elements a plaintiff must plead to state a claim."' Id. (quoting Ashcroft v. Iqbal, 556
U.S. 662, 675 (2009)). Second, the court must accept as true all well-pleaded factual allegations
and construe the complaint in the light most favorable to the plaintiff. Fowler v. UPMC
Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009); see also Connelly v. Lane Const. Corp., 809
F.3d 780, 786, 789 (3d Cir. 2016). However, the court may disregard any conclusory legal

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allegations. Fowler, 578 F.3d at 203. Finally, the court must determine whether the "facts are
sufficient to show that plaintiff has a 'plausible claim for relief."' Id. at 211 (quoting Iqbal, 556
U.S. at 679). If the complaint does not demonstrate more than a "mere possibility of
misconduct," the complaint must be dismissed. Gelman v. State Farm Mut. Auto. Ins. Co., 583
F.3d 187, 190 (3d Cir. 2009) (quoting Iqbal, 556 U.S. at 679).
Although a district court generally must confine its review to the pleadings on a Rule
12(b)(6) motion to dismiss, see Fed. R. Civ. P. 12(d), "a court may consider certain narrowly
defined types of material" beyond the pleadings. In re Rockefeller Ctr. Props., Inc. Sec. Litig.,
184 F.3d 280, 287 (3d Cir. 1999). The Court may consider "the complaint, documents attached
to or submitted with the complaint, matters incorporated by reference or integral to the claims,
matters of which the Court may take judicial notice, matters of public record, orders, and other
items of record in the case." Blue Sky 1, LLC v. Jaguar Land Rover N. Am., LLC, 2016 WL
6803081, at *4 (D.N.J. Nov. 16, 2016).
ANALYSIS
Defendants move to dismiss Plaintiffs claims under three theories: ( 1) the court lacks
subject matter jurisdiction under some combination of the Rooker-Feldman doctrine,· res judicata
and New Jersey's entire controversy doctrine, and collateral estoppel; (2) the court should

observe either the Colorado River or Younger abstention doctrine and decline to hear this case
during the pendency of the state appeal; and (3) Plaintiff fails to assert any claim upon which
relief can be granted. (Defs.' Br. at 6-29, ECF No. 26-1.) Because the Court concludes it lacks
subject matter jurisdiction under Defendants' first theory, it declines to consider Defendants'
second and third theories. As is appropriate on a motion to dismiss, the Court in part relies on
matters of public record in the underlying state foreclosure action.

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I.

The Court Lacks Subject Matter Jurisdiction Over Plaintiffs Claims
Defendants move to dismiss the Complaint under the Rooker-Feldman doctrine. D.C.

Court of Appeals v. Feldman, 460 U.S. 462, 482 (1983); Rooker v. Fidelity Trust Co., 263 U.S.
413, 416 (1923). Pursuant to this doctrine, federal district courts lack subject matter jurisdiction
to review state court judgments. Marks v. Stinson, 19 F.3d 873, 885 n.11 (3d Cir. 1994); see also

Moncrief v. Chase Manhattan Mortg. Corp., 275 F. App'x 149, 152 (3d Cir. 2008). In order to
avoid rendering a preexisting state court ruling void or ineffectual, a district court cannot
"entertain federal claims that ( 1) were previously adjudicated in state court or (2) are inextricably
intertwined with a prior state court decision." Otto v. Wells Fargo Bank, N.A., 2016 WL
8677313, at *3 (D.N.J. July 15, 2016), aff'd, 2017 WL 2364377 (3d Cir. May 31, 2017). "If the
relief requested in the federal action requires determining that the state court 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 v. Allegheny Cty. Court of

Common Pleas, 15 F.3~ 834, 840 (3d Cir. 1996) (quoting Charchenko v. City of Stillwater, 41
F.3d 981, 983 (8th Cir. 1995)). In the foreclosure context, the Third Circuit has repeatedly found
that Rooker-Feldman bars a plaintiffs federal claims seeking redress from a state court
foreclosure judgment. See, e.g., In re Madera, 586 F.3d 228, 232 (3d Cir. 2009); Moncrief, 215 ·

F. App'x at 152; In re Knapper, 401F.3d573, 581 (3d Cir. 2005); Ayres-Fountain v. E. Sav.

Bank, 153 F. App'x 91, 92 (3d Cir. 2005); Otto, 2016 WL 8677313, at *3 (collecting cases).
All of Plaintiff's claims against Defendants U.S. Bank and SPS are barred by Rooker-

Feldman. First, to the extent that Plaintiff seeks return of the now-sold property (see, e.g.,
Compl. 'f 209), Plaintiff's requested relief would require this Court to render void the state
foreclosure judgment as well as all subsequent state court orders denying post-judgment relief.

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(See Defs.' Br. at 6-8.) Second, Plaintiffs federal claims are otherwise inextricably intertwined

with prior state court decisions. Plaintiffs federal Complaint alleges that Defendants violated the
FDCPA and NJ CFA and committed fraud by making a contractual offer to reinstate Plaintiffs
mortgage and then wrongfully preventing him from accepting that offer by performance.
(Compl. ')[')[ 4-6.) This argument was the basis of his state court motions to stay the sheriffs sale,
to vacate the sheriffs sale, and to stay ejectment pending his state court appeal, all of which
were denied. (Defs.' Br. at 6-8, 15, 18-19; see also Parker Deel., Ex. E, ECF No. 26-7.) As
Plaintiff concedes in his Complaint, the state court determined that there was no valid contract
and Plaintiff had no right to reinstate. (Compl. ')[ 157 ("[F]rom the bench, the court ... observed,
'There is no right to reinstate ... the bank will not agree.'").) The state appellate division
likewise determined there was no contract. (Parker Deel., Ex. G, ECF No. 26-9 ("[T]here is no
mutually executed loan modification agreement.").) Accordingly, Plaintiffs claims are
inextricably intertwined with the state court decisions and barred by Rooker-Feldman.
While res judicata, New Jersey's expansive Entire Controversy doctrine, and collateral
estoppel may offer alternative, sufficient grounds for dismissal of Plaintiffs Complaint, the
Court need not explore these alternative arguments. See Otto, 2016 WL 8677313, at *5 n.2
(noting that a court need not consider principles of preclusion if it finds Rooker-Feldman applies
and the court therefore lacks jurisdiction). Plaintiff raised the same contract-based theory in the
state court foreclosure action and continues to pursue that theory in an active state court appeal.
(See Defs.' Br. 6-8, 15, 18-19; see also Parker Deel., Ex. E.) Plaintiff can seek review of the

state court's decisions only through the state court appellate process. Defendan·ts? Motion to
Dismiss is granted.

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II.

Possibility of Amendment

In general the Third Circuit has instructed that where a complaint is vulnerable to
dismissal, "a District Court must permit a curative amendment, unless an amendment would be
inequitable or futile." Alston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004). "An amendment is
futile if the amended complaint would not survive a motion to dismiss for failure to state a claim
upon which relief could be granted." Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir. 2000) (citing

Smith v. NCAA, 139 F.3d 180, 190 (3d Cir. 1998)); see also Pushkin v. Nussbaum, 2014 WL
4543069, at *3 (D.N.J. Sept. 11, 2014). Defendants assert that it would be futile to grant Plaintiff
leave to amend his Complaint. (Defs.' Br. at 29-30.) Having determined that the Court lacks
subject matter jurisdiction over Plaintiffs claims, the Court agrees. An "amended complaint
would not cure this lack of jurisdiction." Ayres-Fountain, 153 F. App'x at 92.

CONCLUSION
For the reasons stated herein, Defendants' Motion is granted. An appropriate order will
follow.

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Date: _ _ _ _ _i__

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