Chestnut et al v. Wells Fargo Bank, NA

Filing 32

MEMORANDUM ORDER granting 20 Motion to Dismiss. For the reasons set forth herein, Wells Fargo's motion to dismiss is GRANTED. The Complaint is DISMISSED WITH PREJUDICE. The Clerk of the Court is directed to mark this matter as closed. So Ordered by Judge Joanna Seybert on 3/2/11. C/M; C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK ------------------------------------X DAWN CHESTNUT AND RODNEY CHESTNUT, Plaintiffs, -againstWELLS FARGO BANK, N.A., Defendant. ------------------------------------X APPEARANCES: For Plaintiffs: Dawn Chestnut, pro se 112 W. Barlett Road Middle Island, NY 11953 Rodney Chestnut, pro se 112 W. Barlett Road Middle Island, NY 11953 For Defendant: Allison J. Schoenthal, Esq. Renee Marie Garcia, Esq. Victoria McKenney, Esq. Hogan Lovells US LLP 875 Third Avenue New York, NY 10022 MEMORANDUM & ORDER 10-CV-4244 (JS)(ARL)

SEYBERT, District Judge: Pending before the Court is Defendant Wells Fargo's motion to dismiss. GRANTED. For the following reasons, that motion is

BACKGROUND1 This is a foreclosure dispute. On August 10, 2005,

Plaintiffs Dawn and Rodney Chestnut, pro se, obtained a home mortgage loan from Fremont Investment and Loan, which then

assigned its right to repayment to Wells Fargo.

In April 2006,

the Chestnuts defaulted on the mortgage, though they continued to reside in the property. In July 2006, Wells Fargo commenced foreclosure On

proceedings in New York Supreme Court, County of Suffolk. February 7, 2007, the New York Supreme Court granted

Wells

Fargo's unopposed summary judgment motion. the New York Supreme Court granted Wells

On July 18, 2007, Fargo's unopposed

motion for a Judgment of Foreclosure.
1

Ordinarily, this section of the Court's opinion would describe the Complaint's allegations. The Complaint, however, contains limited factual material relating to Plaintiffs' contractual dispute with Wells Fargo, or the prior state court proceedings. Instead, the Complaint largely combines legal argument with a public policy critique of the mortgage industry, and then purports to assert twenty-three separate causes of action. Consequently, the Court largely constructs this section from documents that it can take judicial notice of, such as the underlying mortgage documents, the state court records, and the related bankruptcy proceeding. See Int'l Audiotext Network, Inc. v. Am. Tel. and Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995) (in contract action, court can take judicial notice of underlying contract as a document "integral to the complaint"); Ng v. HSBC Mortg. Corp., 2010 WL 889256, at *9 n. 13 (E.D.N.Y. Mar. 10 2010) (in mortgage dispute, taking judicial notice of settlement statements); Anderson News, L.L.C. v. American Media, Inc., 732 F. Supp. 2d 389, 403 (S.D.N.Y. 2010) (on a motion to dismiss, the court can take judicial notice of prior proceedings for the purpose of considering whether collateral estoppel bars the plaintiff's claims). 2

On

September

5,

2007,

Rodney

Chestnut

filed

a

Voluntary Petition in the Bankruptcy Court seeking Chapter 13 bankruptcy. The Bankruptcy Court dismissed Mr. Chestnut's

petition in December 2008. In January 2009, Mr. Chestnut moved, pro se, to vacate the New York Supreme Court's Judgment of Foreclosure and dismiss Wells Fargo's Complaint.2 many of the arguments In this motion, Mr. Chestnut raised that he and his wife present here,

including allegations that Wells Fargo did not own the note at issue and lacked standing to sue. On August 13, 2009, the New

York Supreme Court denied Mr. Chestnut's motion. On March 23, 2010, Mr. Chestnut moved for In

reconsideration of the New York Supreme Court's decision.

this motion, Mr. Chestnut raised still more of the kinds of arguments he raises in this action, including allegations of predatory lending. On May 14, 2010, the New York Supreme Court

denied Mr. Chestnut's motion. On action, action. September to 17, assert 2010, Plaintiffs commenced this of for

purporting Among

twenty-three Plaintiffs

separate assert

causes claims

other

things,

2

Ms. Chestnut did not join in her husband's motion to vacate, or his subsequent motion for reconsideration. But she remained a party to the state court proceedings, and had every opportunity to join those motions, or supplement them with her own arguments. Thus, she remains bound by the state court's decisions. 3

fraudulent enrichment, Plaintiffs that

inducement, and also to

unfair of

business the

practices,

unjust Act. claims law Swap Loan

violations purport have no to

Truth-In-Lending imaginative or

assert in

several any by

appear

basis

statute Credit of

common

doctrine,

including and

"Lender

Profit on

Default Predatory

Derivatives," Product."

"Extra

Profit

Sale

Wells

Fargo

has

moved

to

dismiss.

Wells

Fargo

contends that both the Rooker-Feldman doctrine and collateral estoppel bar Plaintiffs' claims. In addition, Wells Fargo

argues that Plaintiffs fail to properly plead any cognizable causes of action. Plaintiffs' opposition papers address Wells

Fargo's arguments that their claims are not sufficiently pled, but do not contest Wells Fargo's Rooker-Feldman and collateral estoppel arguments. DISCUSSION I. Standard of Review In deciding FED. R. CIV. P. 12(b)(6) motions to dismiss, the Court applies a "plausibility standard," which is guided by "[t]wo working principles," Ashcroft v. Iqbal, __ U.S. __, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009); Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009). accepts all factual allegations First, although the Court as true, and draws all

reasonable inferences in the plaintiff's favor, this "tenet" is 4

"inapplicable

to

legal

conclusions";

thus,

"[t]hreadbare

recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Harris, 572 F.3d at 72

(quoting Ashcroft); Operating Local 649 Annuity Trust Fund v. Smith 2010). Barney Fund Management LLC, 595 F.3d 86, 91 (2d Cir.

Second, only complaints that state a "plausible claim Id. Determining whether

for relief" can survive Rule 12(b)(6).

a complaint does so is "a context specific task that requires the reviewing court Id. to draw on its judicial experience and

common sense."

When considering a Rule 12(b)(1) motion to dismiss3 for lack of subject matter jurisdiction, the Court may consider

affidavits and other materials beyond the pleadings to resolve jurisdictional questions. See Robinson v. Gov't of Malaysia, When there is a question

269 F.3d 133, 140 n. 6 (2d Cir. 2001).

involving federal jurisdiction, such jurisdiction must be shown affirmatively. See Shipping Fin. Servs. Corp. v. Drakos, 140 Accordingly, the Court will not

F.3d 129, 131 (2d Cir. 1998).

draw inferences favorable to the party asserting jurisdiction. See id. Pro se plaintiffs enjoy a somewhat more liberal

pleading standard.
3

See Erickson v. Pardus, 551 U.S. 89, 94, 127

The Court considers Wells Fargo's Rooker-Feldman argument under Rule 12(b)(1), and the remainder of Wells Fargo's arguments under Rule 12(b)(6). 5

S. Ct. 2197, 167 L. Ed. 2d 1081 (2007) ("[A] pro se complaint, however inartfully pleaded, must be held to less stringent

standards than formal pleadings drafted by lawyers.") (internal quotations and citations omitted). However, pro se plaintiffs

must still "comport with the procedural and substantive rules of law." Javino v. Town of Brookhaven, 06-CV-1245, 2008 U.S. Dist.

LEXIS 17323, at *3 (E.D.N.Y. Mar. 4, 2008). II. Rooker-Feldman Doctrine Wells Fargo first argues, and Plaintiffs do not

dispute, that the Rooker-Feldman doctrine deprives the Court of subject matter jurisdiction. The Rooker-Feldman doctrine applies when: (1) the

federal court plaintiff lost in state court; (2) the plaintiff complains of injuries caused by a state court judgment; (3) the plaintiff reject judgment invites state the federal district and court (4) to the court review and

that was

court

judgment; the

state-court proceedings

rendered

before

district

commenced.

See Hoblock v. Albany County Bd. of Elections, 422

F.3d 77, 85 (2d Cir. 2005). The applies here. court losers, Court agrees that the Rooker-Feldman doctrine

It is indisputable that: (1) Plaintiffs are state having suffered a state court foreclosure

judgment; (2) Plaintiffs complain of injuries caused by that state court judgment, with the 6 "crux of [their] complaint

[being] that [Wells Fargo] wrongfully foreclosed on the property in question"; (3) Plaintiffs ask the Court to "restrain[]" the state court's orders, and reverse the state court's decision by "quiet[ing] title" in their favor (Compl. at p. 24); and (4) the state court judgment was rendered more than three years before Plaintiffs commenced this action. See, e.g., In re Wilson, 2011

WL 573476, at *1 (2d Cir. Feb. 18, 2011) (unpublished) (holding that Rooker-Feldman doctrine precluded attempt to re-litigate

state court foreclosure judgment in federal court); Ashby v. Polinsky, 328 Fed. Appx. 20, 21 (2d Cir. 2009) (unpublished) (same); Kalamas v. Consumer Solutions Reo, LLC, 09-CV-5045, 2010 WL 4811894, at *6 (E.D.N.Y. Nov. 17, 2010) (same). the Court agrees that the Rooker-Feldman Accordingly, bars this

doctrine

action. III. Collateral Estoppel But doctrine does even not if, for some reason, this the Rooker-Feldman the Court

entirely

preclude

action,

agrees with Wells Fargo's uncontested argument that collateral estoppel bars the remaining claims. when: issue Collateral estoppel applies

(1) the issues in both proceedings are identical, (2) the in the prior proceeding was actually litigated and

actually decided, (3) there was a full and fair opportunity for litigation in the prior proceeding, and (4) the issues

previously litigated were necessary to support a valid and final 7

judgment on the merits. (2d Cir. 2008).

See Ali v. Mukasey, 529 F.3d 478, 489 Plaintiffs had a full and fair

Here,

opportunity to litigate all issues relating to their mortgage, when Wells Fargo commenced they its foreclosure had three action in state

court.

Indeed,

arguably

such

opportunities.

First, they could have actively defended against Wells Fargo's foreclosure efforts by raising the causes of action they assert here as defenses, counterclaims, and/or legal arguments.

Instead, they permitted Wells Fargo to obtain summary judgment and a foreclosure judgment without opposition. Next, Mr.

Chestnut filed a motion to vacate the judgment that raised many of the same claims Plaintiffs assert here,4 which the New York Supreme Court denied. Finally, Mr. Chestnut filed a motion for

reconsideration that raised still more claims asserted here,5 which the New York Supreme Court also denied. Thus, collateral

4

Mr. Chestnut's motion to vacate argued, among other things, that: (1) Wells Fargo lacked standing to foreclose; (2) the mortgage's assignment to Wells Fargo was ineffective; (3) because Wells Fargo did not have proper ownership of the mortgage and promissory note, its complaint failed to state a claim; and (4) Wells Fargo failed to join the note's real owners, who were indispensible parties. These arguments correspond to Plaintiffs' first and sixth claims, and arguably the sixteenth claim as well.
5

Mr. Chestnut's motion for reconsideration argued, among other things, that Wells Fargo engaged in: (1) "misrepresentation, fraud and deceitful tactic[s]"; and (2) predatory lending. These arguments correspond (either expressly or roughly) to Plaintiffs' third, fourth, fifth, eighth, twelfth, fourteenth, and twentieth causes of action. 8

estoppel bars most, and possibly all, of Plaintiffs' claims. See Estate of Keys v. Union Planters Bank, N.A., 578 F. Supp. 2d 629, 635 (S.D.N.Y. "from 2008) that (collateral the estoppel was precluded improper,

plaintiff

claiming

foreclosure

because that issue was actually litigated and actually decided by the New York State courts several times"). IV. Res Judicata Even assuming arguendo that neither Rooker-Feldman nor collateral estoppel would entirely bar Plaintiffs' Complaint, any remaining claims would fail due to the related doctrine of res judicata. Under res judicata, "a final judgment on the

merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action." Flaherty v. Lang, 199 F.3d 607, 612 (2d Cir. 1999) Here, the state

(internal citations and quotations omitted).

court foreclosure judgment was a final judgment on the merits, the parties were identical, and every one of Plaintiffs' claims were, or could have been, "raised as claims or defenses in the previous action." 3951212, at *15 Swiatkowski v. Citibank, 10-CV-0114, 2010 WL (E.D.N.Y. Oct. 7, 2010) (finding that res

judicata barred attempt to challenge validity of mortgage or foreclosure judgment). And "[b]ecause [P]laintiffs could have

presented the same claims they now assert, including the RESPA claim, as defenses or counterclaims 9 in the action for

foreclosure, the doctrine of res judicata bars this litigation." Yeiser v. GMAC Mortg. Corp., 535 F. Supp. 2d 413, 422 (S.D.N.Y. 2008); Mercado v. Playa Realty Corp., 03-CV-3427, 2005 WL

1594306, at *7 (E.D.N.Y. 2005) (res judicata barred plaintiffs from challenging state foreclosure judgment through "new claims" that "could have been asserted during the foreclosure action as counterclaims"). V. Failure to State a Claim Finally, assuming arguendo that Plaintiffs face no

procedural bar, nearly all of their claims are insufficiently pled. As Wells Fargo aptly points out, five of Plaintiffs' claims are simply "made up," lacking any basis in a statutory right or a common law doctrine. See Docket No. 21 at 13

(discussing purported claims for "Up-Selling," "Extra Profit on Sale of Predatory Lending Product," "Lender Profit by Credit Default Swap of Derivatives," Underwriting "Business Standards," Practices and Concerning of

Disregarding Pleading").

"Sufficiency

The Complaint's TILA and RESPA claims are clearly

time-barred, because Plaintiffs waited more than five years to commence this action, and fail to provide any legitimate grounds to justify equitable tolling. See 15 U.S.C. § 1640(e) (one year

limitation period for TILA claims); 12 U.S.C. § 2614 (one or three year limitations period for RESPA claims, depending on 10

alleged

violation).

The

Federal

Trade

Commission

Act

claim

fails because the statute does not provide for a private right of action. See Green v. STI Prepaid, LLC, 10-CV-2180, 2010 WL The unjust enrichment

4055575, at *4 (S.D.N.Y. Oct. 18, 2010).

claim fails because an express contract indisputably governs the parties' dispute. Pramer S.C.A. v. Abaplus Intern. Corp., 76 And, either

A.D.3d 89, 102, 907 N.Y.S.2d 154, 163 (1st Dep't 2010). except as discussed below, the remaining claims are

wholly conclusory or wholly undecipherable. One kind of claim is sufficiency pled, if the Court ignored Wells Unlike claims the Fargo the glaring lacked rest of procedural standing to bars: Plaintiffs' on the claim that

foreclose claims, simply

mortgage.

Plaintiffs' not

the

standing-related conclusions.

allege for

facts,

legal the

Unfortunately claims are

Plaintiffs, that most

however,

standing-related fall within the For

the

ones

indisputably

Rooker-Feldman, collateral estoppel, and res judicata bars.

the New York Supreme Court's August 13, 2009 Order expressly rejected Mr. Chestnut's identical standing arguments as failing to set forth "a meritorious defense to this mortgage foreclosure action."

11

CONCLUSION Wells Fargo's motion to dismiss is GRANTED. The

Complaint is DISMISSED WITH PREJUDICE.

The Clerk of the Court

is directed to mark this matter as closed.

SO ORDERED

/s/ JOANNA SEYBERT______ Joanna Seybert, U.S.D.J.

Dated:

March 2 , 2011 Central Islip, New York

12