ALMANZAR v. BANK OF AMERICA, N.A. et al

Filing 22

MEMORANDUM OPINION and ORDER. For the reasons stated, therefore, IT IS ORDERED that the Order of the bankruptcy court (Doc. 62) is AFFIRMED. Signed by JUDGE THOMAS D. SCHROEDER on 12/31/2013. (Solomon, Dianne)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

ESTHER ALMANZAR,
Debtor/Appellant,
v.
BANK OF AMERICA, NA, FEDERAL
NATIONAL MORTGAGE ASSOCIATION,
AND SUBSTITUTE TRUSTEE
SERVICE, INC.,
Appellees.

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1:13CV146

MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
This is an appeal from an Order (Doc. 6–2) issued by the
United States Bankruptcy Court for the Middle District of North
Carolina.

Appellant Esther Almanzar, the debtor/plaintiff in

the bankruptcy court, appeals that court’s decision to grant a
motion to dismiss (Docs. 4–2, 4–4) filed by Defendants below,
Bank

of

America,

NA

Mortgage

Association

Service,

Inc.

(“Bank

of

(“STS”)

(“Fannie

America”),

Mae”),

(collectively

and

Federal

National

Substitute

“Appellees”).

Trustee
For

the

reasons set forth herein, the decision of the bankruptcy court
will be affirmed in its entirety.
I.

BACKGROUND
The relevant preliminary facts are set out in detail in the

bankruptcy

court’s

memorandum

opinion

(Doc.

6–1),

which

was

required

to

accept

the

well-pleaded

factual

allegations

in

Almanzar’s complaint (Doc. 4) as true pursuant to Federal Rule
of

Bankruptcy

Procedure

Procedure 12(b)(6).

7012(b)

and

Federal

Rule

of

Civil

In short, Almanzar executed a note in the

amount of $191,960 to Bank of America, secured by a deed of
trust on property located at 308 Rondelay Drive in Durham, North
Carolina

(“the

property”).

(Doc.

6–1

at

2;

Doc.

4

¶

14.)

Subsequently, Bank of America sold its interest in the note to
Fannie Mae.

(Doc. 6–1 at 2; Doc. 4 ¶ 15.)

On September 29,

2010, STS was named as substitute trustee under the deed of
trust.

(Doc. 4 ¶ 26.)

Almanzar defaulted on the note, and the Clerk of Superior
Court of Durham County issued an Order (the “Foreclosure Order”)
on August 31, 2011, allowing STS to foreclose on the property
and conduct a foreclosure sale.

(Doc. 4–5.)

“The Foreclosure

Order found that Bank of America was the holder of the note,
that notice of the foreclosure hearing was properly served on
Almanzar, and that the substitute trustee [STS] was entitled to
foreclose under the terms of the deed of trust.”

(Doc. 6–1 at

2; Doc. 4–5 at 2.)
At the

foreclosure

sale

on

America purchased the property.

September

21,

(Doc. 4 ¶ 36.)

2011,

Bank

of

The ten-day

upset-bid period expired on October 3, 2011, without any bids,

2

and the sale became final on October 7.
2.)

(Id. ¶ 37; Doc. 6–1 at

The deed was recorded on October 13.

(Doc. 6–1 at 2.)

On October 28, Almanzar moved to set aside the foreclosure
with the Clerk of Superior Court of Durham County; the Clerk
transferred the motion to Superior Court.
at 2.)

(Doc. 4 ¶ 38; Doc 6–1

motion

On March 5, 2012, the Superior Court denied Almanzar’s
on

the

ground

it

lacked

subject-matter

jurisdiction

because the foreclosure sale had already been completed and the
property
filed.

conveyed

to

Bank

of

America

before

the

motion

was

petition

for

Chapter

13

(Doc. 4–8.)

Subsequently,
relief.

Almanzar

filed

a

Bank of America moved for relief from stay, seeking

permission to take possession of the property.

(Doc. 6–1 at 3.)

On the day Bank of America’s motion was to be heard, Almanzar
initiated

an

adversary

(Adversary

No.

Foreclosure

Order

Durham County.

proceeding

12–9045),
issued

in

challenging
by

the

(Doc. 6–1 at 3.)

Clerk

the
the
of

bankruptcy
validity
Superior

court

of
Court

the
of

Almanzar now appeals the

bankruptcy court’s Order granting Appellees’ motion to dismiss
her complaint in the adversary proceeding.

(Doc. 6–2.)

In her complaint, Almanzar asserted five causes of action,

3

four of which are currently before this court. 1

First, Almanzar

sought “declaratory relief adjudicating that the foreclosure was
not properly conducted, and that good cause exists to set aside
the foreclosure and subsequent sale to Bank of America.”
6–1 at 3; Doc. 4 at 4.)

(Doc.

Second, she sought damages against Bank

of America and Fannie Mae for an alleged violation of the Real
Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et
seq.,

committed

by

failing

to

servicing rights on the loan.
In

her

fourth

cause

of

notify

her

of

a

change

in

(Doc. 4 at 4; Doc. 6–1 at 3.)

action,

Almanzar

alleged

that

STS

breached its fiduciary duty to her by failing to provide her
statutory notice of foreclosure hearings.
33; Doc. 6–1 at 3.)

(Doc. 4 at 5 & ¶¶ 27–

Finally, Almanzar sought damages against

Bank of America and Fannie Mae under the North Carolina Unfair
and Deceptive Trade Practices Act (“UDTPA”), N.C. Gen. Stat.
§ 75–1.1 et seq., for allegedly “misrepresent[ing] their real
party in interest status to the court and to [Almanzar] and
fail[ing] to notify [Almanzar] of the change in loan servicing.”
(Doc. 4 at 5.)
The bankruptcy court dismissed Almanzar’s complaint in its
entirety.

The

court

held

that

1

the

Rooker-Feldman

doctrine

The third cause of action, against the Federal Housing Finance Agency
for failure to supervise Fannie Mae, was voluntarily dismissed by
Almanzar on August 22, 2012. (Doc. 6–1 at 3 n.1.)

4

prohibited it from granting the relief sought on the claims for
declaratory relief, breach of fiduciary duty, and a portion of
the UDTPA claim.

(Doc. 6–1 at 5–8, 10–11.)

With respect to the

RESPA claim and the remaining UDTPA claim, the court determined
that Almanzar failed to state a claim for which relief could be
granted

but

dismissed

the

claims

without

Almanzar leave to amend her complaint.

prejudice,

granting

(Id. at 8–10.)

The

RESPA claim was dismissed because Almanzar failed to allege that
the servicing of the note was transferred from Bank of America
to Fannie Mae and failed to allege that she suffered any damages
proximately resulting from the alleged violation.
Similarly,

the

remainder

of

the

UDTPA

claim

(Id. at 10.)
was

dismissed

because Almanzar failed to allege any damages resulting from the
alleged change in servicing of the loan.
II.

ANALYSIS
A.

Standard of Review

This

appeal

is

brought

pursuant

Bankruptcy Procedure 8001(a).
court

(Id. at 11.)

in

bankruptcy,

a

to

Federal

Rule

of

“When sitting as an appellate

federal

district

court

applies

the

clearly erroneous standard to the bankruptcy court's findings of
fact,

but

conducts

a

de

novo

review

of

questions

of

law.”

Kadlecek v. Schwank USA, Inc., 486 B.R. 336, 339 (M.D.N.C. 2013)
(citing

In

re

Johnson,

960

F.2d

396,

399

(4th

Cir.

1992)).

Under Federal Rule of Bankruptcy Procedure 7012(b), which is
5

analogous

to

Federal

Rule

of

Civil

Procedure

12(b)(6),

the

bankruptcy court was required to take the factual allegations in
Almanzar’s complaint as true for the purposes of deciding the
motion to dismiss.

See In re Caremerica, Inc., 409 B.R. 737,

745 (Bankr. E.D.N.C. 2009).

Finally, the bankruptcy court’s

decision to deny leave to amend a complaint is reviewable for
abuse of discretion.

Cozzarelli v. Inspire Pharms. Inc., 549

F.3d 618, 630 (4th Cir. 2008).
B.

Claim for Declaratory Relief

The

bankruptcy

doctrine 2

barred

it

court
from

determined

that

reconsidering

the

the

foreclosure and subsequent foreclosure sale.
doctrine
States

is

a

jurisdictional

District

actions,

from

decisions.’”

Courts,

with

‘sit[ting]

in

bar

that

the

exception

direct

Rooker-Feldman

validity

the

The Rooker-Feldman

“prohibits

review

of

of

the

United

habeas

corpus

of

state

court

Jordahl, 122 F.3d at 199 (quoting Feldman, 460

U.S. at 483 n.16).

“The doctrine extends not only to . . .

claims presented or adjudicated by the state courts but also to
claims that are ‘inextricably intertwined’ with a state court
judgment.”
Supreme

Id. (quoting Feldman, 460 U.S. at 486–87).

Court

has

clarified

that

2

Rooker-Feldman

applies

The
to

The doctrine derives its name from D.C. Court of Appeals v. Feldman,
460 U.S. 462 (1983), and Rooker v. Fidelity Trust Co., 263 U.S. 413
(1923). See Jordahl v. Democratic Party of Va., 122 F.3d 192, 197 n.5
(4th Cir. 1997).

6

“cases

brought

caused

by

by

state-court

state-court

losers

judgments

complaining

rendered

before

of

injuries

the

district

court proceedings commenced and inviting district court review
and rejection of those judgments.”

Exxon Mobil Corp. v. Saudi

Basic Indus. Corp., 544 U.S. 280, 284 (2005).

The purpose of

the doctrine is to promote respect between the federal and state
courts in our system of dual sovereignty.

See Vulcan Chem.

Tech., Inc. v. Barker, 297 F.3d 332, 343 (4th Cir. 2002).
the

Supreme

review

Court

state

of

court

the

United

judgments.

States
See

has

Brown

&

Only

jurisdiction
Root,

to

Inc.

v.

Breckenridge, 211 F.3d 194, 198–99 (4th Cir. 2000).
Almanzar
“may”

concedes

implicate

that

her

Rooker–Feldman

claim
and

for

thus

declaratory
contends

relief

that

the

bankruptcy court erred by refusing to allow leave to amend her
complaint as to this claim.

(Doc. 12 at 3.)

The bankruptcy

court held that Rooker-Feldman applied to this claim and that
Almanzar

could

not

avoid

Rooker-Feldman’s

application

by

re-

pleading her allegations. Thus, the court dismissed the claim
for declaratory relief with prejudice.
Rooker-Feldman

applies

the Clerk of Superior Court.
Nat’l

Trust

Co.,

No.

to

(Doc. 6–1 at 8.)

foreclosure

proceedings

before

See, e.g., Brumby v. Deutsche Bank

1:09CV144,

2010

WL

617368,

at

*1,

3

(M.D.N.C. Feb. 17, 2010) (applying Rooker-Feldman to foreclosure
proceedings

before

the

Clerk

of
7

Superior

Court

of

Guilford

County

pursuant

to

N.C.

Gen.

Stat.

§

45-21.16,

which

characterizes such a decision by the Clerk as a “judicial act”).
“In the context of a state court foreclosure proceeding, Rooker–
Feldman

prohibits

claims

brought

in

federal

court

that

may

‘succeed only to the extent that the state court wrongly decided
the foreclosure action.’”

Poindexter v. Wells Fargo Bank, N.A.,

No. 3:10cv257, 2010 WL 3023895, at *2 (W.D.N.C. July 29, 2010)
(quoting Postma v. First Fed. Sav. & Loan of Sioux City, 74 F.3d
160, 162 (8th Cir. 1996)).
Clerk

of

Court

issued

an

Here, like in Brumby, the county
order

declaring

that

the

debt

was

valid, Almanzar was in default, STS had the right to foreclose,
and

Almanzar

had

shown

should not proceed.
5.

no

legal

reason

why

the

foreclosure

See Brumby, 2010 WL 617368, at *3; Doc. 4–

Therefore, the validity of the foreclosure was established

by the state court proceeding and cannot be challenged in the
bankruptcy court or in this court.
Although Almanzar concedes that Rooker-Feldman would apply
to this claim, she appears to argue that some exceptions exist
to the doctrine’s application.

With respect to the claim for

declaratory relief, she contends that a due process exception
exists.

But,

no

exception

procedural due process exists.
(D. Md. 2002).

to

Rooker-Feldman

for

lack

of

In re Keeler, 273 B.R. 416, 421

If Almanzar was dissatisfied with the Clerk’s

Foreclosure Order, her remedy was to seek appellate review in
8

the

North

Carolina

bankruptcy court.

courts,

not

in

this

court

or

in

the

See id. (citing In re Goetzman, 91 F.3d 1173,

1177–78 (8th Cir. 1996)). 3

Therefore, the bankruptcy court did

not err in determining that the Rooker-Feldman doctrine deprived
it of jurisdiction over Almanzar’s claim for declaratory relief. 4
C.

Breach of Fiduciary Duty Claim (against STS)

The bankruptcy court also held that Almanzar’s breach of
fiduciary duty claim against Appellee STS was barred by RookerFeldman

because

the

issue

of

whether

Almanzar

received

“statutory notice” was decided by the Clerk in the Foreclosure
Order.

(Doc. 6–1 at 8.)

Almanzar argues that because this

claim was never fully litigated in the state proceeding, it is
not barred by Rooker-Feldman.

However, as discussed above, her

3

In Almanzar’s “Issues Presented” section of her brief, she suggests
that there is a “void judgment” exception to Rooker-Feldman. However,
other than this statement, she makes no argument in either her
original brief or reply brief to this effect. (Doc. 12 at 2.) To the
extent she intended to raise such an argument, it is waived for
failure to advance it.
4

Almanzar also argues that she should be given leave to amend her
complaint as to this claim to cure the Rooker-Feldman defect.
However, the bankruptcy court held that the defect was not curable
because there was no way to avoid Rooker-Feldman’s application.
The
record certified to this court on appeal does not indicate that a
separate motion to amend was ever filed in the bankruptcy court, as
required by Federal Rules of Civil Procedure 7(b) and 15(a) and Local
Rule 7.3(a).
See Apotex Inc. v. Eisai Inc., No. 1:09CV477, 2010 WL
3420470, at *6 (M.D.N.C. Aug. 27, 2010). Nor does the record include
the required proposed amended complaint. See Rankin v. Mattamy Homes
Corp., No. 1:10CV117, 2010 WL 3394036, at *3 (M.D.N.C. Aug. 26, 2010).
Therefore, the court cannot say that the bankruptcy court abused its
discretion by denying Almanzar leave to amend her complaint.

9

claim

against

STS

may

succeed

only

to

the

extent

that

the

Clerk’s determination that she in fact received notice (Doc. 4–5
¶ 3) was incorrect.

See Poindexter, 2010 WL 3023895, at *2.

Rooker–Feldman deprived the bankruptcy court of jurisdiction to
revisit the Clerk’s determination.

The North Carolina cases

cited by Almanzar prove this very point.

North Carolina courts

on occasion do set aside foreclosure orders issued by the Clerk
of Superior Court.

See, e.g., PMB, Inc. v. Rosenfeld, 48 N.C.

App. 736, 269 S.E.2d 748 (1980).

If Almanzar wanted relief from

the Clerk’s judgment, her remedy was to continue her appeal in
the North Carolina courts rather than to ask the federal courts
to set aside a state court judgment.
correct

that

reconsider

Rooker-Feldman

the

Foreclosure

The bankruptcy court was

divested
Order

it

and

of

jurisdiction

therefore

to

to

consider

Almanzar’s breach of fiduciary duty claim. 5
D.

RESPA Claim (against Bank of America and Fannie Mae)

The bankruptcy court held that Almanzar could not state a
claim for relief under RESPA because her complaint alleged that
Bank of America serviced the loan, but the court dismissed the
claim

without

allegations.

prejudice

to

allow

Almanzar

to

amend

her

She instead chose to appeal to this court.

5

Almanzar’s argument that the bankruptcy court erred by denying her
leave to amend her complaint fails on this claim as well. She cannot
avoid the Rooker-Feldman issue simply by re-pleading her allegations.

10

The bankruptcy court’s analysis of this claim was correct.
The

statute

provides

that

“[e]ach

servicer

of

any

federally

related mortgage loan shall notify the borrower in writing of
any assignment, sale, or transfer of the servicing of the loan
to any other person.”

12 U.S.C. § 2605(b)(1) (emphasis added).

It defines “servicer” as “the person responsible for servicing
of a loan (including the person who makes or holds a loan if
such

person

(emphasis

also

added).

services
As

the

the

loan).”

bankruptcy

Id.

court

§

pointed

2605(i)(2)
out,

the

complaint alleged that Bank of America continued to service the
loan even after it was sold to Fannie Mae.

(Doc. 4 ¶¶ 16–17.)

Because no change in the servicing of the loan is alleged to
have

occurred,

the

bankruptcy

court

correctly

dismissed

Almanzar’s RESPA claim.
E.

UDTPA Claim (against Bank of America and Fannie Mae)

With respect to the UDTPA claim, the bankruptcy court first
held that because the Clerk determined that Bank of America was
the holder of the note (Doc. 4–5 ¶ 1), Rooker-Feldman barred
consideration of any claim based upon the contention that Bank
of

America

or

Fannie

Mae

misrepresented

their

interest status to the court (Doc. 6–1 at 11).

real

party

in

Almanzar argues

both that this claim is not “inextricably intertwined” with the
Clerk’s judgment and, in the alternative, that a fraud and/or
misrepresentation exception to Rooker-Feldman should apply.
11

The

bankruptcy

court

was

correct

that

the

Clerk’s

determination that Bank of America was the holder of the note
effectively bars review of the real party in interest claim.
The Clerk found that Bank of America was the real party in
interest, and there is no dispute that Bank of America was the
servicer of the loan.

This court could not come to a different

conclusion without first determining that the Clerk’s findings
of fact were incorrect.

Therefore, Rooker–Feldman deprived the

bankruptcy court of jurisdiction over a collateral attack of
this finding.
an

attempt

to

Because the real party in interest claim rests on
collaterally

attack

the

finding

that

Bank

of

America was the holder of the note, it cannot proceed.
Almanzar’s

argument

that

a

fraud

exception

Feldman should be recognized is unavailing.

to

Rooker-

The Fourth Circuit

has thus far not recognized such an exception, and the District
of South Carolina, the only court in this circuit that appears
to

have

considered

the

issue,

has

declined

to

do

so.

See

Patterson v. Autozone Auto Parts, Inc., Civ. A. No. 0:10–2438,
2011 WL 379427, at *5 (D.S.C. Feb. 3, 2011); Wise v. Toal, Civ.
A. No. 6:09–00495, 2009 WL 1606498, at *3–4 (D.S.C. June 8,
2009); see also Steven N. Baker, The Fraud Exception to the
Rooker-Feldman

Doctrine:

How

It

Almost

Wasn't

(And

Probably

Shouldn't Be), 5 Fed. Cts. L. Rev. 139, 160–61 (2011) (surveying
the existence of a fraud exception to Rooker-Feldman and noting
12

that the Fourth Circuit has yet to recognize the exception).
This

court

instance.

declines

to

recognize

the

exception

in

the

first

As the court in Patterson recognized, the existence

of fraud in procuring the state court judgment can be challenged
on direct appeal to the state appellate courts.
WL 379427, at *5.
challenge.

Patterson, 2011

This court is not the proper forum for such a

Therefore, the bankruptcy court was correct that

Rooker-Feldman

barred

it

from

considering

the

real

party

in

interest claim.
Finally,
claim

the

without

bankruptcy

prejudice

to

court
the

dismissed

extent

it

Almanzar’s

was

based

UDTPA

upon

an

alleged failure of Bank of America and Fannie Mae to provide
notice of a change in the loan servicer.
court

allowed

leave

to

amend

the

(Doc. 6–1 at 12.)

complaint

to

clarify

The
the

allegations, but dismissed it on the ground that Almanzar failed
to allege any damage proximately resulting from this lack of
notice.

(Id.)

Once again, rather than amend her complaint,

Almanzar elected to appeal to this court.
To prevail on a UDTPA claim, “a plaintiff must show: (1)
an unfair or deceptive act or practice, (2) in or affecting
commerce,

and

plaintiff[].”

(3)

which

proximately

caused

injury

to

Walker v. Fleetwood Homes of N.C., Inc., 362 N.C.

63, 71–72, 653 S.E.2d 393, 399 (2007).

The bankruptcy court was

correct that Almanzar’s complaint failed to allege any injury
13

proximately caused by the alleged failure to provide notice.
Without pleading any injury, Almanzar’s claim cannot survive a
motion to dismiss.
Therefore,

the

bankruptcy

court

correctly

dismissed

Almanzar’s UDTPA claim in its entirety.
III. CONCLUSION
For the reasons stated, therefore,
IT IS ORDERED that the Order of the bankruptcy court (Doc.
6–2) is AFFIRMED.

/s/
Thomas D. Schroeder
United States District Judge
December 31, 2013

14