CONTE et al v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS et al

Filing 9

MEMORANDUM. SIGNED BY HONORABLE MARK A. KEARNEY ON 3/27/2015. 3/27/2015 ENTERED AND COPIES MAILED TO PRO SE AND E-MAILED.(amas)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

ANTHONY J. CONTE, III, et al.

v.

MORTGAGE ELECTRONIC
REGSTRATION SYSTEMS, et al.

: CIVIL ACTION
:
:
:
: NO. 14-6788
:
:
:
MEMORANDUM

KEARNEY, J.

March 27, 2015

Plaintiffs seek to quiet title to 703 South Second Street, Philadelphia, Pennsylvania 19147
(the “Property”) claiming breaches of fiduciary duty (Count I), false and misleading
representations (Count II); false representation and deceptive means to collect or attempt to
collect debt (Count III); and declaratory judgment and a permanent injunction against all
Defendants (Count IV). 1 As this Court lacks subject matter jurisdiction, we grant the motion to
dismiss of Defendants Mortgage Electronic Registration Systems, Inc. (“MERS”), Bank of New
York Mellon (“BNY Mellon”), as Trustee for the Holders of the GE-WMC Asset-Backed PassThrough Certificates, Series 2005-2 (together, the “Trust”), and Ocwen Financial Corp.
(“Ocwen”) (collectively, “Moving Defendants”). 2

1

Plaintiffs’ pro se Complaint is understandably not a model of clarity. Count II is captioned
“False and misleading representations.” Plaintiffs cite to the Pennsylvania Fair Debt Collection
Practices Act (“FDCPA”) multiple times in Count II and we will interpret that count to be
brought pursuant to the FDCPA. Count III is less clear. However, Count III alleges that Moving
Defendants used “deceptive means” in an attempt to collect a debt (i.e. the mortgage balance).
We will thus consider Count III as asserting a cause of action pursuant to the FDCPA as well.

2

On February 3, 2015, this Court issued a Show Cause Order (ECF Doc. No. 8) requiring
Plaintiffs to file their opposition to the instant motion no later than February 17, 2015 or be
subject to dismissal for lack of prosecution. Plaintiffs elected to not respond. Since Plaintiffs

I.

Facts plausibly alleged in the Complaint.
On October 12, 2005, Conte signed a mortgage on the Property in favor of MERS, as

nominee for WMC Mortgage Corporation (“WMC”). (ECF Doc. No. 1, Compl., ¶¶ 13-14.)
Conte then agreed to a loan modification on April 25, 2008, recorded on January 29, 2009. (Id. ¶
15.) On July 16, 2010, MERS recorded an assignment of the Property’s mortgage to BNY
Mellon. (Id. ¶ 16.) Conte alleges that this July 2010 assignment did not mention the April 2008
loan modification. (Id.) On February 19, 2013, Conte sent BNY Mellon a “Request Regarding
Statement of Account.” (Id. ¶ 17.) Conte also sent BNY Mellon a “Notice to Record Mortgage
Satisfaction Piece to Avoid Penalty” on February 19, 2013. (Id. ¶ 18.) BNY Mellon did not
respond to Conte’s requests. (Id. 19.)
On July 8, 2010, BNY Mellon filed suit in the Philadelphia Court of Common Pleas to
foreclose on the Property. 3 (ECF Doc. No. 3-8, State Ct. Docket, 8.) The court entered a default
judgment against Plaintiff Conte on September 2, 2010. (Id. at 10.) After postponing the sale of
the Property multiple times, Conte filed a petition to open the default judgment. (Id. at 17.) The
court denied Conte’s petition on September 24, 2013. (Id. at 18.) On November 28, 2014,
Plaintiffs commenced this action.

failed to file a response, it is within our discretion to grant the motion as uncontested. See Local
Civil Rule 7.1(c). Nonetheless, we consider the merits of the motion. See Harper v. Franklin &
Marshall Coll., Civ. A. No. 10-2647, 2011 WL 1226123, at *1 (E.D. Pa. Mar. 30, 2011);
Boulmetis v. Phila. Park Casino & Racetrack, Civ. A. No. 08-4227, 2008 WL 4566891, at *1 n.1
(E.D. Pa. Oct. 10, 2008).
3

The Court takes judicial notice of the state court docket attached to Moving Defendants’
Motion to Dismiss. See Schafer v. Decision One Mortg. Corp., No. 08-5653, 2009 WL 1532048,
at *3 (E.D. Pa. May 29, 2009) (“[A] court may take judicial notice of the record from a state
court proceeding and consider it on a motion to dismiss.”)
2

II.

Analysis
When considering Moving Defendants’ motion to dismiss for lack of subject matter

jurisdiction under Federal Rule of Civil Procedure 12(b)(1), Plaintiffs bear the burden of
persuading the Court that subject matter jurisdiction exists. Kehr Packages, Inc. v. Fidelcor, Inc.,
926 F.2d 1406, 1409 (3d Cir.1991). We “may not presume the truthfulness of plaintiff's
allegations, but rather must evaluate for itself the merits of the jurisdictional claims.” Hedges v.
United States, 404 F.3d 744, 750 (3d Cir.2005) (internal quotation marks and alteration marks
omitted).
Plaintiffs plead little factual background other than Conte signed a mortgage that was
subsequently modified and assigned. (ECF Doc. No. 1, Compl., ¶¶ 13-16.) Plaintiffs seek to
compel Defendants to “file, record, cancel, surrender or satisfy record, or admit the validity,
invalidity or discharge of, any document, obligation or deed affecting any right, lien, title or
interest in [the Property].” (Id. at 4-5.) While it is difficult to understand exactly what relief the
pro se Plaintiffs are requesting, the Court understands the Complaint as challenging the validity
of the mortgage assignment in each count.
Moving Defendants argue that Plaintiffs’ Complaint, styled as an Action to Quiet Title,
should be dismissed because the claims are barred under the Rooker-Feldman doctrine, as well
as res judicata. First, under the Rooker-Feldman doctrine, Plaintiffs’ claims are barred because
granting the relief requested would necessarily require a finding that the state court’s entry of
judgment in the foreclosure proceedings was erroneous. (ECF Doc. No. 3-2, Defs.’ Mem., 1518.) Second, Moving Defendants argue that even if the Rooker-Feldman doctrine does not bar
Plaintiffs’ claims, res judicata prevents Plaintiffs from asserting claims that were actually
litigated or could have been litigated in the state court foreclosure proceeding. (Id. at 18-19.)

3

A.

The Rooker-Feldman doctrine

“The Rooker-Feldman doctrine bars a federal court from entertaining ‘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.’ ” Stephens v. Zucker, Goldberg & Ackerman, Civ. A. No. 14-2483, 2014 WL
4744550, at *2 (E.D. Pa. Sept. 24, 2014) (quoting Exxon Mobil Corp. v. Saudi Basic Indus.
Corp., 544 U.S. 280, 284, 125 S.Ct. 1517, 161 L. Ed. 2d 454 (2005)). A plaintiff may not “seek
relief that requires a predicate finding that the state court’s action resulting in the entry of a
judgment was wrongfully entered.” Sherk v. Countrywide Home Loans, Inc., No. 08-5969, 2009
WL 2412750, at *6 (Aug. 5, 2009). To meet Rooker-Feldman, a plaintiff must show: “(1) the
federal plaintiff lost in state court; (2) the plaintiff ‘complain[s] of injuries caused by [the] statecourt 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). “The factors that
typically drive the inquiry are two and four, the substantive ones.” Sherk, 2009 WL 24112750,
at *2. On multiple occasions, our Court of Appeals has held that the Rooker-Feldman doctrine
bars federal courts from providing relief that invalidates a state court foreclosure decision. See,
e.g., Gage v. Wells Fargo Bank, NA AS, 521 F. App'x 49, 51 (3d Cir. 2013); Manu v. Nat'l City
Bank of Indiana, 471 F. App'x 101, 105 (3d Cir. 2012); Laychock v. Wells Fargo Home Mortg.,
399 F. App’x 716 (3d Cir. 2010); Easley v. New Century Mortg. Corp., 394 F. App’x 946 (3d
Cir. 2010); Moncrief v. Chase Manhattan Mortg. Corp., 275 F. App'x 149, 152 (3d Cir.2008).

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i.

Breach of fiduciary duty (Count I) is barred by the Rooker-Feldman
doctrine.

Plaintiffs’ breach of fiduciary duty claim (Count I) is barred by the Rooker-Feldman
doctrine as it directly challenges the validity of the state court’s foreclosure judgment and
complains of injuries caused by the state court foreclosure. The breach of fiduciary duty claim
alleges that Defendants failed to secure the proper endorsements before assigning the mortgage.
(ECF Doc. No. 1, Compl., ¶ 26.) This allegedly puts a “cloud of [sic] the property title.” (Id. ¶
28.) Further, Plaintiffs allege that the failure to secure the proper endorsements results in only a
“partial interest” for Defendants and this “partial interest” should not be used by Defendants to
“gain an advantage.” (Id. ¶¶ 26, 31-32.) While Plaintiffs do not expand on the advantage
Defendants gained, this Court interprets that phrase to mean the obtaining of a foreclosure.
As the Court liberally reads Count I, Plaintiffs challenge the validity of the assignment to
BNY Mellon arguing that BNY Mellon improperly foreclosed on the Property. It is evident that
Plaintiffs are complaining about the injuries caused by the state court’s judgment. The state
court judgment resulted in Moving Defendants gaining an “advantage”, which Plaintiffs now
contest. Further, a finding that BNY Mellon did not have a proper interest in the mortgage
through a valid assignment would be tantamount to a reversal of the state court’s foreclosure
decision. See Sherk, 2009 WL 24112750, at *6 (“Whether [defendants] had the legal right to
foreclose on the mortgage loan has been determined in state court and cannot be reconsidered by
a federal court.”). As such, Plaintiffs’ breach of fiduciary duty claim in Count I is barred by the
Rooker-Feldman doctrine.
ii.

Plaintiffs’ FDCPA claims (Counts II and III) are barred by the RookerFeldman doctrine.

5

Counts II and III are barred by the Rooker-Feldman doctrine. We find the analysis in
Sherk to be instructive. In Sherk, the plaintiffs’ property was foreclosed and sold at Sheriff’s
sale. 2009 WL 2412750, at *4. In a subsequent federal lawsuit, plaintiffs alleged, among other
things, violations of the FDCPA. Id. at *1. At oral argument, plaintiffs’ counsel conceded that
“the entire basis for the FDCPA cause of action rests on the [plaintiffs’] contention that the
assignment of the mortgage was invalid.” Id. at *6. The court found that to the extent the
plaintiffs were arguing that the state court judgment was entered “erroneously” due to invalidity
of the assignment, the claim was barred by the Rooker-Feldman doctrine. Id.
Here, Plaintiffs allege in Count II that there was a separation of the “interest of the note
and mortgage which makes the character of the mortgage null.” (ECF Doc. No. 1, Compl., ¶ 35.)
Since the note and mortgage are “separated”, the mortgage is “unsecured.” (Id. ¶ 36.) Plaintiffs
argue that because of this separation, the assignment of the mortgage was only partial and this
makes BNY Mellon’s alleged statements regarding the character of the debt unlawful. (Id. ¶ 38.)
Similarly, Count III argues that BNY Mellon “represents that they have creditor status by way of
an assignment” but that this assignment may be invalid because it does not mention the
modification. (Id. ¶ 42-44.)
Similar to the FDCPA claims in Sherk, the gravamen of Plaintiffs’ claims is that the
assignment to BNY Mellon, or the Trust, was invalid and therefore these parties had no legal
right to collect the mortgage debt, or ultimately foreclose on the property.

However, [a]

mortgage foreclosure [ ] depends ‘upon the existence of a valid mortgage.’ ” Laychock, 2008
WL 2890962, at *3 (citing In re Randall, 358 B.R. 145, 158 (Bankr. E.D. Pa. 2006)). Plaintiffs
cannot transform their action into one under the FDCPA and avoid the fact that they are
complaining of an injury caused by the state court’s foreclosure judgment. See Hua v. U.S. Bank

6

Nat. Ass’n, No. 14-6767, 2015 WL 1071606, at *3 (E.D. Pa. Mar. 11, 2015). Granting Plaintiffs
their requested relief will result in a finding that the state court erred in its entry of judgment.
Stephens, 2014 WL 4744550, at *3 (dismissing claim where plaintiff challenged validity of
mortgage assignment because granting relief would “reject the state court judgment”); Hua, 2015
WL 1071606, at *3 (dismissing FDCPA claim pursuant to Rooker-Feldman as it challenged the
validity of mortgage). The Rooker-Feldman doctrine bars these claims as well.
iii.

Plaintiffs’ request for injunctive relief (Count IV) is barred by the
Rooker-Feldman doctrine.

Count IV for injunctive relief is also barred by Rooker-Feldman. In Count IV, Plaintiffs
seek “clarification about the of the [sic] apparent defects in the partial mortgage assignment on
the record.” (ECF Doc. No. 1, Compl., ¶ 49.) Plaintiffs assert that a declaration is necessary
because “the chain of title for [the Property] may be fraudulent without a proper chain of
recorded assignments.” (Id. ¶ 50.) It is apparent from this request, that Plaintiffs are askingthis
Court to declare BNY Mellon’s assignment invalid, and overturn the foreclosure proceeding by
providing Plaintiffs clear title to the property. In fact, Plaintiffs’ request for relief asks the Court
to “quiet title” in favor of Conte. (Id. ¶ 52.) This makes it “abundantly clear that [plaintiff]
seeks to overturn the foreclosure judgment.” Gage, 521 F. App’x at 50 (finding claim barred by
the Rooker-Feldman doctrine where plaintiff sought to have deed restored to him). Granting
such relief would necessarily require a complete review and rejection of the state court’s entry of
judgment. Count IV is barred by the Rooker-Feldman doctrine.
B.

Res Judicata

We also find that res judicata bars Plaintiffs’ claims. Res judicata provides that “a
federal court must give a state court judgment the same preclusive effect that the state court
would give it.” Sherk, 2009 WL 2412750, at *6 (citing Lance v. Dennis, 546 U.S. 459, 466, 126
7

S.Ct. 1198, 163 L.Ed.2d 1059 (2006) and Turner v. Crawford Square Apartments III, L.P., 449
F.3d 542, 548 (3d Cir. 2006)). “Any final, valid judgment on the merits by a court of competent
jurisdiction precludes any future suit between the parties or their privies on the same cause of
action.” Balent v. City of Wilkes-Barre, 542 Pa. 555, 669 A.2d 309, 313 (Pa. 1995) (citation
omitted). Res judicata “applies not only to claims actually litigated, but also to claims which
could have been litigated during the first proceeding if they were part of the same cause of
action.” Id. A claim challenging a party’s conduct that occurred prior to the state court entering
judgment in a foreclosure proceeding may not be barred by the Rooker-Feldman doctrine but
instead is subject to the principles of preclusion under res judicata. See Hua, 2015 WL 1071606,
at *3 (observing that if the source of the injury is defendant’s actions “[t]he federal suit is an
independent claim that is not barred by the Rooker-Feldman doctrine, and is, instead, subject to
state law principles of preclusion.” (citing Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544
U.S. 280, 293, 125 S.Ct. 1517, L.Ed.2d 454 (2005)).
Again, Sherk is instructive. In addition to addressing the Rooker-Feldman doctrine, the
court found that to the extent the plaintiffs were arguing that they were injured by the
defendants’ conduct prior to the entry of judgment, res judicata barred the claims because they
could have been litigated in the state court proceeding. Sherk, 2009 WL 2412750, at *6; see also
Laychock, 399 F. App’x at 718-19 (finding res judicata bars defenses raised in petition to open,
as well as defenses that the party “ ‘might have, but did not raise.’ ” (quoting Riverside Memorial
Mausoleum, Inc. v. UMET Trust, 581 F.2d 62, 66-67 (3d Cir. 1978))).
Plaintiffs seek relief for Moving Defendants’ conduct prior to the state court’s entry of
judgment. In Count I, Plaintiffs allege that Moving Defendants’ breached a fiduciary duty owed
to Plaintiffs by not securing proper endorsements with regard to the assignment of the mortgage.

8

(ECF Doc. No. 1, Compl., ¶ 26.) In Counts II and III, Plaintiffs challenge the validity of the
assignment to BNY Mellon and allege that they were injured by BNY Mellon’s conduct in
attempting to collect on the debt. (Id. ¶¶ 34-40, 42-45.) Finally in Count IV, Plaintiffs wish to
have the assignment declared invalid and enjoin Defendants from collecting on the mortgage.
(Id. ¶¶ 47-52.)
The conduct Plaintiffs complain of occurred prior to the state court foreclosure
proceeding. The time and place to challenge the Defendants’ conduct was in the state court
proceedings, including an appeal to the proper Pennsylvania appellate court. Because Plaintiffs
chose not to bring these direct causes of action challenging Defendants’ conduct in state court
they cannot now bring them in federal court. Moncrief, 275 F. App’x at 153 (dismissing claim
pursuant to res judicata where plaintiff could have brought challenge to bank’s standing during
the foreclosure action); Laychock, 2008 WL 2890962, at *2 (dismissing complaint pursuant to
the Rooker-Feldman doctrine and res judicata).
Further, Plaintiffs did challenge the validity of the assignment in a petition to open the
default judgment. (ECF Doc. No. 3, Def.’s Mot., Ex. D.) The state court rejected the arguments
made in the petition. (Id. at Ex. F, 18.) Therefore, Plaintiffs’ arguments regarding the validity of
the mortgage assignment have already been decided by the state court and cannot be brought
again here in federal court.
III.

CONCLUSION
As we find that all of Plaintiffs’ claims are barred by either the Rooker-Feldman doctrine

or res judicata, we dismiss the Complaint with prejudice as this Court lacks subject matter
jurisdiction.

9