Lenczner, Bernard et al v. Wells Fargo Bank, N.A. et al

Filing 16

ORDER granting in part and denying in part Motion to Dismiss. Signed by District Judge William M. Conley on 09/09/2016. (kc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
BERNARD P. LENCZNER and
LISA D’ALESSIO LENCZNER,
Plaintiffs,

OPINION AND ORDER

v.

14-cv-691-wmc

WELLS FARGO, N.A., et al.,
Defendants.

Plaintiffs Bernard P. Lenczner and Lisa D’Alessio Lenczner filed this lawsuit against
defendants “Wells Fargo, N.A., as Trustee for the Holders of Park Place Securities, Inc.,
Asset-back Passed Through Certificate Series 2004, and Does 1-100” (collectively, “Wells
Fargo”). Wells Fargo has responded by filing a motion to dismiss the complaint under
Fed. R. Civ. P. 12(b)(1) and 12(b)(6). After considering all of the pleadings in the record,
the court will grant Wells Fargo’s motion in part and deny it in part. The Lenczners will
be allowed to proceed with their claims for violation of the Fair Debt Collection Practices
Act, the Fair Credit Reporting Act and for intentional infliction of emotional distress. The
remaining claims will be dismissed.
FACTS 1
On March 10, 2004, the Lenczners executed a note and mortgage loan from Argent
Mortgage Company, LLC. (“Argent Mortgage”), in the amount of $160,000.00 for the

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Consistent with Seventh Circuit precedent, the following facts are taken from the complaint, from
reasonable inferences drawn in plaintiffs’ favor as the non-moving party, and from information
contained in earlier state court and bankruptcy proceedings over which this court may take judicial
notice. See discussion, infra, at 4-5.

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purchase of a home located in Sun Prairie, Wisconsin. Subsequently, Argent Mortgage
assigned the Lenczners’ mortgage to Wells Fargo.
In September of 2009, the Lenczners stopped making payments on their mortgage
and defaulted on their loan. Thereafter, the Lenczners began receiving collection notices
from Select Portfolio Servicing on behalf of Wells Fargo. The Lenczners responded that
they had no contract or agreement with Wells Fargo and took no steps to cure their default.
On January 3, 2012, Wells Fargo filed a foreclosure action against the Lenczners in
Dane County Circuit Court. See Wells Fargo Bank, N.A. et al. v. Bernard P. Lenczner et al.,
Case No. 12CV6. As part of that action, Wells Fargo asserted that: (1) it was the current
holder of the Lenczners’ mortgage loan; (2) the Lenczners were in default on the mortgage
loan; and (3) the amount due and owing to Wells Fargo was $164,796.69, exclusive of
interest and other charges.
When the Lenczners failed to answer, Wells Fargo eventually filed a motion for a
default judgment. After a hearing on that motion, the circuit court entered findings of
fact, conclusions of law and judgment in favor of Wells Fargo on July 3, 2012.
Specifically, the circuit court adjudged that: (1) all material allegations in Wells Fargo’s
complaint were proven true; (2) Wells Fargo was entitled to default judgment against the
Lenczners; (3) the total amount due to Wells Fargo under the terms of the note and
mortgage was $208,671.95; and (4) the mortgage property could be sold after the
expiration of the redemption period. The Lenczners did not appeal that decision.

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Once the redemption period expired, Wells Fargo noticed a Sheriff’s Sale of the
mortgaged property for February 25, 2014. On February 7, 2014, the Lenczners filed a
“Motion to Dismiss Plaintiff’s Complaint” in the foreclosure action, alleging for the first
time that Wells Fargo lacked standing to foreclose because their original mortgage loan was
with Argent Mortgage, not Wells Fargo. The Dane County Circuit Court denied the
Lenczners’ motion and affirmed the judgment of foreclosure.
After the Dane County Circuit Court denied their motion, the Lenczners filed for
bankruptcy. See In re: Bernard P. Lenczner and Lisa Lenczner, Case No. 14-10571 (W.D.
Wis.). In response, the United States Trustee filed a motion to deny relief, noting that the
Lenczners were not entitled to discharge because they had been previously granted a
discharge in 2011.

The Lenczners neither responded to the Trustee’s motion, nor

appeared at the meeting of creditors, in violation of an order entered by the Bankruptcy
Court. On April 4, 2014, the Bankruptcy Court granted the Trustee’s motion and denied
discharge; on May 15, 2014, the Bankruptcy Court dismissed the Lenczners’ bankruptcy
proceeding; after which, Wells Fargo re-noticed a Sheriff’s Sale of the mortgaged property.
In October 2014, the Lenczners filed a complaint with this court. The complaint
alleges causes of action for: (1) violation of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692; (2) violation of the Fair Credit Reporting Act and
Wisconsin’s consumer and credit reporting laws; (3) intentional infliction of emotional
distress; and (4) wrongful foreclosure. The Lenczners seek declaratory and injunctive
relief in the form of a judgment stating that they are the sole owners of the mortgaged

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property and that Wells Fargo has no right to the mortgaged property whatsoever.
Arguing that these claims depend on issues that were resolved against the Lenczners in
state court, Wells Fargo moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(1) and
12(b)(6).

OPINION
In reviewing a motion to dismiss for lack of subject matter jurisdiction under Fed. R.
Civ. P. 12(b)(1), a court accepts as true the well pleaded factual allegations found in the
complaint, drawing all reasonable inferences in favor of the plaintiff. Center for Dermatology
and Skin Cancer, Ltd. v. Burwell, 770 F.3d 586, 588 (7th Cir. 2014). The court may also
consider “documents attached to the complaint, documents that are critical to the
complaint and referred to in it, and information that is subject to proper judicial notice,”
along with additional facts set forth in the plaintiff’s brief opposing dismissal, so long as
those facts “are consistent with the pleadings.” Geinosky v. City of Chicago, 675 F.3d 743,
745 n. 1 (7th Cir. 2012). The burden of establishing proper subject matter jurisdiction
rests on the party asserting it, typically, as here, the plaintiff. Muscarello v. Ogle Cnty. Bd. of
Comm’rs, 610 F.3d 416, 425 (7th Cir. 2010).
Motions to dismiss under Fed. R. Civ. P. 12(b)(6) are appropriate only where the
plaintiff’s complaint fails to state a claim upon which relief can be granted. Ordinarily,
federal pleading rules require no more than “a short and plain statement of the claim”
showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a). A court reviewing a

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motion to dismiss under Rule 12(b)(6) must construe the complaint in the light most
favorable to the plaintiff, accepting as true all well-pleaded facts alleged and drawing all
permissible inferences in his favor. Fortres Grand Corp. v. Warner Bros. Entertainment Inc.,
763 F.3d 696, 700 (7th Cir. 2014) (citation omitted). Pleadings filed by a pro se litigant
are entitled to a liberal construction that affords all reasonable inferences which can be
drawn from them. See Haines v. Kerner, 404 U.S. 519, 521 (1972). Nevertheless, to
survive a motion to dismiss, a plaintiff must allege “sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Wells Fargo does not move to dismiss the complaint based on factual deficiencies in
the pleadings. Instead, Wells Fargo maintains that the complaint must be dismissed for
lack of subject matter jurisdiction as barred by the Rooker-Feldman doctrine and the related
doctrine of abstention. In the alternative, Wells Fargo argues that the complaint must be
dismissed under the doctrine of claim preclusion or res judicata. These arguments are
addressed in turn below.
I.

Rooker-Feldman Doctrine
Wells Fargo argues that the underlying premise of each of the Lenczners’ claims is

that Wells Fargo lacked standing to enforce the 2004 mortgage on their home, making
unlawful any attempt by Wells Fargo to collect on the mortgage loan debt or to foreclose on
the mortgaged property. Arguing that the Lenczners’ claims constitute a collateral attack
on the Dane County Circuit Court’s judgment of foreclosure, Wells Fargo maintains that

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review of the present complaint is constrained by the Rooker-Feldman doctrine. See Rooker v.
Fidelity Trust Co., 263 U.S. 413, 415-16 (1923); District of Columbia Ct. of App. v. Feldman,
460 U.S. 462, 486 (1983).
The Rooker-Feldman doctrine precludes federal district courts from exercising
jurisdiction over “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.” Exxon Mobil Corp. v. Saudi
Indus. Corp., 544 U.S. 280, 284 (2005). If the Rooker-Feldman doctrine applies, a suit must
be dismissed without prejudice under Fed. R. Civ. P. 12(b)(1) for lack of subject matter
jurisdiction. See Frederiksen v. City of Lockport, 384 F.3d 437, 439 (7th Cir. 2004); see also
Fed. R. Civ. P. 12(h)(3) (“If the court determines at any time that it lacks subject-matter
jurisdiction, the court must dismiss the action.”).
Thus, the relevant question in determining whether Rooker-Feldman bars a particular
claim is whether the plaintiff is seeking redress for an injury caused by the state court
judgment. See Iqbal v. Patel, 780 F.3d 728, 730 (7th Cir. 2015) (“[T]he Rooker-Feldman
doctrine asks what injury the plaintiff asks the federal court to redress.”) Here, Claims 4,
5 and 6 of the Lenczners’ complaint clearly seek redress for injuries caused by the state
court foreclosure judgment.

In Claim 4, “Declaratory Judgment/Lien Release,” the

Lenczners seek a declaration that they are the sole owners of the property and that Wells
Fargo had no right to seek foreclosure of the property. They seek to quiet title of the
property in their names.

(See Cpt. ¶¶ 82-87.)

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In Claim 5, “Injunctive Relief, the

Lenczners seek to enjoin Wells Fargo from depriving them of their property. (Id. ¶¶
90-92.)

Finally, in Claim 6, “Wrongful Foreclosure,” the Lenczners again request a

finding that Wells Fargo had no legal right to foreclose the property. Because Claims 4, 5
and 6 are obvious challenges to the state court foreclosure judgment itself, these claims are
barred by the Rooker-Feldman doctrine and must be dismissed for lack of subject matter
jurisdiction. See Crawford v. Countrywide Home Loans, Inc., 647 F.3d 642, 646-47 (7th Cir.
2011) (dismissing claims that directly challenged state foreclosure action as barred by
Rooker-Feldman); Taylor v. Federal Nat’l Mortg. Ass’n, 374 F.3d 529, 533 (7th Cir. 2004)
(same); Sheikhani v. Wells Fargo Bank, 526 F. App'x 705, 706 (7th Cir. 2013) (same).
That being said, the Lenczners’ remaining claims are not merely challenges to the
state foreclosure judgment. Instead, in Claims 1, 2 and 3, the Lenczners allege injuries
that preceded the state court foreclosure judgment. In support of their claim under the
Fair Debt Collection Practices Act (“FDCPA”) (Claim 1), the Lenczners allege that Wells
Fargo engaged in numerous false, deceptive or misleading collection practices that violated
the Act, such as reporting misleading information about them to credit bureaus. (See, e.g.,
Cpt. ¶¶ 44, 49, 58, 61, 62). Similarly, they allege that Wells Fargo violated the Fair Credit
Reporting Act (“FCRA”) (Claim 2) by taking numerous actions preceding the foreclosure
judgment, such as obtaining credit reports unlawfully. (Id. ¶¶ 68-71.) 2 The Lenczners
seek statutory damages for the alleged violations of the FDCPA and FCRA, and do not
merely seek to overturn the foreclosure action. Finally, the Lenczners allege that various
Wells Fargo has not argued these allegations are insufficient to state claims under either the FDCPA or
FCRA.

2

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actions by Wells Fargo, and not just the foreclosure action itself, amounted to intentional
infliction of emotional distress (Claim 3). (Id. ¶¶77-78.)
Because Claims 1, 2 and 3 seek to redress out-of-court injuries that preceded the
state foreclosure judgment, they are not barred by the Rooker-Feldman doctrine. See Iqbal,
780 F.3d at 730 (“[I]f a plaintiff contends that out-of-court events have caused injury that
the state judiciary failed to detect and repair, then a district court has jurisdiction.”).
Therefore, Wells Fargo’s motion to dismiss those claims under Rooker-Feldman will be
denied. The Lenczner’s should be aware, however, that even if they ultimately succeed on
the merits of their claims under the FDCPA, FCRA or state law, this court cannot undue
the state court’s foreclosure judgment. 3 Rather, the Lenczner’s would be entitled only to
statutory damages or other damages not flowing directly from the state foreclosure action.
II.

Abstention
Wells Fargo argues that the Lenczner’s lawsuit should also be dismissed under

doctrines of “abstention,” or non-intervention, because the Lenczners’ current lawsuit has
served to frustrate efforts to enforce the state court’s judgment of foreclosure by allowing
the Sheriff’s Sale to take place. Abstention and non-intervention doctrines are based on
traditional principles of “equity, comity, and federalism.” SKS & Assoc. v. Dart, 619 F.3d
674, 676 (7th Cir. 2010). In that respect, Younger v. Harris, 401 U.S. 37 (1971), requires
a federal court to abstain in cases where a federal litigant seeks to enjoin execution of a state
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Similarly, the Lenczner’s may not relitigate the amount that the state court already adjudicated to be due and owing
Wells Fargo nor assert a claim of misrepresentation under FDCPA, or FCRA inconsistent with that finding. Delaney
v. Specialized Loan Servicing, LLC, No. 15-c-5260, 2015 U.S. Dist. WL 7776905 at *7 (N.D. Ill. Dec. 3, 2015)
(plaintiff may not pursue an FDCPA claim premised on an attempt to collect debts [they] did not owe” if state
foreclosure action held that amount was due and owing).

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court judgment or to interrupt ongoing state proceedings. See Pennzoil Co. v. Texaco, Inc.,
481 U.S. 1, 14 (1987) (“Not only would federal injunctions in such cases interfere with the
execution of state judgments, but they would do so on grounds that challenge the very
process by which those judgments were obtained.”). Similarly, Burford v. Sun Oil Co., 319
U.S. 315 (1943), and Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25 (1959),
counsel against a federal court sitting in diversity jurisdiction from interfering in a complex
or important area of state law. See also Colorado River Water Conservation District v. United
States, 424 U.S. 800 (1976) (counseling against a federal court from interfering with
parallel state litigation).
The court concludes that abstention principles would likely require this court to
refrain from addressing any of the Lenczners’ claims that seek to forestall execution of the
state court’s judgment of foreclosure. As is discussed above, however, the Lenczners’
claims seeking such relief is already precluded by the Rooker-Feldman doctrine.

With

respect to the remaining claims, the court is not persuaded that their resolution would
interfere with a sheriff’s sale or any ongoing state proceedings. See DeHart v. US Bank, 811
F. Supp. 2d 1038, 1046 (D.N.I. 2011) (determination of fair debt collection claims based
on threats of illegal acts, profane language, excessive calls or fake or misleading statements
not inconcistent with the underlying foreclosure judgment); Owens v. Howe, No.
1:04-CV-152, 2004 U.S. Dist. WL 6070565, at*4 (N.D. Ind. Nov. 8, 2004) (holding that
resolution of the state court case will not dispose of the FDCPA claims in the present case).
Rather, the Lenczners can proceed with their claims for damages without any disruption of

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the sheriff’s sale itself. Accordingly, Wells Fargo’s motion to dismiss Claims 1, 2 and 3 on
abstention grounds will also be denied.
III.

Claim Preclusion
Finally, the court is not persuaded that Claims 1, 2 and 3 should be dismissed under

preclusion principles either. Wells Fargo argues that the judgment of foreclosure entered
in Dane County Circuit Court is entitled to preclusive effect because all of the
requirements for claim preclusion are satisfied.

In Wisconsin, the doctrine of claim

preclusion holds that “a final judgment is conclusive in all subsequent actions between the
same parties as to all matters which were litigated or which might have been litigated in the
former proceedings.” Menard, Inc. v. Liteway Lighting Prods., 2005 WI 98, ¶ 26, 282 Wis. 2d
582, 698 N.W.2d 738 (emphasis added). 4 Wisconsin law requires the following essential
elements for res judicata to apply: (1) an “identity between the parties or their privies in the
prior and present suits”; (2) that the “prior litigation resulted in a final judgment on the
merits by a court with jurisdiction”; and (3) an “identity of the causes of action in the two
suits.” Sopha v. Owens-Corning Fiberglass Corp., 230 Wis. 2d 212, 601 N.W.2d 627, 637
(Wis. 1999). Consistent with Wisconsin’s compulsory counterclaim rule, this bar applies
to “preclude a defendant who may counterclaim in a prior action from bringing a
subsequent action on the claim if the action would nullify the initial judgment or impair

Under the Full Faith and Credit Act, 28 U.S.C. § 1738, federal courts are required to give a state
judgment the same preclusive effect that it would receive in state court. See Allen v. McCurry, 449 U.S. 90,
94 (1980); Gambino v. Koonce, 757 F.3d 604, 608 (7th Cir. 2014). Thus, state law determines whether
the previous judgment entered in Dane County Circuit Court precludes the Lenczners’ pending
complaint. See Gambino, 757 F.3d at 608.

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rights established in the initial action.” A.B.C.G. Enters., Inc. v. First Bank Southeast, N.A.,
184 Wis. 2d 465, 480, 515 N.W.2d 904 (Wis. 1994).
Here, it is clear that the state court did not resolve any of the claims the Lenczner’s
now seek to assert in Claims 1, 2 and 3. Thus, the only basis for applying claim preclusion
would be that the Lenczners’ could have and should have brought their federal claims as
counterclaims in the foreclosure action. But Wells Fargo does not make any argument as
to why the Lenczners were required to bring claims challenging pre-foreclosure collection
efforts in the foreclosure action, particularly where the relief now sought with respect to
these claims – statutory and/or compensatory damages -- would not nullify or impair the
foreclosure judgment. Nor does Wells Fargo point the court to any case law suggesting
that Wisconsin would consider these types of claims as compulsory counterclaims in a
foreclosure action. Finally, while plaintiffs likely could have asserted FDCPA and FCRA
counterclaims in the state foreclosure action, finding claim preclusion would necessarily
mean that defendants foreclosure actions must forego their right to proceed in federal court
on federal rights to fair debt collection and credit reporting simply because the underlying
debt is the same. Accordingly, the court will deny the motion to dismiss these claims on
preclusion grounds as well.

ORDER
IT IS ORDERED that:
1. Defendant Wells Fargo’s motion to dismiss (dkt. # 10) is GRANTED IN
PART and DENIED IN PART. The motion is GRANTED with respect to

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Claims 4, 5 and 6 of the complaint, and those claims are DISMISSED for
lack of subject matter jurisdiction under the Rooker-Feldman doctrine. The
motion is DENIED in all other respects.
2. The clerk of court is directed to set this case for a preliminary pretrial
conference before Magistrate Judge Stephen Crocker.
Entered this 9th day of September, 2016.

BY THE COURT:
/s/
________________________________________
WILLIAM M. CONLEY
District Judge

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