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Dismissing A Borrower’s Post-Foreclosure Federal Court Action For Fraud And Deception: Rooker-Feldman Strikes Again

Lesson.  A defendant in state court foreclosure action doesn’t get another bite at the apple in federal court.

Case cite.  Shaffer v. PNC, 2015 U.S. Dist. LEXIS 116831 (S.D. Ind. 2015) (.pdf).

Legal issue.  Whether federal court had jurisdiction over the plaintiff borrower’s post-foreclosure case against the defendant lender and its law firm.

Vital facts.  This federal court case followed a judgment rendered in a residential foreclosure suit in state court.  In state court, the lender/mortgagee sued its borrower/mortgagor for a default under the subject promissory note and to foreclose the subject mortgage.  The state court granted summary judgment for the lender, and the mortgaged property was sold at a sheriff’s sale.  Efforts by the borrower to appeal failed.  Subsequently, the borrower filed a complaint in federal court asserting claims for:  “demand for chain of title; statutory violations; a Fourteenth Amendment violation; and a clarification as to the individual status of each party under the Fair Debt Collection Practices Act.”  At its core, the borrower alleged fraud and deception on the part of the lender and its law firm.   

Procedural history.  The Shaffer opinion arose out of the defendants’ motion to dismiss for lack of subject matter jurisdiction.  Judge William T. Lawrence of the U.S. District Court for the Southern District of Indiana issued the ruling that dismissed the plaintiff borrower’s complaint. 

Key rules. 

  • The outcome hinged on the Rooker-Feldman doctrine, which bars two categories of federal claims:  (1) where a plaintiff requests a federal court to overturn an adverse state court judgment or (2) where federal claims were not raised in state court but yet are “inextricably intertwined” with a state court judgment. 
  • In addition, “fraud (no matter how described) does not permit a federal district court to set aside a state court’s judgment in a civil suit.” 
  • Subject matter jurisdiction motions to dismiss are based upon Rule 12(b)(1).  

Holding.  The Court dismissed the case, stating “[borrower’s] claims are precisely the type of claims the Rooker-Feldman doctrine was designed to prevent the Court from reviewing.”

Policy/rationale.  The purpose of the Rooker-Feldman doctrine is to preclude lower federal court jurisdiction over claims seeking review of state court judgments because “no matter how erroneous or unconstitutional the state court judgment may be, the Supreme Court of the United States is the only federal court that could have jurisdiction to review a state court judgment.”  In Shaffer, the borrower sought review and reversal of the state court judgment.  “The thrust of her complaint is that [the lender] cannot enforce its note and mortgage.”  Moreover, while federal courts have jurisdiction to award damages “for fraud that imposes extrajudicial injury,” the borrower’s complaint in Shaffer made no such allegation.  As such, no exception to the Rooker-Feldman doctrine applied. 

Related posts. 

The Latest Marion County (Indianapolis) Sheriff's Sale Links/Forms

Our firm recently re-learned the hard way that Marion County's monthly sheriff’s sales have been bumped up an hour from 3:15pm to 2:15pm, which is when the oral auction starts.  Fortunately, no harm, no foul. 

In the recent past, Marion County mandated that third party (non-plaintiff) bids over and above the plaintiff’s posted bid must be tendered by 2pm instead of 3pm (with cash on deposit by then).  As always, the plaintiff’s (the mortgagee's) bid package still must be submitted the day before the sale.

1:  Click here for a link to the Marion County Sheriff’s home page dealing with sheriff’s sales.

2:  Click here for a link to their forms page, including instructions/rules for plaintiffs and third-party bidders.

Be advised – as of today’s date, many of the links along the left side of the sheriff’s website (#1 above) contain old forms indicating that bidding is open until 3:00pm.  Don’t use those forms or that information.  Use the links in #2 above, which also are in the body/center of link #1.  I mentioned the problem to the staff today, and they indicated that the county’s web provider is or should be in the process of fixing the problem.

Finally, don't forget that no two counties are the same.  Although this 2/28/10 post needs to be updated, the theme that "local rules, customs and practices control" remains true today.  Check with your specific county to confirm when sheriff's sales begin because times vary across the state.

Carry on….   

Judgment Lien Principles Courtesy Of The Indiana Supreme Court

This week’s post should be read along with last week’s post:  Indiana Supreme Court Tackles Lis Pendens Law.  The topic of discussion is JPMorgan Chase v. Claybridge, 39 N.E.3d 666 (Ind. 2015).  Today’s question surrounds whether a judgment, which was not properly docketed/indexed, was nonetheless a valid and enforceable lien. 

A key fact in Claybridge was that a homeowner’s association had obtained a personal judgment against a property owner.  However, the county clerk, in an oversight, “mistakenly failed to enter the [judgment] on the Judgment Docket.” 

In addressing Indiana judgment lien law, the Court noted the following:

  • A “lien” is a claim “on another’s property” to secure a debt.  And, an action to enforce a lien is in rem (as to property), not in personam (as to individual). 
  • By statute, a personal judgment does not become a judgment lien on real estate until “the judgment is recorded in the docket in the county where the realty held by the debtor is located.”  Indiana’s judgment lien statute at Ind. Code 34-55-9-2 makes judgments a lien “after the judgment is entered and indexed.” 
  • Despite the judgment lien statute requiring the judgment to be properly indexed, Indiana common law provides that a judgment always constitutes a lien between the parties to the judgment and between the parties who have actual notice of the judgment.  Moreover, a judgment constitutes an in rem real estate interest. 

The Court in Claybridge concluded that, although the HOA’s judgment was unrecorded, the HOA held an enforceable judgment lien as between it and the defendant/owner.  In other words, the failure to index the judgment did not wholly destroy its effect as a lien.  On the other hand, the lien was not enforceable as to third parties unless they had actual notice of the lien. 

Related posts.