Sunday, March 31, 2013

Challenge to foreclosure dismissed due to res judicata.

Merrick v. CitiMortgage, Inc., 2013 DNH 027 (DNH 2013)
March 5, 2013, Opinion by Judge Steven J. McAuliffe

District Court dismissed (granting mortgagee's 12(b)(6) motion) the pro se litigants' challenge to the mortgagee's foreclosure, finding the issues were already decided in the underlying bankruptcy case.

Pro se litigants (Mr. and Mrs. Merrick) challenged CitiMortgage's right to foreclose, averring that CitiMortgage had not demonstrated to their satisfaction that they held the mortgage, and thus able to foreclose. CitMortgage removed the case from state to federal court, and moved to dismiss on the grounds of res judicata, arguing that the issue had already been litigated and decided by the Bankruptcy Court in the Merricks' Chapter 13 case. The  Merricks' bankruptcy case and related adversary proceeding against CitiMortgage had been dismissed by the bankruptcy court for, inter alia, the Merricks' delay and failure to comply with court orders.

The essential elements of res judicata are: "(1) a final judgment on the merits in an earlier action; (2) an identity of parties or privies in the two suits; and (3) an identity of the cause of action in both the earlier and later suits." FDIC v. Shearson-American Express, Inc., 996 F.2d 493, 497 (1st Cir. 1993). Here, each of those essential elements is present. First, As noted above, the bankruptcy court dismissed Mr. Merrick's
bankruptcy petition for cause and subsequently dismissed his adversary complaint as well. Neither order contains any language suggesting that the dismissal was without prejudice to Mr. Merrick's refiling his claim
against CitiMortgage. The order dismissing his adversary complaint was, then, an adjudication on the merits of that claim. See Fed. R. Bank. P. 7041(b) ("If the plaintiff fails to prosecute or to comply with these rules or a court order, a defendant may move to dismiss the action . . . Unless the dismissal order states otherwise, a dismissal under this subdivision. . . . operates as an adjudication on the merits."). See also Fed. R.
Civ. P. 41((b). 

Secondly, regarding the Identity of Parties or Privies: CitiMortgage is the defendant in both the present action and the previously-dismissed adversary proceeding in the bankruptcy court. The only
difference in parties in the two actions is that Mrs. Merrick is also a plaintiff in this proceeding. As the court of appeals has noted, when the plaintiffs "are nominally different[,] . . . the question reduces to whether the plaintiffs, though not identical, are sufficiently in privity to satisfy this element." In re Colonial Mortgage Bankers Corp., 324 F.3d 12, 17 (1st Cir. 2003). They are. Although she was not a named plaintiff in her husband's adversary complaint against Citi Mortgage, Mrs. Merrick's interests were adequately represented in the bankruptcy proceeding insofar as: (1) her interests and those of her husband were virtually identical with regard to the claim against Citi and Mr. Merrick's efforts to prevent the foreclosure upon the couple's home; and (2) she would have benefited to the same extent as her husband, if he had prevailed on his claims against Citi in the bankruptcy court. In fact, Mr. Merrick tacitly acknowledged his wife's interest in the adversary proceeding when he signed his adversary complaint against Citi as the "authorized representative for John & Joanne Merrick." Accordingly, the second element of res judicata - identity of parties or privies - is satisfied. See, e.g., Eubanks v. FDIC, 977 F.2d 166, 170 (5th Cir. 1992) (holding that wife's interests were sufficiently well-represented in husband's bankruptcy proceeding to give it res judicata effect against her); Cuauhtli v. Chase Home Fin. LLC, 308 Fed. Appx. 772, 773 (5th Cir. 2009) (holding that husband and wife were in privity, such that wife's prior suit challenging legality of foreclosure proceedings precluded subsequent similar claims by her husband); In re Rhoads, 2012 WL 603652 (9th Cir. BAP 2012) (finding privity between a husband and wife with regard to claims arising out of the foreclosure of jointly owned property); Hintz v. JP Morgan Chase Bank, N.A., 2011 WL 579339, *7 (D. Minn.,2011) ("The First Lawsuit involved the same parties, or their privities, as the current lawsuit. Here, Mr. Hintz, one of the two Plaintiffs in this case, was the plaintiff in the state lawsuit. As a joint owner of the Property, Ms. Hintz, the second Plaintiff in this case, was in privity with Mr. Hintz. Two parties who have similar interests in the same realty are in privity.") (citation and internal punctuation omitted).

Third, regarding the Identity of the Cause of Action:Finally, there can be little doubt that the claim the Merricks' advance against Citi in this proceeding is identical to the one Mr. Merrick pursued against Citi in his adversary proceeding. Both actions involve allegations of Citi's lack of "standing" to enforce the judicial
sale provisions of the mortgage deed; both actions rely on allegations that Citi lacks a "proof of claim" that would allegedly demonstrate its legal authority to foreclose the mortgage; and both actions allege that
Citi is not the current holder in due course of the mortgage deed, with power/authority to enforce it. Compare Adversary Complaint (document no. 4-3) with Motion to Order a Temporary Restraining Order (document no. 1-1).

click here for the full opinion:  Click here: ISYS:web 8

1 comment:

  1. This post indicates the pitfalls that the law presents and why it is important to have good quality legal representation when taking on or enduring legal challenges.