Aura Investors LLC v. Romspen Mortgage Ltd Partnership

• Court: Court of Appeals for the Third Circuit
• Decided: November 4, 2025
• Docket: 24-3255
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

No. 24-3255

AURA INVESTORS, LLC; THIRD STATE INVESTORS, LLC, Appellants v.

ROMSPEN MORTGAGE LIMITED PARTNERSHIP, an Ontario, Canada limited partnership

On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 1:24-cv-00952) District Judge: Honorable Karen M. Williams

Submitted Under Third Circuit LAR 34.1(a) September 19, 2025

Before: BIBAS, MONTGOMERY-REEVES, and AMBRO, Circuit Judges

(Opinion filed: November 4, 2025)

OPINION *

AMBRO, Circuit Judge

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. Aura Development Group LLC (“Aura Development”) agreed to mortgage various

parcels of land to secure financing for a development project, but trouble quickly ensued.

To begin, Aura Development did not actually possess title to all of the land it had agreed

to mortgage, and its anticipated acquisition of certain parcels fell through. Further

complicating matters, an affiliate of Aura Development funded a purchase of two such

parcels through a newly formed subsidiary in exchange for a first-priority and second-

priority lien, leaving Aura Development’s financier with less security than it had bargained

for.

Aura Development soon found itself in default, and its financier demanded full

repayment. To that end, the financier also filed suit in state court, seeking an equitable

mortgage consistent with the terms Aura Development had accepted in the underlying loan

documents. 1 And once the state court granted that relief, Aura Development’s interloping

affiliate filed suit in the United States District Court for the District of New Jersey to clarify

the amount and scope of the equitable mortgage. The Court, for its part, dismissed the

complaint on preclusion grounds, and we affirm its order because we agree that issue

1 Whereas classical mortgages are formal, publicly filed documents that establish liens on real property, an equitable mortgage treats real property as collateral in the absence of traditional public-filing formalities. As we have previously observed, “[t]he whole doctrine of equitable liens or mortgages is founded upon that cardinal maxim of equity which regards as done that which has been agreed to be, and ought to have been, done.” Midlantic Nat'l Bank v. Bridge (In re Bridge), 18 F.3d 195, 200 (3d Cir. 1994) (internal citations omitted). State law may therefore impose an “equitable mortgage” where the circumstances make clear that a party intended yet failed to convey a lien on its property. See, e.g., id. Equitable mortgages are typically created by the deposit with a lender of previously recorded titles or deeds, thus equivalent to a pledge entitling the applicable lender to foreclose on the property in court. Here, however, the intent was to grant Romspen a security interest in property to be acquired at a later date. 2 preclusion controls.

I. BACKGROUND

Years ago, the principal of Aura Development undertook to develop hundreds of

single-family homes in the Township of Elk, New Jersey. To obtain necessary funds for

the construction of the development, Aura Development sought financing from Romspen

Mortgage Limited Partnership (“Romspen”). It agreed to provide Aura Development with

a term loan and revolving credit facility, both of which were memorialized in a loan

agreement (the “ADG Loan Agreement”) and promissory notes (the “ADG Notes”). With

respect to the term loan, Aura Development agreed, among other things, to repay a

principal sum of $8,500,000 at an interest rate of 12% per annum. As to the revolving loan,

Romspen provided Aura Development with up to an additional $4,500,000 in

commitments.

To induce Romspen to provide such financing, Aura Development agreed to liens

on various parcels of land as collateral (the “ADG Mortgage”). However, Aura

Development had not yet taken title to a subset of the parcels it had agreed to mortgage to

Romspen (such subset, the “Unacquired Parcels”). The ADG Loan Agreement thus

provided—without precondition—that Aura Development would convey a first mortgage

on each of the Unacquired Parcels after taking title to them. As planned, Aura Development

acquired one of the Unacquired Parcels shortly thereafter, at which time the ADG

Mortgage was modified to grant Romspen a first-priority lien on that parcel. And in the

following months Aura Development drew on the loans provided by Romspen to finance

improvements benefitting the remaining Unacquired Parcels (“Parcels G and H”).

3 Trouble began when Aura Development was unable to close on Parcels G and H. In

response, Appellant Third State Investors, LLC (“Third State”)—which was controlled by

the principal of Aura Development—formed Appellant Aura Investors, LLC (“Aura

Investors” and, together with Third State and Romspen, the “Parties”) for the purpose of

taking title to Parcels G and H. Aura Investors succeeded in doing so, and it granted Third

State (x) a first-priority mortgage on both parcels to secure payment of the purchase money

funding, and (y) a second-priority mortgage on the parcels to secure all of its other

obligations to Third State. Third State recorded both mortgages on June 8, 2015.

Aura Development ultimately defaulted on its loans to Romspen by, among other

things, failing to repay all principal and interest by the May 1, 2016, maturity date specified

in the ADG Loan Agreement. As a result, the total principal and interest outstanding under

the loans provided by Romspen was accelerated as permitted by the ADG Notes. Then, in

August of 2016, Romspen filed suit (the “State Court Action”) against Aura Investors,

Aura Development, and Third State in the Superior Court of New Jersey, Gloucester

County, Chancery Division (the “State Court”), seeking relief in the form of an equitable

mortgage over Parcels G and H.

The State Court Action stretched on for several years, culminating in a final

judgment (the “Final Judgment”) that explicitly incorporated and deemed final the findings

set out in an earlier order issued by the State Court (the “May 28 Order”). In particular,

the Final Judgment incorporated the following from the May 28 Order:

Romspen is awarded a second priority equitable mortgage . . . based on the same terms and conditions, and securing the same total debt, as the May 16, 2013 Mortgage, Assignment of

4 Leases and Rents, Security Agreement, and Fixture filling given to Romspen by Aura Development Group, LLC.

JA 144 (internal parentheticals omitted); see also JA 150-51 (incorporating findings from

the May 28 Order). On October 14, 2021, Third State and Aura Investors filed a notice of

appeal with the Superior Court of New Jersey, Appellate Division, seeking to challenge

the Final Judgment and equitable mortgage. The Appellate Division affirmed the State

Court in all respects on January 22, 2024.

Third State and Aura Investors filed a complaint in the District Court shortly after

the Appellate Division affirmed the State Court. Specifically, they asserted claims under

the New Jersey Quiet Title Statute, N.J. Stat. Ann. 2A:62-1, and sought a declaratory

judgment to “fix the dollar amount” of Romspen’s equitable mortgage (the “District Court

Action”). JA 35. Romspen, for its part, filed a motion to dismiss on April 17, 2024, arguing

that the District Court Action was doomed on preclusion and other grounds.

Prior to a decision on its motion to dismiss, Romspen filed suit in the State Court

seeking to foreclose on its equitable mortgage on Parcels G and H (the “Foreclosure

Action”). Then, on November 22, 2024, the District Court granted Romspen’s pending

motion and dismissed the District Court Action with prejudice. Third Street and Aura

Investors (“Appellants”) appeal from the order dismissing their complaint.

II. JURISDICTION AND STANDARD OF REVIEW

The record before us did not clearly establish diversity jurisdiction. Under 28 U.S.C.

§ 1653, however, we are authorized to grant leave to amend jurisdictionally defective

pleadings. To that end, on August 21, 2025, we ordered the Parties to submit supplemental

5 letter memoranda stating the basis for jurisdiction under 28 U.S.C. § 1332. On September

24, 2025, we ordered Appellants Aura Investors and Third Street to amend their complaint

or submit supporting affidavits, certifications, or other proofs to substantiate or supplement

their allegations of jurisdiction. They submitted a further supplemental letter explaining

the basis for jurisdiction and identifying the citizenship of each of the Parties, which

confirmed diversity jurisdiction. Accordingly, we proceed with subject matter jurisdiction

under 28 U.S.C. § 1332(a) and appellate jurisdiction under 28 U.S.C. § 1291.

“We exercise fresh review over the District Court’s dismissal of the suit under

Federal Rule of Civil Procedure 12(b)(1).” Vuyanich v. Smithton Borough, 5 F.4th 379,

384 (3d Cir. 2021). Likewise, we exercise de novo review over an appeal from the District

Court’s grant of a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Marshall v. Lauriault,

372 F.3d 175, 179 (3d Cir. 2004). We construe the complaint liberally and accept all

factual allegations therein as true. In re Lipitor Antitrust Litig., 868 F.3d 231, 249 (3d Cir.

2017). “The dismissal will be upheld if we agree with the District Court that the Appellants

can prove no set of facts that would entitle them to relief.” Marshall, 372 F.3d at 179.

III. ISSUE PRECLUSION CONTROLS 2

In relevant part, issue preclusion “bars successive litigation of an issue of fact or

2 The District Court dismissed Appellants’ complaint based on claim preclusion, issue preclusion, and the Rooker-Feldman doctrine (which generally prohibits federal courts, but for the Supreme Court, from reviewing state court decisions without explicit congressional authorization). As we explained in a recent decision, the Rooker-Feldman doctrine has a narrow application and “does not ‘supersed[e] the ordinary application of preclusion law’ when a plaintiff relitigates a matter decided in another forum.” In re Adams, 151 F.4th 144, 152 (3d Cir. 2025) (quoting Exxon Mobil Corp. v. Saudi Basic Indus., 544 U.S. 280, 281 (2005)) (alteration in original). Because we agree with the District Court that issue 6 law that was actually litigated, resolved in a valid court determination, and essential to that

prior judgment, even if the issue recurs in the context of a different claim.” In re Adams,

151 F.4th 144, 153 (3d Cir. 2025) (cleaned up). As we have explained, the doctrine applies

when “(1) the issue sought to be precluded is the same as that involved in the prior action;

(2) that issue was actually litigated; (3) it was determined by a final and valid judgment;

and (4) the determination was essential to the prior judgment.” Burlington N. R. v. Hyundai

Merch. Marine, 63 F.3d 1227, 1231–32 (3d Cir. 1995) (cleaned up). Each element is

satisfied here.

As the District Court observed, the Parties devoted significant attention throughout

the State Court Action to litigating the scope and dollar amount of Romspen’s equitable

mortgage. This process culminated in the Final Judgment, which incorporated an earlier

finding by the State Court that Romspen held a second priority equitable mortgage “on the

same terms and conditions, and securing the same total debt, as the [ADG Mortgage].” JA

144 (internal parentheticals omitted); see also JA 150-51 (incorporating findings from the

May 28 Order). After the Appellate Division affirmed the Final Judgment, Appellants

asked the District Court “to fix the dollar amount of Romspen’s equitable mortgage and

determine whether it has been [s]atisfied.” JA 44-46. Thus, they seek to relitigate precisely

the issue that was both litigated and determined by a final judgment in state court, and the

preclusion controls, we decline to plumb the narrow depths of the Rooker-Feldman doctrine here. Laurel Gardens, LLC v. McKenna, 948 F.3d 105, 116 (3d Cir. 2020) (“[W]e may affirm on any ground supported by the record . . . .”). 7 doctrine of issue preclusion prohibits their attempt to do so. 3

Appellants dispute this outcome by asserting that the Final Judgment did not

liquidate and explicitly state the face value of the equitable mortgage. And while that

argument is clever, it misses the mark. Indeed, as the District Court explained in its oral

decision, the exact dollar amount of the equitable mortgage was determined by the ADG

Mortgage. In other words, the State Court Action ended in a determination that the current

amount of the equitable mortgage may ebb and flow with the ADG Mortgage based on the

terms and conditions in the ADG Loan Agreement. That the State Court did not list the

precise dollar value of the ADG Mortgage—and therefore the equitable mortgage—as of

the date of the Final Judgment does not mean that Appellants enjoy a second bite at the

apple with respect to determining the scope and face value of the equitable mortgage. 4

As ordered by incorporation into the Final Judgment, the equitable mortgage secures

the same total debt as the ADG Mortgage, and the doctrine of issue preclusion bars

Appellants from challenging that determination before the District Court. If they wish to

liquidate the current value of the equitable mortgage, the Foreclosure Action is the

appropriate venue. See, e.g., Cent. Penn Nat’l Bank v. Stonebridge Ltd., 448 A.2d 498, 504

3 Equally as relevant to our conclusion that Appellants seek to relitigate the amount and scope of the equitable mortgage, rather than simply fix its present value, is that they sought a judgment from the District Court declaring that the equitable mortgage is limited by Romspen’s cost-sharing advances. The State Court considered and ultimately dispensed with that argument when it determined that the equitable mortgage secured “the same total debt” as the ADG Mortgage. JA 144. 4 Notably, Appellants made much of the fact that the Final Judgment does not specifically quantify the value of Romspen’s mortgage during the state court process as well. Like we do here, the State Court and Appellate Division rejected that argument at every turn. 8 (N.J. Super. Ct. Ch. Div. 1982) (“The purpose of a foreclosure action is to determine the

right to foreclosure and the amount due on the mortgage . . . .”).

* * *

We thus affirm the dismissal of Appellants’ complaint.