Merrick v. CitiMortgage, Inc. 12-CV-263-SM 3/5/13 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
John and Joanne Merrick. Plaintiffs
v. Case No. 12-cv-263-SM Opinion No. 2013 DNH 027 CitiMortgage, Inc., Defendant
O R D E R
Pro se plaintiffs John and Joanne Merrick filed this action
in state court, seeking to enjoin the foreclosure of their home.
In essence, they claim CitiMortgage, Inc. ("Citi") has failed to
demonstrate - at least to the Merricks' own satisfaction - that
it is the holder of the mortgage deed to their home.
Consequently, say the Merricks, Citi lacks the legal authority to
foreclose on that mortgage.
Citi removed the proceeding to this forum, see 28 U.S.C.
§ 1441, and now moves to dismiss the Merricks' complaint, saying
it is barred by the doctrine of res judicata. The Merricks
obj ect.
Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must "accept as true all well-pleaded facts set out in the complaint and indulge all reasonable inferences in
favor of the pleader." SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). A defendant is entitled to dismissal only if it
demonstrates that "it clearly appears, according to the facts
alleged, that the plaintiff cannot recover on any viable theory."
Langadinos v. American Airlines, Inc., 199 F.3d 68, 69 (1st Cir.
2000). But, as the court of appeals has noted:
In passing upon a motion to dismiss for failure to state a claim, the reviewing court's focus on the well- pleaded facts is more expansive than might first be thought. Within that rubric, the court may consider matters fairly incorporated within the complaint and matters susceptible of judicial notice. Thus, where the motion to dismiss is premised on a defense of res judicata — as is true in the case at hand — the court may take into account the record in the original action.
Andrew Robinson Intern., Inc. v. Hartford Fire Ins. Co., 547 F.3d
48, 51 (1st Cir. 2008). See also In re Colonial Mort. Bankers
Corp.. 324 F.3d 12, 19 (1st Cir. 2003) ( " M a t t e r s of public
record are fair game in adjudicating Rule 12(b)(6) motions, and a
court's reference to such matters does not convert a motion to
dismiss into a motion for summary judgment.").
Here, in support of its assertion that the Merricks' claims
are barred by res judicata, Citi has attached to its motion
several pleadings filed in Mr. Merrick's chapter 13 bankruptcy,
2 an order issued by the bankruptcy court, and a copy of the
court's electronic docket in Mr. Merrick's bankruptcy.
Background
On May 27, 2 008, John and Joanne Merrick borrowed money
from, and executed a promissory note in favor of, Citicorp Trust
Bank. That loan was secured by a mortgage deed to the Merricks'
home in Manchester, New Hampshire. It was duly recorded in the
Hillsborough County Registry of Deeds. Subsequently, Citicorp
Trust Bank assigned both the mortgage and the underlying
promissory note to CitiMortgage. That assignment was also
recorded in the registry of deeds. See Exhibit 6 to Plaintiffs'
Objection (document no. 6-7), "Assignment of Mortgage." Then, in
January of 2012, the note was assigned to Citibank, NA. Exhibit
7 to Plaintiff's Objection (document no. 6-8). It appears,
however, the Citi retained the mortgage deed and acted as the
"servicer" of the note - that is, the entity to which the
Merricks made periodic payments.
At some undisclosed time, the Merricks defaulted on their
loan. Then, in May of 2011, John Merrick filed a chapter 13
bankruptcy petition. In conjunction with his petition, Mr.
Merrick brought an adversary proceeding against Citi, asserting
that it lacked the authority to foreclose the mortgage on his
3 home. In his complaint against Citi, Mr. Merrick explained that
"[t]he point at issue is whether or not the Defendant has valid
proof of claim and therefore standing to enforce the instrument."
Exhibit 2 to Defendant's Memorandum, "Declaratory Judgment for
Verification of Debt" (document no. 4-3) at 2. And, as part of
his prayer for relief, Mr. Merrick asked the bankruptcy court to
release all claims that Citi might have against him, enjoin it
from foreclosing the mortgage deed to his home, and declare that
the promissory note he and his wife had executed had been
"Settled in Full." Jd. at 9.
In the months following initiation of his adversary
complaint, Mr. Merrick failed to comply with several orders of
the bankruptcy court and, on January 4, 2012, the court dismissed
his bankruptcy petition "for cause, specifically, unreasonable
delay by the Debtor that is prejudicial to creditors and failure
to comply with Court orders." Exhibit 3 to Defendant's
memorandum (document no. 4-4) at 2. Then, on May 15, 2 012, the
bankruptcy court dismissed Mr. Merrick's adversary proceeding as
well. Exhibit 4 (document no. 4-5) at 4.
Citi asserts that the claims advanced by the Merricks in
this proceeding are barred by the doctrine of res judicata.
4 Accordingly, it says it is entitled to dismissal of the Merricks'
complaint.
Discussion
Because Citi seeks to give preclusive effect to the
bankruptcy court's dismissal of Mr. Merrick's adversary
proceeding, federal law of res judicata applies. See, e.g.. In
re lannochino, 242 F.3d 36, 41 (1st Cir. 2001) ("Federal res
judicata principles govern the res judicata effect of a judgment
entered in a prior federal suit, including judgments of the
bankruptcy court."). As the Supreme Court has observed, the
federal doctrine of res judicata provides that a "final judgment
on the merits of an action precludes the parties or their privies
from relitigating issues that were or could have been raised in
that action." Allen v. McCurrv, 449 U.S. 90, 94 (1980).
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.
5 A. Final Judgment on the Merits.
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 Citi. 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
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Merrick v. CitiMortgage, Inc. 12-CV-263-SM 3/5/13 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
John and Joanne Merrick. Plaintiffs
v. Case No. 12-cv-263-SM Opinion No. 2013 DNH 027 CitiMortgage, Inc., Defendant
O R D E R
Pro se plaintiffs John and Joanne Merrick filed this action
in state court, seeking to enjoin the foreclosure of their home.
In essence, they claim CitiMortgage, Inc. ("Citi") has failed to
demonstrate - at least to the Merricks' own satisfaction - that
it is the holder of the mortgage deed to their home.
Consequently, say the Merricks, Citi lacks the legal authority to
foreclose on that mortgage.
Citi removed the proceeding to this forum, see 28 U.S.C.
§ 1441, and now moves to dismiss the Merricks' complaint, saying
it is barred by the doctrine of res judicata. The Merricks
obj ect.
Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must "accept as true all well-pleaded facts set out in the complaint and indulge all reasonable inferences in
favor of the pleader." SEC v. Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). A defendant is entitled to dismissal only if it
demonstrates that "it clearly appears, according to the facts
alleged, that the plaintiff cannot recover on any viable theory."
Langadinos v. American Airlines, Inc., 199 F.3d 68, 69 (1st Cir.
2000). But, as the court of appeals has noted:
In passing upon a motion to dismiss for failure to state a claim, the reviewing court's focus on the well- pleaded facts is more expansive than might first be thought. Within that rubric, the court may consider matters fairly incorporated within the complaint and matters susceptible of judicial notice. Thus, where the motion to dismiss is premised on a defense of res judicata — as is true in the case at hand — the court may take into account the record in the original action.
Andrew Robinson Intern., Inc. v. Hartford Fire Ins. Co., 547 F.3d
48, 51 (1st Cir. 2008). See also In re Colonial Mort. Bankers
Corp.. 324 F.3d 12, 19 (1st Cir. 2003) ( " M a t t e r s of public
record are fair game in adjudicating Rule 12(b)(6) motions, and a
court's reference to such matters does not convert a motion to
dismiss into a motion for summary judgment.").
Here, in support of its assertion that the Merricks' claims
are barred by res judicata, Citi has attached to its motion
several pleadings filed in Mr. Merrick's chapter 13 bankruptcy,
2 an order issued by the bankruptcy court, and a copy of the
court's electronic docket in Mr. Merrick's bankruptcy.
Background
On May 27, 2 008, John and Joanne Merrick borrowed money
from, and executed a promissory note in favor of, Citicorp Trust
Bank. That loan was secured by a mortgage deed to the Merricks'
home in Manchester, New Hampshire. It was duly recorded in the
Hillsborough County Registry of Deeds. Subsequently, Citicorp
Trust Bank assigned both the mortgage and the underlying
promissory note to CitiMortgage. That assignment was also
recorded in the registry of deeds. See Exhibit 6 to Plaintiffs'
Objection (document no. 6-7), "Assignment of Mortgage." Then, in
January of 2012, the note was assigned to Citibank, NA. Exhibit
7 to Plaintiff's Objection (document no. 6-8). It appears,
however, the Citi retained the mortgage deed and acted as the
"servicer" of the note - that is, the entity to which the
Merricks made periodic payments.
At some undisclosed time, the Merricks defaulted on their
loan. Then, in May of 2011, John Merrick filed a chapter 13
bankruptcy petition. In conjunction with his petition, Mr.
Merrick brought an adversary proceeding against Citi, asserting
that it lacked the authority to foreclose the mortgage on his
3 home. In his complaint against Citi, Mr. Merrick explained that
"[t]he point at issue is whether or not the Defendant has valid
proof of claim and therefore standing to enforce the instrument."
Exhibit 2 to Defendant's Memorandum, "Declaratory Judgment for
Verification of Debt" (document no. 4-3) at 2. And, as part of
his prayer for relief, Mr. Merrick asked the bankruptcy court to
release all claims that Citi might have against him, enjoin it
from foreclosing the mortgage deed to his home, and declare that
the promissory note he and his wife had executed had been
"Settled in Full." Jd. at 9.
In the months following initiation of his adversary
complaint, Mr. Merrick failed to comply with several orders of
the bankruptcy court and, on January 4, 2012, the court dismissed
his bankruptcy petition "for cause, specifically, unreasonable
delay by the Debtor that is prejudicial to creditors and failure
to comply with Court orders." Exhibit 3 to Defendant's
memorandum (document no. 4-4) at 2. Then, on May 15, 2 012, the
bankruptcy court dismissed Mr. Merrick's adversary proceeding as
well. Exhibit 4 (document no. 4-5) at 4.
Citi asserts that the claims advanced by the Merricks in
this proceeding are barred by the doctrine of res judicata.
4 Accordingly, it says it is entitled to dismissal of the Merricks'
complaint.
Discussion
Because Citi seeks to give preclusive effect to the
bankruptcy court's dismissal of Mr. Merrick's adversary
proceeding, federal law of res judicata applies. See, e.g.. In
re lannochino, 242 F.3d 36, 41 (1st Cir. 2001) ("Federal res
judicata principles govern the res judicata effect of a judgment
entered in a prior federal suit, including judgments of the
bankruptcy court."). As the Supreme Court has observed, the
federal doctrine of res judicata provides that a "final judgment
on the merits of an action precludes the parties or their privies
from relitigating issues that were or could have been raised in
that action." Allen v. McCurrv, 449 U.S. 90, 94 (1980).
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.
5 A. Final Judgment on the Merits.
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 Citi. 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).
B. Identity of Parties or Privies.
Citi 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.
6 Although she was not a named plaintiff in her husband's
adversary complaint against Citi, 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 benefitted 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." Adversary Complaint (document no. 4-3) at 10.
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
7 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).
C. 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).
8 Conclusion
In light of the foregoing, and for the reasons set forth in
defendant's memorandum (document no. 4-1) , the claim advanced by
Mr. and Mrs. Merrick against Citi in this proceeding is barred by
the doctrine of res judicata. CitiMortgage's motion to dismiss
(document no. 4) is, therefore, granted. The Clerk of Court
shall enter judgment in accordance with this order and close the
case.
SO ORDERED.
Steven J./McAuliffe United States District Judge
March 5, 2013
cc: John Merrick, pro se Joanne Merrick, pro se John A. Houlihan, Esq. Alexander G. Henlin, Esq.