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Markey v. Wells Fargo Bank, N.A.

United States District Court, D. Maryland, Southern Division

March 20, 2019

MARY MARKEY, Plaintiff,
WELLS FARGO BANK, N.A., et al., Defendant.


          Paul W. Grimm United States District Judge.

         Mary Markey, a Maryland resident, lost her Florida rental property (the “Property”) in a foreclosure action to which she was not a party. Am. Compl., ECF No. 1-3. U.S. Bank, National Association, as Trustee for Citigroup Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2005-3 (“U.S. Bank”), which held the Note and Deed of Trust that Ms. Markey had executed in conjunction with the mortgage loan she had obtained for the Property, had initiated the foreclosure action; Wells Fargo Bank, N.A. (“Wells Fargo”) had serviced the mortgage. More than three years later, Ms. Markey filed suit against U.S. Bank and Wells Fargo in Maryland state court, alleging violations of Maryland and federal statutes and the common law, based on the statements and representations Wells Fargo made while she attempted to pay her arrears, obtain a loan modification, appeal the denial of that modification, and otherwise avoid foreclosure. Compl., ECF No. 1-2.

         Defendants removed the lawsuit to this Court based on diversity jurisdiction. Notice of Removal, ECF No. 1; Civil Cover Sheet, ECF No. 1-1. Pending is their Motion to Dismiss, based on res judicata or Rooker- Feldman[1] abstention grounds or, alternatively, for failure to state a claim. ECF No. 19.[2] Because Ms. Markey was not a party to the foreclosure action, res judicata does not bar her claims. The Rooker-Feldman doctrine also is not a bar. But, the statutes of limitations ran on all but her breach of contract/covenant of good faith and fair dealing claim before she filed suit, and Ms. Markey fails to state a claim for breach of contract. Therefore, I will grant Defendants' motion. I will, however, allow Plaintiff to amend her pleadings with regard to her one timely claim for breach of contract.

         Background [3]

         Ms. Markey obtained the mortgage from U.S. Bank, secured by a rental property she purchased in Florida (the “Property”), and she executed a Note and Deed of Trust of the Property in favor of the note holder on May 4, 2005. Am. Compl. ¶¶ 5, 9. Wells Fargo serviced the loan. Id. ¶ 4. While Ms. Markey was preoccupied with “serious health and mental health issues” in late 2012, “the auto-debits for her mortgage on the Subject Property apparently [did] not go[] through, ” and Ms. Markey defaulted on her loan. Id. ¶¶ 11-14. Then, in early January 2013, she learned from Wells Fargo that “her loan had been referred to foreclosure.” Id. ¶¶ 14-16. She attempted to negotiate a loan modification, but she claims that the modification was “wrongfully denied” after “a 26-month torturous process . . . that . . . put her payments in huge arrears . . . .” Id. ¶ 19.

         On June 28, 2013, U.S. Bank instituted foreclosure proceedings in Florida state court. See State Ct. Docket, ECF No. 19-2; see also State Ct. Docket, The summons for Ms. Markey was “returned not served, ” after which U.S. Bank sought and was granted permission to effect service by publication; notice was posted in a local newspaper in Florida once a week for two consecutive weeks. State Ct. Docket.

         Ms. Markey alleges that, while the foreclosure action was pending, she was informed “of multiple foreclosure sales dates scheduled, then lifted, then rescheduled.” Pl.'s Opp'n 6-7 (citing Am. Compl. ¶¶ 22-26).[4] She submitted “more and more repetitive documents” that defendants requested as part of the loan modification process; appealed the denial of the loan modification; and was told “not to worry about a foreclosure sale, that [Defendants' representative] would seek a postponement of the sale date just like she had done before.” Id. After U.S. Bank postponed the sale various times, the Property was sold through a foreclosure sale on March 5, 2015. State Ct. Docket; Am. Compl. ¶ 27. Meanwhile, Ms. Markey had gone to the hospital on January 20, 2015 and from there to a rehabilitation facility, where she remained until “mid to late March, ” when she returned home and read through “her back pile of mail” that had accumulated and learned of the foreclosure sale. Am. Compl. ¶ 27. She claims that she continued to receive correspondence from Defendants about avoiding foreclosure, even after the Property sold. Id. ¶ 28.

         Ms. Markey filed suit in Maryland state court on May 1, 2018, challenging how Defendants handled her loan after she missed payments. Compl. Specifically, she claims that Defendants “engag[ed] in unfair acts and practices in their servicing of Plaintiff's Loan, ” making representations that were “deceptive” and “purposefully and/or negligently misleading and confusing” and caused her to fall farther into arrears and ultimately default on her loan, without having the opportunity to modify it. Am. Compl. ¶¶ 19, 57-60. She lists various specific actions, such as “failure to perform its loan servicing function consistent with its responsibilities under [federal law] and its contracts with the loan holder”; “refusal to accept Plaintiff's proffered payment on the loan”; and “failure to advise Plaintiff of her right to appeal the initial denial of her modification application.” Id. ¶ 61; see also Id. ¶¶ 73, 112, 124, 135 (incorporating actions identified in ¶ 61). She claims damages including a lowered credit score, costs and fees, the loss of her property, and “extreme anxiety and emotional distress contributing to the transient ischemic attack (‘TIA') (mini-stroke) she suffered in 2013 and her weakened immune system that [is] exacerbating her battle with cancer.” Id. ¶¶ 67, 84, 98, 105, 113, 130; see also Id. ¶ 135 (claiming only physical damage for negligent infliction of emotional distress count).

         Standard of Review

         Pursuant to Rule 12(b)(6), Markey's Amended Complaint is subject to dismissal if it “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), and must state “a plausible claim for relief, ” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Rule 12(b)(6)'s purpose “‘is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.'” Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012) (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)).

         Defendants assert res judicata as an affirmative defense. The Court may consider affirmative defenses such as res judicata on motions to dismiss only when they “clearly appear[] on the face of the complaint.” Kalos v. Centennial Sur. Assocs., No. CCB-12-1532, 2012 WL 6210117, at *2 (D. Md. Dec. 12, 2012) (quoting Andrews v. Daw, 201 F.3d 521, 524 n.1 (4th Cir. 2000) (citation and quotation marks omitted)). That is the case here, as the suit concerns the propriety of foreclosure proceedings in a Florida state court. Therefore, I will consider res judicata as a basis for dismissal. See id.


         The Rooker-Feldman doctrine “holds that ‘lower federal courts are precluded from exercising appellate jurisdiction over final state-court judgments.'” Thana v. Bd. of License Comm'rs for Charles Cty., Md., 827 F.3d 314, 319 (4th Cir. 2016) (quoting Lance v. Dennis, 546 U.S. 459, 463 (2006) (per curiam)). It “assesses only whether the process for appealing a state court judgment to the Supreme Court under 28 U.S.C. § 1257(a) has been sidetracked by an action filed in a district court specifically to review that state court judgment.” Id. at 320. Thus, the doctrine “is to play” a “narrow role” and is “confined to ‘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.'” Id. at 319, 320 (quoting Lance, 546 U.S. at 464 (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005))). Indeed, “the Supreme Court has noted repeatedly that, since the decisions in Rooker and Feldman, it has never applied the doctrine to deprive a district court of subject matter jurisdiction, ” and, “since Exxon, [the Fourth Circuit has] never, in a published opinion, held that a district court lacked subject matter jurisdiction under the Rooker-Feldman doctrine.” Id. at 320.

         Notably, “federal courts may still entertain claims the state court examined, so long as those claims do not challenge the state-court decision itself.” Lane v. Anderson, 660 Fed.Appx. 185, 189 (4th Cir. 2016). Defendants argue that “Plaintiff was required to defend the Florida action in Florida and assert all her claims and defenses there and may not appeal the decision or seek to vacate the judgment by filing in another court.” Defs.' Reply 3. Perhaps so. But, Ms. Markey's claims allege damages based on how Defendants handled her loan and specifically her application for a mortgage loan modification. In all but Count VII (negligent infliction of emotional distress), Ms. Markey claims damages including a lowered credit score and costs and fees, Am. Compl. ¶¶ 67, 84, 98, 105, 113, 130, and for all counts she claims “extreme anxiety and emotional distress contributing to the transient ischemic attack (‘TIA') (mini-stroke) she suffered in 2013 and her weakened immune system that [is] exacerbating her battle with cancer, ” id. ¶ 67; see also Id. ¶¶ 84, 98, 105, 113, 130, 135. “While success on these claims could call into question the validity of the state court's . . . order authorizing foreclosure, the claims do not seek appellate review of that order or fairly allege injury caused by the state court in entering that order.” Vicks v. Ocwen Loan Servicing, LLC, 676 Fed.Appx. 167, 169 (4th Cir. 2017). Thus, these claims are not barred by the Rooker-Feldman doctrine. And, although Plaintiff claims the “loss of the Subject Property” as damages, Am. Compl. ¶¶ 67, 84, 98, 105, 113, 130, she does not seek review of the state court order or injunctive relief regarding the Property in her claim for relief, id. at 18. Thus, she does not bring a direct “challenge [to] the state-court decision itself, ” which this Court would lack jurisdiction to review. See Lane, 660 Fed.Appx. at 189. Therefore, Defendants' Rooker-Feldman defense is without merit.

         Res Judicata

Under Florida law, [6]
“res judicata applies where there is: (1) identity of the thing sued for; (2) identity of the cause of action; (3) identity of the persons and parties to the action; (4) identity of the quality [or capacity] of the persons for or against whom the claim is made; and (5) the original claim was disposed on the merits.”

Kaplan v. Kaplan, 624 Fed.Appx. 680, 681 (11th Cir. 2015) (quoting Lozman v. City of Riviera Beach, Fla., 713 F.3d 1066, 1074 (11th Cir. 2013) (quotation and citation omitted) (alteration in original)). “The policy underlying res judicata is that if a matter has already been decided, the petitioner has already had his or her day in court, and for purposes of judicial economy, that matter generally will not be reexamined again in any court (except, of course, for appeals by right).” Nassar v. Nassar, No. 14-CV-1501-J-34MCR, 2017 WL 26859, at *6 (M.D. Fla. Jan. 3, 2017) (quoting Zikofsky v. Marketing 10, Inc., 904 So.2d 520, 523 (Fla. 4th Dist. Ct. App. May 25, 2005)), aff'd, 708 Fed.Appx. 615 (11th Cir. 2017), cert. denied, 139 S.Ct. 68 (2018).

         Plaintiff argues that res judicata does not apply because she never was served in the foreclosure proceeding, she never appeared, and consequently the Florida court never obtained personal jurisdiction over her. Pl.'s Opp'n 9-10. Certainly, if the Florida court lacked jurisdiction, res judicata would not bar a later suit. See Nassar, 2017 WL 26859, at *10 (“[O]nly a final judgment on the merits rendered by a court of competent jurisdiction may bar a subsequent suit raising the same claims.” (emphasis added)); Hedge v. Hedge, 816 So.2d 241, 243 (Fla. Dist. Ct. App. 2002) (holding that order that was void for lack of personal jurisdiction could not form basis for res judicata); see also Williams v. Cadlerock Joint Venture, L.P., 980 So.2d 1241, 1243 (Fla. Dist. Ct. App. 2008) (“A foreign judgment need not be recognized if the foreign court lacked either personal or subject matter jurisdiction. . . .“If . . . the defendant did not have the opportunity to contest jurisdiction, he may raise the issue subsequently in a proceeding brought to enforce the judgment.” (citations omitted)).

         And, while the state court docket shows that Ms. Markey ultimately was served, it was constructive service by publication after the summons initially was “returned not served.” See State Ct. Docket; see also Fla. Stat. Ann. § 49.011(1) (“Service of process by publication may be made in any court on any party identified in § 49.021 in any action or proceeding: . . . [t]o enforce any legal or equitable lien or claim to any title or interest in real or personal property within the jurisdiction of the court . . . .”). “‘The case law is clear . . . that constructive service by publication under [section 49.011(1), Florida Statutes] cannot confer a court with jurisdiction over a person.' Rather, constructive service confers only in rem jurisdiction on the trial court.” Archer v. U.S. Bank Nat'l Ass'n, 220 So.3d 477, 478 (Fla. Dist. Ct. App. 2017) (quoting Milanick v. State, 147 So.3d 34, 35 (Fla. Dist. Ct. App. 2014)). Significantly, this does not mean that the court could not proceed with the foreclosure action; “personal jurisdiction is not required to initiate a foreclosure action because foreclosure proceedings instituted against the subject property are in rem proceedings.” Id.

         Defendants argue that the Florida court nevertheless could exercise personal jurisdiction over Plaintiff based on her ownership of the Property in Florida. It is true that a nonresident of Florida, like Ms. Markey, who “[o]wn[s] . . . any real property within [Florida], ” as Ms. Markey did at the time of the foreclosure action, “thereby submits himself or herself . . . to the jurisdiction of the court of [Florida] for any cause of action arising from [that ownership].” Fla. Stat. § 48.193(1)(a)(3). But this misses the point. The fact that the court could exercise jurisdiction over Ms. Markey does not mean that it did. Rather, “service [must be] perfected as required by law” for the state court to have personal jurisdiction over the defendant. See P.S.R. Assocs. v. Artcraft-Heath, 364 So.2d 855, 857 (Fla. Dist. Ct. App. 1978); see also Fla. Stat. § 48.193(3) (“Service of process upon any person who is subject to the jurisdiction of the courts of [Florida] as provided in this section may be made by personally serving the process upon the defendant outside [Florida], as provided in § 48.194.”);[7] Nat'l League for Nursing v. Bluestone, 388 So.2d 1090, 1091 (Fla. Dist. Ct. App. 1980) (“[A] party invoking this long-arm statute must effect personal service upon the defendant pursuant to Section 48.194, Florida Statutes” to establish jurisdiction.). In the foreclosure action, U.S. Bank resorted to constructive service by publication which, as noted, cannot confer personal jurisdiction. See Archer, 220 So.3d at 478-79. Therefore, the state court did not obtain personal jurisdiction over Ms. Markey in the foreclosure proceeding. See id.

         Still, the foreclosure proceeding is an in rem proceeding over which the Florida court had subject matter jurisdiction, despite its lack of personal jurisdiction over the homeowner. SeeArcher, 220 So.3d at 478-79. Thus, this case turns on whether in rem foreclosure proceedings have preclusive effects on the property owner (as opposed to the property itself) if the owner does not submit to the court's jurisdiction but then files suit against the lenders, that is, whether the parties are identical in a subsequent proceeding when the court did not have personal jurisdiction ...

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