Tanasi v. CitiMortgage, Inc.
257 F.Supp.3d 232 (2017)
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Rule of Law:
The doctrine of res judicata bars a borrower from bringing federal claims for mortgage servicing violations if those claims are transactionally related to a prior state court foreclosure judgment and could have been raised as counterclaims in that action.
Facts:
- In 2007, Richard and Athansula Tanasi purchased a property encumbered by a mortgage loan.
- The mortgage was eventually sold to Hudson City Savings Bank (a predecessor to M&T Bank) and serviced by CitiMortgage.
- Starting in 2009, the Tanasis engaged in loss mitigation efforts with CitiMortgage, submitting their first mortgage modification application.
- On or about July 1, 2010, the Tanasis missed their first mortgage payment and made no subsequent payments.
- Between 2012 and 2016, the Tanasis submitted numerous additional mortgage modification applications and formal requests for information to CitiMortgage.
- The Tanasis alleged that during this period, CitiMortgage repeatedly solicited new applications, requested duplicative information, failed to respond to many of their submissions, and did not provide a consistently accessible single point of contact.
Procedural Posture:
- On July 18, 2011, CitiMortgage filed a foreclosure action against the Tanasis in Connecticut Superior Court (a state trial court).
- The parties engaged in the court's foreclosure mediation program, which was terminated on January 4, 2013.
- The Superior Court granted summary judgment in favor of CitiMortgage on October 10, 2014.
- On March 7, 2016, the Superior Court entered a final judgment of strict foreclosure against the Tanasis.
- The Tanasis filed an appeal of the foreclosure judgment with the Connecticut Appellate Court (a state intermediate appellate court).
- While the state appeal was pending, on May 16, 2016, the Tanasis filed this action against CitiMortgage and M&T Bank in the U.S. District Court for the District of Connecticut (a federal trial court).
- Defendants filed a motion to dismiss the Tanasis' amended complaint for lack of subject matter jurisdiction and failure to state a claim.
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Issue:
Does the doctrine of res judicata bar federal claims for mortgage servicing violations under RESPA and state law when those claims could have been raised as counterclaims in a prior state court foreclosure action that has proceeded to a final judgment?
Opinions:
Majority - Victor A. Bolden
Yes, the doctrine of res judicata bars claims that are transactionally related to the prior state foreclosure action, but not those that are independent of it. The court determined that under Connecticut's transactional test, claims concerning the improper processing of loss mitigation and mortgage modification applications are precluded because they directly relate to the enforcement of the note and mortgage and could have been raised as counterclaims in the state foreclosure proceeding. However, the Rooker-Feldman doctrine does not bar jurisdiction because the Tanasis' suit complains of injuries from the servicer's conduct, not from the state-court judgment itself, and does not seek to overturn that judgment. Therefore, claims independent of the foreclosure—such as those for failure to respond to specific requests for information, failure to provide a single point of contact, and deceptive solicitation of applications—are not barred by res judicata and may proceed.
Analysis:
This case clarifies the critical distinction between the Rooker-Feldman doctrine and res judicata in the context of post-foreclosure litigation against mortgage servicers. It establishes that while Rooker-Feldman is a narrow jurisdictional bar against direct attacks on state judgments, res judicata has a much broader preclusive effect, barring claims that 'could have been' litigated. The decision serves as a guide for pleading such cases, demonstrating that a state foreclosure judgment will preclude subsequent federal claims challenging the substance of the foreclosure (like improper denial of a modification) but may permit claims based on discrete, procedural servicing violations that are not transactionally related to the enforcement of the mortgage.
