Borrower Assails Lender In Federal Court – Again – And Loses

This is not such an atypical story – lenders and servicers will recognize it (with dismay) – but with a welcome result.  Why the lender wins is a subject reviewed in previous alerts, but well worthy of a revisit.

What rescues the lender is the Rooker-Feldman doctrine and it is reported in a new case, Jones v. Phelps Corporation, 2014 WL 2195944 (N.D.N.Y.).

The facts lead to the happy legal conclusion.  Borrower defaults on his mortgage and a foreclosure is commenced.  This leads to a judgment of foreclosure and sale, an auction sale and eviction proceedings in a state court, followed by a warrant of eviction.  Just to set the stage for the borrower’s attack which readers will recognize as coming, observe that previously the borrower defaulted in paying taxes, eliciting a tax lien foreclosure and the need for the mortgage holder to pay those taxes. The borrower then sued the lender in federal court alleging a usurious mortgage which the lender successfully beat back.

Now, after the inevitable foreclosure and an imminent eviction, comes the borrower seeking in federal district court (among other things) a temporary restraining order claiming that the lender misused and abused the state court system by filing a defective and unlawful foreclosure action in state court and obtaining a favorable judgment.  There was also a separate attack on the warrant of eviction.

Will any of this work?  No.  The borrower’s claims are precluded by the Rooker-Feldman doctrine which provides that the Supreme Court of the United States is the only federal court empowered to exercise appellate jurisdiction over state court judgments.  Similarly, the doctrine bars federal courts from considering claims inextricably intertwined with a prior state court determination.

Further, the essence of the doctrine prohibits what in essence would be a losing party’s claim that the state judgment itself violates the loser’s federal rights.

In the end, federal courts in New York have consistently ruled that any attack on a judgment of foreclosure is clearly barred by the Rooker-Feldman doctrine.

And so the borrower loses here.  As always, however, the lender was forced to defend the litigation, incur the costs and lose the time.  Even when totally wrong, obstreperous borrowers can make that happen.  The ploy will no doubt be repeated for all the years any of us will be involved with mortgage foreclosures, but lenders can be confident that the borrowers will just as regularly lose the gambit.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.