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Bozek v. Bank of America N.A.

United States District Court, N.D. Illinois, Eastern Division

October 28, 2016

JOSEF BOZEK and EVA BOZEK, Plaintiffs,
v.
BANK OF AMERICA, N.A., PNC BANK, and PNC MORTGAGE, Defendants.

          MEMORANDUM OPINION AND ORDER

          HON. JORGE L. ALONSO United States District Judge.

         Plaintiffs Josef Bozek and Eva Bozek, who are facing foreclosure of the mortgage on their home, brought this action against their lenders, and they now seek leave to file a second amended complaint. The motion [60] is granted, but this action is stayed pursuant to the Colorado River abstention doctrine pending the outcome of the state-court foreclosure proceeding. The parties are directed to notify this Court when a final order has been entered in that foreclosure proceeding.

         BACKGROUND

         Plaintiffs are the defendants in a foreclosure action, case no. 2010-CH-47361, in the Circuit Court of Cook County, in which BANA seeks to foreclose on a mortgage on plaintiffs' property at 616 The Lane, Hinsdale, Illinois. The mortgage secured a $490, 000 loan plaintiffs received from PNC's predecessor, National City Bank, in order to purchase the property. PNC brought the foreclosure action against plaintiffs in 2010. In 2011, while the foreclosure action remained pending, PNC assigned the note and mortgage to BANA.

         In November 2014, plaintiffs filed a declaratory judgment action, case no. 2014-CH-19090 in the Circuit Court of Cook County, seeking a declaration that the note and mortgage are void because they are misleading, not properly notarized, and on their face not in compliance with applicable regulations, including the federal Truth in Lending Act (“TILA”).

         On October 28, 2015, in the foreclosure action, the state court granted BANA's motion for summary judgment and entered a judgment of foreclosure and sale.[1]

         On February 17, 2016, the circuit court dismissed the declaratory action with prejudice. On March 17, 2016, plaintiffs filed a timely appeal, which remains pending.

         Plaintiffs filed this case on March 14, 2016, asserting violations of TILA, including failure to respond to plaintiffs' rescission notice within 20 days of receipt, and failure to cancel the note and mortgage. Plaintiffs filed an amended complaint on May 10, 2016, and PNC and BANA both moved to dismiss. On the date that plaintiffs' response brief was due, plaintiffs instead filed a motion for leave to file a second amended complaint. The proposed second amended complaint abandons the TILA claims asserted in the previous complaints in favor of a number of other claims in eleven counts: (1) negligent damage to credit, (2) declaratory judgment, (3) temporary restraining order and preliminary injunction to enjoin the foreclosure sale, (4) fraudulent misrepresentation, (5) breach of good faith and fair dealing, (6) quiet title, (7) accounting, (8) specific performance, (9) breach of contract, (10) violation of RICO Act, 18 U.S.C. §§ 1961-1964, and (11) discrimination and violation of civil rights pursuant to the Civil Rights Act of 1871, 42 U.S.C. § 1983, the Fair Housing Act, 42 U.S.C. §§ 3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f. Broadly, the gist of the proposed second amended complaint is that defendants failed to properly apply plaintiffs' payments to their account; defendants mischaracterized plaintiffs' obligations under the note and mortgage, including by ignoring a loan modification (although plaintiffs also appear to admit that the loan modification was a “ruse” offered by a rogue “loan negotiator” rather than a valid loan modification); and defendants brought the foreclosure action even though, based on a proper understanding of plaintiffs' obligations, plaintiffs were not actually behind in their payments.

         Shortly after moving for leave to file the amended complaint, on June 21, 2016, plaintiffs moved for a temporary restraining order staying the foreclosure sale of plaintiffs' property, which was scheduled for June 27, 2016. Plaintiffs claimed that they had removed the foreclosure action to federal court in July 2015, where it was given case number 15 C 6739, and the case was never properly remanded, so the state court had no jurisdiction to order the sale of plaintiffs' property. At a hearing on June 23, 2016, this Court denied the motion for temporary restraining order, explaining that the motion was baseless; the district judge to whom case number 15 C 6739 had been assigned (not the undersigned judge) had dismissed the case on August 25, 2015, because it was improvidently removed from state court, and under such circumstances, the state court need not wait for some sort of technical remand before it begins to exercise jurisdiction again.

         On October 13, 2016, plaintiffs filed a version of the same temporary restraining order request, stating that the foreclosure sale was set for October 18, 2016 (it had evidently been rescheduled) and again seeking to stay the foreclosure sale, on the same grounds. This Court denied the request again, on October 14, 2016, for the same reasons it gave at the June 23 hearing.

         Defendants have filed briefs in opposition to plaintiffs' motion for leave to file a second amended complaint, arguing that the motion should be denied because plaintiffs' proposed amendments would be futile. In particular, defendants argue that this court lacks subject-matter jurisdiction over plaintiffs' claims under the Rooker-Feldman doctrine and, even if the Court could exercise jurisdiction, plaintiffs fail to state a claim on which relief can be granted in any of the eleven counts of the proposed second amended complaint. PNC also argues that the case should be stayed under the Colarado River abstention doctrine.

         DISCUSSION

         Both PNC and BANA argue that the Court lacks subject-matter jurisdiction over plaintiffs' claims because they are barred by the Rooker-Feldman doctrine. This doctrine precludes district courts from exercising jurisdiction over “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.” Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005) (citing 28 U.S.C. § 1257). It bars claims that seek redress for injury allegedly caused by the state-court judgment. Iqbal v. Patel, 780 F.3d 728, 730 (7th Cir. 2015); Richardson v. Koch Law Firm, P.C., 768 F.3d 732, 733 (7th Cir. 2014).

         BANA argues that the Rooker-Feldman doctrine applies here because this lawsuit is essentially a request for this Court to review the state-court declaratory action. While some portions of plaintiffs' proposed amended complaint are reminiscent of the declaratory action, in which plaintiffs alleged essentially that the note and mortgage documents were facially deficient because they failed to comply with various regulatory requirements, the gist of the proposed second amended complaint, as the Court explained above, is that defendants failed to properly apply plaintiffs' payments to their account, mischaracterized their obligations under the note and mortgage, and brought the foreclosure action even though, based on a proper understanding of those obligations, plaintiffs were not actually behind in their payments. These claims are broadly related to the mortgage, but they have less to do with the validity of the mortgage (as in the declaratory action) than with the servicing of the ...


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