United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, DISTRICT JUDGE.
Malden sued Bank of America, Fannie Mae, and Real Property
Services in state court. In her lawsuit, Ms. Malden sought to
overturn a judgment of foreclosure entered against her in
state court, and she sought damages on claims for breach of
contract, violation of the Illinois Consumer Fraud Act, and
other claims. Bank of America and Fannie Mae removed the case
to federal court based on diversity of citizenship, saying
that Ms. Malden had actually asserted no claims against Real
Property Management, so that company should be disregarded
for purposes of determining diversity. Ms. Malden then filed
an amended complaint essentially confirming this, as she
named only Bank of America and Fannie Mae as defendants.
Defendants have now moved to dismiss Ms. Malden's suit on
the basis of res judicata, or claim preclusion.
reasons stated below, the Court grants defendants' motion
Court takes the facts from Ms. Malden's amended complaint
and its attachments, as well as documents referenced in the
complaint, as well as materials from the court record of the
foreclosure lawsuit, which the Court may consider even though
this is a motion to dismiss under Rule 12(b)(6), because Ms.
Malden refers so extensively to the state court suit in her
complaint. See, e.g., Reed v. Palmer, 906 F.3d 540,
548 (7th Cir. 2018); Henson v. CSC Credit Servs., 29
F.3d 280, 284 (7th Cir. 1994).
2006, Ms. Malden obtained a home mortgage loan with
Countrywide Bank. The loan was secured by a real estate
mortgage in favor of Mortgage Electronic Registration
Systems, Inc. (MERS), as nominee for Countrywide and its
successors and assigns. MERS later assigned the mortgage to
BAC Home Loans Servicing, LP. BAC merged into Bank of
filed suit against Ms. Malden in state court in 2011,
alleging she had defaulted on her loan and seeking
foreclosure. To the best of this Court's knowledge, Ms.
Malden asserted no counterclaims. The state court entered a
judgment of foreclosure and sale against Malden in 2013. In
March 2018, the state court entered an order approving a
sheriff's sale of the property, directing the issuance of
a deed to Bank of America, and giving Bank of America
possession of the property.
Malden filed the present lawsuit about a year later, in March
2019. In her amended complaint, Ms. Malden alleges that
Countrywide engaged in a scheme "to fraudulently get
homeowners to take out loans that they could not afford by
using fraudulent or false documentation to get homeowners
approved." Am. Compl. (dkt. no. 9), p. 9 of 46, see
also id., p. 11 of 46. This generated large commissions
for Countrywide salespeople. Id., p. 12 of 46. Ms.
Malden alleges that in her case, the loan agent had her leave
the date blank when she signed the relevant papers, see
id., and apparently filled this in later, which she
alleges was fraudulent. See Id. Ms. Malden also
alleges that a Countrywide representative said he would get
her loan approved by relying on the amounts held in her
retirement account, which she also alleges was fraudulent.
See id., p. 15 of 46. With respect to the
foreclosure case, Ms. Malden contends that Bank of America
could not prove that it was a valid holder of her note and
mortgage, and she says that the defendants never were able to
produce her original promissory note despite her requests.
See id., p. 18 of 46. She contends that the state
court judge improperly found against her in the state court
case for these reasons. See Id. Ms. Malden also
appears to allege that the claimed assignment of her note and
mortgage was inappropriate and a breach of contract, see
id., pp. 21-22 of 46, and/or that the transfer of her
loan into a pool was a breach of contract and/or fraud,
see id., p. 23 of 46.
contend that Ms. Malden's claims are barred by the
doctrine of res judicata, or claim preclusion. The
preclusive effect of a state-court judgment is determined by
the law of the state where the judgment was rendered, in this
case Illinois. 28 U.S.C. § 1738; Marrese v. Am.
Academy of Orthopaedic Surgeons, 470 U.S. 373, 380
(1985). In order for claim preclusion to bar a subsequent
lawsuit under Illinois law, there must be a final judgment on
the merits by a court of competent jurisdiction; an identity
of the causes of action; and an identity of the parties or
their privies. Rein v. David A. Noyes & Co., 172
Ill.2d 325, 337, 665 N.E.2d 1199, 1205 (1996). If these three
elements are present, claim preclusion "will bar not
only every matter that was actually determined in the first
suit, but also every matter that might have been raised and
determined in that suit." Id. at 338, 665
N.E.2d at 1205.
first and third of the three requirements are unquestionably
met. Specifically, the state court's approval of the
sheriff's sale of the property constituted a final
judgment on the merits. See HSBC Bank USA, N.A. v.
Townsend, 793 F.3d 771, 775-76 (7th Cir. 2015)
(foreclosure not final until sale of property). And the same
parties-Ms. Malden and Bank of America-were opposing
litigants in both cases.
the second requirement, the current case and the foreclosure
suit involve the same "cause of action" as Illinois
claim preclusion law uses that term. Separate claims are
considered part of the same cause of action for purposes of
claim preclusion if they arise from a single group of
operative facts, even if different theories of relief are
involved. See Huon v. Johnson & Bell, Ltd., 757
F.3d 556, 558 (7th Cir. 2014) (applying Illinois law). Both
the state-court foreclosure suit and Ms. Malden's current
suit arise from the same group of facts, specifically the
execution and performance of the note and mortgage.
the point, "Illinois preclusion law bars a party from
raising a claim in a subsequent proceeding that would have
constituted a defense or counterclaim in a prior action if
the successful prosecution of the later claim would nullify
rights established by the prior action." Henry v.
Farmer City State Bank, 808 F.2d 1228, 1235 (7th Cir.
1986). As in Henry, Ms. Malden's
"allegations of fraud . . ., if substantiated, would
have been a complete defense to the foreclosure
proceedings." Id. Having failed to assert those
allegations in state court, Ms. Malden cannot, in effect,
attack the state court judgment by filing a fresh suit based
on the same facts. See also, e.g., Whitaker v. Ameritech
Corp.,129 F.3d 952, 957 ...