7th Circuit affirms dismissal of foreclosure fraud case

An Indiana man’s various federal claims against his former mortgage holders cannot proceed because federal district courts do not have jurisdiction to vacate state court decisions, the 7th Circuit Court of Appeals ruled Wednesday.

In Eric Mains v. Citibank, N.A., et al., 16-1985, Eric Mains executed a mortgage on his home with Washington Mutual in December 2006 and made payments for two years. When Washington Mutual failed in 2008, Chase Bank purchasing Main’s mortgage and note, then assigned the mortgage and note to Citibank in 2010.

Mains began falling behind on his mortgage payments and discontinued them in March 2009, prompting Nelson & Frankenberger P.C. to send him a default and acceleration notice. In 2010, Citibank filed a foreclosure action against Mains in Clark Circuit Court.

The state court eventually granted summary judgment to Citibank in May 2013, and after failing to get a decision in his favor in the Indiana appellate courts, Mains filed a complaint in the U.S. District Court for the Southern District of Indiana in March 2015. In his federal complaint, Mains alleged that he had discovered new evidence of fraud that could not have been presented to the state court and included alleged violations of state and federal law.

The district court dismissed Mains’ complaint for lack of subject matter jurisdiction, finding that his claims would nullify the state court judgment if resolved in his favor. Mains then appealed to the 7th Circuit Court of Appeals, but the appellate court affirmed, though with a modification to a dismissal without prejudice.

In his appeal, Mains argued that the district court erred in dismissing his claim on the basis of the Rooker-Feldman doctrine, which “prevents lower federal courts from exercising jurisdiction over cases brought by state-court losers challenging state-court judgments rendered before the district court proceedings commenced.” But Chief Judge Diane Wood wrote in the appellate court’s Wednesday opinion that federal claims not raised in state court can trigger Rooker-Feldman if they are closely enough related a state-court judgment.

“Reading through the verbiage of Mains’ filings, we are left with the impression that the foundation of the present suit is his allegation that the state court’s foreclosure judgment was in error because it rested on a fraud perpetrated by the defendants,” Wood wrote. “Mains wants the federal courts to redress that wrong. That is precisely what Rooker-Feldman prohibits, however.”

Instead, Wood said Indiana law allows a party to file for relief from judgment based on newly discovered evidence or based on fraud or misrepresentation under Indiana Trial Rule 60(B).

Mains further claimed that Chase and Citibank violated the Truth in Lending Act by misrepresenting payments due and his related obligations, and by failing to respond to his rescission, but Wood said that issue is also barred by Rooker-Feldman because it would require the 7th Circuit to vacate the state court decision on the issue.

Mains made additional claims, including injuries in the form of attorney fees, a RICO conspiracy and further violations of federal law, but Wood wrote each issue was either barred by the Rooker-Feldman doctrine or by issue preclusion.

Finally, Mains attempted to bring a federal fraud claim against Cynthia Riley in her former capacity as vice president of Washington Mutual. But Woods wrote the proper party to sue would have been Washington Mutual itself, and such a suit would have been blocked by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.