Merrick v. CitiMortgage, Inc. 12-CV-263-SM 3/5/13 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

John and Joanne Merrick. Plaintiffs

v. Case No. 12-cv-263-SM Opinion No.

CitiMortgage, Inc., Defendant

O R D E R

Pro se plaintiffs John and Joanne Merrick filed this action

in state court, seeking to enjoin the foreclosure of their home.

In essence, they claim CitiMortgage, Inc. ("Citi") has failed to

demonstrate - at least to the Merricks' own satisfaction - that

it is the holder of the mortgage deed to their home.

Consequently, say the Merricks, Citi lacks the legal authority to

foreclose on that mortgage.

Citi removed the proceeding to this forum, see

, and now moves to dismiss the Merricks' complaint, saying

it is barred by the doctrine of res judicata. The Merricks

obj ect.

Standard of Review

When ruling on a motion to dismiss under Fed. R. Civ. P.

12(b)(6), the court must "accept as true all well-pleaded facts set out in the complaint and indulge all reasonable inferences in

favor of the pleader." SEC v. Tambone,

(1st

Cir. 2010). A defendant is entitled to dismissal only if it

demonstrates that "it clearly appears, according to the facts

alleged, that the plaintiff cannot recover on any viable theory."

Langadinos v. American Airlines, Inc.,

(1st Cir.

2000). But, as the court of appeals has noted:

In passing upon a motion to dismiss for failure to state a claim, the reviewing court's focus on the well- pleaded facts is more expansive than might first be thought. Within that rubric, the court may consider matters fairly incorporated within the complaint and matters susceptible of judicial notice. Thus, where the motion to dismiss is premised on a defense of res judicata — as is true in the case at hand — the court may take into account the record in the original action.

Andrew Robinson Intern., Inc. v. Hartford Fire Ins. Co.,

(1st Cir. 2008). See also In re Colonial Mort. Bankers

Corp..

(1st Cir. 2003) ( " M a t t e r s of public

record are fair game in adjudicating Rule 12(b)(6) motions, and a

court's reference to such matters does not convert a motion to

dismiss into a motion for summary judgment.").

Here, in support of its assertion that the Merricks' claims

are barred by res judicata, Citi has attached to its motion

several pleadings filed in Mr. Merrick's chapter 13 bankruptcy,

2 an order issued by the bankruptcy court, and a copy of the

court's electronic docket in Mr. Merrick's bankruptcy.

Background

On May 27, 2 008, John and Joanne Merrick borrowed money

from, and executed a promissory note in favor of, Citicorp Trust

Bank. That loan was secured by a mortgage deed to the Merricks'

home in Manchester, New Hampshire. It was duly recorded in the

Hillsborough County Registry of Deeds. Subsequently, Citicorp

Trust Bank assigned both the mortgage and the underlying

promissory note to CitiMortgage. That assignment was also

recorded in the registry of deeds. See Exhibit 6 to Plaintiffs'

Objection (document no. 6-7), "Assignment of Mortgage." Then, in

January of 2012, the note was assigned to Citibank, NA. Exhibit

7 to Plaintiff's Objection (document no. 6-8). It appears,

however, the Citi retained the mortgage deed and acted as the

"servicer" of the note - that is, the entity to which the

Merricks made periodic payments.

At some undisclosed time, the Merricks defaulted on their

loan. Then, in May of 2011, John Merrick filed a chapter 13

bankruptcy petition. In conjunction with his petition, Mr.

Merrick brought an adversary proceeding against Citi, asserting

that it lacked the authority to foreclose the mortgage on his

3 home. In his complaint against Citi, Mr. Merrick explained that

"[t]he point at issue is whether or not the Defendant has valid

proof of claim and therefore standing to enforce the instrument."

Exhibit 2 to Defendant's Memorandum, "Declaratory Judgment for

Verification of Debt" (document no. 4-3) at 2. And, as part of

his prayer for relief, Mr. Merrick asked the bankruptcy court to

release all claims that Citi might have against him, enjoin it

from foreclosing the mortgage deed to his home, and declare that

the promissory note he and his wife had executed had been

"Settled in Full." Jd. at 9.

In the months following initiation of his adversary

complaint, Mr. Merrick failed to comply with several orders of

the bankruptcy court and, on January 4, 2012, the court dismissed

his bankruptcy petition "for cause, specifically, unreasonable

delay by the Debtor that is prejudicial to creditors and failure

to comply with Court orders." Exhibit 3 to Defendant's

memorandum (document no. 4-4) at 2. Then, on May 15, 2 012, the

bankruptcy court dismissed Mr. Merrick's adversary proceeding as

well. Exhibit 4 (document no. 4-5) at 4.

Citi asserts that the claims advanced by the Merricks in

this proceeding are barred by the doctrine of res judicata.

4 Accordingly, it says it is entitled to dismissal of the Merricks'

complaint.

Discussion

Because Citi seeks to give preclusive effect to the

bankruptcy court's dismissal of Mr. Merrick's adversary

proceeding, federal law of res judicata applies. See, e.g.. In

re lannochino,

(1st Cir. 2001) ("Federal res

judicata principles govern the res judicata effect of a judgment

entered in a prior federal suit, including judgments of the

bankruptcy court."). As the Supreme Court has observed, the

federal doctrine of res judicata provides that a "final judgment

on the merits of an action precludes the parties or their privies

from relitigating issues that were or could have been raised in

that action." Allen v. McCurrv,

(1980).

The essential elements of res judicata are: "(1) a final

judgment on the merits in an earlier action; (2) an identity of

parties or privies in the two suits; and (3) an identity of the

cause of action in both the earlier and later suits." FDIC v.

Shearson-American Express, Inc.,

, 497 (1st Cir.

1993). Here, each of those essential elements is present.

5 A. Final Judgment on the Merits.

As noted above, the bankruptcy court dismissed Mr. Merrick's

bankruptcy petition for cause and subsequently dismissed his

adversary complaint as well. Neither order contains any language

suggesting that the dismissal was without prejudice to Mr.

Merrick's refiling his claim against Citi. The order dismissing

his adversary complaint was, then, an adjudication on the merits

of that claim. See Fed. R. Bank. P. 7041(b) ("If the plaintiff

fails to prosecute or to comply with these rules or a court

order, a defendant may move to dismiss the action . . . Unless

the dismissal order states otherwise, a dismissal under this

subdivision . . . . operates as an adjudication on the merits.").

See also Fed. R. Civ. P. 41 ( (b).

B. Identity of Parties or Privies.

Citi is the defendant in both the present action and the

previously-dismissed adversary proceeding in the bankruptcy

court. The only difference in parties in the two actions is that

Mrs. Merrick is also a plaintiff in this proceeding. As the

court of appeals has noted, when the plaintiffs "are nominally

different[,] . . . the question reduces to whether the

plaintiffs, though not identical, are sufficiently in privity to

satisfy this element." In re Colonial Mortgage Bankers Corp.,

(1st Cir. 2003). They are.

6 Although she was not a named plaintiff in her husband's

adversary complaint against Citi, Mrs. Merrick's interests were

adequately represented in the bankruptcy proceeding insofar as:

(1) her interests and those of her husband were virtually

identical with regard to the claim against Citi and Mr. Merrick's

efforts to prevent the foreclosure upon the couple's home; and

(2) she would have benefitted to the same extent as her husband,

if he had prevailed on his claims against Citi in the bankruptcy

court. In fact, Mr. Merrick tacitly acknowledged his wife's

interest in the adversary proceeding when he signed his adversary

complaint against Citi as the "authorized representative for John

& Joanne Merrick." Adversary Complaint (document no. 4-3) at 10.

Accordingly, the second element of res judicata - identity

of parties or privies - is satisfied. See, e.g., Eubanks v.

FDIC,

(5th Cir. 1992) (holding that wife's

interests were sufficiently well-represented in husband's

bankruptcy proceeding to give it res judicata effect against

her); Cuauhtli v. Chase Home Fin. LLC,

(5th Cir. 2009) (holding that husband and wife were in privity,

such that wife's prior suit challenging legality of foreclosure

proceedings precluded subsequent similar claims by her husband);

In re Rhoads,

(9th Cir. BAP 2012) (finding privity

between a husband and wife with regard to claims arising out of

7 the foreclosure of jointly owned property); Hintz v. JP Morgan

Chase Bank. N .A ..

, *7 (D. Minn.,2011) ("The First

Lawsuit involved the same parties, or their privities, as the

current lawsuit. Here, Mr. Hintz, one of the two Plaintiffs in

this case, was the plaintiff in the state lawsuit. As a joint

owner of the Property, Ms. Hintz, the second Plaintiff in this

case, was in privity with Mr. Hintz. Two parties who have

similar interests in the same realty are in privity.") (citation

and internal punctuation omitted).

C. Identity of the Cause of Action.

Finally, there can be little doubt that the claim the

Merricks advance against Citi in this proceeding is identical to

the one Mr. Merrick pursued against Citi in his adversary

proceeding. Both actions involve allegations of Citi's lack of

"standing" to enforce the judicial sale provisions of the

mortgage deed; both actions rely on allegations that Citi lacks a

"proof of claim" that would allegedly demonstrate its legal

authority to foreclose the mortgage; and both actions allege that

Citi is not the current holder in due course of the mortgage

deed, with power/authority to enforce it. Compare Adversary

Complaint (document no. 4-3) with Motion to Order a Temporary

Restraining Order (document no. 1-1).

8 Conclusion

In light of the foregoing, and for the reasons set forth in

defendant's memorandum (document no. 4-1) , the claim advanced by

Mr. and Mrs. Merrick against Citi in this proceeding is barred by

the doctrine of res judicata. CitiMortgage's motion to dismiss

(document no. 4) is, therefore, granted. The Clerk of Court

shall enter judgment in accordance with this order and close the

case.

SO ORDERED.

Steven J./McAuliffe United States District Judge

March 5, 2013

cc: John Merrick, pro se Joanne Merrick, pro se John A. Houlihan, Esq. Alexander G. Henlin, Esq.

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