Crutchfield v. Countrywide Home Loans

F I L E D
United States Court of Appeals
Tenth Circuit

NOV 24 2004
PUBLISH

UNITED STATES COURT OF APPEALS PATRICK FISHER
Clerk
TENTH CIRCUIT

MARK CRUTCHFIELD,

Plaintiff-Appellant,
v. No. 03-6311

COUNTRYWIDE HOME LOANS and
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,

Defendants-Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. NO. 03-CIV-110-F)

Mark Crutchfield, Brooklyn, New York, for Plaintiff-Appellant.

John F. Fischer, (Leif Swedlow with him on the brief) Andrews Davis, Oklahoma
City, Oklahoma, for Defendants-Appellees.

Before Chief Judge TACHA , KELLY , and McCONNELL , Circuit Judges.

McCONNELL , Circuit Judge.
 The Plaintiff, Mark Crutchfield, appeals the district court’s award of

summary judgment to the Defendants, Countrywide Home Loans (“Countrywide”)

and Mortgage Electronic Registration Systems, Inc. (“MERS”). Mr. Crutchfield

seeks a declaratory judgment from the district court that he lawfully rescinded his

assumption of his mother’s mortgage pursuant to the Truth in Lending Act

(“TILA”). The district court found that there were no facts suggesting he actually

assumed his mother’s mortgage or that Countrywide extended him credit.

Without evidence of an assumption or a consumer credit transaction, the

rescission provisions of TILA do not apply. Consequently, the district court

found there were no genuine issues of material fact concerning Mr. Crutchfield’s

power to rescind the mortgage, and granted summary judgment in favor of the

Defendants. The presence of a state court default judgment foreclosing on the

mortgage ousts our subject matter jurisdiction under the Rooker-Feldman

doctrine. Therefore, the District Court order granting summary judgment to the

defendants is VACATED for want of subject matter jurisdiction to address the

merits of Mr. Crutchfield’s alleged rescission.

I.

Estella Crutchfield, the Plaintiff’s mother, purchased a house in Oklahoma

City on January 31, 2001. Mr. Crutchfield provided the down payment and

executed a memorandum of understanding with his mother providing that full

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interest in the house would pass to him. Mrs. Crutchfield executed a promissory

note and a real estate purchase money mortgage to acquire the property.

Countrywide, through MERS, took a lien against the property.

On March 3, 2001, Mrs. Crutchfield died. On November 4, 2001, the

executrix of her estate executed a deed conveying the property subject to existing

mortgages, liens, taxes, grants, charges, and encumbrances to Mr. Crutchfield.

Mr. Crutchfield contacted Countrywide on November 29, 2001 to inquire about

assuming the loan, although he never signed a written assumption agreement. In

a letter dated December 19, 2001, Countrywide notified Mr. Crutchfield that it

had received the documentation to change its record of ownership and advised

him that the due date of the mortgage would remain the same. After March of

2002, however, Mr. Crutchfield ceased to make any mortgage payments on the

home. Subsequently, MERS brought an in rem foreclosure action in the District

Court for Oklahoma County on July 30, 2002. MERS sent a copy of the summons

and the complaint to a mailbox rented by Mr. Crutchfield in New York City, but

he did not appear in the foreclosure proceeding.

In a letter dated October 16, 2002, Mr. Crutchfield purported to notify both

Countrywide and MERS that he was exercising his right to rescission pursuant to

TILA. He did not, however, tender the principal or any back interest to

Countrywide or MERS. On November 14, 2002, Mr. Crutchfield commenced a

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federal action seeking a declaratory judgment that he had rescinded his

assumption of the mortgage pursuant to TILA, thus removing the lien on the

property, and the return of any money paid to the Defendants. Mr. Crutchfield

did not seek statutory damages under TILA. On November 13, 2002, the

Oklahoma court entered a default judgment foreclosing on the mortgage.

On July 7, 2003 the federal district court ruled on the Defendants’ first

motion for summary judgment. The Defendants argued that the state court default

judgment precluded Mr. Crutchfield from bringing his TILA claim in federal

court pursuant to res judicata. Mr. Crutchfield replied that service in the state

foreclosure action had been improper and that the lack of privity between MERS

and Countrywide prevented preclusion of his TILA claim against Countrywide.

The district court denied the motion for summary judgment. The court held that

the Oklahoma default judgment was not void for lack of proper service, but it

accepted Mr. Crutchfield’s argument that there was insufficient evidence of the

relationship between MERS and Countrywide to warrant summary judgment as a

matter of res judicata.

On October 28, 2003 the district court ruled on the Defendants’ second

motion for summary judgment. The Defendants argued that they did not enter

into any transaction with Mr. Crutchfield that would permit rescission under

TILA. Mr. Crutchfield responded that there was sufficient evidence of a

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consumer credit transaction to survive summary judgment. The district court

awarded summary judgment to the Defendants, finding that there was no evidence

of either a consumer credit transaction or a written assumption. Without evidence

of one of these transactions, Mr. Crutchfield would not have rescission rights

under TILA.

On February 6, 2004 Mr. Crutchfield filed a timely motion in Oklahoma

state court to vacate the default judgment on the ground that MERS did not have

standing to sue him and that service was defective. The state court denied this

motion on March 8, 2004. Ever valiant, Mr. Crutchfield filed a motion to

reconsider the state court’s refusal to vacate on March 22, 2004, which the state

court denied on May 28, 2004. Mr. Crutchfield has appealed this ruling to an

Oklahoma appellate court, and has moved in state trial court for a temporary

restraining order to prohibit sale of the property pending his state court appeal.

II.

On this appeal the Defendants argue, for the first time, that the Rooker-

Feldman doctrine should have precluded the federal district court from exercising

subject matter jurisdiction. Because subject matter jurisdiction is integral to our

power to hear any case, it is permissible for the Defendants to invoke the Rooker-

Feldman doctrine for the first time on appeal. Pittsburg County Rural Water

Dist. No. 7 v. City of McAlester , 358 F.3d 694, 706 (10th Cir. 2004).

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 The Rooker-Feldman doctrine is the product of two Supreme Court cases

interpreting 28 U.S.C. § 1257(a). Section 1257(a) provides that “[f]inal

judgments or decrees rendered by the highest court of a State in which a decision

could be had, may be reviewed by the Supreme Court by writ of certiorari.” The

Rooker-Feldman doctrine is the negative inference of §1257(a): if appellate

review of state court judgments is vested in the United States Supreme Court, it

follows that review is not vested in lower federal courts. Section 1257(a) thus

implicitly deprives lower federal courts of subject matter jurisdiction to entertain

cases that would entail review of decisions rendered by state courts. In Rooker v.

Fidelity Trust Co. , 263 U.S. 413, 415–416 (1923) the Supreme Court held that

lower federal courts may not hear claims actually decided by a state court. Sixty

years later in District of Columbia Court of Appeals v. Feldman , 460 U.S. 462,

483 n.16 (1983), the Court extended the holding of Rooker to claims that are

“inextricably intertwined” with a state court judgment. By confining state cases

to state appellate systems, the Rooker-Feldman doctrine preserves the state

plaintiff’s forum choice. More importantly, it respects the values of federalism

implicit in our parallel system of independent state and federal courts, with the

United States Supreme Court at the apex of both—a structure established by the

first Judiciary Act of 1789 and adhered to ever since.

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 The Rooker-Feldman doctrine prohibits “a party losing in state court from

seeking what in substance would be appellate review of the state judgment in a

United States district court, based on the losing party’s claim that the state

judgment itself violates the loser’s federal rights.” Kiowa Indian Tribe v. Hoover ,

150 F.3d 1163, 1169 (10th Cir. 1998), quoting Johnson v. De Grandy , 512 U.S.

997, 1005–06 (1994). To determine whether a federal plaintiff’s claim is

inextricably intertwined with a state court judgment we must pay close attention

to the relief the plaintiff seeks. See Kenman Eng’g v. City of Union , 314 F.3d

468, 476 (10th Cir. 2002). While a litigant may be able to make a federal claim

appear unrelated to a state court judgment through artful pleading, the requested

relief can quickly reveal whether Rooker-Feldman applies. Where a plaintiff

seeks a remedy that would “disrupt or undo” a state court judgment, the federal

claim is inextricably intertwined with the state court judgment. Id. at 478.

There are two issues potentially barred by Rooker-Feldman in this case: Mr.

Crutchfield’s claim that notice was defective and his request for a declaratory

judgment that he rescinded the mortgage. We analyze these issues in turn.

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 A.

Mr. Crutchfield appeals the district court’s ruling that notice in the state

court foreclosure action was proper. Rooker-Feldman bars our subject matter

jurisdiction to entertain this argument. The District Court for Oklahoma County

held that Mr. Crutchfield was personally served with a summons in the manner

required by law and that the court “approves the service as meeting the statutory

requirements.” Aplt.App.50. In response to the Defendants’ first motion for

summary judgment in federal court, Mr. Crutchfield contended that the state

court’s holding was contrary to Oklahoma’s notice statute. This was, in

substance, a request that the federal district court overturn the judgment of the

state court, which the federal court may not do. When a state court actually

decides an issue, Rooker-Feldman prevents federal courts from hearing an appeal

of that claim. Rooker , 263 U.S. at 415-16. Allowing parallel litigation on the

same point of law would invite chicanery from litigants. For example, Mr.

Crutchfield is attempting to maintain simultaneous appeals on the notice issue in

state and federal court, creating the danger of a federal court judgment that calls

into question the judgment of the state court. Section 1257(a) eliminates this

prospect by requiring us to confine Mr. Crutchfield’s notice of appeal to the state

court system. He litigated the issue in state court, lost, and has appealed to the

state appellate court. If he loses there, he has a right to petition the United States

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Supreme Court for certiorari. He may not pursue a collateral attack on the state

court decision in the lower federal courts.

B.

Unlike the adequacy of notice, the state court did not actually decide

whether Mr. Crutchfield had a right to rescission under TILA. Consequently, we

must determine whether that claim is inextricably intertwined with the state court

judgment. The effect of the state court judgment was to foreclose the mortgage

on the home that Mr. Crutchfield inherited from his mother. If he were to receive

his requested relief, the district court would issue a declaratory judgment that he

had validly rescinded the mortgage and thus removed the lien on the property.

Mr. Crutchfield is thus asking a federal court to do precisely what Rooker-

Feldman prohibits: to undo the effect of the state court judgment. He tells us as

much when he characterizes the state court judgment as “a judicial nullity.”

Aplt.Rep.Br. 6. Consequently, Mr. Crutchfield’s request for a declaratory

judgment is inextricably intertwined with the state court judgment. 1
Unless this

case falls within an exception to the Rooker-Feldman doctrine for general

1
One of Mr. Crutchfield’s requests for relief is the return of his mortgage
payments. He bases this claim on 15 U.S.C. 1635(b), a provision of TILA, which
provides, “When an obligor exercises his right to rescind. . . . [w]ithin 20 days
after receipt of a notice of rescission, the creditor shall return to the obligor any
money or property given as earnest money, downpayment, or otherwise.” Because
this relief depends on a finding of rescission, a request for return of his mortgage
payments is also inextricably intertwined with the state court judgment.

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constitutional claims that are otherwise inextricably intertwined with state court

judgments, we must dismiss the case for want of jurisdiction. 2

There is an exception to the Rooker-Feldman doctrine for general

constitutional challenges to state laws. As Justice Brennan explained in Feldman ,

constitutional challenges to state statutes or rules are not attacks on state court

judgments. Feldman , 460 U.S. at 486. Consequently, § 1257(a) does not bar

lower federal courts from hearing general claims that state laws are

unconstitutional, even if the requested relief is inextricably intertwined with a

state court judgment. In contrast, only the Supreme Court can hear “challenges to

state court decisions in particular cases . . . even if those challenges allege that

the state court's action was unconstitutional.” Id.

If Mr. Crutchfield were making a general allegation that one of the

Oklahoma statutes or procedures relevant to this case is unconstitutional, he might

be free of the bar imposed by the Rooker-Feldman doctrine. However, he

confines his arguments to particularized, statutory claims regarding defective

notice and TILA violations. He does not contend that the Oklahoma laws under

which MERS obtained foreclosure are constitutionally defective. Mr.

2
Mr. Crutchfield contends that there is an additional exception to Rooker-
Feldman when the state action does not require compulsory counterclaims. He
cites no cases to support this claim, and indeed there is nothing in our Rooker-
Feldman doctrine to suggest that state compulsory counterclaim rules have any
effect on federal subject matter jurisdiction.

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Crutchfield’s failure to raise a constitutional challenge to a general law or

procedure means that this exception to Rooker-Feldman does not apply.

III.

Mr. Crutchfield is using the federal court to challenge the judgment of an

Oklahoma state court. The Rooker-Feldman doctrine removes federal subject

matter jurisdiction in such situations and restricts Mr. Crutchfield’s appeals to the

Oklahoma state court. For this reason the District Court order granting summary

judgment to the defendants is vacated and the appeal is DISMISSED for want of

subject matter jurisdiction.

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