Fighting Foreclosure: Lessons from a Massachusetts Federal Court Case

A recent decision from the U.S. First Circuit Court of Appeals provides an important lesson on fighting foreclosure and the importance of properly preparing such a defense.  The case, Klimowicz v. Deutsche Bank, is included below.

Background

Massachusetts is a non-judicial foreclosure state.  Unlike judicial foreclosure states, such as New York and Vermont, a lender does not need to bring a court case to foreclose.  Rather, a lender can foreclose through a series of notices and publications.

In Klimowicz, the homeowner went through a non-judicial foreclosure and the lender, Deutsche Bank, became the record owner of the home following the foreclosure sale.  Deutsche Bank then brought an eviction (“summary process”) case against the former homeowner for possession of the property.

Massachusetts permits defendants in a post-foreclosure eviction case to raise defenses against the validity of the foreclosure sale.  If successful, a homeowner can defeat a bank’s right to possession of the property.  In this case, the homeowner did just that, and attempted to argue that the foreclosure was void due to problems with the mortgage assignment.

The homeowner lost this eviction, and failed to appeal this case.

Federal Court Lawsuit 

Following this unsuccessful eviction case, this homeowner continued fighting foreclosure through a federal court lawsuit.

By way of brief background, federal courts are permitted to hear state court matters under specific circumstances, including what is known as diversity jurisdiction: where the parties live in different states.  Diversity jurisdiction is common in foreclosure defense cases, as the homeowner and bank tend to be in different states.

In this case, the homeowner attempted to pursue her foreclosure defense case in federal court, by essentially arguing the same claims raised in her eviction case.  The federal court dismissed this lawsuit, and the appeals court agreed that the homeowner was not entitled to pursue this federal court action.

The main basis of this dismissal is a federal law concept known as the Rooker-Feldman Doctrine.  In a nutshell, this doctrine prevents federal courts from hearing cases brought by parties who have lost in state court.  In other words, as the homeowner had lost her case in the state eviction case, she was not able to pursue it again in federal court.  If the homeowner had wished to continue fighting foreclosure, she needed to have appealed her eviction case, rather than starting a federal court lawsuit.

Although not discussed in Klimowicz, another basis for denying this federal court lawsuit was res judicata.  This legal defense prevents a party from getting a “second bite at the apple” by bringing a claim that was decided (or could have been decided) in a prior claim involving the same parties.

Practical Implications

Klimowicz has an important lesson for homeowners fighting foreclosure: it is incredibly difficult to have a second chance in defending against a foreclosure, if the homeowner is unsuccessful in their first court case.  There are many, many similar cases like this where courts have denied homeowners their day in court because their foreclosure defense claims (no matter how strong or compelling) were, or could have been, raised before.  There are few “second chances” to defend against a foreclosure.

Conclusion 

If you need assistance with fighting foreclosure, contact me for a consultation.