Francis v. Accubanc Mortgage Corporation

Background

Michael and Carmen Francis, proceeding without a lawyer, brought a New York state-law action arising from the foreclosure of their mortgage. The defendants were AccuBanc Mortgage Corporation, J.P. Morgan Chase Bank, EMC Mortgage LLC, and Fannie Mae. The mortgage concerned real property in Indianapolis, Indiana.

EMC began a foreclosure action in Indiana state court in 2007. The Indiana Superior Court later granted EMC summary judgment and entered a foreclosure judgment. The Indiana Court of Appeals affirmed that decision in April 2017. The Francises then filed a related challenge in Indiana state court against the same defendants. That court dismissed the action with prejudice, and the Indiana Court of Appeals affirmed based on res judicata, a rule that generally bars relitigating claims that were or could have been decided in an earlier case.

The Francises filed this action in New York state court on December 17, 2018, asserting five New York-law claims and seeking a declaration and substantial monetary relief. The defendants removed the case to federal court based on diversity jurisdiction. The court previously ruled that EMC had been fraudulently joined because none of the five claims could succeed against EMC in New York state court, so EMC’s citizenship did not defeat removal.

Motions for Default Judgment

The Francises moved for default judgment against Chase, EMC, and Fannie Mae. Those defendants had been served before removal but had not answered in state court. Under Federal Rule of Civil Procedure 81(c)(2), a defendant that did not answer before removal receives a specified period after removal to answer or raise defenses. The court had also extended their deadline while deciding whether federal jurisdiction existed.

The court found that the defendants’ deadline was July 15, 2019, and that they filed their motions to dismiss on that date. Because they complied with the applicable deadlines and the court’s order, they had not defaulted. The court therefore denied the Francises’ motion for default judgment.

Motions to Dismiss

The defendants moved to dismiss under Rule 12(b)(6), which allows dismissal when a complaint does not state a legally sufficient claim. The court generally accepted factual allegations as true for this motion but did not accept unsupported legal conclusions.

The court first held that all five claims were barred by res judicata. Because the earlier foreclosure judgment was entered in Indiana, the court applied Indiana’s claim-preclusion law. It found that the Indiana judgment came from a court with authority, was decided on the merits through summary judgment, involved matters that were or could have been decided in that action, and involved the same parties or parties legally connected to them. The court also found that the Francises’ separate Indiana collateral action independently precluded the claims because that action had been dismissed and the dismissal had been affirmed on appeal.

The court alternatively held that each claim failed as a matter of law:

- The first claim, under Article 23-A of New York’s General Business Law, failed because the Martin Act does not create a private right to sue. - The second claim, under New York Executive Law § 63(12), failed because that statute does not create a private right of action for the Francises. - The third claim, under New York Real Property Law § 1921, was untimely. The court stated that the claim accrued 30 days after December 1, 2001, and that the applicable limitations period was six years. - The fourth claim, for breach of fiduciary duty, failed because the complaint did not allege special circumstances or an intent to create a fiduciary relationship between the lenders or servicers and the borrowers. The court stated that a standard lender-borrower relationship ordinarily does not create such a duty under New York or Indiana law. - The fifth claim, for slander of title, was untimely. The court stated that the relevant limitations period was one year in New York and two years in Indiana, while the alleged assignments occurred more than five years before the complaint was filed.

The court rejected the Francises’ argument that the defendants’ failure to provide a notice required by Local Rule 12.1 defeated the motions. It concluded that the Francises knew about the rights addressed by that rule and had not shown prejudice. The court also rejected arguments concerning alleged fabricated evidence, obstruction of justice, and a broader alleged conspiracy as irrelevant or legally unsupported in this action.

Requests for Judicial Notice

The Francises filed four requests asking the court to take judicial notice of documents, including purported mortgage-servicing records. The court held that the documents were not materials of which it could take judicial notice and that, even if considered, they would not change the outcome. The court denied the requests.

Disposition

Judge Alison J. Nathan denied the motion for default judgment, granted the defendants’ motions to dismiss in full, and denied the requests for judicial notice. The court dismissed the complaint with prejudice because the claims were precluded and any amendment would be futile. It directed the Clerk of Court to close the case. The court also certified that any appeal would not be taken in good faith and denied permission to proceed without paying the filing fees on appeal.