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Otto v. Judiciary Courts of State of New Jersey

United States District Court, D. New Jersey

January 16, 2018

DENISE OTTO, Plaintiff,
v.
JUDICIARY COURTS OF THE STATE OF NEW JERSEY, THE OFFICE OF THE ADMINISTRATOR OF THE COURTS, SUPREME COURT OF NEW JERSEY, SUPERIOR COURT OF NEW JERSEY OFFICE OF FORECLOSURE, SUPERIOR COURT OF NEW JERSEY ESSEX COUNTY VICINAGE, JUDGE KENNETH S. LEVY, JUDGE DAVID M. KATZ, JUDGE PAUL INNES, ARMANDO B. FONTOURA, WELLS FARGO BANK, N.A.; U.S. BANK, NATIONAL ASSOCIATION AS TRUSTEE FOR BNC MORTGAGE LOAN TRUST 2006-2, PHELAN HALLINAN DIAMOND & JONES, PC, LAWRENCE T. PHELAN, ROSEMARIE DIAMOND, FRANCIS S. HALLINAN, JOHN HABERMANN, Defendants.

          OPINION

          KEVIN MCNULTY United States District Judge.

         Denise Otto entered into a $160, 000 mortgage in 2006. In 2011, she defaulted, and ultimately a judgment of foreclosure was entered. U.S. Bank, etc. v. Otto, No. F-026230-12 ( N.J.Super. Ct., Ch. Div. Essex Cry.). Otto, as borrower and property owner, sues the courts, the judges, the sheriff, the opposing attorneys, her mortgagee, and others.[1] This is her second federal action attempting to undo the foreclosure or seek damages based on the mortgage default and the proceedings surrounding the foreclosure. Before the court is the motion of the three defendants who have been served and have appeared to dismiss the current action. For the reasons stated herein, the motion to dismiss will be granted.

         I. Procedural Background

         A. Mortgage and State foreclosure judgment

         On November 13, 2012, U.S. Bank filed a foreclosure action in the Superior Court of New Jersey, Chancery Division, Essex County. (U.S. Bank, etc. v. Otto, No. F-026230-12. (ECF no. 3-3) U.S. Bank was represented in the foreclosure by Phelan Hallin & Diamond, PC, named as a defendant here.

         The complaint in foreclosure alleged as follows: On August 30, 2006, Denise Otto and Eugene I. Otto entered into a $160, 000 note and mortgage with BNC Mortgage, Inc., secured by their property at 139-141 Western Parkway in Irvington. On January 16, 2009, the mortgage was assigned to U.S. Bank National Association, as Trustee for BNC Mortgage Loan Trust 2006-2. On September 18, 2012, it was again assigned to U.S. Bank National Association, as Trustee for BNC Mortgage Loan Trust 2006-2, Mortgage Pass-Through Certificates, Series 2006-2. Otto failed to make the monthly mortgage payment due on June 1, 2011, and all payments thereafter, and the mortgage went into default. Due notice of default was given.

         On August 12, 2014, the court entered a final judgment of foreclosure in the amount of $236, 762.78, plus interest and counsel fees. A sheriffs sale was ordered.

         B. The Prior Federal Action

         This action must be understood in the context of a prior, dismissed action, Otto v. Wells Fargo, Civ. No. 15-8240 (the "Prior Federal Action"). In that action, Ms. Otto sued the the Bank defendants and die Law Firm defendants. (Categories (c) & (d). Seen.l, supra.) That action was based on matters arising from the same mortgage and the state court judgment of foreclosure upon which this action is based.[2]

         Ms. Otto filed the complaint in the Prior Federal Action on November 24, 2015, some 15 months after the entry of final judgment in the state foreclosure action. It had six Counts:

Count 1: Rescission under the Truth in Lending Act ("TILA"), 15 U.S.C. § 1635
Count 2: Enforcement of rescission under 15 U.S.C. § l638(a)(l)
Count 3: Enforcement of rescission under 12 C, F.R. § 226.23
Count 4: Assertion that the three-year deadline on rescission has not run because loan not consummated
Count 5: Violation of criminal statute, 15 U.S.C. § 1511, by Wells Fargo and the Phelan firm
Count 6: Restitution under 12 C.F.R. § 1026.23

         In the Prior Federal Action, I filed an order and opinion ("Prior Op.") (Otto v. Wells Fargo Bank, Civ. No. 15-8240, 2016 WL 8677313 (July 15, 2016), affd, 693 Fed.Appx. 161 (3d Cir. May 31, 2017), which granted motions to dismiss the complaint with prejudice. A copy of that prior Opinion is attached to this Opinion as an appendix.

         First, I dismissed the action under the Rooker-Feldman doctrine to the extent that it sought to attack the validity of the mortgage or the other merits issues decided by the state court judgment of foreclosure. (Prior Op. 5-8)

         Second, and relatedly, I applied res judicata, and in particular the New Jersey entire controversy rule, to dismiss any claims that were or could have been asserted in the state court foreclosure action. (Prior Op. 9-14)

         Third, I held in the alternative that the complaint did not state a claim in several particulars. The claim under die Truth in Lending Act ("TILA") had not been brought within the one-year statute of limitations. Any claim against parties or their attorneys based on positions taken in the state court were barred by the litigation privilege. A criminal statute cited as the basis of a claim, 15 U.S.C. § 1611, does not give rise to a civil cause of action. (Prior Op. 14-15)

         My decision dismissing the Prior Federal Action was affirmed by the United States Court of Appeals for the Third Circuit. (Docket No. 16-3385, 693 Fed.Appx. 161 (3d Cir. May 31, 2017)

         C. ...


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