Wellington v. Profolio Home Mortg. Corp.

DAVID WELLINGTON, Plaintiff, v. PROFOLIO HOME MORTGAGE CORPORATION, et al., Defendants.

Civ. No. 21-322 JB/GBW

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

July 27, 2021

PROPOSED FINDINGS AND RECOMMENDED DISPOSITION

THIS MATTER comes before me pursuant to the Court's Order of Reference (doc. 8), referring this case to me for analysis, proposed findings, and a recommended disposition. On April 20, 2021, Defendant MTGLQ Investors, LP ("MTGLQ") filed a motion to dismiss Plaintiff's complaint on grounds of res judicata. Doc. 11. On June 21, 2021, Plaintiff filed a motion to amend his complaint. Doc. 17. Having reviewed the motions and their attendant briefing (docs. 14, 15, 18, 19), I RECOMMEND that the Court GRANT MTGLQ's Motion to Dismiss and DENY Plaintiff's Motion for Leave to File Amended Complaint for the reasons that follow.

I. BACKGROUND

In 2017, MTGLQ filed suit against Monica Wellington seeking to recover amounts due on a note secured by a mortgage and to foreclose on the mortgage. MTGLQ Invs., LP v. Wellington, Civ. No. 17-487 KG/LF, 2018 WL 1997294, at *1 (D.N.M. Apr. 27, 2018) (unpublished) ("MTGLQ I"). The mortgage was secured by a piece of real property, described as follows:

Lot numbered Twenty-nine (29) of ALTURA VILLAGE, being a Replat of Tracts A1 Netherwood Park, Addition, as the same is shown and designated on the Plat of said addition, filed in the Office of the County Clerk of Bernalillo County, New Mexico, on December 3, 1997, in Plat Book 97C, folio 341,

and more commonly described as 2124 Altura Verde Ln NE, Albuquerque, NM 87110 ("the Property"). MTGLQ Invs., LP v. Wellington, Civ. No. 17-487 KG/LF, ECF No. 204 (D.N.M. Dec. 20, 2019) (unpublished) ("MTGLQ II"). Ms. Wellington removed the case to federal court on grounds of diversity and filed counterclaims alleging violations of the Fair Debt Collection Practices Act and seeking a declaratory judgment that MTGLQ and another entity had no claim against Ms. Wellington or the Property. See First Amended Counterclaim of Monica L. Wellington, MTGLQ Invs., LP v. Wellington, Civ. No. 17-487 KG/LF (D.N.M. June 27, 2017), ECF No. 12.

In 2018, David Wellington—Plaintiff in the present suit and Ms. Wellington's brother—filed a motion to intervene. MTGLQ Invs., LP v. Wellington, Civ. No. 17-487 KG/LF, 2018 WL 2723767, at *1 (D.N.M. June 6, 2018) (unpublished). Plaintiff asserted an interest in the Property as joint tenant with right of survivorship with Ms. Wellington by grant deed conveyed on January 16, 2018. Id. The court deniedintervention pursuant to Federal Rule of Civil Procedure 24(a)(2) on the ground that Ms. Wellington adequately represented Plaintiff's interest in the Property. Id. at *3-4.

On April 27, 2018, Ms. Wellington's counterclaims were dismissed by the court. MTGLQ I, 2018 WL 1997294, at *4-8. On September 23, 2019, the court granted summary judgment in favor of MTGLQ. MTGLQ Invs., LP v. Wellington, Civ. No. 17-487 KG/LF, 2019 WL 4600196, at *1 (D.N.M. Sept. 23, 2019) (unpublished). On December 20, 2019, the court filed a judgment of foreclosure and sale, entering judgment in personam against Ms. Wellington for amounts due and owing on the note plus interest and costs and judgment of foreclosure of the Property. MTGLQ II, Civ. No. 17-487 KG/LF, ECF No. 204.

Ms. Wellington appealed. On January 7, 2021, the Tenth Circuit affirmed the lower court's rulings, including the dismissal of Ms. Wellington's counterclaims and the judgment of foreclosure and sale. MTGLQ Invs., LP v. Wellington, 2021 WL 56698, at *1 (10th Cir. Jan. 7, 2021) (unpublished). Following denial of Ms. Wellington's petition for panel rehearing and rehearing en banc, the Tenth Circuit filed a revised order affirming the lower court's rulings. MTGLQ Invs., LP v. Wellington, 2021 1217451, at *1 (10th Cir. Mar. 31, 2021) (unpublished) ("MTGLQ III").

On March 4, 2021, Plaintiff, proceeding pro se, filed his Complaint to Quiet Title and for Declaratory Relief in state court. Doc. 1-1. Plaintiff alleges violations of the Federal Truth in Lending Act and requests a declaratory judgment quieting title againstDefendants. Id. MTGLQ removed the complaint to this Court on April 9, 2021, pursuant to the Court's diversity jurisdiction. Doc. 1.

On April 20, 2021, MTGLQ filed its Motion to Dismiss, asserting that Plaintiff's claims are barred by res judicata. Doc. 11. Plaintiff filed a response on May 14, 2021, to which MTGLQ filed a reply on May 20, 2021. Docs. 14, 15. On June 21, 2021, Plaintiff filed his Motion for Leave to File Amended Complaint. Doc. 17. MTGLQ filed a response on July 6, 2021, to which Plaintiff filed a reply on July 12, 2021. Docs. 18, 19.

II. LEGAL STANDARD

A. Fed. R. Civ. P. 12(b)(6)

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint "must contain sufficient factual matter, accepted as true, 'to state a claim to relief that is plausible on its face.'" Leverington v. City of Colorado Springs, 643 F.3d 719, 723 (10th Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). This standard does not require "detailed factual allegations," but it does require more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). When ruling on a 12(b)(6) motion, the court must "assume the truth of all well-pleaded facts in the complaint, and draw all reasonable inferences therefrom in the light most favorable to the plaintiffs." Leverington, 643 F.3d at 723 (quoting Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178(10th Cir. 2009)). However, the court need not accept the truth of any legal conclusions. Iqbal, 556 U.S. at 678.

The plausibility standard "does not impose a probability requirement." Twombly, 550 U.S. at 556. Rather, "a well-pleaded complaint may proceed even if it appears 'that a recovery is very remote and unlikely.'" Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). The complaint must only be "enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. at 555. However, "[w]here a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of 'entitlement to relief.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). In other words, the well-pleaded facts must "permit the court to infer more than the mere possibility of misconduct"; otherwise, the plaintiff has not shown entitlement to relief. Id. at 679.

When evaluating the pleadings of a party proceeding pro se, a court must liberally construe them and should hold them to a less stringent standard than to the pleadings of a represented party. Hall v. Bellmon, 935 F.3d 1106, 1110 (10th Cir. 1991). But "[t]his liberal treatment is not without limits, and '[the Tenth Circuit] has repeatedly insisted that pro se parties follow the same rules of procedure that govern other litigants.'" Kay v. Bemis, 500 F.3d 1214, 1218 (10th Cir. 2007) (quoting Garrett v. Selby, Connor, Maddux & Janer, 425 F.3d 836, 840 (10th Cir. 2005)).

B. Fed. R. Civ. P. 15(a)(2)

Federal Rule of Civil Procedure 15(a) allows a party to amend its pleading once as a matter of course if certain temporal conditions are met. Fed. R. Civ. P. 15(a)(1). Otherwise, as is the case here, the party seeking to amend its pleading must obtain either the written consent of opposing parties or leave of the Court. Fed. R. Civ. P. 15(a)(2).

The Court "should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). The decision to grant leave to amend a complaint is within the Court's discretion. Castanon v. Cathey, 976 F.3d 1136, 1144 (10th Cir. 2020). "Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993) (citation omitted); see also Foman v. Davis, 371 U.S. 178, 182 (1962)). "A proposed amendment is futile if the complaint, as amended, would be subject to dismissal." Jefferson Cnty. Sch. Dist. No. R-1 v. Moody's Inv.'s Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999) (citations omitted).

III. ANALYSIS

A. MTGLQ's Motion to Dismiss

To determine whether the prior suit is entitled to preclusive effect here, I must first determine what law of preclusion applies to a federal judgment on a matter of statelaw. As a general rule, federal law determines the application of res judicata to judgments of a federal court. Petromanagement Corp. v. Acme-Thomas Joint Venture, 835 F.2d 1329, 1332 (10th Cir. 1988). But when the federal judgment is based on state law, as when the Court sits in diversity, the question is more difficult. Id. In these cases, the Tenth Circuit applies federal law "at least insofar as the res judicata issue is not clearly substantive." Id. at 1333. The Tenth Circuit has identified the law of privity as an issue that is "more distinctively substantive." Id. Accordingly, I will apply federal law to the overall question of whether res judicata applies, while looking to state law to answer the privity component of that question. See New Mexico ex rel. King v. Cap. One Bank (USA) N.A., 980 F. Supp. 2d 1346, 1350-52 (D.N.M. 2013).

Res judicata applies where three elements are present: "(1) a judgment on the merits in the earlier action; (2) identity of the parties or their privies in both suits; and (3) identity of the cause of action in both suits." Yapp v. Excel Corp., 186 F.3d 1222, 1226 (10th Cir. 1999). If these three elements are satisfied, res judicata applies, unless the party opposing it can show that he did not have "a full and fair opportunity to litigate" the claim in the prior suit. Id. at 1226 n.4. While the Tenth...