614 B.R. 321
Bankr. E.D. Wis.2020Background
- In 2011 Lisa Jacobson’s then-husband obtained a VA‑guaranteed mortgage for the residence by allegedly misrepresenting marital status and debts; the mortgage was later assigned to Wells Fargo.
- Jacobson received the house in the 2015 divorce and thereafter sued lenders, brokers, and others in Wisconsin state court alleging fraud in the loan origination; she amended claims and some causes were dismissed or resolved against her on appeal.
- Wells Fargo filed a foreclosure action; Jacobson raised defenses late in that litigation but the state courts granted summary judgment to Wells Fargo and affirmed on appeal.
- Wells Fargo filed a proof of claim in Jacobson’s Chapter 13 bankruptcy for the mortgage debt; Jacobson filed this adversary proceeding seeking disallowance of the claim, a declaration that the note and mortgage are void, damages under Wis. Stat. ch. 224, and other relief, alleging the loan was procured by fraud (including fraud on the state court).
- Wells Fargo moved to dismiss, arguing (1) Rooker‑Feldman bars federal review of state judgments, and (2) res judicata/claim preclusion under Wisconsin law prevents relitigation of matters already litigated in state court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker‑Feldman bars this court from hearing claims that would set aside or attack state‑court judgments | Jacobson seeks relief based on pre‑loan fraud and alleges fraud on the state court; many claims are independent of the state judgments | Wells Fargo says Jacobson is effectively asking the bankruptcy court to review and overturn state‑court judgments, which Rooker‑Feldman forbids | Rooker‑Feldman bars claims that seek relief from the state judgments (direct or inextricably intertwined); but it does not bar independent pre‑existing claims arising before the state proceedings began |
| Whether the bankruptcy court has jurisdiction to adjudicate Jacobson’s objection to Wells Fargo’s proof of claim | Jacobson objects that the mortgage/note are unenforceable under state law | Wells Fargo relies on state judgments and argues issues already litigated | Bankruptcy court has jurisdiction to hear objections to proofs of claim; Rooker‑Feldman does not strip that jurisdiction where creditor (Wells Fargo) invoked the bankruptcy forum by filing a claim |
| Whether claim preclusion (res judicata) prevents Jacobson from relitigating the same causes of action in bankruptcy/adversary | Jacobson contends the validity and procurement-by-fraud issues were not litigated in foreclosure | Wells Fargo contends both state suits arose from the same transaction and were finally adjudicated | Under Wisconsin law there is identity of causes of action (same nucleus of operative facts); claim preclusion bars the claims and the objection to the claim (dismissed with prejudice) |
| Whether alleging fraud on the court avoids preclusion or renders the state judgment void | Jacobson alleges the state judgment was procured by fraud and seeks relief here | Wells Fargo argues fraud allegations do not negate preclusion and this court lacks appellate authority to set aside the judgment | A state judgment procured by fraud is voidable (not void) unless jurisdiction/notice defects exist; such equitable relief must be sought in state court and is barred here by Rooker‑Feldman |
Key Cases Cited
- Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) (federal courts lack authority to reverse state court judgments)
- District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983) (limits on federal review of state court decisions concerning state‑law matters)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005) (clarifies Rooker‑Feldman scope; distinguishes independent federal claims from forbidden review)
- Taylor v. Fed. Nat’l Mortg. Ass’n, 374 F.3d 529 (7th Cir. 2004) (explains "inextricably intertwined" test and fraud‑on‑court collateral‑attack limits)
- Teske v. Wilson Mut. Ins. Co., 928 N.W.2d 555 (Wis. 2019) (Wisconsin test for claim preclusion: same parties, same cause(s) of action, final judgment)
- Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007) (bankruptcy claim‑allowance principles and application of nonbankruptcy defenses)
- Mains v. Citibank, N.A., 852 F.3d 669 (7th Cir. 2017) (fraud allegations that would require vacating a state judgment present Rooker‑Feldman problems)
- Kett v. Cmty. Credit Plan, Inc., 586 N.W.2d 68 (Wis. Ct. App. 1998) (distinguishes void and voidable judgments under Wisconsin law)
- State v. Campbell, 718 N.W.2d 649 (Wis. 2006) (judgment is void only for lack of jurisdiction or inadequate notice)
- Brokaw v. Weaver, 305 F.3d 660 (7th Cir. 2002) (distinguishes collateral federal claims from impermissible attempts to bypass state judgments)