Bankr. E.D.N.C.: Burgess v. Citimortgage, Inc. – Rooker-Feldman Doctrine & Collateral Estoppel Effect of Foreclosure


Mr. Burgess, who had previously been the president of the mortgage lender that originated the loan at question in this case, sought to avoid the mortgage, challenging the chain of assignments, on the basis that an unauthorized party endorsed the note, that eventually lead to Citimortgage foreclosing on his residence and asserting claims in his Chapter 11 case.

In ruling on the Motion to Dismiss filed by Citimortgage, the bankruptcy court first addressed questions of whether the Rooker-Feldman doctrine deprived it of jurisdiction, particularly in light of recent opinions by the North Carolina Supreme Court in In re Lucks, — N.C. –, 794 S.E.2d 501 (2016) and the 4th Circuit Court of Appeals in Vicks v. Ocwen Loan Servicing, LLC, 676 Fed. Appx. 167 (4th Cir. Jan 25, 2017) (per curiam).

The Rooker–Feldman doctrine provides that appellate jurisdiction to reverse or modify state court judgments is lodged exclusively with state appellate courts and the U.S. Supreme Court, working as a jurisdictional limitation review of state court judgments by lower federal courts. See Burcam Capital II, LLC v. U.S. Bank Nat’l Ass’n (In re Burcam Capital II, LLC), 539 B.R. 96, 99 (Bankr. E.D.N.C. 2015). Under this review, for Mr. Burgess to prevail on his Complaint, the bankruptcy court would have been required to expressly contradict the statutory findings made in the order of foreclosure.

This is somewhat muddled, however, by the ruling in Lucks, which held that:

Non-judicial foreclosure is not a judicial action; the Rules of Civil Procedure and traditional doctrines of res judicata and collateral estoppel applicable to judicial actions do not apply. To the extent that prior case law implies otherwise, such cases are hereby overruled. 794 S.E.2d at 507 (emphasis added).

The bankruptcy court noted, however, that N.C.G.S. § 45-21.16(d1) specifically provides that the findings by a clerk of court in a foreclosure “is a judicial act”. As such, despite the Lucks opinion, the statute, which is “vague or self-contradicting, but rather is clear and concise”, “remains the law even in the face of a case seemingly ruling to the contrary.” Accordingly, the Rooker-Feldman doctrine still applied.

Similarly, the Vicks decisions, which the bankruptcy court took pains to note was unpublished and not binding precedent, held that despite a findings by a clerk of court in a foreclosure proceeding, the plaintiff could raise claims under RESPA and various North Carolina statutes as the relief sought was not to overturn the foreclosure and thus did “seek appellate review of that order or fairly allege injury caused by the state court in entering that order.” In the present case the bankruptcy court held that the claims raised by Mr. Burgess were not “separate from the defenses he raised or could have raised at the foreclosure hearing (ownership of the note and deed of trust) in support of a separate cause of action” but instead sought to overturn the foreclosure.
The argument that Mr. Burgess the individual party to the foreclosure was not the same as Mr. Burgess the Debtor in Possession was dispensed with by the bankruptcy court held that the Rooker-Feldman doctrine, unlike res judicata or collateral estoppel, does not depend on the identity of the parties. See Pyne v. Hartman Paving, Inc. (In re Hartman Paving, Inc.), 745 F.2d 307 (4th Cir. 1984).

Additionally, the bankruptcy court held that Mr. Burgess failed to state a claim upon which relief could be granted due to res judicata and collateral estoppel, the bankruptcy court concluded “that Mr. Burgess’ claims all rest on whether or not CitiMortgage is the valid holder of the Note and Deed of Trust, and that those matters were conclusively established by the clerk in entering the foreclosure order.”


While N.C.G.S. § 45-21.16(d1) may seem clear and unambiguous to the bankruptcy court, it seems a bit odd and troubling that, in an opinion otherwise tied up in questions of whether lower federal courts can overturn state judicial acts,  the determination by the North Carolina Supreme Court  that “nonjudicial foreclosure is not a judicial action” can be, if not overturned, at least minimized to the point of disregard.

At root, an explanation may be that judges hate the idea of “free houses” so much (particularly those worth $984,080) that they often ignore that, particularly in the avoidance of a voluntary transfer, where exemptions cannot, pursuant to 11 U.S.C. § 522(g), be claimed in the resulting equity, the debtor will be paying for the house, with that money being paid fairly to all unsecured creditors, including the erstwhile mortgage holder.

For a copy of the opinion, please see:

Burgess v. Citimortgage, Inc. – Rooker-Feldman Doctrine & Collateral Estoppel Effect of Foreclosure


1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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