Please ensure Javascript is enabled for purposes of website accessibility
Home / News in Brief / Foreclosure suit not barred by res judicata

Foreclosure suit not barred by res judicata

A couple who lost their home to foreclosure will get another chance to sue for breach of contract and constructive fraud. The 4th U.S. Circuit Court of Appeals reversed dismissal of the suit, finding fault with the Richmond federal court’s analysis of Virginia rules on res judicata. 

Stephen and Kimberly Buzzell filed a complaint in Lancaster County Circuit Court against JP Morgan Chase Bank NA and Residential Funding Corporation. The defendants removed the suit to federal court. The action was stayed as to Residential Funding when it filed for bankruptcy. The district court dismissed the claim against JP Morgan, determining that a prior state court decision addressed the same claims against the same parties or their privies.

But the state court order was not a final order and could not support res judicata, a 4th Circuit panel said in its March 10 unpublished opinion. In the earlier state court action, the Lancaster County Circuit Court had dismissed with prejudice claims against all defendants except for one claim against Samuel I. White PC, which is still pending.

In Buzzell v. JP Morgan Chase Bank, the appeals court rejected the district court’s application of Virginia’s “severable interest rule” to say that the state court’s interlocutory order dismissing claims against all parties except Samuel I. White meant the state court order could be deemed “final.”

Under Virginia law, a judgment is not final for purposes of res judicata when it is being appealed or when the time limits fixed for perfecting an appeal have not expired, the panel said.

Upon entry of a judgment in the claim against Samuel I. White, the Buzzells may appeal from the earlier order dismissing the other parties, the panel said.

“Thus, the state court’s prior order is not a final order for purposes of res judicata and does not preclude the Buzzells’ present action against JP Morgan,” the panel concluded. It vacated the district court judgment and remanded for further proceedings.

Leave a Reply