In re: Deborah A. Madera v. AMERIQUEST MORTGAGE COMPANY On Appeal from the United States District Court for the…

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 08-2205
IN RE: DEBORAH A. MADERA, DEBTOR
DEBORAH A MADERA; MICHAEL MADERA,
Appellants
v.
AMERIQUEST MORTGAGE COMPANY
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-07-cv-01396)
District Judge: Honorable James Knoll Gardner
Submitted Under Third Circuit LAR 34.1(a)
October 26, 2009
Before: SLOVITER, FUENTES, and HARDIMAN,
Circuit Judges.
(Filed: November 12, 2009)
____
David A. Scholl
Regional Bankruptcy Center of
Southeastern Pennsylvania
Newtown Square, PA 19073
Attorney for Appellant

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The Bankruptcy Court had jurisdiction pursuant to 281
U.S.C. § 157(b). The District Court had jurisdiction pursuant to 28
U.S.C. § 158(a)(1). This court has jurisdiction pursuant to 28
U.S.C. §§ 158(d) and 1291. We review the grant of summary
judgment de novo. We review the decision to deny the Maderas’
motion to amend their complaint for abuse of discretion.
2
Sandhya M. Feltes
Kaplin, Stewart, Meloff, Reiter & Stein
Blue Bell, PA 19422
Attorney for Appellee
____
OPINION OF THE COURT
SLOVITER, Circuit Judge.
Appellants Deborah and Michael Madera (the Maderas)
appeal the District Court’s affirmance of the Bankruptcy Court’s
grant of summary judgment in favor of Appellees, Ameriquest
Mortgage Company and AMC Mortgage Services, Incorporated
(“Ameriquest” and “AMC,” respectively). The Maderas
challenge the Bankruptcy Court’s sua sponte ruling that it lacked
jurisdiction to review their rescission claims because of the
Rooker-Feldman doctrine, its dismissal of their damages claim
under the Truth in Lending Act (“TILA”), and its denial of the
Maderas’ motion for leave to amend their complaint, all of
which were affirmed by the District Court.1
I.
The Maderas are co-owners of real property located in
Warminster, Pennsylvania. In January 2005, they obtained a loan
from Option One Mortgage Company, secured by a mortgage on
that property (the “Option One loan”). They used this loan to
pay off a prior mortgage and to help finance their son’s college

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The Maderas assert that the Court of Common Pleas failed2
to correctly docket their Answer, the proper filing of which would
have forestalled the default and foreclosure judgments.
In Madera I, the Maderas also alleged that Ameriquest3
violated the Real Estate Settlement Procedures Act, 12 U.S.C. §§
2601 et seq. (“RESPA”), by failing to respond to their “qualified
written request” for information about the loan. App. at 48. For
this alleged violation, the Maderas sought damages and costs. The
Complaint also included an allegation that Ameriquest violated the
3
tuition. After making one payment on that mortgage, they
defaulted.
In June 2005, less than six months later, they entered into
another loan transaction, this time with Ameriquest (the
“Ameriquest loan”), again secured by a mortgage on their home.
They used the Ameriquest loan to repay the Option One loan.
The Maderas made only one payment under the
Ameriquest loan before defaulting, and in March 2006, Deutsche
Bank National Trust Company, as assignee of the loan, initiated
foreclosure proceedings in the Court of Common Pleas of Bucks
County. Although the Maderas contend that they filed a pro se
Answer to the Complaint seeking foreclosure, the Court of
Common Pleas entered a default foreclosure judgment against
them in May 2006.2
Deborah Madera then filed for Chapter 13 bankruptcy
protection on July 19, 2006. Moreover, in August 2006, the
Maderas instituted the first of two adversary actions in the
Bankruptcy Court against Ameriquest (Madera I).
The Maderas raised four claims. As pertinent to this
appeal, they alleged that Ameriquest failed to accurately disclose
the terms of the Ameriquest loan as required under TILA, 15
U.S.C. § 1601, et seq., because, they argue, the title insurance
charges were excessive and this overcharge should have been
disclosed as a “finance charge.” Based on TILA, they sought
rescission of the Ameriquest loan as well as damages.3

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Equal Credit Opportunity Act, 15 U.S.C. § 1691e et seq., and
sought damages and costs. These claims are not at issue on appeal.
In the proposed Amended Complaint, the Maderas sought4
to withdraw their RESPA claim against Ameriquest, and assert it
instead against AMC. In addition, the proposed Amended
Complaint asserted another TILA violation against Ameriquest, as
well as a violation of the Pennsylvania Unfair Trade Practices Act
and Consumer Protection Law, 73 Pa. Cons. Stat. §§ 201-2(4) and
201-7.
In response, the Maderas filed a second adversary action5
against Ameriquest and AMC, (Madera II), in which they sought
to assert the very legal theories they had included in the proposed
Amended Complaint.
The issues the Maderas raise on appeal, however, relate
only to the Bankruptcy Court’s grant and the District Court’s
affirmance of Ameriquest’s summary judgment motion in response
to Madera I, and the lower courts’ denial of the motion to amend.
Moreover, it is clear that the Maderas’ “claim against Appellee
AMC has been resolved.” Appellee’s Br. at 8. AMC’s sole
interest as appellee, therefore, relates to our review of the Maderas’
motion to amend.
4
After discovery, Ameriquest filed its summary judgment
motion, after which the Maderas filed a motion for leave to
amend their complaint. In November 2006, the Bankruptcy4
Court held a hearing on Ameriquest’s summary judgment motion
and the Maderas’ motion to amend. At that hearing, the
Bankruptcy Court orally denied the motion to amend. In
February 2007, the Bankruptcy Court filed a Memorandum
Opinion and Order granting Ameriquest’s summary judgment
motion and reiterating its denial of the Maderas’ motion to
amend.5
The Bankruptcy Court reasoned that the Rooker-Feldman
doctrine barred its jurisdiction over the Maderas’ claims for
rescission because rescinding the loan would invalidate the
aforementioned foreclosure judgment entered by the Court of

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Common Pleas. In addition, the Bankruptcy Court dismissed the
Maderas’ TILA claim for damages regarding Ameriquest’s
failure to disclose title insurance fees, finding that the Maderas
presented insufficient evidence to prove they were entitled to a
lower rate because they had not shown that they obtained prior
title insurance in connection with the Option One loan, or that
Ameriquest knew or should have known of any such prior title
insurance. The Bankruptcy Court also explained that it had
denied the motion to amend on the ground that it was untimely,
futile, and would unduly prejudice Ameriquest and AMC.
The Maderas filed a Motion Requesting Reconsideration
of the Memorandum Opinion and Order, which was denied. On
appeal, the District Court affirmed the Bankruptcy Court’s grant
of summary judgment for Ameriquest, its denial of the Maderas’
motion to amend, and its order denying reconsideration,
adopting and extending the Bankruptcy Court’s reasoning.
II.
Before us, the Maderas first challenge the conclusion of
the Bankruptcy and District Courts that they lacked subject-
matter jurisdiction under the Rooker-Feldman doctrine to hear
the Maderas’ claims seeking rescission. See District of
Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983),
and Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923). The
Rooker-Feldman doctrine precludes lower federal courts “from
exercising appellate jurisdiction over final state-court
judgments” because such appellate jurisdiction rests solely with
the United States Supreme Court. See Lance v. Dennis, 546 U.S.
459, 463 (2006). We have held that this doctrine applies equally
to federal bankruptcy courts. See In re Knapper, 407 F.3d 573,
582 (3d Cir. 2005).
The Rooker-Feldman doctrine is implicated when, “in
order to grant the federal plaintiff the relief sought, the federal
court must determine that the state court judgment was
erroneously entered or must take action that would render that
judgment ineffectual.” FOCUS v. Allegheny County Court of
Common Pleas, 75 F.3d 834, 840 (3d Cir. 1996). Accordingly, a

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claim is barred by Rooker-Feldman under two circumstances:
(1) “if the federal claim was actually litigated in state court prior
to the filing of the federal action” or (2) “if the federal claim is
inextricably intertwined with the state adjudication, meaning that
federal relief can only be predicated upon a conviction that the
state court was wrong.” In re Knapper, 407 F.3d at 580.
Moreover, a federal claim is “inextricably intertwined”
with an issue adjudicated by a state court when (1) the federal
court must determine that the state court judgment was
erroneously entered in order to grant the requested relief, or (2)
the federal court must take an action that would negate the state
court’s judgment. Id. at 581 (quoting Walker v. Horn, 385 F.3d
321, 330 (3d Cir. 2004)).
The Bankruptcy and District Courts both held that
Rooker-Feldman precluded their jurisdiction over the Maderas’
rescission claim because that claim was inextricably intertwined
with the Court of Common Pleas’ foreclosure judgment. They
reasoned that granting rescission would amount to finding that
no valid mortgage existed, which would negate the foreclosure
judgment, as a “mortgage foreclosure action depends upon the
existence of a valid mortgage.” App. at 24. We agree. Indeed,
a favorable decision for the Maderas in the federal courts would
prevent the Court of Common Pleas from enforcing its order to
foreclose the mortgage. See In re Knapper, 407 F.3d at 581
(“Rooker-Feldman does not allow a plaintiff to seek relief that,
if granted, would prevent a state court from enforcing its
orders.”) (quoting Walker, 385 F.3d at 330).
The Maderas next contend that the Bankruptcy and
District Courts were incorrect in rejecting their TILA claim
seeking damages for Ameriquest’s failure to disclose the title
insurance charge, which was set at the “basic rate,” rather than
the lower “refinance rate.”
The Bankruptcy Court granted summary judgment against
the Maderas on their TILA damages claim on the ground that
they failed to create a genuine issue of material fact as to
whether they had prior title insurance in connection with the

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The parties agree that the Manual of Title Insurance Rating6
Bureau of Pennsylvania (“TIRBOP Manual”) establishes
prevailing, i.e., “reasonable,” rates for title insurance in
Pennsylvania. The TIRBOP Manual provides that a borrower with
a prior mortgage is entitled to the “refinance rate” when three
conditions are satisfied: (1) the prior mortgage must have been
insured within three years of refinancing; (2) the premises must be
identical to that which was previously insured; and (3) there must
be no change in the fee simple ownership.
7
Option One loan. We conclude that was an adequate basis for
the Bankruptcy Court’s grant of summary judgment.
TILA requires certain disclosures of credit terms so that
customers may compare the various terms available to them and
avoid the uninformed use of credit. See, e.g., 15 U.S.C. §§
1602(u), 1638(a). One fee subject to disclosure under TILA is
the “finance charge” – the sum of all those charges “payable
directly or indirectly by the person to whom the credit is
extended, and imposed directly or indirectly by the creditor as an
incident to the extension of credit.” 15 U.S.C. § 1605(a).
The statute expressly exempts title insurance fees from
the definition of “finance charge.” 15 U.S.C. § 1605(e)(1). The
regulations interpreting TILA, however, mandate that title
insurance costs are to be treated as finance charges if they are
not “bona fide and reasonable in amount.” 12 C.F.R. §
226.4(c)(7). Put another way, under the regulations, title
insurance fees must be disclosed under TILA to the extent they
are not “reasonable in amount.” Ameriquest concedes that it did
not disclose title insurance charges in the loan agreement, but it
argues that it was not obligated to do so because the Maderas did
not put Ameriquest on actual or constructive notice of their
entitlement to a lower rate prior to or at closing.6
The problem is not that the Maderas failed to put
Ameriquest on notice of their eligibility for a lower rate. Rather,
as the Bankruptcy Court found, it is that they failed to create a
question of fact as to whether they had indeed purchased title

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8
insurance in association with the Option One loan.
The Maderas argue that TILA does not place a burden on
borrowers to notify lenders of eligibility for reduced title
insurance rates, but rather that TILA simply requires the lender
to disclose title insurance fees if the amount charged is higher
than it should be under the TIRBOP Manual. The Maderas
assert that the disclosure provision of TILA imposes strict
liability, requiring the lender to disclose any excessive title
insurance charge even when the lender has neither actual nor
constructive notice of the borrower’s eligibility for the lower
rate.
Assuming arguendo that this is an accurate view of the
law, the grant of summary judgment was proper. Irrespective of
which party bears notice burdens under TILA, the Maderas were
required to create a question of fact that would allow a
reasonable jury to find in their favor, i.e., that under the TIRBOP
Manual they were in fact entitled to receive the refinance rate.
See Fed. R. Civ. P. 56(e)(2).
The Maderas failed to provide evidence of the existence
of prior title insurance associated with the Option One loan,
apparently because, even at the time of summary judgment, they
were unaware that they had purchased such insurance. For
example, when asked at deposition whether she was issued a title
insurance policy in connection with the Option One loan, Mrs.
Madera said, “I don’t know.” App. at 146. As stated by the
Bankruptcy Court, “Not only did [the Maderas] fail to retain
their copies of documentation of that relatively recent
transaction, but it does not appear that they made any effort to
obtain them for this litigation.” App. at 63.
After the Bankruptcy Court issued its Memorandum
Opinion, the Maderas did attach to their appellate brief in the
District Court a settlement sheet which showed that they had
purchased title insurance in association with the Option One
loan. However, because it was not “made a part of the appellate
record by the bankruptcy court” and because “attaching a
document to a brief does not make it part of the record,” the

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District Court chose to ignore this new evidence. App. at 4.
This was not error. See In re Foust, 52 F.3d 766, 768 (8th Cir.
1995) (holding that district court erred by supplementing the
bankruptcy court’s record with new evidence); see also In re
Colorado Corp., 531 F.2d 463, 467 (10th Cir. 1976) (“It is clear
that the district court cannot receive evidence when reviewing a
finding or an order by the bankruptcy judge.”).
We also conclude that the Bankruptcy Court did not abuse
its discretion in denying the Maderas’ motion to amend. Courts
may deny a motion to amend if “a plaintiff’s delay in seeking
amendment is undue, motivated by bad faith, or prejudicial to
the opposing party.” Cureton v. Nat’l Collegiate Athletic Ass’n,
252 F.3d 267, 273 (3d Cir. 2001). Coming as it did after the
parties had completed discovery, and after the deadline by which
time all pretrial motions were due, the Maderas’ motion to
amend was untimely. The claims contained in the proposed
Amended Complaint are not based on evidence that came to
light after discovery. On the contrary, the Maderas simply failed
to assert these claims before Ameriquest’s summary judgment
motion was filed.
Granting the motion to amend would have resulted in
prejudice to Ameriquest by requiring it to reopen discovery and
respond to new legal theories. As the District Court noted,
Ameriquest would have to depose the Maderas again, “incur
additional costs in preparing for a new trial based on new
theories of liability, as well as prepare any appropriate motions,
briefs and memoranda.” App. at 35.
Lastly, amending the complaint would be futile, as the
proposed Amended Complaint sought to press the exact claims
the Maderas asserted in Madera II, in which Ameriquest and
AMC prevailed at summary judgment. The Bankruptcy Court
thus did not abuse its discretion in denying the Maderas’ motion
to amend, and the District Court was correct to affirm that
decision.
III.

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For the above-stated reasons, we will affirm the District
Court’s affirmance of the Bankruptcy Court’s grant of summary
judgment to Ameriquest and its denial of the Maderas’ motion to
amend.

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