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Ernest v. Citimortgage, Inc.

United States District Court, Fifth Circuit

January 22, 2014

JOE F. ERNEST, Plaintiff,
v.
CITIMORTGAGE, INC. as loan originator; U.S. BANK, NA as Trustee for Securitized Trust CitiMortgage Alternative Loan Trust 2007-A6; CITIMORTGAGE, INC. as loan sponsor; CITICORP MORTGAGE SECURITIES. INC. as loan servicer; MORTGAGE ELECTRONIC REGISTRATION SYSTEM aka

ORDER: (1) GRANTING DEFENDANTS' MOTION TO DISMISS AND (2) GRANTING DEFENDANTS' ORAL MOTION FOR A BOND FOR APPEAL

DAVID A. EZRA, District Judge.

On January 8, 2014, the Court heard argument on Defendants' Motion to Dismiss (Dkt. # 3). Chad Dawson Elrod, Esq., appeared on behalf of Plaintiff. Andrew J. Schumacher, Esq., represented Defendants. After careful consideration of the arguments at the hearing and memoranda in support of and in opposition to Defendants' Motion to Dismiss, the Court GRANTS Defendants' Motion to Dismiss and GRANTS Defendants' Motion for a Bond for Appeal.

BACKGROUND

CitiMortgage, Inc. ("CMI"), Citicorp Mortgage Securities, Inc. ("Citicorp"), U.S. Bank National Association as Trustee for Securitized Trust CitiMortgage Alternative Loan Trust 2007-A6 ("US Bank"), and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively "Defendants") filed a Motion to Dismiss Plaintiff Joe Ernest's claims.

I. The Security Instruments

On or around May 9, 2007, Ernest entered into a Note with CMI in the amount of $397, 012.00. (Dkt. # 3 at 2.) The Note listed CMI as the Lender. ( Id., Ex. 1.) Ernest also executed a Deed of Trust on his residence at 21 Aston Glen, San Antonio, Texas 78257 ("the Property") securing the Note. The Deed of Trust listed CMI as the Lender and MERS both as the nominee for the Lender (and the Lender's successors and assigns) and as the beneficiary. ( Id., Ex. 2.) The Deed of Trust was filed in Bexar County. (Id.)

On October 19, 2012, MERS, acting as nominee for CMI, assigned its interest in the Deed of Trust to CMI. ( Id., Ex. 3.)

II. The Petitions

On March 5, 2012, Ernest and Caroline Flores ("Original Plaintiffs") filed suit against CMI and MERS (the "Original Petition"). ( Id., Ex. 6 ¶ 11.) In the Original Petition, the Original Plaintiffs alleged that "[t]he instrument recorded in the real property records of Bexar County, Texas, by Defendant Citi [alleging] an interest in the subject property through a purported conveyance is fraudulent and void." (Id.) The Original Plaintiffs claimed that CMI had "no standing, no interest, no evidence or fact of unbroken chain of title in either (a) the underlying real estate lien note and/or (b) the subject deed of trust." (Id.) They asserted that the assignment of the instruments through MERS rendered the assignments void under a "Split the Note" theory and sought declaratory and injunctive relief. (Id.)

On March 6, 2012, the Original Plaintiffs obtained a temporary restraining order enjoining CMI from conducting a foreclosure sale of their property. (Id. at 3.) CMI removed the suit to the District Court for the Western District of Texas.[1] Subsequently, the parties filed a Joint Stipulation of Dismissal, dismissing the Original Plaintiffs' claims with prejudice.

Next, on February 20, 2013, the Original Plaintiffs filed another Petition/Counterclaim in state court (the "Second Petition"). ( Id., Ex. 8.) The Original Plaintiffs added new defendants[2] in the Second Petition, including U.S. Bank and Citicorp, but alleged the same theory as the Original Petition - that the inclusion of MERS on the Deed of Trust split the Note, rendering the sale provisions in the Deed of Trust unenforceable. (Id.)

CMI contacted the Original Plaintiffs demanding that they dismiss the Second Petition because it presented claims that had already been dismissed with prejudice. (Id. at 3.) The Original Plaintiffs non-suited CMI, but pursued their claims against the other defendants.

Defendants next filed a Motion to Enjoin Plaintiffs from Pursuing the State Court Proceedings in the Western District Case. (See id., Ex. 8.) Plaintiffs non-suited the Second Petition before the Court could rule on it, and it was dismissed as moot. (Id.)

On August 2, 2013, Plaintiff filed a third petition ("Third Petition") in state court, and Defendants removed the case to this Court on August 27, 2013. In the Third Petition, Plaintiff alleges (1) Defendants do not have standing to foreclose on the Property; (2) Defendants engaged in fraud in the concealment; (3) Defendants engaged in fraud in the inducement; (4) Defendants intentionally inflicted emotional distress upon Ernest; (5) Defendants engaged in slander of title; (6) Plaintiff has a right to quiet title; (7) Plaintiff has a right to declaratory relief; (8) Defendants violated TILA, 15 U.S.C. § 1601 et seq.; (9) Defendants violated the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq.; and (10) Plaintiff is entitled to rescission of the loan and accompanying documents.

In response, Defendants filed the instant Motion to Dismiss. (Dkt. # 3).

Plaintiff failed to respond to the Defendants' Motion to Dismiss within the fourteen-day period prescribed by the Local Rules. W.D. Tex. Civ. R. 7(e). Instead, Plaintiff filed a response seven days past the deadline, without seeking leave from the Court. However, for the sake of thoroughness, the Court will address the arguments raised in Plaintiff's untimely response.

LEGAL STANDARDS

I. Motion to Dismiss

A proper pleading under the Federal Rules of Civil Procedure must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "[T]he pleading standard Rule 8 announces does not require detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555 (2007). The complaint must contain more than mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (citing Twombly , 550 U.S. at 555).

In reviewing a motion to dismiss, the Court accepts as true all of the well-pleaded factual allegations in the complaint. See Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009).

In order to survive a motion to dismiss, a claim must allege "enough facts to state a claim to relief that is plausible on its face." Twombly , 550 U.S. at 547. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that ...


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