Ernest v. CitiMortgage Inc., et al
ORDER GRANTING 3 Motion to Dismiss for Failure to State a Claim and GRANTING motion for a bond for appeal. Signed by Judge David A. Ezra. (rg)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
JOE F. ERNEST,
CITIMORTGAGE, INC. as loan
originator; US 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;
REGISTRATION SYSTEM aka
“MERS”; DOES 1 through 100,
ORDER: (1) GRANTING DEFENDANTS’ MOTION TO DISMISS AND
(2) GRANTING DEFENDANTS’ ORAL MOTION FOR A BOND FOR
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.
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.
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.)
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
Although MERS was named as a defendant in the original suit, it was never
served, and therefore never became a party in the case.
Original Plaintiffs added new defendants2 in the Second Petition, including US
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;
The Defendants in the Second Petition are the same as those in the present
Petition: CitiMortgage, US Bank, Citicorp, MERS.
(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.
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 the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 677.
In adjudicating a motion to dismiss, the Court considers only the
pleadings and those matters of which it may take judicial notice under Rule 201 of
the Federal Rules of Evidence. Lovelace v. Software Spectrum Inc., 78 F.3d 1015,
1018–19 (5th Cir. 1996) (adopting a rule that a court in a securities fraud action
may take judicial notice of relevant public disclosure documents required to be
filed with the SEC); Hurd v. BAC Home Loans Servicing, LP, 880 F.Supp. 2d 747,
758 (N.D. Tex. 2012) (taking judicial notice of matters of public record and
considering documents attached to a motion to dismiss as part of the pleadings
because they were central to the claims in the complaint).
Defendants argue that the Third Petition fails to state a claim upon
which relief can be granted. Defendants assert (1) Plaintiff’s claims are barred by
res judicata3; (2) Plaintiff’s claims are predicated upon theories squarely rejected
by Texas courts; (3) Plaintiff lacks standing to bring claims regarding the
assignments; and (4) Plaintiff failed to plead the necessary elements of a quiet title
claim. (See Dkt. # 3.)
Defendants included, as exhibits to the Motion to Dismiss, copies of
the Note (Id., Ex. 1); the First Deed of Trust (Id., Ex. 2); the Assignment of the
Deed of Trust from MERS to CMI (Id., Ex. 3); the first Notice of Removal from
April 20, 2012 with attached exhibits (Id., Ex. 6); the Joint Stipulation of Dismissal
with Prejudice filed December 11, 2012 (Id., Ex. 7); and the Motion to Enjoin filed
in June 2013 (Id., Ex. 8). The Court relies on these documents because they are
either central to Plaintiff’s claims in the Third Petition or because they are matters
of public record.
Although Defendants allege that Plaintiff’s claims also are barred by collateral
estoppel, Defendants do not address this theory in their Motion to Dismiss and
only briefly touch on the issue in their Reply. Because the Court finds that
Defendants’ Motion to Dismiss should be granted on other grounds, the Court
declines to address this issue of collateral estoppel here.
Defendants first argue that res judicata precludes all of Plaintiff’s
claims. (See Dkt. # 3 at 6.) Res judicata bars “successive litigation of the very
same claim, whether or not relitigation of the claim raises the same issues as the
earlier suit.” Taylor v. Sturgell, 553 U.S. 880, 892 (2008) (quoting New
Hampshire v. Maine, 532 U.S. 742, 748 (2001)).
Res judicata prevents parties from “contesting matters that they have
had a full and fair opportunity to litigate” and seeks to avoid “the expense and
vexation attending multiple lawsuits, [to] conserv[e] judicial resources, and [to]
foste[r] reliance on judicial action by minimizing the possibility of inconsistent
decisions.” Id. (quoting Montana v. United States, 440 U.S. 147, 153–154 (1979)).
Res judicata applies when “1) the parties to both actions are identical
(or at least in privity); 2) the judgment in the first action is rendered by a court of
competent jurisdiction; 3) the first action concluded with a final judgment on the
merits; and 4) the same claim or cause of action is involved in both suits.” Ellis v.
Amex Life Ins. Co., 211 F.3d 935, 937 (5th Cir. 2000).
The inquiry into whether there is res judicata concludes with an
analysis of whether “the previously unlitigated claims could or should have been
asserted in the prior proceeding.” In re Paige, 610 F.3d 865, 873 (5th Cir. 2010)
(internal quotation marks omitted). Res judicata only bars claims that could or
should have been asserted in an earlier proceeding. Id. The inquiry centers on
whether and to what extent Plaintiff had actual or imputed awareness of the
now-presented claims had and whether Plaintiff could have asserted them in the
previous action. In re Intelogic Trace, Inc., 200 F.3d 382, 388 (5th Cir. 2000).
Because Plaintiff does not challenge the competency of the Court’s
jurisdiction or the finality of the prior judgment4, we limit our discussion to
whether the parties are in privity, whether the causes of action are the same, and
whether the claims could or should have been presented in the earlier proceeding.
Privity is a “legal conclusion that the relationship between the one
who is a party on the record and the non-party is sufficiently close to afford
application of the principle of preclusion.” Meza v. Gen. Battery Corp., 908 F.2d
1262, 1266–67 (5th Cir. 1990). The Fifth Circuit maintains that privity may be
found only in three narrow situations: “(1) where the non-party is the successor in
interest to a party’s interest in property; (2) where the non-party controlled the
prior litigation; and (3) where the non-party’s interests were adequately
represented by a party to the original suit.” Id.
“It is clear that a stipulation of dismissal with prejudice, or for that matter, a
dismissal with prejudice at any stage of a judicial proceeding, normally constitutes
a final judgment on the merits which bars a later suit on the same cause of action.”
Astron Indus. Assocs., Inc. v. Chrysler Motors Corp., 405 F.2d 958, 960 (5th Cir.
Courts acknowledge that privity exists between preceding and
succeeding owners of property. See Taylor, 553 U.S. at 893. Similarly, assignees
and servicing agents of a loan are in privity with an original mortgage company.
See McMahan v. First Union Nat. Bank, No. C.A.SA–01–782 FB NN, 2003 WL
1606084, at *2 (W.D. Tex. Mar. 7, 2003) (citing Northern Pac. Ry. Co. v. Slaught,
205 U.S. 122, 128 (1907)); see also Steele v. Quantum Servicing Corp., No. 4:12–
CV–344, 2012 WL 4162138, at *4 (E.D. Tex. Aug. 24, 2012) (vacated on other
grounds) (finding that an assignment between successive defendants is sufficient to
The issue before the Court is whether MERS, US Bank, and CitiCorp
are in privity with CMI, the defendant in the Original Petition.
Defendants assert that the parties in the Third Petition are identical to
or in privity with the parties in the Original Petition. (See Dkt. # 3 at 7.) There is
no dispute that Ernest is the same Plaintiff as in the Original Petition. (Id.)
Additionally, Defendants assert that both CitiCorp and US Bank are in privity with
CMI. (See id.) Defendants argue that because Plaintiff’s claims focus on actions
that concern the origination and securitization of the mortgage, and because CMI
was the originator, sponsor, and servicer of the loan, all of the Defendants are in
privity with CMI. (See id.)
In contrast, Plaintiff asserts that defendants US Bank, MERS, and
CitiCorp have not demonstrated that they were in privity with CMI. (See
Dkt. # 6 at 22.) Plaintiff argues that Defendants have produced no contract or any
evidence indicating a relationship between CMI and defendants US Bank, Citicorp,
and MERS. (See id.) Plaintiff contends that there cannot be privity because the
assignments were void and incapable of creating the necessary relationship.
The Court finds that, MERS, as the original beneficiary under the
Deed of Trust and assignor, shares sufficient interest with CMI to establish privity.
See Butts v. J.P. Morgan Chase Bank, No. 3–11–CV–2542–M–BD, 2011 WL
7109344, at*2 (N.D. Tex. Dec. 28, 2011) (finding privity between MERS, as the
original beneficiary on a deed of trust, and the subsequent assignee of the note and
deed of trust).
Additionally, as Plaintiff alleges, Citicorp is “the Depositor for [the]
Securitized Trust and/or a purported participant in the imperfect securitization of
the Note and/or Deed.” (Dkt. # 1 ¶5.) As a link in the chain of assignment,
Citicorp is in privity with CMI. Similarly, as trustee, US Bank shares an identity
of interest with CMI creating privity. At the very least, CMI is in privity with both
Citicorp and US Bank because it adequately represented their interests in the
Because there is privity between each of the Defendants in the Third
Petition and CMI, this requirement of res judicata is satisfied.
Identical claims or causes of action
The Court applies the transactional test to determine whether two
cases involve the same cause of action. In re Paige, 610 F.3d 865, 872 (5th Cir.
2010). Under the transactional test, “the preclusive effect of a prior judgment
extends to all rights the original plaintiff had with respect to all or any part of the
transaction, or series of connected transactions, out of which the [original] action
arose.” Id. (internal quotation marks omitted). The linchpin of this test is whether
the two actions are based on “the same nucleus of operative facts, rather than the
type of relief requested, substantive theories advanced, or types of rights asserted.”
Id. (internal citations and quotation marks omitted). The fact that “a number of
different legal theories casting liability on an actor may apply to a given episode
does not create multiple transactions . . . [even where] the several legal theories
depend on different shadings of the facts, or would emphasize different elements of
the facts, or would call for different measures of liability or different kinds of
relief.” Restatement (Second) of Judgments, § 24, cmt. c (1982). Additionally, the
“the type of relief requested, substantive theories advanced, or types or rights
asserted is not controlling for the purposes of the transactional test.” In re Paige,
610 F.3d at 873 (internal quotation marks omitted); see also In re Howe, 913 F.2d
1138, 1144 (5th Cir. 1990) (“[T]he critical issue is not the relief requested or the
theory asserted but whether plaintiff bases the two actions on the same nucleus of
In the Original Petition, Plaintiff claims that “[the deed] 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.” (Dkt. # 3 Ex. 6-B.) Plaintiff argues that “Defendant Citi has 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.)
Additionally, in the Original Petition Plaintiff sought (1) declaratory
relief; (2) a finding that “the Deed and provisions therein relating to the
enforcement of the Note through foreclosure, are null and void”; (3) a finding “that
a separation of/between the deed and note occurred, rendering unenforceable any
interest in the subject property which Defendant seeks to enforce”; and (4) findings
“as to the legitimacy and efficacy of the transfers of the deed and note which
occurred between the time of closing and the present.” (Id., Ex. 6-B at 7.) Each of
these requests is predicated upon the invalidity of the assignments of the Note and
Deed of Trust.
In the Third Petition, Plaintiff asserts ten causes of action: (1) lack of
standing; (2) fraud in the concealment; (3) fraud in the inducement; (4) intentional
infliction of emotional distress; (5) slander of title; (6) quiet title; (7) declaratory
relief; (8) violations of the Truth In Lending Act; (9) violations of the Real Estate
Settlement Procedures Act; and (10) rescission. (Dkt. # 1 Ex. 4.) Plaintiff states
that the claims for fraud, intentional infliction of emotional distress, declaratory
relief based on TILA and RESPA violations, and rescission arise from “the facts
and circumstances surrounding Plaintiff’s original loan transaction and subsequent
securitization.” (Id., Ex. 4 ¶ 15.)
Although Plaintiff is indeed seeking more specific and numerous
forms of relief than he did in his Original Petition, each of the claims in the Third
Petition is based upon the same nucleus of operative facts, namely the allegedly
invalid assignments of the Note and Deed of Trust. Therefore, both Plaintiff’s
Original Petition and Third Petition arise out of the same transaction.
Should Plaintiff’s Claims have been Raised in the Original Petition
The Court finds that Plaintiff should have asserted all of the Third
Petition’s claims in the Original Petition because all of the claims are predicated on
the same nucleus of operative facts. Although Plaintiff argues that he could not
have raised the issue of the validity of the assignment in the Original Petition
because it is predicated on “new facts and evidence which could not have been
[presented] even with due diligence,” he has provided no support for this assertion,
and the Court cannot conceive of any reason why Plaintiff could not have included
the Third Petition’s claims in the Original Petition. (See Dkt. # 6 at 20.) Indeed,
the fact that Plaintiff’s claims in the Original Petition were predicated upon the
same theory asserted in the Third Petition belies Plaintiff’s argument.
Plaintiff’s Third Petition is barred by res judicata because the parties
are in privity, the prior final judgment was rendered by a court of competent
jurisdiction, the claims arise out of the same transaction, and the claims could and
should have been brought in the prior suit.
“Split the Note” and “Show Me the Note” Theories
Although Plaintiff’s claims must be dismissed on res judicata grounds,
the Court will briefly address the other grounds for dismissal Defendants presented
in the Motion to Dismiss.
Each of Plaintiff’s claims in the Third Petition is based upon the “Split
the Note” and “Show Me the Note” theories. (See Dkt. # 6.) Defendants correctly
argue that Texas courts have already addressed and rejected both of these theories.
(Dkt. # 3 at 9.)
First, the Fifth Circuit rejected the “Show Me the Note” theory that
argues that, in order to foreclose, “a party must produce the original note bearing a
wet ink signature.” Martins v. BAC Home Loans Servicing, L.P., 722 F.3d 249,
253 (5th Cir. 2013) (internal quotation marks omitted). The Fifth Circuit explicitly
held that “Texas recognizes assignment of mortgages through MERS and its
equivalents as valid and enforceable without production of the original, signed
Second, the Fifth Circuit also rejected the “Split the Note” theory that
argues that the “transfer of a deed of trust by way of MERS ‘splits’ the note from
the deed of trust, thus rendering both null” and that to foreclose, “a party must hold
both the note and the deed of trust.” Id. at 254. The Fifth Circuit held that “the
Texas Property Code contemplates and permits MERS either (1) to grant the
mortgage servicer the authority to foreclose or, if MERS is its own mortgage
servicer, (2) to bring the foreclosure action itself. In either event, the mortgage
servicer need not hold or own the note and yet would be authorized to administer a
foreclosure.” Id. at 255.
All of Plaintiff’s claims are based on these defunct theories and
cannot survive a motion to dismiss.
Defendants argue that Plaintiff does not have standing to challenge the
assignments because Plaintiff is not a party to the assignments, and any alleged
violations would at most render the assignments voidable, not void.5
A plaintiff may challenge a void assignment to which is he not a party, but is
precluded from challenging one that is merely voidable. Reinagle v. Deutsche
Bank Nat. Trust Co., 735 F.3d 220, 226 (5th Cir. 2013).
In contrast, Plaintiff asserts that he is challenging the assignments
because they were forged and asserts that Defendants have not shown that CMI
had sufficient authority to foreclose based on those assignments. (Dkt. # 6.)
The Fifth Circuit unequivocally held that an alleged lack of authority
of an entity assigning a note and deed of trust only makes the assignment voidable,
not void, and therefore does not provide standing to a mortgagor to challenge the
validity of the assignment. Reinagel v. Deutsche Bank Nat. Trust Co., 735 F.3d
220, 226 (5th Cir. 2013).
Additionally, under Rule 9(b) of the Federal Rules of Civil Procedure,
“a party must state with particularity the circumstances constituting fraud or
mistake.” Here, Plaintiff has done no more than make a general allegation that the
assignments were forged. Plaintiff’s pleading and response do not provide any
factual allegations satisfying the 9(b) pleading standard.
Because Plaintiff’s claims of standing are foreclosed by the Fifth
Circuit’s decision in Reinagel, and Plaintiff has failed to meet the heightened
pleading standard of Rule 9(b) for claims of fraud, all of Plaintiffs claims must be
Plaintiff Claim to Quiet Title
Defendants contend that Plaintiff did not adequately plead a claim to
quiet title. Defendants assert that Plaintiff’s petition does not include any facts
supporting the strength of the Plaintiff’s title, but only attacks the strength of
Defendants’ title. (Dkt. # 3 at 12.) Defendants maintain that this is not sufficient
to allow Plaintiff’s claim to quiet title to withstand a motion to dismiss. (Id.) In
contrast, Plaintiff argues that a quiet title claim can be maintained when Plaintiffs
have pled title to their property while challenging the strength of Defendants’
claim to title. (Dkt.# 6 at 16.)
In the Third Petition, Plaintiff pleaded that he was the owner of the
Property. (Dkt. # 1 Ex. 4.) However, Plaintiff’s claim to superior title is premised
on the “Show Me the Note” and “Split the Note” theories previously rejected by
the Fifth Circuit. See e.g., Martins, 722 F.3d at 253–54.
“A suit to quiet title or to remove a cloud can be maintained only by a
person owning an interest in the property involved.” Bell v. Ott, 606 S.W.2d 942,
953 (Tex. App. 1980). “A plaintiff in a suit to quiet title must prove and recover
on the strength of his own title, not the weakness of his adversary’s title.” Fricks v.
Hancock, 45 S.W.3d 322, 327 (Tex. App. 2001). Because Plaintiff’s claim to
superior title is premised on discredited theories and because Plaintiff has not
pleaded any other facts supporting his claim to superior title, the Court finds that
Plaintiff has failed to state a claim to quiet title.
MOTION FOR BOND ON APPEAL
During the hearing, Defendants moved for an appeal bond pursuant to
Rule 7 of the Federal Rules of Appellate Procedure that provides “the district court
may require an appellant to file a bond or provide other security in any form and
amount necessary to ensure payment of costs on appeal.” Fed. R. App. P. 7.
In evaluating a Rule 7 motion, the court considers “(1) whether there
is a risk of non-payment in the event that the appellants lose their appeal, (2) any
previous bad faith or vexatious conduct on the part of the appellants, and (3) the
likely merits of the appeal.” Noatex Corp. v. King Const. of Houston, L.L.C., 732
F.3d 479, 489 (5th Cir. 2013). The Noatex court recognized that whether
attorney’s fees may constitute costs has not been definitively decided in the Fifth
Circuit, and additionally that the circuit courts are currently divided on this issue.
Compare Pedraza v. United Guar Corp., 313 F.3d 1323, 1333 (11th Cir. 2002)
(holding that a court should determine whether attorney’s fees constitute costs
allowable under Rule 7 by examining the definition of costs in the statute
underlying plaintiff’s cause of action, but finding that under RESPA, costs are
separate from attorney’s fees), Azizian v. Federated Dept. Stores, Inc., 499 F.3d
950, 958 (9th Cir. 2007) (“We agree with the Second, Sixth, and Eleventh Circuits
and hold that the term ‘costs on appeal’ in Rule 7 includes all expenses defined as
‘costs’ by an applicable fee shifting statute, including attorney’s fees.”), and
Adsani v. Miller, 139 F.3d 67, 75 (2d Cir. 1998) (holding that attorney’s fees may
properly be included in costs), with Hirschensohn v. Lawyers Title Ins. Corp., No.
96–7312, 1997 WL 307777, at *3 (3d Cir. June 10, 1997) (holding that Rule 7 does
not allow a bond to include the estimated costs of attorney’s fees). In Noatex, the
Fifth Circuit “assume[d] without deciding that attorney’s fees may constitute costs
for Rule 7 purposes.” 732 F.3d at 498 n. 8.
During argument on January 9, 2014, Defendants stated the Plaintiff
had been living in the Property without making any payments toward the
mortgage. This fact indicates both that there is a risk of non-payment if Plaintiff
were to lose on appeal and indicates, if not bad faith, at least an intent of Plaintiff
to avoid meeting his obligations on the Property. Additionally, because the Fifth
Circuit has already rejected the theories Plaintiff asserts to support his claims, the
Court finds that Plaintiff has a very low likelihood of success on appeal.
Therefore, this Court finds that a Rule 7 Bond for Appeal is appropriate.
Because of the Fifth Circuits intimation in Noatex that attorney’s fees
may be included in a Rule 7 Bond for Appeal, the Court requires Plaintiff to post a
bond in the sum total of the amount of debt secured by the Note and Deed of Trust
and an additional amount representing reasonable attorney’s fees prior to taking
any appeal from this Order.
For the reasons presented above, the Court hereby GRANTS
Defendants’ Motion to Dismiss (Dkt. # 3) and GRANTS Defendants’ Motion for a
Bond for Appeal.
IT IS SO ORDERED.
DATED: San Antonio, Texas, January 22, 2014.
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