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Old Atlanta Road, LLC v. Specialized Loan Servicing, LLC

United States District Court, N.D. Georgia, Gainesville Division

January 26, 2015

OLD ATLANTA ROAD, LLC, Plaintiff,
v.
SPECIALIZED LOAN SERVICING, LLC, and WILMINGTON TRUST, N.A., Defendants.

FINAL REPORT AND RECOMMENDATION

J. CLAY FULLER, Magistrate Judge.

This case is before the Court on a Second Motion For Leave To Amend (Doc. 24) filed by Plaintiff Old Atlanta Road, LLC ("Old Atlanta") and Defendants' Motion To Dismiss (Doc. 10).

FACTUAL AND PROCEDURAL HISTORY

The following facts[1] are taken from public records and prior cases concerning the subject property. Old Atlanta is an LLC formed by Mark and Cindy Lesman. On August 31, 2006 Mark Lesman secured a $1, 065, 000.00 loan from Countrywide Bank, N.A. Mark and Cindy Lesman executed a security deed in favor of Mortgage Electronic Registration Systems, Inc. ("MERS"). The deed was recorded in Deed Book 4439, Page 713, of the Forsyth County, Georgia records. (Doc. 10-2). Later, the deed was assigned to Defendant Wilmington Trust, National Association, as successor Trustee to Citibank, N.A., as Trustee of SAMI II Inc., Bear Stearns ARM Trust Mortgage Pass-Through Certificates, Series 2006-4 ("Trustee"), as reflected in an Assignment recorded in Deed Book 5722, Page 554 of the Forsyth County, Georgia, records. In particular, Defendants point to a Corrective Assignment recorded on February 15, 2013, in Deed Book 6587, Page 432, of the Forsyth County, Georgia records. (Doc. 10-3 at 5).

After Mark Lesman defaulted on the loan, foreclosure proceedings were begun against the property. Before those proceedings could be completed, other litigation occurred. In August 2008, Lesman filed for Chapter 13 bankruptcy relief in the United States Bankruptcy Court, Northern District of Georgia, Gainesville Division in Case No. 08-22378-reb. That case was later converted to a Chapter 11, then a Chapter 7 case. In August 2010, Citibank, N.A. moved for relief from the automatic stay. That September, the Bankruptcy Court granted Citibank relief from the automatic stay so it could foreclose on the property. (Doc. 10-4). On October 5, 2010, Mark Lesman was granted a bankruptcy discharge. See In re Lesman, Case No. 08-22378-reb, Doc. 112 (Bankr. N.D.Ga. Oct. 5, 2010).

After the discharge, yet before the foreclosure proceedings could be completed, the Lesmans filed a lawsuit challenging the impending foreclosure in the Superior Court Forsyth County, Georgia on November 28, 2011. That lawsuit was removed to this Court on January 25, 2012. See Lesman, et al v. Mortgage Elec. Reg. Sys., Inc. and Bank of America, N.A, as Servicer for Citibank, N.A., (" Lesman v. MERS "), 2:12-cv-23-RWS (Doc. 1, Jan. 25, 2012). Defendants filed motions to dismiss, which were granted by order of this Court on February 19, 2013. Lesman v. MERS, Doc. 40 (filed in this action as Doc. 10-6). The Lesmans appealed the Order of February 19, 2013, but the Eleventh Circuit Court of Appeals dismissed the appeal as untimely filed by order of May 15, 2013. (Doc. 10-7).

While the appeal was pending, on April 30, 2013 Mark and Cindy Lesman formed Old Atlanta, LLC. (Doc. 10-8). On May 23, 2013, Mark Lesman transferred his interest in the property to Old Atlanta. (Doc. 10-9). On July 5, 2013, Cindy Lesman conveyed her interest in the property to Old Atlanta. (Doc. 10-10). The public records reflect that no consideration changed hands with respect to this transaction. (Doc. 10-11).

After foreclosure proceedings were again instituted, this lawsuit was filed on April 28, 2014. (Doc. 1-1). Old Atlanta filed a Motion Tor Temporary Restraining Order, which was denied by an Order of June 30, 2014. (Doc. 4). On July 1, 2014, the property was sold at a public auction. On July 25, 2014, Old Atlanta filed a Motion To Remand. (Doc. 9). On July 31, 2014, Defendants filed a Motion To Dismiss. (Doc. 10). The matter was referred to the undersigned by Order of October 8, 2014. (Doc. 22).

Old Atlanta filed its Second Motion To Amend on December 9, 2014. (Doc. 24). On December 12, 2014, the undersigned entered a Report and Recommendation in which it was recommended that Plaintiffs' Motion To Remand be denied and an Order stating that the filing of the Second Motion To Amend had rendered the first Motion To Amend moot. (Doc. 25). Defendants filed a response in opposition to the Second Motion To Amend on December 29, 2014. (Doc. 28). Old Atlanta filed its reply in support of its Second Motion To Amend on January 15, 2015. (Doc. 29).

Briefing is now complete on the pending motions, and the undersigned turns to their merits.

Discussion

I. Defendants' Motion To Dismiss (Doc. 10)

Defendants contend that Old Atlanta's claims are barred by res judicata, and, alternatively, that Old Atlanta fails to state a claim upon which relief may be granted.

A. Res Judicata

"The general principle of res judicata prevents the relitigation of issues and claims already decided by a competent court." Cmty. State Bank v. Strong, 651 F.3d 1241, 1263 (11th Cir. 2011). "Res judicata comes in two forms: claim preclusion (traditional res judicata') and issue preclusion (also known as collateral estoppel')." Id. "While claim preclusion bars repetitious suits involving the same cause of action..., issue preclusion precludes the re-adjudication of the same issue, where the issue was actually litigated and decided in the previous adjudication, even if it arises in the context of a different cause of action." Id. at 1263-64.

As the Eleventh Circuit has stated:

It is by now hornbook law that the doctrine of res judicata "bars the filing of claims which were raised or could have been raised in an earlier proceeding." For res judicata to bar a subsequent case, four elements must be present: "(1) there is a final judgment on the merits; (2) the decision was rendered by a court of competent jurisdiction; (3) the parties, or those in privity with them, are identical in both suits; and (4) the same cause of action is involved in both cases."
...
As for the fourth element, two cases are generally considered to involve the same cause of action if the latter case "arises out of the same nucleus of operative fact, or is based upon the same factual predicate, " as the former one. " Res judicata acts as a bar not only to the precise legal theory presented in the previous litigation, but to all legal theories and claims arising out of the same operative nucleus of fact.'"

Maldonado v. U.S. Atty. Gen., 664 F.3d 1369, 1375-76 (11th Cir. 2011) (internal citation omitted). Here, there is no dispute that the prior decision was a final judgment on the merits by a court of competent ...


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