Altmann v. Homestead Mortg. Income Fund, LLC

• Decision Date: 29 May 2012
• Docket Number: Case No. CV F 11–0984 LJO SMS.
• Citation: 887 F.Supp.2d 939
• Court: U.S. District Court — Eastern District of California
• Parties: Ernie ALTMANN, et al., Plaintiffs, v. HOMESTEAD MORTGAGE INCOME FUND, LLC, et al., Defendants.

887 F.Supp.2d 939

Ernie ALTMANN, et al., Plaintiffs,

v.HOMESTEAD MORTGAGE INCOME FUND, LLC, et al., Defendants.

Case No. CV F 11–0984 LJO SMS.

United States District Court,

E.D. California.

May 29, 2012.

John W. Villines, JV Law, Modesto, CA, for Plaintiffs.

Julia M. Wei, Law Office of Peter N. Brewer, Palo Alto, CA, for Defendants.

ORDER ON F.R.Civ.P. 12 MOTIONS TO DISMISS AND ON F.R.Civ.P. 11 SANCTIONS (Docs. 21, 22.)

LAWRENCE J. O'NEILL, District Judge.

INTRODUCTION

Several lender and related defendants seek to dismiss in the absence of this Court's jurisdiction and as legally barred plaintiffs Ernie Altmann (“Mr. Altmann”) and Creative Builders, Inc.'s (“CBI's”) California statutory and common law claims arising out of Mr. Altmann's construction loan for a Stanislaus County property (“property”). The moving defendants further to seek to impose F.R.Civ.P. 11(c)(2) sanctions of $14,466.38 against Mr. Altmann and CBI (collectively “plaintiffs”) in that plaintiffs' claims are frivolous. Plaintiffs filed no timely opposition to the motions to dismiss and for sanctions. This Court considered defendants' F.R.Civ.P. 12(b)(1) and (6) motions to dismiss and F.R.Civ.P. 11(c)(2) sanctions motion on the record and VACATES the May 31, 2012 and June 8, 2012 hearings, pursuant to Local Rule 230(g). For the reasons discussed below, this Court DISMISSES this action and IMPOSES on plaintiffs' counsel a $6,888.38 sanction.

BACKGROUND¹

The Property

The property comprises two parcels with street addresses of 16413 Sonora Road and 16419 Sonora Road in Knights Ferry, Stanislaus County, California. Although the property has two street addresses, it has a single legal description and single assessor's parcel number (“APN”). The SAC alleges that Mr. Altmann had owned both parcels and that CBI was title owner of 16413 Sonora Road.

Mr. Altmann's Loan

In April 2007, Mr. Altmann, a then general contractor, obtained a $1,205,000 construction loan from defendant Homestead Mortgage Income Fund, LLC (“Homestead”), a California limited liability company. Private Money Brokers (“Brokers”) of Gilroy, California was the referring broker for Mr. Altmann's loan. The loan was secured by a deed of trust of which defendant FCI Lender Services (“FCI”), a California business, was beneficiary. Defendant National Investment Mortgage Fund, LLC (“National Fund”), a California limited liability company, serviced and acquired an interest in the loan. Defendant Real Estate Lending Group, Inc. (“RELG”) is the manager of Homestead and National Fund. Defendant Steven Belleville (“Mr. Belleville”) is a RELG officer.²

At the time of signing the construction loan documents, the property was unimproved with incomplete construction. The loan had a two-year term and provided funds to complete, remodel and expand the house structure and four-car garage.

Mr. Altmann's April 5, 2007 application indicated the loan was for investment. Mr. Altmann signed an April 5, 2007 Occupancy and Financial Status Affidavit to address property occupancy:

Investment. The Property is owned and held by Borrower as an investment property. Borrower does not occupy or use the property, and has no present intention to occupy or use the Property in the future, either as Borrower's principal residence or second home. Borrower now occupies and uses other property or properties as Borrower's principal residence and/or second home.

Loan funds were distributed pursuant to milestones determined by Builders Control. In December 2007, National Fund acquired a 50 percent interest in Mr. Altmann's loan.

Loan Modification

In April 2008, Mr. Altmann's loan was modified to an increased $1,215,000 principal. Mr. Altmann's April 4, 2008 application indicated the loan was for investment. Mr. Altmann's April 4, 2008 Occupancy and Financial Status Affidavit included the same statements as his prior affidavit that the property was investment property which Mr. Altmann did not occupy and did not intend to occupy.

Forbearance Agreements And Foreclosure

As of July 22, 2008, Mr. Altmann had listed the property to sell for $2,195,000. Mr. Altmann was unable to sell the property and began to occupy the property.

Mr. Altmann requested Homestead and National Fund to forbear property foreclosure and to accept reduced payments. His request resulted in a September 1, 2008 forbearance agreement. In July 2009, Mr. Altmann, Homestead and National Fund entered into an addendum to the forbearance agreement for Mr. Altmann's further reduced payments.

After Mr. Altmann ceased making payments, FCI conducted a May 4, 2010 trustee's sale of the property by which the property reverted to Homestead, which later sold the property to current owners Miguel and Gloria Olivo (the “Olivos”).

Mr. Altmann's Claims In This Action

The SAC alleges that this action “arises out of the origination of loans to Plaintiff Altmann and the wrongful foreclosure of both parcels that comprise the Property.” The SAC claims that Mr. Altmann's loans “were memorialized in Promissory Notes which were secured by a Deeds [sic] of Trust on 16419 Sonora Road only.” The SAC alleges that CBI built a large second residence with a separate 16413 Sonora Road address on which CBI had no loans or encumbrances. The SAC claims that Homestead's loan “was made only to Altmann and only for 16419 Sonora Road” and that “the second home owned by Plaintiff CBI was not part of Defendant Homestead's loan to Altmann.” The SAC alleges that the trustee's sale notice and sales deed list only Mr. Altmann's 16419 Sonora Road home, not the 16413 Sonora Road home owned by CBI, to result in wrongful foreclosure of 16413 Sonora Road.

The SAC alleges a negligence claim, three wrongful foreclosure claims, and a wrongful eviction claim which assert essentially that the lender defendants had no right to foreclose on CBI's 16413 Sonora Road. The SAC alleges a breach of contract claim that Brokers and Homestead failed to provide Mr. Altmann an affordable loan, failed to finance his loan, and forced Mr. Altmann into foreclosure. The SAC includes a constructive fraud claim that Brokers and Homestead gained advantage by deceiving Mr. Altmann into “a mortgage transaction,” “misinformed” loan terms, and “extended credit to Altmann without regard to his ability to pay.”

Plaintiffs' Other Litigation

On August 25, 2010, Mr. Altmann had filed a Stanislaus County Superior Court action (“first state action”) against Homestead, FCI, and others to challenge foreclosure of the property. Mr. Altmann did not serve Homestead and FCI with the first state court action, and Homestead and FCI took action to expunge the lis pendens associated with the first state action. In June 2011, Mr. Altmann dismissed the first state action and withdrew the lis pendens to allow the property sale to the Olivos.³

Shortly after dismissing the first state court action, plaintiffs filed this federal action on June 14, 2011 through counsel John Villines (“Mr. Villines”). Plaintiffs filed their first amended complaint on June 27, 2011 and were granted leave to file the SAC, which plaintiffs filed on March 6, 2012. The lending defendants were served shortly thereafter and filed their pending F.R.Civ.P. 12 motions to dismiss on March 28, 2012 and their F.R.Civ.P. 11 sanctions motion on April 25, 2012.

On June 22, 2011, plaintiffs filed a lis pendens in connection with this action. The lender defendants are unable to determine if the lis pendens was recorded or indexed properly.

On February 21, 2012, plaintiffs filed a second Stanislaus County Superior Court action against the lender defendants and the Olivos to again challenge property foreclosure and the sale to the Olivos. As such, the lender defendants note that plaintiffs have filed four actions against them regarding the property.

DISCUSSION

F.R.Civ.P. 12(b)(1) Motion To Dismiss Standards

The lender defendants initially attack the SAC's failure to invoke this Court's subject matter jurisdiction based on diversity of citizenship or federal question.

F.R.Civ.P. 12(b)(1) authorizes a motion to dismiss for lack of subject matter jurisdiction. Fundamentally, federal courts are of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). A “court of the United States may not grant relief absent a constitutional or valid statutory grant of jurisdiction.” U.S. v. Bravo–Diaz, 312 F.3d 995, 997 (9th Cir.2002). “A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears.” Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221, 1225 (9th Cir.1989). Limits on federal jurisdiction must neither be disregarded nor evaded. Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978). “When subject matter jurisdiction is challenged under Federal Rule of Procedure 12(b)(1), the plaintiff has the burden of proving jurisdiction in order to survive the motion.” Tosco Corp. v. Communities for Better Environment, 236 F.3d 495, 499 (9th Cir.2001).

When addressing an attack on the existence of subject matter jurisdiction, a court “is not restricted to the face of the pleadings.” McCarthy v. U.S., 850 F.2d 558, 560 (9th Cir.1988). In such a case, a court may rely on evidence extrinsic to the pleadings and resolve factual disputes relating to jurisdiction. St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir.), cert. denied,493 U.S. 993, 110 S.Ct. 541, 107 L.Ed.2d 539 (1989); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987); Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir.1983); Smith v. Rossotte, 250 F.Supp.2d 1266, 1268 (D.Or.2003) (a court “may consider evidence outside the pleadings to resolve factual disputes apart from the pleadings”).

No presumptive truthfulness attaches to a plaintiff's allegations, and the existence of disputed material facts does not preclude evaluation of the merits of jurisdictional claims. Thornhill Pub....