Newsom v. Countrywide Home Loans Inc. Dba America's Wholesale Lender

• Decision Date: 19 May 2010
• Docket Number: Case No.: C 09-5288 SBA.
• Parties: Peter and Stephanie NEWSOM, Plaintiffs, v. COUNTRYWIDE HOME LOANS, INC. dba America's Wholesale Lender, Mortgage Electronic Registrations Systems, Inc., Bankers Alliance Inc., Julie Whiteside, and Does 1-20, inclusive, Defendants.
• Court: U.S. District Court — Northern District of California

714 F.Supp.2d 1000

Peter and Stephanie NEWSOM, Plaintiffs,

v.COUNTRYWIDE HOME LOANS, INC. dba America's Wholesale Lender, Mortgage Electronic Registrations Systems, Inc., Bankers Alliance Inc., Julie Whiteside, and Does 1-20, inclusive, Defendants.

Case No.: C 09-5288 SBA.

United States District Court,N.D. California, Oakland Division.

May 19, 2010.

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Tiffany Rochelle Norman, The Law Office of Tiffany R. Norman, San Francisco, CA, for Plaintiffs.

Benjamin J.B. Allen, Bryan Cave LLP, Santa Monica, CA, Stephanie Ann Blazewicz, James Goldberg, Esq., Bryan Cave LLP, San Francisco, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT COUNTRYWIDE HOME LOAN, INC.'S MOTION TO DISMISS, TO EXPUNGE LIS PENDENS AND TO STRIKE

SAUNDRA BROWN ARMSTRONG, District Judge.

Plaintiffs, Dr. Peter Newsom (“Newsom”) and Stephanie Newsom (collectively “Plaintiffs”), allege that they were defrauded by their lender, mortgage broker and others in connection with the refinancing of their home in Woodside, California. The Second Amended Complaint (“SAC”) alleges nine claims for relief against defendants, Countrywide Home Loans, Inc. dba America's Wholesale Lender (“Countrywide”), Mortgage Electronic Registrations Systems, Inc. (“MERS”), Bankers Alliance Inc. (“Bankers Alliance”) and Julie Whiteside (“Whiteside”). Only Countrywide has been served with the SAC.

The parties are presently before the Court on Countrywide's Motion to Dismiss Plaintiffs' Second Amended Complaint, Motion to Strike, and Motion to Expunge Lis Pendens. Having read and considered the papers submitted in connection with this matter, and being fully informed, the Court hereby: (1) GRANTS IN PART and DENIES IN PART the motion to dismiss; (2) GRANTS IN PART and DENIES IN PART the motion to strike; and (3) DENIES the motion to expunge lis pendens. Pursuant to Federal Rule of Civil Procedure 78(b), the Court adjudicates the instant matter without oral argument.

I. BACKGROUNDA. Factual Summary

Plaintiffs are the equitable owners of a residence located at 150 Brookwood Road, Woodside, California, which they purchased in 2002. SAC ¶ 1; Def.'s Request for Judicial Notice (“RJN”) Ex. N. In July 2006, Plaintiffs retained a mortgage broker, Bankers Alliance, to assist them with refinancing an existing mortgage on their property. SAC ¶ 11. Whiteside, ostensibly on behalf of Bankers Alliance, informed Plaintiffs that she would obtain a “no cost, no charge” loan for them. Id. ¶ 12. Plaintiffs allegedly were led to believe that they would receive a 6% interest rate on a new first mortgage and an 8% interest rate on the second. Id. ¶ 26. On August 23, 2006, Whiteside obtained financial and other information from Plaintiffs, including the amount of their monthly income, and on their behalf, submitted a loan application for a 30-year fixed rate loan in the amount of $2.15 million at an interest rate of 6.75%. Id. ¶ 14. Unbeknownst to Plaintiffs, Whiteside allegedly inflated the amount of Plaintiffs' monthly income from $30,000 to $47,000. Id. ¶ 16. ¹

On September 11, 2006, Newsom went to the title company to sign closing documents. Id. ¶ 27. While walking into the title company, Newsom was on the telephone with Whiteside, who informed him that the interest rate on the first mortgage, in fact, would be 6.75% the first mortgage and 12% on the second. Id. Newsom nonetheless proceeded to sign the loan papers, though Whiteside allegedly told him “not to worry because it would be only for a couple of months because they could refinance.” Id. ¶ 27. Newsom claims that the ramifications of these changes were not disclosed to him and that “he did not fully understand the implications in the 50% increase in his interest rate at the last minute.” Id. After the closing, Newsom received another call from Whiteside, who told him that the documents that he had executed were “incorrect” and needed to be re-signed. Id. ¶ 28. On September 13, 2006, Whiteside's mother went to Newsom's office for a “second closing ceremony.” Id. On the same date, Plaintiffs received final Truth in Lending Disclosure Statements for both loans. Id. ¶ 21.

According to Plaintiffs, the terms of the notes were different than what was previously represented to them by Whiteside. Id. ¶ 28. After receiving a billing statement, Plaintiffs allegedly realized that “just how materially worse the loans were” and “immediately tried to get out of them.” Id. ¶ 31. Plaintiffs contacted the lender, Countrywide, which refused to rescind. Id. As a result, Plaintiffs sought to refinance their mortgages through another lender. Id. ¶ 32. First Federal Bank of California approved Plaintiffs for a first mortgage at 4% interest, provided that Countrywide would agree to refinance the second mortgage at 8% interest, subordinate to the first mortgage. Id. In April 2007, Countrywide rejected Plaintiffs' application to refinance his second mortgage because it was no longer originating second mortgages. Id. ¶ 33. Plaintiffs were unable to refinance their property, and were compelled to make monthly payments in the amount of $16,500. Id. ¶ 36.

In Spring 2008, Newsom was diagnosed with cancer and was hospitalized. Id. ¶ 37. In June 2008, Plaintiffs applied for a loan modification from Countrywide, which was denied on December 25, 2008. Id. ¶ 38. However, on August 29, 2009, Countrywide offered to modify the terms of the first mortgage. Id. ¶¶ 39-40. On December 30, 2009, Plaintiffs sent the requested documents to Countrywide via overnight delivery. Id. ¶ 40.

B. Procedural History

In the meantime, on July 10, 2009, Plaintiffs filed the instant action against Countrywide and Bankers Alliance in San Mateo County Superior Court, but served neither party. Notice of Removal ¶ 1, Docket 1. On September 9, 2009, Plaintiffs filed an Amended Complaint against Countrywide, Recontrust Company, N.A., Bankers Alliance, John Whiteside and Old Republic Title Company. Id. ¶ 2. On November 6, 2009, Countrywide removed the action to this Court on the ground that Plaintiffs had alleged federal claims under the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”). Id. ¶ 5. Plaintiff and Countrywide subsequently stipulated to the filing of a Second Amended Complaint (“SAC”), which is the operative pleading before the Court. Docket 12, 13.

On January 11, 2010, Plaintiffs filed a SAC alleging alleges nine causes of action for: (1) cancellation of a voidable contract under California Revenue and Tax Code sections 23304.1 and 23305a; (2) breach of the implied covenant of good faith and fair dealing; (3) rescission under TILA; (4) unjust enrichment; (5) violation of California Business and Professions Code section 17200 (also known as the Unfair Competition Law) (“UCL”); (6) fraudulent misrepresentation and fraudulent nondisclosure; (7) quiet title; (8) reformation; and (9) breach of fiduciary duty. Countrywide is named as a defendant in all claims except the first claim under California Revenue and Tax Code, which is alleged against MERS only.

Countrywide now moves to dismiss all claims, to expunge the lis pendens that Plaintiffs recorded on their property, and to strike Plaintiffs' prayer for punitive and treble damages. Accompanying the motion is a Request for Judicial Notice (“RJN”) in which Countrywide has attached what are purported to be copies of various loan documents and disclosures signed by Plaintiffs. Plaintiffs have filed an opposition to the motion as well as an objection to the RJN. The matter has been fully briefed and is now ripe for determination.

II. LEGAL STANDARD

A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim if the plaintiff fails to state a cognizable legal theory, or has not alleged sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). To survive a motion to dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Id. The pleadings must “give the defendant fair notice of what ... the claim is and the grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (internal quotation marks omitted). “[A] Plaintiffs' obligation to provide the ‘grounds' of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

When considering a motion to dismiss under Rule 12(b)(6), a court must take the allegations as true and construe them in the light most favorable to plaintiff. See Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993). Where the plaintiff is pro se, the Court must liberally construe his pleadings. Balistreri, 901 F.2d at 699. However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949-50, 173 L.Ed.2d 868 (2009). “While legal conclusions can provide the complaint's framework, they must be supported by factual allegations.” Id. at 1950. Those facts must be sufficient to push the claims “across the line from conceivable to plausible [.]” Id. at 1951 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955). If the complaint is dismissed, the plaintiff generally should be afforded leave to amend unless it is clear the complaint cannot be saved by amendment. See Sparling v. Daou, 411 F.3d 1006, 1013 (9th Cir.2005).

III. DISCUSSIONA. California Revenue and Tax Code sections 23304 and 23305a

Plaintiffs' first cause of action alleges that MERS violated California Revenue and Tax Code...