Smith v. Chase Mortg. Credit Group, CIV. S-08-1049 LKK/KJM.

• Decision Date: 02 September 2009
• Docket Number: No. CIV. S-08-1049 LKK/KJM.,CIV. S-08-1049 LKK/KJM.
• Court: U.S. District Court — Eastern District of California
• Parties: David SMITH, Plaintiff, v. CHASE MORTGAGE CREDIT GROUP, La Jolla Lending & Real Estate, Inc., Paul Bakhtiar, Pooyan Bakhtiar, Wells Fargo, N.A., West American Escrow, Inc., and Does 1 through 10, inclusive, Defendants. and Related Counterclaims.

653 F.Supp.2d 1035

David SMITH, Plaintiff, v. CHASE MORTGAGE CREDIT GROUP, La Jolla Lending & Real Estate, Inc., Paul Bakhtiar, Pooyan Bakhtiar, Wells Fargo, N.A., West American Escrow, Inc., and Does 1 through 10, inclusive, Defendants and Related Counterclaims.

No. CIV. S-08-1049 LKK/KJM.

United States District Court, E.D. California.

September 2, 2009.

COPYRIGHT MATERIAL OMITTED

Karen M. Goodman, Summer Dawn Haro, Goodman & Associates, Sacramento, CA, for Plaintiff.

Joshua Eric Whitehair, Michael J. Steiner, Severson and Werson, San Francisco, CA, Maureen Anne Rodgers, Glynn & Finley, LLP, Walnut Creek, CA, Dale F. Hardeman, Irvine, CA, for Defendants.

ORDER

LAWRENCE K. KARLTON, Senior District Judge.

Plaintiff David Smith brings suit alleging that defendants committed various unlawful acts surrounding the refinance of his home loan. Plaintiff specifically alleges that Wells Fargo Bank ("Wells Fargo") violated the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act of 1974 ("RESPA") and California Business and Professions Code § 17200. Pending before the court is plaintiff's motion for summary judgment against Wells Fargo. Plaintiff also moves for declaratory and injunctive relief. As explained herein, the court grants the motion in part and denies it in part.

I. Background and Facts

A. Facts¹

Plaintiff brought this case alleging defendants' unlawful acts surrounding the negotiation and consummation of a refinance of plaintiff's home loan. In July 2002, plaintiff purchased residential property for which he obtained a home loan from Countrywide Home Loans ("Countrywide").² In October 2007, plaintiff was contacted by defendant Paul Bakhtiar³ to refinance his home loan.

1. The Parties

In October 2007, Bakhtiar was employed by defendant Chase Mortgage Credit Group ("Chase"). The parties dispute whether Bakhtiar was a loan broker or a loan processor. See SSUF ¶ 3; Decl. of Summer Haro In Support of Pls.' Mot. for Summ. J. ("Haro Decl.") Ex. 10-11; Decl. of John Whitehair in Support of Defs.' Opp. to Pls.' Mot. for Summ. J. ("Whitehair Decl.") Ex. C (Bakhtiar Depo. at 10:12-21). Sometime in 2008, Chase's became La Jolla Lending & Real Estate, Inc. ("La Jolla"). It is unclear whether Chase and La Jolla became the same entity or operated as separate corporations throughout plaintiff's loan negotiation, as the evidence indicates that during this time La Jolla used its and Chase's names interchangeably. See Whitehair Decl. Ex. B (Dadar Dep. 11:9-22, 12:13-13:15); Ex. A (Smith Dep. 32:13-34:2); see also Haro Decl. Ex. 10-11 (Bakhtiar's Resp. To Pl's Req. for Admis., No. 2); Whitehair Decl. Ex. C (Bakhtiar Depo. at 10:3-10).

At the time, Wells Fargo had a broker origination agreement with La Jolla whereby La Jolla would submit loan applications to Wells Fargo and Wells Fargo would issue the loan. Defendants Bakhtiar served as the "Broker Contact" for La Jolla on various loan documents received by plaintiff during his refinancing. The parties agree that La Jolla brokered the loan by Wells Fargo used for plaintiff's home refinancing. After the loan was consummated on December 10, 2007, Wells Fargo held a security interest in the loan and collected plaintiff's monthly payments.

2. The Loan Transaction

Plaintiff has tendered evidence that he was first contacted by Bakhtiar in October 2007, at which time Bakhtiar represented that he was a licensed agent working with Chase who would broker a loan for plaintiff. Smith Decl. ¶ 3. Bakhtiar denies that he represented himself as a licensed agent when he first spoke with plaintiff. See Haro Decl. Ex. 10-11 (Bakhtiar's Resp. to Pl.'s Req. for Admis. No. 5). When Bakhtiar contacted plaintiff, he was not licensed with either the California Department of Real Estate or the California Department of Financial Services.

Plaintiff has tendered evidence that Bakhtiar was the only person plaintiff corresponded with from Chase and La Jolla before escrow closed on the Wells Fargo loan on December 10. Smith Decl. ¶ 3. However, defendant has tendered evidence that plaintiff also spoke with Mr. Dadar and Mr. Moorhaj, though it is unclear whether they spoke with plaintiff before or after escrow closed on the loan. See Whitehair Decl. Ex. A (Smith Dep. at 33:1-34:20), Ex. B (Dadar Dep. 19:5-20:13).

According to plaintiff, in November 2007 Bakhtiar told him that he would offer plaintiff a loan that would have no loan fees and have taxes impounded in the monthly payments to make the new loan payments equal to plaintiff's existing Countrywide loan payments.⁴ Smith Decl. ¶ 3. Plaintiff would also receive $50,000 in cash back from the refinancing. Id. Defendant denies plaintiff's contention and has tendered evidence that Bakhtiar told plaintiff that the loan would include "reasonable fees for brokering the loan" which would be included in the United States Department of Housing and Urban Development ("HUD") closing statement. Haro Decl. Ex. 10-11 (Bakhtiar's Resp. to Interrogs. Set One No. 10).

On December 1, 2007, a man representing himself as a notary arrived at plaintiff's home with the documents for the Wells Fargo loan on behalf of La Jolla. Wells Fargo has tendered evidence that the notary was Mr. Moorhaj from La Jolla. Whitehair Decl. Ex. C (Bakhtiar Dep. 47:7-25). The loan documents provided to plaintiff included a deed of trust and promissory note for the property by which Wells Fargo secured the loan and acquired a security interest in the property. These documents state that the loan totaled $264, 500. 00 with monthly payments of $1,607.13 and an interest rate of 6.125 percent. Plaintiff calculated that the loan would result in $19,500.00 in cash back after he paid off the Countrywide loan. However, none of the documents provided by plaintiff appear to detail this cash back calculation. Wells Fargo has tendered evidence that on November 30, 2007, plaintiff signed a document "Borrower's Estimated Closing Costs" which reflected $1,523.14 in cash back. Whitehair Decl. Ex. A (Smith Dep. 76:2-10 & Dep. Ex. 20). Plaintiff testified that he did not recall signing the document. Id.

Plaintiff contends that none of the documents he reviewed on December 1, 2007 included a good faith estimate ("GFE"), itemization of the amount financed, or statement that plaintiff had the right to receive a written itemization for the loan. Smith Decl. ¶ 4. Wells Fargo relies on the "Borrower's Estimated Closing Costs" and the "Loan Closing Instructions", which provide an itemization of the loan, to demonstrate that plaintiff did receive an itemization before consummation of the loan. See Whitehair Decl. Ex. A (Smith Dep. Exs. 20, 26). Plaintiff testified that he did not see the "Borrower's Estimated Closing Costs" and he was never provided with the pages showing the itemization in the "Loan Closing Instructions." Id. (Smith Dep. 76:2-10, 80:1-81:5).

Escrow on the Wells Fargo loan closed on December 10, 2007. Plaintiff contends that he did not receive any GFE or itemization of the loan before escrow closed. Smith Decl. ¶ 5. Wells Fargo has tendered evidence that several versions of a GFE were faxed to plaintiff before December 10, 2007. See Haro Decl. Ex. 24. Plaintiff contends that he never saw these. See Pl.'s Reply to SSUF ¶ 17; Whitehair Decl. Ex. A (Smith Dep. 76:2-10, 80:1-81:5).

According to Wells Fargo's person most knowledgeable on loan procedures, Wells Fargo requires that the broker provide a GFE to Wells Fargo as part of a complete loan package. Reply Decl. of Summer Haro In Support of Pl.'s Mot. for Summ. J. ("Haro Reply Decl.") Ex. 33 (Benbow Dep. 21:1-4). Wells Fargo does not have a way of verifying that a GFE is provided to the borrower by the broker, however. Id. (Benbow Dep. 21:5-8).⁵ To demonstrate that a GFE was delivered to plaintiff, defendant relies on Bakhtiar's response to plaintiff's interrogatory, which prompted Bakhtiar to describe "all facts describing the delivery method(s) you for providing [sic] Plaintiff with documents for the subject loan." Bakhtiar responded, "As far as I recall, Mr. Smith, like all borrowers, was provided a `Good Faith Estimate' at the time of the initial loan estimates, as and (sic) Form Z Federal Loan Disclosure and HUD Closing Statement before close of escrow, all of which he signed for and received." Whitehair Decl. Ex. E (Bakhtiar's Resp. to Pl.'s Interrogs., No. 9).

Plaintiff also contends that he never received a HUD-1 Preliminary Settlement Statement from Wells Fargo. Under Wells Fargo's policy, the closing agent is responsible for preparing the HUD-1 Settlement Statement. Haro Reply Decl. Ex. 33 (Benbow Dep. 30:3-19). Wells Fargo does not have a mechanism for verifying that the closing agent includes the estimated HUD-1 or the Truth in Lending disclosures in the closing package to the borrower. Id. (Benbow Dep. 40:15-23). Plaintiff received the final HUD-1 Settlement Statement after escrow had closed on the Wells Fargo loan on December 10, 2007. The final HUD included $15,364.62 in fees for settlement charges.

3. Events Subsequent to the Close of Escrow

After escrow closed on the loan, plaintiff contacted Bakhtiar to discuss the loan fees. Bakhtiar testified that the loan fees attached to the HUD-1 were inadvertent mistakes and that they offered to refund plaintiff for certain fees. Haro Reply Decl. Ex. 32 (Bakhtiar Dep. 64:11-67:12). Plaintiff later received a refund check for the Wells Fargo loan for $2,564.23. On February 1, 2008, plaintiff demanded rescission of the loan based on the grounds that Wells Fargo had not provided plaintiff with a GFE or itemization of the loan. Plaintiff then filed the instant suit in Sacramento County Superior Court.

B. Procedural History

Plaintiff commenced this action in Sacramento County Superior Court on April 14, 2008, which was subsequently removed to this court. In his complaint, plaintiff asserts six claims against various defendants: breach of fiduciary duty,...