Sundby v. Marquee Funding Grp.
| Decision Date | 14 September 2020 |
| Docket Number | Case No.: 3:19-CV-0390-GPC-AHG |
| Parties | DALE SUNDBY, Plaintiff, v. MARQUEE FUNDING GROUP, INC., et al., Defendants. |
| Court | U.S. District Court — Southern District of California |
[ECF Nos. 164, 165, 166, 167.]
On June 30, 2020, Plaintiff Dale Sundby filed an amended motion for summary judgment, or in the alternative partial summary judgment, and a motion to limit Defendants' expert. ECF Nos. 165, 166. On June 30, 2020, Defendant Marquee Funding Group ("MFG") also filed its motion for summary judgment. The remaining defendants too filed a motion for summary judgment, or in the alternative partial summary judgment. ECF Nos. 164, 167.
For the reasons discussed below, the Court GRANTS IN PART and DENIES IN PART Plaintiff's motions for summary judgment and to limit an expert opinion. The Court also GRANTS IN PART and DENIES IN PART Defendants' motions for summary judgment.
"Congress enacted [the Truth in Lending Act] TILA 'to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.'" Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. 2009) (quoting 15 U.S.C. § 1601). To effectuate TILA's purpose, a court must construe "the Act's provisions liberally in favor of the consumer" and require absolute compliance by creditors. In re Ferrell, 539 F.3d 1186, 1189 (9th Cir. 2008); see also Jackson v. Grant, 890 F.2d 118, 120 (9th Cir.1989) ().
"Historically, Regulation Z of the Board of Governors of the Federal Reserve System (Board), 12 CFR part 226, has implemented TILA." Fowler v. U.S. Bank, Nat. Ass'n, 2 F. Supp. 3d 965, 976 (S.D. Tex. 2014) (quoting Truth in Lending (Regulation Z), 76 Fed. Reg. 79768, 79768 (Dec. 22, 2011)). "[T]he Dodd-Frank Act transferred rule making authority for TILA to the [Consumer Finance Protection Bureau] CFPB, effective July 21, 2011." Id. at 977 (quotation marks, citation, and alterations in the original omitted) (citing Designated Transfer Date, 75 Fed. Reg. 57252 (Sept. 20, 2010)). The CFPB's subsequent regulations were codified in 12 C.F.R. § 1026 et seq. and prescribed an effective date of January 10, 2014. Id. The CFPB has also issued "OfficialInterpretations," also known as "Staff Commentary," alongside its final rules to facilitate the implementation of TILA. See Curtis v. Propel Prop. Tax Funding, LLC, 915 F.3d 234, 242 (4th Cir. 2019); see also, e.g., Loan Originator Compensation Requirements Under the Truth in Lending Act (Regulation Z), 78 Fed. Reg. 11280 (Feb. 15, 2013).
TILA and its corresponding regulations apply to consumer credit transactions. Gilliam, Tr. of Lou Easter Ross Revocable Tr. v. Levine, Tr. of Joel Sherman Revocable Tr., 955 F.3d 1117, 1120 (9th Cir. 2020). "For a loan to qualify as a consumer credit transaction under the statute, a borrower must demonstrate that the loan was extended to (1) a natural person, and was obtained (2) 'primarily for personal, family, or household purposes.'" Id. (quoting 15 U.S.C. § 1602(i)).
TILA, moreover, provides a private right of action, 15 U.S.C. § 1640(a), to all "consumers who suffer damages as a result of a creditor's failure to comply with TILA's provisions" so that the Act may be broadly enforced. Household Credit Servs., Inc. v. Pfennig, 541 U.S. 232, 235 (2004). Section 1640(a) permits recovery of actual damages, statutory damages, costs, and attorneys' fees, and, as relevant here, may be used as a basis for a claim against "any creditor who fails to comply with any requirement imposed under [15 U.S.C. §§ 1631-1651]." Krieger v. Bank of Am., N.A., 890 F.3d 429, 433 (3d Cir. 2018). TILA also creates liability for mortgage originators under 15 U.S.C. § 1639b(d)(1).
Here, Plaintiff has alleged Defendants' violation of several TILA provisions actionable under Section 1640. First, Plaintiff moves for summary judgment against the 2016 Lender Defendants for three violations of TILA with respect to the 2016 promissory note: the inclusion of a prepayment penalty under 15 U.S.C. § 1639(c)(1)(A), the inclusion of a balloon payment under 15 U.S.C. § 1639(e), and a failure to abide by the ability-to-repay provisions under 15 U.S.C. § 1639c(a). Second, Plaintiff moves for summary judgment against the 2017 Lender Defendants for the same three violations of TILA with respect to the 2017 promissory note. Lastly, Plaintiff moves for summaryjudgment against Defendant MFG for two related violations: steering Plaintiff towards a residential mortgage he lacked a reasonable ability to repay under 15 U.S.C. § 1639b(c)(3), and a failure to abide by the ability-to-repay provisions of 15 U.S.C. § 1639c(a).
In March of 2016, Plaintiff and his spouse, Mrs. Edith Littlefield Sundby, applied as co-borrowers for a refinancing of the mortgage on their home at 7740 Eads Avenue (the "Property"). ECF No. 165-6 at 1-6. Among other information, the application included that neither borrower was employed, that the "Purpose of Loan" was to "Refinance," and that the Property would be the borrowers' "Primary Residence." Id. at 2, 3. The application also noted that the home was encumbered with nearly $2.2M in mortgage debt, and that the borrowers "intend[ed] to occupy the property as [their] primary residence." Id. at 4, 5. Other than this information, the application does not include any income or asset information from the borrowers. Id. at 1-6. As a part of the application process, Plaintiff and Mrs. Sundby also signed a statement on March 15, 2018 stating, "I understand and hereby certify that I WILL occupy the property that will secure the loan ('Security Property') as my primary residence . . . ." ECF No. 196-1 at 76.
The application names Defendant Marquee Funding Group ("MFG")1 as the loan originator. ECF No. 165-6 at 5. In connection with the loan, Dale and Edith Sundbyexecuted a promissory note, dated March 29, 2016, in their capacities as Trustees to their real estate Trust that included a promise to pay $2,600,000 to the 2016 Lender Defendants by May 1, 2017.2 ECF No. 164-5 at 37-41. On April 6, 2016, the 2016 Note was funded and interest "commenced" accruing. Id. at 23, 38; ECF No. 196-1 at 105. The Note was then updated on March 31, 2016 to reflect an agreement between the borrowers and the lenders to prepay 11 months of interest through the loan transaction. ECF No. 164-5 at 41.
The Note, moreover, contains several clauses which form the basis of Plaintiff's claims under TILA. At Paragraph 3, the Note states that a single payment of $2,621,666.67 is due on May 1, 2017. Id. at 38. At Paragraph 5, the Note states that, if the Borrower pays the principal down on the loan before it is due, then the Borrower also "agree[s] to pay a prepayment penalty computed as follows: Borrower agrees to pay the Lender a Minimum of 90 days interest from the day of this loan funding." Id. at 38.
Dale Sundby and Edith Sundby also executed a Deed of Trust in connection with the 2016 loan on March 30 and 31, 2016, which was then recorded with the San Diego County Recorder on April 7, 2016. ECF No. 164-5 at 28-46. Plaintiff's 2016 Final Settlement Statement details the charges associated with obtaining and processing Plaintiff's loan. ECF No. 165-6 at 23. These include, for example, about $18,000 charged to Plaintiff as "[i]nterest" for funding the loan on April 6, 2016 instead of May 1, 2016, as well as insurance payments, fees, and other costs. Id.
Prior to completing the loan process, on March 25, 2016, Plaintiff informed R.J. Solovy, Vice President of Defendant MFG, by email that the Property would "be listed for sale no later than April 1, 2016." ECF No. 196-1 at 79. On April 12, 2016, Plaintiff informed Mr. Solovy via email that he had "authorized the continued listing" after speaking with his agent and that they agreed the Property would be "showable" after "additional cleaning and prep" that week. Id. at 80.
Later, during the pendency of the 2016 loan, Plaintiff and his spouse leased a townhouse on the Property through two month-to-month lease agreements, one beginning on October 24, 2015 and the other beginning on April 1, 2016. ECF No. 196-1 at 131, 142-46. Plaintiffs collected $37,056 rental income from April 6, 2016 to May 1, 2017. Id.; ECF No. 182-1 at ¶ 8.
On May 17, 2017, Dale Sundby and Edith Sundby applied for a second loan to refinance the Property. ECF No. 196-1 at 110-15. Among other information, the application again noted that neither borrower was employed, that the "Purpose of Loan" was to "Refinance," and that the Property would be the borrowers' "Primary Residence." Id. at 111-12. The application also noted that the home was encumbered with about $2.6M in mortgage debt, and that the borrowers "intend[ed] to occupy the property as [their] primary residence." Id. at 113-14. Lastly, this application included a summary of the borrowers' income, including $3,200 in net rental income and $4,000 in social security, disability, and pension payments. Id. at 112. Defendant MFG again originated the loan. Id. at 114.
On June 29, 2017, Dale Sundby and Edith Sundby executed a promissory note in connection with the 2017 loan in their capacities as Trustees to their real estate Trust that included a promise to pay $3,160,000 to the 2017 Lender Defendants by July 8, 2018. ECF No. 164-5 at 53-60. Three versions of this document exist: the 2017 Original Note, ECF No. 165-6 at 10-14, the 2017 MFG Note, ECF No. 164-5 at 53-60, and the 201...
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