Sundby v. Marquee Funding Grp., Inc., Case No.: 19-CV-00390-GPC-MDD

Decision Date20 August 2019
Docket NumberCase No.: 19-CV-00390-GPC-MDD
PartiesDale Sundby, Trustee, Plaintiff, v. Marquee Funding Group, Inc.; Salomon Benzimra, Trustee; Stanley Kesselman, Trustee; Jeffrey Myers; Kathleen Myers; Andres Salsido, Trustee; Benning Management Group 401(k) Profit Sharing Plan; Christopher Myers; Vickie McCarty; Dolores Thompson; Kimberly Gill Rabinoff; Steven M. Cobin, Trustee; Susan L. Cobin, Trustee; Equity Trust Company, Custodian FBO Steven M. Cobin Traditional IRA; Todd B. Cobin, Trustee; Barbara A. Cobin, Trustee; Fasack Investments LLC; and Does 1-X, Defendants.
CourtU.S. District Court — Southern District of California
ORDER
(1) DENYING MARQUEE FUNDING GROUP'S MOTION TO DISMISS [ECF No. 30];
(2) DENYING LENDER DEFENDANTS' MOTION TO DISMISS [ECF No. 31];

The matter before the Court arises from two loans that pro se Plaintiff, Dale Sundby, obtained from the above-captioned Defendants, secured by a mortgage on his primary residence. Plaintiff has sued the Defendants for damages pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., and for a declaration clarifying the parties' rights and obligations with respect to one of the loans.

On May 22, 2019, Defendant Marquee Funding Group, Inc. ("Marquee"), filed a motion to dismiss Plaintiff's First Amended Complaint (hereinafter "FAC"). (ECF No. 30.) This motion has been opposed and replied to (ECF Nos. 34, 36); upon request by the Plaintiff, the Court permitted a sur-reply. (ECF No. 39.) On May 28, 2019, the remaining defendants (hereinafter the "Lender Defendants") filed a motion to dismiss. (ECF No. 31.) This motion has also been fully briefed. (ECF Nos. 34, 35.)

Pursuant to Civil Local Rule 7.1(d)(1), the Court finds the matter suitable for adjudication without oral argument. For the reasons explained below, the Court denies both motions.

I. Background
A. Factual Allegations
1. The 2016 Loan

In 2016, Plaintiff, acting on behalf of his family trust, arranged with Marquee, a mortgage broker, to obtain refinancing on an existing 2015 mortgage loan secured by Plaintiff's primary residence at 7740 Eads Avenue, La Jolla, CA 92037 (the "Eads property"). (FAC ¶¶ 27-30, ECF No. 13.)

On March 10, 2016, Plaintiff submitted to Marquee a "Uniform Residential Loan Application for a conventional fixed-rate mortgage. (Id.) Plaintiff's application sought a residential mortgage loan of $2,600,000, secured by his primary residence, and indicated that the purpose of the loan was for refinancing. (FAC ¶¶ 27-31.). Plaintiff stated only the Eads property under "Assets" and listed two loans secured by the Eads property as "Liabilities." (FAC ¶¶ 32-35.) Plaintiff's application did not make any statement as to the borrower's "employer," nor did it state any "income." (FAC ¶¶ 32-33.)

Pursuant to this application, on March 30, 2016, Plaintiff signed a Note Secured by a Deed of Trust ("2016 Note"), which included a prepayment paragraph.1 The 2016 Note contains a "payments" paragraph prescribing a combined balloon payment and one month of interest. It indicates that the borrower's "payments are Interest Only." (FAC ¶¶ 48-49.) That same day, Plaintiff signed an Amendment to the 2016 Note which stated that "[i]t is hereby agreed that borrower is prepaying 11 months of interest through the loan transaction." (FAC ¶ 50.)

The 2016 Loan was funded on April 6, 2016. The corresponding Deed of Trust was recorded on April 7, 2016. (FAC ¶ 52.) The Escrow Holder's Final Settlement Statement for this transaction indicated that Marquee was due a $39,000.00 broker's fee, designated as an "Origination Charge." (FAC ¶¶ 53-54.) According to Plaintiff, "Defendants did nothing to qualify Plaintiff for the 2016 Loan," even though his 2016 application listed no employer, no income, or non-Property asserts. (FAC ¶ 131(e).)

2. 2017 Loan

In 2017, Plaintiff arranged with Marquee to obtain a $3,160,000 refinancing for his residential mortgage loan. Plaintiff completed a "Uniform Residential Loan Application" indicating, once again, the refinance purpose and the residential property at issue. (FAC ¶ 55; see also ECF No. 33-1, at 7 (2017 application).) The 2017 application stated no employer. According to Plaintiff, the amount listed as the borrower's income, minus expenses, was less than 10% of the $25,016.67 monthly interest on the loan. (FAC ¶¶ 58-59.) The non-property assets on the 2017 application were less than the non-property liabilities. (FAC ¶ 60.) The 2017 application was submitted to Marquee on May 17, 2017. According to Plaintiff, despite these red flags, Defendants never qualified him for the 2017 Loan.

On June 27, 2017, Marquee emailed a bundle of loan documents to Plaintiff. These documents included a deed of trust, a note secured by a deed of trust (the "Original 2017 Note"), a notice of right to cancel, a disclosure statement, a set of escrow instructions, and a set of closing disclosures. (FAC ¶¶ 63-80.) The closing disclosures indicated the loan's purpose as "refinance." (Id.) On June 28, 2017, Plaintiff signed all the June 27, 2017 documents and initialed every page of each document not requiring a signature. (FAC ¶ 82.)

On June 29, 2017, Marquee emailed Plaintiff a set of updated documents, and requested Plaintiff to "review, print and sign" the updated documents, "confirming acceptance of the vesting change." (FAC ¶ 86.) These documents included (1) an updated Note Secured by Deed of Trust ("Emailed 2017 Note," ECF No. 33-1, at 28); and a "Page 1" of an updated Deed of Trust ("Emailed 2017 Deed of Trust Page 1," ECF No. 33-1, at 26). (FAC ¶¶ 87-88.)

Under the Emailed 2017 Note, Plaintiff promised to make payments of the principal, plus interest, to the "Lenders" named in Paragraph 1. Paragraph 5 contains a "Prepayment Penalty," which advises, "[i]f this loan is paid off or refinanced during the first Six (6) month(s) of the term, a prepayment penalty equal to the difference between Six (6) month(s) of interest and the date of prepayment shall be due tendered." Paragraph 9, titled "Use of Proceeds," states that "Loan Proceeds are intended to be used primarily for business and commercial purposes and are not intended to be used for personal, family or household purpose or in any manner which may result in the loan Transaction not being exempt from Truth in Lending Act (TILA), 15 U.S.C.A. 1602(h)."

On June 29, 2019 Plaintiff initialed the bottom of the Emailed Deed of Trust Page 1, signed the Emailed 2017 Note, and sent back all of the updated documents to Marquee via FedEx. (FAC ¶¶ 93-99.) Plaintiff also sent PDF versions of the updated loan documents to Marquee. (FAC ¶ 100.)

3. Forbearance Letter and Subsequent Developments

On January 24, 2019, Marquee's attorney emailed Plaintiff to advise him that Marquee was in the process of finalizing a draft forbearance agreement. (FAC ¶ 101.) On January 29, 2019, Plaintiff received the draft agreement, which stated: "Lender and Marquee contend that the Loan Documents are enforceable, and that Lender can pursue foreclosure; Borrower disputes such contentions." (FAC ¶ 106.)

After receipt, Plaintiff noticed that the draft forbearance agreement named different entities as Lenders than was stated on the Emailed 2017 Deed and the Emailed 2017 Note. On February 8, 2019, Plaintiff and obtained a certified copy of the deed for the 2017 Loan from the San Diego County Recorder (hereinafter the "Recorded 2017 Deed"). (FAC ¶¶ 107-108.) That deed was recorded on July 7, 2017 by Marquee, and according to Plaintiff, was not the same as the Emailed 2017 Deed which he had signed and returned to Marquee. (FAC ¶¶ 109.)

Plaintiff observes two primary differences between the two deeds. First, Plaintiff's signature, which he had affixed to the Emailed 2017 Deed of Trust Page 1, was missing from the Recorded 2017 Deed.

Second, the Emailed 2017 Deed was made with reference to the entirety of the Eads property, which, according to attachment Exhibit A, encompassed Parcels 1A, 1B, 2A, 2B, 3A, and 3B; the Recorded 2017 Deed, on the other hand, narrowed the property conveyed to only "Parcels 1A, 1B and 2B." (Compare ECF No. 33-1, at 26 (Emailed), with ECF No. 31-3, at 50 (Recorded).)

Third, the lenders named in the first paragraph of the deeds were not identical, and further, their stated ownership interest percentages are not the same. For example, whereas in the Emailed 2017 Deed, "Jeffrey Myers and Kathleen Myers, husband and wife as joint tenants," were to obtain "an undivided 44.147% interest," in the Recorded 2017 Deed, the same were to take "an undivided 44.148% interest." (Compare ECF No. 33-1, at 26 (Emailed), with ECF No. 31-3, at 50 (Recorded).) Similarly, whereas in the Emailed 2017 Deed, "Equity Trust Company Custodian FBO Steven M. Cobin Traditional IRA" was to take "an undivided 15.823% interest," the Recorded 2017 Deedseems to have bifurcated that interest, providing instead that "Steven M Cobin and Susan L. Cobin, Trustees of the Cobin Family Trust," would take "an undivided 7.911 interest," and that the "Equity Trust Company Custodian FBO Steven M. Cobin Traditional IRA," would take the other undivided 7.911 interest. (Id.)

Observing these inconsistencies, Plaintiff asked Marquee to send him copies of the loan documents which Plaintiff signed and returned on June 29, 2017—i.e., the emailed documents. (See FAC ¶¶ 115-117 (asking Marquee to provide "the final 2017 loan documents").) On February 13, 2019, Marquee used a service called "Dropbox" to send to Plaintiff documents responsive to his request.

According to Plaintiff, the deed Marquee sent via Dropbox was the Recorded 2017 Deed, not the Emailed 2017 Deed that he recalls signing. Plaintiff also alleges that the escrow instructions received through Dropbox were not the ones he had signed, since the Dropbox version was missing his signature. (FAC ¶ 127.) He further claims that the note received through Dropbox ("Dropbox 2017 Note") was not the same as the Emailed 2017 Note which he approved and...

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