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PLATA v. LONG BEACH MORTGAGE CO.

December 13, 2005.

CRISTINA PLATA, et al., Plaintiffs,
v.
LONG BEACH MORTGAGE COMPANY, et al., Defendants.



The opinion of the court was delivered by: JEREMY FOGEL, District Judge

ORDER*fn1 (1) DENYING MOTION TO STRIKE AND (2) GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
I. BACKGROUND
On July 5, 2005, Plaintiffs Cristina Plata ("Plata") and Luis Mapula ("Mapula") filed a complaint against Defendants Long Beach Mortgage Company ("LBMC"), Vision Quest 21 Inc. dba Century 21 Su Casa ("Vision Quest"), Mariposa Mortgage, Inc. ("Mariposa"), Washington Mutual, Bic D. Pho ("Pho"), Felipe Antonio Neri ("Neri"), Antonio Sandoval ("Sandoval"), Raphael Angel Berrios ("Berrios"), and Does 1 to 50. Plaintiffs allege fourteen claims for relief:*fn2 (1) Violation of the Truth in Lending Act, 15. U.S.C. § 1601 et seq., and Federal Reserve Regulation Z. 12 C.F.R. § 226 et seq., (2) Violation of the Real Estate and Settlement Procedures Act, 12 U.S.C. § 2601 et seq. and Federal Reserve Regulation X, 24 C.F.R. § 3500 et seq., (3) Predatory Lending, California Financial Code § 4970 et seq., (4) Violation of the Unfair Competition Act, California Business and Processions Code § 17200 et seq., (5) Violation of the False Advertising Act, California Business and Processions Code § 17500 et seq., (6) Constructive Fraud, California Civil Code, § 1573, (7) Intentional Misrepresentation, California Civil Code §§ 1709-1710, (8) Concealment, California Civil Code §§ 1709-1710, (9) Negligent Misrepresentation, California Civil Code §§ 1709-1710, (10) Breach of Fiduciary Duty, (11) Negligence, (12) Notary Malfeasance, (13) Violation of California Civil Code § 1632, and (14) Rescission/Cancellation, California Civil Code § 1689 and "Court's Inherent Equitable Authority." Plaintiffs request damages and injunctive and declaratory relief.

Plaintiffs allege the following facts. Plata and Mapula are of Mexican origin and, at all relevant times, were married to each other. Also at all relevant times, both Plaintiffs spoke minimal English and could not read or write in English. In April 2004, Plata attended a flea market in San Jose, California, where Vision Quest had a marketing table. An individual who identified himself as a representative of Century 21 Su Casa, which Plaintiffs allege was a name under which Vision Quest did business, approached Plata and offered to assist her with the purchase of a home. She explained that she was living in a converted single-room garage and was not actively shopping for a home, but nevertheless gave her contact information to the representative. Neither Plata nor Mapula had ever purchased any real property.

  Approximately one week after the introduction at the flea market, Humberto Madero ("Madero") contacted Plaintiffs and invited them to Vision Quest's office for an evaluation of their home-purchasing options. Approximately one week later, Plaintiffs met Madero at the Vision Quest office, where Madero introduced Plaintiffs to his supervisor, Neri. Neri evaluated Mapula's credit history and informed him that he would be able to purchase a home with no down payment. Madero then drove Plaintiffs to several properties for sale, of which the Plaintiffs liked a home located at 2834 Burdick Way in San Jose, California ("Burdick property"), owned by Sandoval. Madero told Plaintiffs that the monthly payment should be no more than $2,800. In a meeting at the end of April, 2004, Neri informed Plaintiffs that their monthly payments would be approximately $2,700 and that Sandoval would give Plaintiffs $8,000 which could be used toward the purchase of the property. Mapula then signed a purchase agreement.

  In early May, 2004, Madero informed Plaintiffs for the first time that they would have to pay to Neri all closing costs, represented to be $5,000, up front. Plaintiffs assert that they would not have purchased the property if they had known that they would need to pay the closing costs up front, but that Mapula believed that he had entered into a binding agreement. Plaintiffs borrowed $5,000 to pay Neri.

  Approximately one week later, while at the Vision Quest office, an employee of Vision Quest asked Mapula, through a Spanish-language interpreter, how much he and Plata could afford to pay in monthly mortgage payments. Mapula responded that he understood that the monthly payments would be approximately $2,700 and that they could not afford a monthly payment greater than $3,000. Later that month, Plata said to the interpreter that he and his wife could not afford a monthly mortgage payment of $3,000. The interpreter told Plata that he and Mapula would be able to move into the Burdick property no later than June 14, 2005. Soon thereafter, Plata traveled to Mexico for several weeks.

  In early June, Mapula tried unsuccessfully to reach Madero by telephone and, subsequently, went to the Vision Quest office. Neri then informed Mapula that the monthly payments would be $3,200. Mapula responded that he and his wife could not afford this payment, to which Neri responded that they could refinance the property in 24 months so that the monthly payment could be lowered. Neri also told Mapula that he would receive several thousand dollars in cash which would ease the burden of the monthly payments. Neri further advised Mapula that if he was unable to make payments, he should contact Neri, who would refinance the home, but that Mapula could not fall behind on the payments for more than one month.

  In early July, 2004, at the request of Neri, Mapula met with Berrios and signed certain documents. Mapula noticed that one of the documents contained a figure between $3,500 and $4,500. Neri explained that the figure was incorrect, and would be corrected later to $3,200. At this meeting, Mapula informed Berrios that Plata was in Mexico and would not return until late July, 2004. Neri then handed the documents that were to be signed by Plata to Berrios, and directed Berrios to make sure that the paperwork was completed. Plaintiffs believe that these documents included an inter-spousal conveyance of a community property interest from Plata to Mapula. This conveyance was recorded as document number 17882693 at the Santa Clara Count Recorder's office on or about July 6, 2004. Though Plata claims never to have met Berrios or signed the conveyance, this document was notarized by Berrios as having been signed by Plata in his presence on June 24, 2004.

  Soon thereafter, Mapula was informed that escrow had closed and he took possession of the Burdick property. Two weeks after he took possession, Mapula again met with Neri. Neri informed Mapula that he would not receive the several thousand dollars which had been discussed previously, but that Neri had either contributed or arranged to contribute $16,000 toward the purchase of the property. Neri had Mapula sign a note for $16,000 payable to Sandoval, though the street address listed on the note was the address of the Vision Quest office. This was the first that Plaintiffs learned of a $16,000 note.

  Plaintiffs have since learned that the loan application prepared by Neri contained many false or misleading representations about Mapula's assets, income, and employment history, significantly exaggerating his financial capacity. They learned also that they had purchased the property with two loans underwritten by LBMC, the total principal of which was $543,000. Plaintiffs' combined monthly mortgage payment is more than $3,500. Washington Mutual subsequently acquired both of the LBMC loans. Plaintiffs believe that all of the documents related to their purchase of the Burdick property are written in English.

  In connection with Plaintiffs' loans, Mariposa received over $7,030 in fees and costs and a yield spread premium of $4,344 (which was not clearly disclosed as such to Plaintiffs). In addition, Mariposa charged Plaintiffs $75 for Mapula's credit report. The final HUD-1 shows that Vision Quest received $295 and Berrios received $250.

  Two motions are presently before the Court. First, Defendant LBMC moves to strike nine passages of Plaintiffs' complaint, selected from Plaintiffs' first and fourth claims and the prayer for relief. Second, Defendants LBMC and Washington Mutual move to dismiss the second and eleventh claims against LBMC and the thirteenth claim against both LBMC and Washington Mutual, pursuant to Federal Rule of Civil Procedure 12(b)(6).

  II. DISCUSSION

  1. Motion to strike

  Defendant LBMC moves to strike nine selected passages of Plaintiffs' complaint. The Court may strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). Motions to strike generally will not be granted unless it is clear that the matter to be stricken could not have any possible bearing on the subject matter of the litigation. LeDuc v. Kentucky Central Life Insurance Co., 814 F.Supp. 820, 830 (N.D. Cal. 1992). Allegations "supplying background or historical material or other matter of an evidentiary nature will not be stricken ...


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