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Marcelos v. Dominguez

July 18, 2008

RICARDO MARCELOS, PLAINTIFF,
v.
EDWIN MAURICIO PARADA DOMINGUEZ, GLENDA PARADA, LORENZO PARADA, COUNTRYWIDE HOME LOANS, NEW MORTGAGE COMPANY, LLC, PRIMESTAR FINANCIAL SERVICES, SHOAIB MAHMUD, FINANCIAL TITLE COMPANY, NEW CENTURY TITLE COMPANY, RECONTRUST COMPANY, N.A., AND DOES 1 AND THROUGH 100, DEFENDANTS.



The opinion of the court was delivered by: William A Lsup United States District Judge

ORDER: (1) GRANTING COUNTRYWIDE'S MOTION TO DISMISS; (2) GRANTING IN PART AND DENYING IN PART ARGENT CENTURY'S MOTION TO DISMISS; (3) DENYING ARGENT'S MOTION TO DISMISS; AND (4) GRANTING IN PART AND DENYING IN PART COUNTRYWIDE ARGENT'S REQUEST FOR JUDICIAL NOTICE

INTRODUCTION

This action arises out of the sub-prime lending crisis. Defendants Countrywide Home Loans, Argent Mortgage Company, and New Century Title Company move to dismiss certain claims filed against them. This order finds that plaintiff's first amended complaint fails to state the following claims against Countrywide: (i) violation of the Truth in Lending Act; (ii) fraud and deceit; (iii) aiding and abetting fraud; and (iv) violation of California Business & Professions Code Section 17200. Countrywide's motion to dismiss is hereby GRANTED.

In addition, plaintiff has failed to cure the deficiency in his claim alleging a violation of California Civil Code Section 1632 against New Century. Accordingly, these claims are DISMISSED WITHOUT LEAVE TO AMEND. This order finds that plaintiff's claims alleging fraud, aiding and abetting fraud, and violation of Section 17200 have been pled with sufficient particularity as to New Century and Argent. New Century's motion to dismiss is therefore GRANTED IN PART AND DENIED IN PART. Argent's motion to dismiss is DENIED.*fn1

STATEMENT

For the purpose of this motion, all well-pled allegations of fact are taken as true. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 340 (9th Cir. 1996). Plaintiff Ricardo Marcelos generally alleges that he was deceived by defendant Edwin Parada, a mortgage broker, into taking out a financially burdensome loan on his home located on Folsom Street in San Francisco. Marcelos also alleges that Edwin has unlawfully withheld some $200,000 from him following this refinance. The two negotiated in Spanish but Marcelos was required to sign loan documents solely in English, thereby concealing key terms of the loan. Argent Mortgage Company was the lender in this transaction. New Century Title Company served as escrow agent. Countrywide Home Loans is the servicer of the loan. Marcelos purchased the home on Folsom Street on December 15, 1994, as a joint tenant, and became the sole owner on March 5, 2002. In February 2005, Edwin contacted Marcelos at his home, and, speaking in Spanish, introduced himself as a real estate agent. He asked Marcelos if he wished to refinance his home. Marcelos said no. Edwin pursued Marcelos with multiple phone calls and unannounced visits. Marcelos informed Edwin that he could not afford a larger mortgage and that he did not want to raise his debt. Edwin, however, eventually persuaded Marcelos to open an equity line of credit to purchase a second home. He did so by showing Marcelos on his laptop that the Folsom Street home was valued at $800,000 and by informing him that an equity line of credit would not increase his mortgage payments by more than $100 per month. At that time, the monthly payment due on Marcelos' home was $2,600. All conversations were conducted in Spanish.

Edwin later brought his brother, defendant Lorenzo Parada, to the Folsom Street home. Speaking in Spanish, Lorenzo assured Marcelos that a second home was a good idea and that he would take him to view potential new homes. Marcelos gave the two defendants documents, which indicated that his monthly income was $4,200 with only $2,000 in savings. Edwin assured Marcelos that his income would not be a problem, as he knew lenders, such as Argent, that would lend to him despite his credit and income. In March 2005, Lorenzo met Marcelos to sign loan documents at a Starbucks coffee shop in Hayward, California. Edwin was not present. Lorenzo presented Marcelos with a set of documents drafted in English and directed him where to sign. He signed the documents and was not given any copies. Marcelos is uncertain whether these documents pertained to the Folsom Street home or another property that he planned to purchase.

On March 29, 2005, Marcelos met Edwin and/or Lorenzo and Viki Raab, an escrow agent and notary employed by New Century, at New Century's office in Hayward. Marcelos thereupon signed loan documents, which were in English, in Raab's presence and upon her direction. Marcelos never spoke directly to Raab nor did he speak English. He did not receive any copies of the documents or Spanish translations, and was told he would receive copies in the mail. These documents later turned out to be refinance papers with Argent, not documents to open an equity line of credit. Within these documents, the HUD-1 disclosure settlement costs authorized a disbursement of $200,000 to Edwin Parada. This document was drafted by New Century. Over the next several weekends, Lorenzo Parada took plaintiff to see numerous homes in Hayward and San Francisco, and plaintiff was finally persuaded to purchase a home on Girard Street in San Francisco. The apparent purpose of purchasing a second home was to acquire a larger home for his family to live in and to rent out the smaller Folsom Street home. In October 2005, Marcelos received a mortgage bill on the Folsom Street home for $3,200. The loan has since readjusted upward and the monthly payments are now over $4,400. Also in October 2005, Marcelos approached Edwin at his place of residence and questioned him about the increased payments. It is unclear from plaintiff's allegations whether and how Edwin explained the increases. At the meeting, Edwin informed Marcelos that a sum of $200,000 in funds from the Folsom-property transaction, originally intended as a down payment on the Girard Street home, was instead being held by him. Edwin said Marcelos could have the funds at any time, and the parties agreed that Edwin would pay Marcelos $3,000 per month in interest until he could pay the full amount. Edwin made only two or three such payments and then stopped. A few months later, Marcelos requested the full amount of $200,000 from Edwin. Marcelos was unable to reach Edwin until August 2006, whereupon Edwin wrote Marcelos a bad check for $10,000. In November 2006, Marcelos and his wife finally met with Edwin in his office, where he agreed to pay the remainder in three installments over the next twelve months. No further payments were made.

In December 2006, having never received any loan documents from Edwin, Marcelos requested said documents from Countrywide and received "some of the loan documents" for the Folsom Street home, all in English. Edwin made more promises to repay Marcelos in January 2007 and thereafter, but made no payments. The Girard Street home was sold at a foreclosure sale on June 6, 2007. Marcelos and his family had been living in the Girard Street home while renting out the Folsom Street home. In September 2007, Marcelos and his family moved back into the Folsom Street home. Marcelos received a notice of foreclosure sale for the Folsom Street home on December 15, 2007. Marcelos filed this action on January 4, 2008. The foreclosure had been scheduled to proceed on January 7, but was stayed by a temporary restraining order until the resolution of this matter. In February 2008, defendants Argent, New Century Title, and Viki Raab filed motions to dismiss the claims filed against them. In an order dated April 21, 2008, this Court granted in part and denied in part defendants' motions to dismiss. The order held that certain claims were time-barred, and therefore dismissed those claims without leave to amend. The order found that other claims, which are the subject of the present motions, were not pled with sufficient particularity. These claims were dismissed with leave to amend. The latter claims included: a claim under California Civil Code Section 1632 against New Century, a claim alleging fraud and deceit, and a claim under California Business & Professions Code Section 17200. Plaintiff voluntarily dismissed Viki Raab from this action on April 25, 2008. On May 12, plaintiff filed a first amended complaint in order to plead the above-mentioned claims with requisite specificity. He also added a claim alleging aiding and abetting fraud, which was pled against defendants Countrywide, Argent, and New Century. New Century now requests that this Court refrain from exercising supplemental jurisdiction over its state-law claims or, in the alternative, dismiss all claims filed against it. Likewise, Countrywide and Argent move to dismiss certain claims filed against them.

Plaintiff did not oppose Countrywide's motion to dismiss. In its motion, Countrywide rebutted plaintiff's allegation that it is the successor-in-interest to Argent and thereby assumed the rights, remedies, and liabilities thereof.*fn2 Countrywide asserted that it is merely the servicer of Marcelos' loan, responsible for collecting and processing the monthly payments. Countrywide further stated that it was not involved in the origination of the loan nor has it ever owned the loan. Plaintiff did not file an opposition to Countrywide's motion to dismiss, but also did not file a notice of non-opposition. Consequently, on July 3, 2008, Countrywide filed a notice of non-opposition noting that plaintiff had failed to oppose its motion and assuming that plaintiff therefore conceded all of the points made therein. Plaintiff never replied to this filing either. During oral argument on July 17, counsel for plaintiff acknowledged that they do not oppose Countrywide's motion to dismiss. Countrywide's motion to dismiss is therefore granted.*fn3

ANALYSIS

1. LEGAL STANDARD.

A motion to dismiss under FRCP 12(b)(6) tests for the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). All material allegations of the complaint are taken as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 340 (9th Cir. 1996). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action ...


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