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Bantique v. Greenpoint Mortgage Funding

April 30, 2009

MATTHEW BANTIQUE, PLAINTIFF,
v.
GREENPOINT MORTGAGE FUNDING, INC., BUSINESS ENTITY, FORM UNKNOWN; PREMIER FUNDING GROUP, INC., BUSINESS ENTITY, FORM UNKNOWN; GMAC MORTGAGE, BUSINESS ENTITY, FORM UNKNOWN; EMC MORTGAGE CORPORATION, BUSINESS ENTITY, FORM UNKNOWN; T.D. SERVICE COMPANY OF ARIZONA, BUSINESS ENTITY, FORM UNKNOWN; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., BUSINESS ENTITY, FORM UNKNOWN; ALL PERSONS UNKNOWN, CLAIMING ANY LEGAL OR EQUITABLE RIGHT, TITLE, ESTATE, LIEN, OR INTEREST IN THE PROPERTY DESCRIBED IN THIS COMPLAINT ADVERSE TO PLAINTIFF'S TITLE THERETO; AND DOES 1 THROUGH 25, INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS

Plaintiff Matthew Bantique brought this action in state court against Greenpoint Mortgage Funding Inc. ("Greenpoint"), Premier Funding Group Inc. ("Premier"), GMAC Mortgage ("GMAC"), EMC Mortgage Corporation ("EMC"), T.D. Service Company of Arizona ("TDS"), and Mortgage Electronic Registration Systems Inc. ("MERS") seeking declaratory relief and rescission and alleging breach of the implied covenant of good faith and fair dealing, fraud, breach of fiduciary duty, quiet title, and violations of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210, with respect to the refinancing of the first and second mortgages on his home in Vallejo, California. EMC and MERS now move to dismiss plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

I. Factual and Procedural Background

In December 2005, plaintiff contacted Premier, a real estate brokerage company, in order to refinance the first and second mortgages on his home located at 100 Matthew Court in Vallejo, California ("Subject Property"). (Compl. ¶¶ 3, 15, 17.) Premier instructed plaintiff to complete a loan application, and the parties then engaged Greenpoint to serve as the lender. (Id. ¶¶ 18-19.) Greenpoint completed a Uniform Residential Lending Application Form for plaintiff, and plaintiff then signed an Income Tax Disclosure Form to permit Premier and Greenpoint to investigate his income. (Id. ¶ 19.) However, Premier and Greenpoint allegedly approved plaintiff's loan application without attempting to verify plaintiff's income. (Id.)

Thereafter, plaintiff signed a promissory note in favor of Greenpoint for $656,000 dated December 16, 2005, in order to refinance plaintiff's first mortgage. (Id. ¶ 1.) This note was secured by a Deed of Trust on the Subject Property, which was executed on December 30, 2005. (Id.) Plaintiff also signed a promissory note in favor of Greenpoint for $82,000 dated December 16, 2005, in order to refinance plaintiff's second mortgage. (Id.) This note was also secured by a Deed of Trust on the Subject Property and was executed on December 16, 2005. (Id.)

Plaintiff alleges that during the loan application process, Premier failed to provide him with a Mortgage Loan Origination Agreement in violation of California law. (Id. ¶ 21.) Plaintiff further alleges that both Premier and Greenpoint failed to provide him with certain disclosures required by the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, and the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617. (Id. ¶¶ 22, 26.) Specifically, plaintiff alleges that he did not receive a "Right to Cancel" form required by 12 C.F.R. §§ 226.17 and 226.23 (promulgated under TILA) or the disclosures required by 24 C.F.R. § 3500.6(a) (promulgated under RESPA). Plaintiff also alleges that he did not receive certain disclosures required by California Civil Code section 1916.7(c) for adjustable rate loans or a copy of the appraisal of his home as required by California Business and Professions Code section 10241.3. (Id. ¶¶ 23-24.) In addition, certain characteristics of plaintiff's loan, such as its manner of amortization, payment schedule, and prepayment provision, also allegedly violated California Civil Code sections 1916.7(a)(8) and (b). (Id. ¶ 27.)

MERS is the nominee/beneficiary for Greenpoint and is listed as the beneficiary of the Deeds of Trust executed on December 16 and 30, 2005. (Id. ¶ 2.) At some point in time, MERS allegedly authorized TDS to substitute as the trustee of the Deeds of Trust. (Id. ¶ 4.) EMC is currently servicing the loan originated by Greenpoint in the amount of $656,000, and GMAC is currently servicing the loan originated by Greenpoint in the amount of $82,000. (Id. ¶ 6.)

On July 10, 2008, a Notice of Default on these loans was recorded in the Solano County Recorder's Office, and a Notice of Trustee's sale was then entered on October 14, 2008. (Id. ¶ 28.) With the Trustee's Sale scheduled for November 3, 2008, plaintiff sent EMC and GMAC a Notice of Cancellation pursuant to TILA and California law on October 30, 2008. (Id. ¶ 29.) On that date, plaintiff also filed a Complaint against the aforementioned parties in Solano County Superior Court seeking declaratory relief and rescission and alleging breach of the implied covenant of good faith and fair dealing, fraud, breach of fiduciary duty, quiet title, and violations of the UCL. (See Docket No. 1.) The action was subsequently removed to this court under federal question jurisdiction on March 10, 2009. (Id.) MERS and EMC (together, "defendants") now move to dismiss plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

II. Discussion

A. Legal Standard

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Dismissal is appropriate, however, where the plaintiff fails to state a claim supportable by a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990); see also Conley v. Gibson, 355 U.S. 41, 47 (1957) (complaint must "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests"), abrogated on other grounds by Twombly, 550 U.S. at 563.

B. Declaratory Relief

Plaintiff requests a judicial declaration that "defendants' security interest in the Subject Property has been rendered void . . . pursuant to [TILA] . . . when plaintiff sent his cancellation notice." (Compl. ¶ 31.) Relying on the Ninth Circuit's decision in Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003), defendants contend that plaintiff's request for declaratory relief is "premature" because "the loan transaction is not void until there has been a determination that rescission is warranted." (Mem. Supp. Mot. Dismiss 9:7-9.) In Yamamoto, the Ninth Circuit held:

[I]t cannot be that the security interest vanishes immediately upon the giving of notice. Otherwise, a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any. Rather, under the statute and the regulation, the security interest "becomes void" only when the consumer "rescinds" the transaction. In a contested case, this happens when the right to rescind is determined in the borrower's favor.

Id. at 1172.

While plaintiff's notice of cancellation alone was insufficient to void his loan agreements, this does not preclude him from requesting declaratory relief while simultaneously alleging a claim for rescission in his Complaint. (See Compl. 11:6-8); see also infra Section II.E. Adjudication of plaintiff's request for declaratory relief will implicitly require the preliminary step of determining the merits of his rescission claim; consequently, the court sees no persuasive reason to require plaintiff to file a subsequent action for declaratory relief only after "the right to rescind is determined in [his] favor."*fn1 Cf. Fed. R. Civ. P. 57 ("The existence of another adequate remedy does not preclude a declaratory judgment that is otherwise appropriate.").

Defendants further contend that declaratory relief is inappropriate because "there is no present controversy between defendants and plaintiff." (Reply 3:3; see Mem. Supp. Mot. Dismiss 10:19-20.) Although California courts have long held that declaratory relief "operates prospectively, and not merely for the redress of past wrongs," Babb v. Superior Court, 3 Cal. 3d 841, 848 (1971) (quoting Travers v. Louden, 254 Cal. App. 2d 926, 931 (1967)), the court cannot agree with defendants' characterization of plaintiff's request for declaratory relief as "unnecessary and improper because there is no occasion to guide the future conduct of [plaintiff] and [defendants]" (Reply 3:24-26). Plaintiff does ...


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