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House v. Cal State California Corp.

February 26, 2010

JOSEPHINE HOUSE, BY HER GUARDIAN AD LITEM PUBLIC GUARDIAN OF STANISLAUS COUNTY, PLAINTIFF,
v.
CAL STATE CALIFORNIA CORPORATION; CAL STATE MORTGAGE CO., INC., A CORPORATION; HOME LOANS INC., A CALIFORNIA BENJAMIN CAPITAL INC., A CALIFORNIA CORPORATION; ALEXANDER GOMEZ; MURPHY SABATINO; LARRY MENTON; AND JOAN HOUSE, A NECESSARY PARTY, DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION AND ORDER RE: PLAINTIFF'S MOTION TO AMEND (Docs. 64 & 67)

I. INTRODUCTION

Before the court is Plaintiff's motion for leave to file a Third Amended Complaint. Plaintiff seeks to add four new defendants, and to add and clarify alleged facts. Plaintiff does not seek to allege any new claims or theories of liability.

Defendants Cal State Mortgage Co., Inc. ("Cal State Mortgage"), Cal State Home Loans Inc. ("Cal State Home Loans"), and Alexander Gomez (collectively, the "Cal State Defendants") oppose the motion. Defendant Murphy Sabatino, represented by separate counsel, has "no general objection" to Plaintiff's motion. If leave to amend is granted, all Defendants request a modification of the Scheduling Order to extend the discovery deadlines, the pre-trial motion deadlines, the pre-trial conference and trial date. Plaintiff agrees that such an extension would be appropriate. The following background facts are taken from the parties' submissions in connection with the motion and other documents on file in this case.

II. BACKGROUND

A. Procedural History

This is a mortgage fraud case in which Plaintiff, a disabled individual, claims to be the victim of two predatory and discriminatory loans secured by her residence in Turlock, California. On December 5, 2008, Plaintiff filed her initial complaint against those allegedly involved in the illicit lending, including Cal State Mortgage, Cal State Home Loans, Alexander Gomez, Benjamin Capital, Inc. ("Benjamin Capital"), and Murphy Sabatino. (Doc. 1.) Gomez is the president, owner, operator, and designated broker of Cal State Home Loans and Cal State Mortgage. Murphy Sabatino is a licensed broker and officer of Benjamin Capital.

On February 9, 2009, Plaintiff filed a First Amended Complaint ("FAC") as a matter of right under Rule 15. (Doc. 12.) The FAC retained all five original defendants and added two more: Larry Menton and Joan House. Menton allegedly participated in arranging the predatory loans at issue. Joan*fn1 is Plaintiff's sister who co-owns, with Plaintiff, the Turlock residence. Allegedly Joan is a dependent adult with mental limitations. Plaintiff added Joan as a necessary party against whom no relief is sought.

On February 16, 2009, the Cal State Defendants filed a motion to dismiss (Docs. 24 and 26) all claims in the FAC. On July 9, 2009, the motion was denied in part and granted in part with leave to amend. (Doc. 49.) The Memorandum Decision and Order on the motion to dismiss specified that "Plaintiff shall file a Second Amended Complaint . . . within twenty (20) days" of the filing date of the Memorandum Decision and Order. (Id. at 49.)

A scheduling conference was held following the Memorandum Decision and Order. On July 28, 2009, a Scheduling Order was issued. (Doc. 53.) Under a section of the Scheduling Order entitled "Orders re Amendments To Pleadings" it states that "Plaintiffs plan to file a Second Amended Complaint on or before July 29, 2009." (Id. at 3.) Later in the Scheduling Order, under a section entitled "Pre-Trial Motion Schedule," dates were set for the filing of non-dispositive and dispositive pre-trial motions. (Id. at 7.)

On July 29, 2009, Plaintiff filed her Second Amended Complaint. This pleading retained all the same defendants, and no new defendants were added.

B. The Second Amended Complaint

The Second Amended Complaint, currently the operative pleading, asserts claims for: (1) violation of the Truth In Lending Act; (2) violation of the Home Ownership and Equity Protection Act; (3) violation of the Real Estate Settlement Procedures Act; (4) violation of the Fair Housing Act; (5) violation of the California Fair Employment and Housing Act; (6) violation of the California Covered Loans Law; (7) breach of fiduciary duty; (8) financial abuse under the California Welfare and Institution Code; (9) fraud; and (10) a violation of California's Unfair Competition Law, California Business & Professions Code § 17200.

Plaintiff's claims relate to three mortgage loans, two of which Plaintiff asserts were predatory and tainted with various forms of illegality. As alleged, after inheriting the Turlock Residence, Plaintiff and her sister obtained a $10,000 mortgage in order to renovate their kitchen. Due to their mental illness, and inability to transact business and take care of their property, Plaintiff and her sister were unable to keep up with the payments. By 2005, they faced foreclosure.

Judy Towns, a non-party to this action, learned of Plaintiff's financial predicament and spoke with Menton regarding the foreclosure. Towns believed that Menton, an alleged agent with Benjamin Capital, could assist Plaintiff with refinancing into an affordable loan. ...


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