The opinion of the court was delivered by: Honorable Larry Alan Burns United States District Judge
ORDER GRANTING IN PART MOTION TO DISMISS; AND ORDER GRANTING MOTION TO EXPUNGE NOTICE OF LIS PENDENS [Docket numbers 12, 18.]
Plaintiff brought this action seeking to set aside a trustee's sale of his residence, and also seeking damages and equitable relief. He dismissed one Defendant, then filed his amended complaint (the "FAC"). Defendants Deutsche Bank National Trust Company as Trustee for Morgan Stanley Ixis Real Estate Capital Trust 2006-2 ("Deutsche Bank")*fn1 and Saxon Mortgage Services, Inc. ("Saxon") then moved to expunge a notice of pendency of action Plaintiff recorded while this action was pending. As part of the motion to expunge, these Defendants sought attorney's fees. If the Court does not order the notice of lis pendens expunged, the motion requests an order requiring Plaintiff to post a bond. These Defendants then filed a motion to dismiss for failure to state a claim, and sought judicial notice of several loan-related documents.
Although the motion to dismiss was filed later, the Court finds it appropriate to address it first, because it disposes of most of the issues raised in the motion to expunge.
I. Summary of Allegations and Claims
The FAC shifts between making accusations against Defendants Deutsche Bank and Saxon (and a third entity, Lending House d.b.a. Master Financial, which has not appeared and which apparently is now out of business) and making accusations against various other entities who are not parties to this action. The FAC identifies Deutsche Bank, Saxon, and Master Financial collectively as the "Broker and Lender Defendants" (FAC, ¶ 15), though in fact these are the only Defendants.
According to the FAC, Deutsche Bank, Saxon, and Master Financial told Plaintiff in July of 2006 he would qualify for a loan at a fixed rate of 7.45% for 360 months, with monthly payments just over $4,000. (FAC, ¶ 16.) The mortgage was to be secured by the equity in his home. The FAC alleges that, at closing, Plaintiff was provided with loan documents that included various false representations regarding Plaintiff's ability to pay (increasing his monthly salary from $9,650 to $13,726), increased closing costs from approximately $10,000 to approximately $28,000, and changed the nature of the loan. The FAC says the loan Plaintiff was actually given was an adjustable rate interest-only loan for two years, with a margin of 5.455% and a prepayment penalty designed to prevent refinancing. (FAC ¶ 17.) The amount of the prepayment penalty isn't alleged. The FAC alleges the broker and lenders didn't provide required disclosures or give him an accurate copy of the loan documents, and that they knew he wouldn't be able to pay the mortgage.
According to the FAC, Deutsche Bank and Saxon were the original brokers, Master Financial was the lender,*fn2 and these three deceived him. (FAC, ¶¶ 12,15.) But in a very lengthy paragraph 26, with multiple sub-parts, the FAC accuses several non-Defendants of altering documents, failing to make disclosures, and deceiving him.
In this section of the FAC, Plaintiff accuses Master Financial, Fair Home Lending Financial, Inc. or Principal Mortgage Fund, Inc. (not Deutsche Bank or Saxon) of failing to make disclosures as required under the Truth in Lending Act (TILA). (FAC, ¶ 26(1)(d)). The FAC says Plaintiff later received another misleading TILA disclosure but doesn't say who gave it to him. (Id.) It also accuses a Fair Home Lending interviewer, not Defendants, of altering the loan documents without authorization so the information about his mortgage wouldn't be reported to the federal government. (Id., ¶ 26(1)(e).)
The FAC then alleges Deutsche Bank, Saxon, and Master Financial didn't provide him with "the proper documentation on the mortgage application," (FAC, ¶ 26(1)(f)), though it's not explained what "the proper documentation" here means. But then, "at the end of the process," the FAC alleges Deutsche Bank, Saxon, and Master Financial presented him with documentation showing the loan he got, not the loan he thought he was getting. (Id., ¶ 26(1)(g).) The FAC alleges the Fair Home Lending interviewer altered Plaintiff's income on the application (id., ¶ 26(2)(a)), but says "Defendants" (apparently Deutsche Bank, Saxon, and Master Financial) changed the interest rate on his application. (Id., ¶ 26(2)(b).)
The FAC then alleges Deutsche Bank, Saxon, and Master Financial failed to make required TILA disclosures or to provide him with "the proper documentation" on his mortgage application. (FAC, ¶ 26(2)(d) and (e).) The FAC leaves unexplained what "proper documentation" refers to.
In the next subsection, the FAC makes allegations about the terms of the loan and disclosures Plaintiff was given, and says the disclosures are attached as exhibits D and E. (FAC, ¶ 26(3)). Exhibit D is a borrower's estimated settlement statement signed by Plaintiff, and identified as coming from LandAmerica Southland Title. The FAC doesn't refer to an entity by this name, though it identifies Southland Title Escrow as settlement agent for the loan. (Id., ¶ 14.) Exhibit E is a mortgage loan origination disclosure identifying Fair Home Lending as the broker.
The next subsection alleges "the final loan documents were dramatically and secretly switched and for the worse," (FAC, ¶ 26(4)(a)), but doesn't say who switched them. It accuses Master Financial or two non-Defendants of falsifying the application documents. (Id., ¶ 26(4)(b) and (c).) It alleges "[a]ll these facts were kept hidden from Plaintiff when he signed," but doesn't say who hid them. (Id., ¶ 26(4)(d).) It then says at the closing either Master Financial or two non-parties failed to provide accurate TILA disclosure statements or "proper documentation on the 1003 loan application." (Id., ¶ 26(4)(e) and (f). It also alleges Master Financial was responsible for making Plaintiff sign a rider agreeing to a prepayment penalty. (Id., ¶ 26(4)(g).)
The FAC concludes that as a result of Deutsche Bank's, Saxon's, and Master Financials' actions, Plaintiff lost his home in foreclosure and forfeited all his payments, and his credit was ruined. (FAC, ¶ 27.) It is on this basis that he seeks relief. (Id.)
The initial allegations are followed by sections identifying sixteen causes of action, and a prayer for relief. The sections identifying causes of action are all styled as being brought against Defendants, but as with the initial allegations, the factual allegations contained in these sections alternately lay the blame at the feet of non-party entities. For example, in support of the TILA claim, the FAC alleges that Fair Home Lending, Principal Mortgage Fund, Inc, Master Financial, "and/or" Saxon did a bait and switch with a fixed mortgage; did a bait and switch with Plaintiff's 7.450% - 360 month loan application ...