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Norlito Soriano v. Chavez

April 11, 2011


The opinion of the court was delivered by: Lucy H. Koh United States District Judge


United States District Court For the Northern District of California

Plaintiff Norlito Soriano brings suit against Countrywide Home Loans, Inc. (CHL) and Bank of America Corporation (BofA) (together, Defendants).*fn1 Plaintiff alleges that Defendants 20 improperly changed the terms of his home mortgage loan, and failed to respond to complaint letters 21 written by his counsel about this change. On the basis of these allegations, Plaintiff alleges three 22 causes of action: violation of the Real Estate Settlement Procedures Act ("RESPA", 12 U.S.C. § 23 17200 et seq.); and violation of the Truth in Lending Act ("TILA," 15 U.S.C. § 1601 et seq.).

No. 49, Motion). The Court finds this matter suitable for decision without oral argument. See Civ. 2601 et seq.); violation of California's Unfair Competition Law ("UCL," Bus. & Prof. Code § 24

Presently before the Court is Defendants' motion for summary denial of all Plaintiff's claims (Dkt. 26 L.R. 7-1(b). Therefore, the April 14, 2011 hearing on this Motion is VACATED. For the reasons 2 set forth below, the Motion is GRANTED in part and DENIED in part.

June 1, 2009, after the Plaintiff added claims arising under federal law in his Third Amended Defendants moved to dismiss the Third Amended Complaint. Judge Ware, to whom this case was 9 previously assigned, dismissed the federal claims but granted Plaintiff leave to amend those claims.

alleged that he made a Qualified Written Request (QWR) under RESPA, and that his pleadings did not establish a basis for equitably tolling his claim for TILA damages (which was otherwise barred 13 by the one-year statute of limitations). Id.

of the asserted claims other than the TILA claim. This time, Judge Ware denied the Motion to Dismiss regarding the federal claims.*fn2 See Order dated Feb. 5, 2010 (Dkt. No. 28). Judge Ware 17 found that Plaintiff had sufficiently alleged both a RESPA violation and resulting actual and 18 statutory damages. Id. at 5-6. In the same Order, Judge Ware dismissed all of the state law causes 19 of action, finding that Plaintiff had failed to allege sufficient facts to state those claims.

RESPA and TILA claims, and the UCL claim based on the underlying RESPA and TILA claims.

Plaintiff did not timely file his Opposition; however, the Court granted a Motion for Extension of Time to File an Opposition. See Dkt. No. 54. Plaintiff filed his Opposition within the extended 25 time. Defendants then filed a Reply.

I. Introduction

Plaintiff initially filed a complaint asserting only California law claims in Santa Clara County Superior Court on January 24, 2008. Dkt. No. 1. The matter was removed to this Court on 6 Complaint (the RESPA, TILA, and a UCL claim based on these alleged violations). Id. 8

See Dkt. No. 17. In dismissing the claims, Judge Ware found that Plaintiff had not sufficiently Plaintiff then filed a Fourth Amended Complaint (4AC). Defendants moved to dismiss all

Accordingly, the remaining causes of action after the February 5, 2010 Order were Plaintiff's

Defendants timely filed this Motion for Summary Judgment of Plaintiff's three remaining claims.

(Note). The Note refinanced Plaintiff's property at 574 Quady Lane, Madera, California, 93637.

Id. The Note secures a Deed of Trust (Deed), also executed on November 1, 2006, and recorded 6 against the Quady Lane property. Id. at Ex. 2 (Deed). In the negotiations relating to the Note, Defendants. Talbot Decl. Exs. B-E. Plaintiff did not read the loan documents before he signed 9 them, instead relying on representations about the terms of the loan made by the real estate agents. 10

II. Factual Background

On November 1, 2006, Plaintiff executed a promissory note, by which he borrowed $281,400 from Alliance Bancorp. Talbot Decl. ISO Motion (Talbot Decl.) at Ex. A (Pl. Dep.), Ex. 4 Plaintiff had discussions with certain real estate agents, but had no contact with either of the Talbot Decl. Ex. A, 31:11-32:5; see also Opp'n at 18.

The loan documents include a number of different forms, all of which were signed by Plaintiff on November 1, 2006. The Note itself states that the initial interest rate on the loan is 1%, 13 but that this interest rate can change beginning on January 1, 2007. See Note ¶ 2. The Note states 14 that the principal amount of the loan may change, but will never exceed 110% of the original 15 principal. Note ¶ 1. Elsewhere, however, it states that the principal may exceed 110% if the 16 borrower makes only minimum payments and if the interest rate increases; in this event, a new 17 minimum payment sufficient to repay the unpaid principal based on the interest rate in effect 18 during the prior month will apply. Note ¶ 3(F). The Note states that the initial monthly payments 19 will be $711.54, but that these payments may change starting January 1, 2008, and every twelfth 20 month thereafter, and may change sooner if the principal exceeds 110%. Note ¶ 3. The Note 21 further states that Plaintiff will be billed for various different so-called "payment options," which 22 become applicable after January 1, 2007. Note ¶ 3. Four types of payment options are defined: 1)

Minimum Payment (which will not decrease the principal, and could result in a principal decrease 24 if it is insufficient to pay the current interest due); 2) Interest Only Payment (which will cover 25 interest, but will not decrease the principal; 3) 30-year Amortized Payment (which will pay off the 26 principal and interest in substantially equal payments by the maturity date; and 4) 15-year 27

Amortized Payment (which will pay off the principal and interest in substantially equal amounts 28 within a fifteen year term). Id.

In addition to the Note itself, Plaintiff executed a document titled Adjustable Rate Balloon Rider (Balloon Rider) which states that it "is incorporated into and shall be deemed to amend and 3 supplement the Mortgage Deed of Trust." Pl. Dep. Ex. 2 (Note) at 16-20. Like the Note, the 4

Balloon Rider states that the interest rate applied to the principal may change as of January 1, 2007, 5 and that the monthly payment may change starting January 1, 2008, or earlier if the unpaid 6 principal balance exceeds 110%. See Note at ¶¶ 2 - 3.

statements in the Note and other disclosure documents regarding the changing interest rate and 9 payment options, this document states that the "loan provides for 359 monthly payments of 10 principal and interest in the amount of $711.54 each. Assuming that all of the monthly payments $186,191.38 shall become due and payable on DECEMBER 1, 2036." See Pl. Dep. Ex. 3 (Balloon Plaintiff also signed a "Variable Rate Mortgage Balloon Loan Program Disclosure," which provides information regarding the different payment options available depending on various 17 circumstances, as defined in the Note. See Pl. Dep. Ex. 4 (Second Balloon Disclosure). Plaintiff 18 also signed a document titled "Federal Truth-in-Lending Disclosure Statement." See Pl. Dep. Ex. 5. This statement shows that Plaintiff's payment schedule would be: $711.54 monthly for 12 20 months; $764.91 monthly for 10 months; $2,280.16 monthly for 337 months; and a final payment 21 of $186,191.39 on December 1, 2036. 22

Plaintiff also executed a document titled Balloon Payment Disclosure. Contrary to the have been paid exactly on the date that each is due, a final balloon payment of the then outstanding principal balance plus all earned interest remaining unpaid estimated to be in the amount of Disclosure).

Plaintiff's loan was transferred from the original lender, Alliance, to a third party (GMAC Mortgage), and then transferred again to CHL on February 1, 2007. See Compl. Ex. 6. Defendants 24 do not deny that while the loan was serviced by Alliance and GMAC, Plaintiff was billed $711.54 25 monthly, in accordance with the 1% interest rate in effect during that time. Opp'n at 14. After March, 2007, CHL billed Plaintiff using the "payment options" described in the Note. See Jones CHL took possession of the loan, it raised the interest rate. See, e.g., Pl. Dep. Ex. 6. Beginning in Decl. ISO Motion at ¶¶ 6-7. Because the interest rate had been raised, the "minimum payment" of 2 $711.54 no longer covered principal and interest.

In March, 2007, Plaintiff contacted CHL by writing on the payment coupon for that month.

See Pl. Dep. Ex. 7. Plaintiff wrote a list of statements and questions, including "why keep 5 changing account numbers" and "no payment options this month . . . no home loan activity this 6 month -- please respond." Id. CHL responded to this inquiry with a letter dated March 16, 2007, 7 stating that Plaintiff's account number had changed when the loan was transferred, and indicating 8 that his March payment and an additional payment were applied toward the loan, and that the next 9 payment was due on April 1, 2007. Pl. Dep. Ex. 8. Additional correspondence between Plaintiff 10 and CHL followed. Finally, on September 20, 2007, Plaintiff's attorney sent a letter to CHL. See Pl. Dep. Ex. 10. In this letter, Plaintiff's counsel states that Plaintiff's belief that there has been an error in servicing his account because the principal of his loan has increased despite his monthly 13 payments of $711.54. Id. Citing the Balloon Disclosure, the letter states Plaintiff's understanding 14 that $711.54 should cover both interest and principal. Id. CHL never provided a substantive 15 response to this letter. Rather, CHL first requested that Plaintiff's counsel provide proof of 16

Plaintiff's consent for CHL to discuss the loan with counsel. Plaintiff's counsel sent a follow-up 17 letter asking CHL to respond to the QWR. Plaintiff's counsel also responded to CHL's demand for 18 proof of Plaintiff's consent to discuss the loan by forwarding an authorization. CHL responded 19 with a letter providing a phone number for Plaintiff or counsel to contact with questions. Compl. 20

BofA is the parent company for Countrywide Financial Corporation; CHL is a wholly- owned subsidiary of Countrywide Financial Corporation. ...

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