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Chang Bee Yang and Lau Yang v. Sun Trust Mortgage

June 14, 2011

CHANG BEE YANG AND LAU YANG,
PLAINTIFFS,
v.
SUN TRUST MORTGAGE, INC., A VIRGINIA CORPORATION; DOES 1 THROUGH 25, DEFENDANTS.



The opinion of the court was delivered by: Sheila K. Oberto United States Magistrate Judge

ORDER GRANTING PLAINTIFFS' MOTION TO AMEND

(Docket No. 27)

I. INTRODUCTION

Plaintiffs Change Bee Yang and Lau Yang ("Plaintiffs") filed a complaint against Defendant SunTrust Mortgage, Inc. ("Defendant" or "SunTrust") on August 25, 2010, alleging twenty-three separate causes of action which relate to a Residential Construction Loan Agreement ("RCLA") entered into between Plaintiffs and Defendant. (Doc. 1).

Plaintiffs and Defendant entered into the RCLA on December 16, 2006. (Doc. 1, ¶ 8.) Under the RCLA, Defendant agreed to loan Plaintiffs $742,450 to purchase real property located at 10966

E. Promontory Way, Clovis, California, 93619. (Doc. 1, ¶ ¶ 8-9.) Plaintiffs used $200,000 of the loan money to purchase the lot and the remaining $542,450 for construction. (Doc. 1, ¶ 11.) Plaintiffs hired Sierra Custom Homes, Inc. (the "Contractor") to construct the residential home on the property. (Doc. 1, ¶ 10.)

Pursuant to the terms of the RCLA, the loan proceeds were to be deposited into an account held by Defendant and advanced to the Contractor when the Contractor reached various states of completed work. (Doc. 1, ¶ 12.) According to the RCLA, Plaintiffs were to supervise the Contractor and inform Defendant about the Contractor's need for monies. (Doc. 1, ¶ 12.)

Paragraph 7 of the RCLA granted Defendant "Power-of Attorney" and allowed Defendant to make payments directly to the Contractor. (Doc. 1, ¶ 13.) Defendant hired an appraiser to evaluate and inspect the Contractor's work on the project and each of the Contractor's draw requests. (Doc. 1, ¶ 16.) The Contractor made fifteen total draw requests. (Doc. 1, ¶ 17.) Each draw request was paid by Defendant without Plaintiffs' authorization or approval. (Doc. 1, ¶ 17.) The Contractor failed to complete work for which it was paid by Defendant. (Doc. 1, ¶ 18.)

On October 29, 2010, Defendant filed a motion to dismiss the complaint which was granted on March 15, 2011. (Doc. 21.) Plaintiffs were permitted leave to file an amended complaint within 30 days as to causes of action 14-16 (breach of contract), 20 (negligence), 21 (fraud), and 23 (negligent misrepresentation).

On April 14, 2011, Plaintiffs filed a First Amended Complaint ("FAC") which added a new party, Michael J. Carter; restated claims for fraud, negligent misrepresentation, and declaratory relief; and added new claims for violation of California Business and Professions Code section 17200, civil conspiracy, conversion, accounting, intentional infliction of emotional distress, and breach of a written contract.

Defendant objected to the adding of new claims and a new party in Plaintiffs' FAC as impermissible in light of the Court's order on Defendant's motion to dismiss (See Doc. 28, 4:3-15; Doc. 32, 1:8 n.1).*fn1 The parties agreed by stipulation that Plaintiff would dismiss newly added defendant Michael J. Carter and the causes of action for violations of section 17200, civil conspiracy, conversion, declaratory relief, accounting, intentional infliction of emotional distress, and breach of a written contract -- ostensibly so that Plaintiffs could seek permission from the Court for leave to file such an amended pleading in light of the fact that Defendant refused to stipulate to such an amendment. On May 12, 2011, the Court granted the parties' stipulation for dismissal of the new claims asserted and the new defendant named in the FAC. (Doc. 30.)

After stipulating to dismiss the portions of the FAC to which Defendant objected, Plaintiffs filed a motion to amend the FAC on May 6, 2011, requesting permission to add Michael J. Carter as a defendant and to plead causes of action for (1) fraud, (2) negligent misrepresentation, (3) violation of section 17200 of the California Business and Professions Code, (4) civil conspiracy, (5) conversion, (6) accounting, (7) intentional infliction of emotional distress, and (8) breach of contract.

On May 9, 2011, Defendant filed a motion to dismiss the FAC, asserting that Plaintiffs failed to plead their fraud and negligent misrepresentation claims with the requisite ...


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