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John Lystad, et al v. Suntrust Mortgage

July 6, 2011

JOHN LYSTAD, ET AL.,
PLAINTIFF,
v.
SUNTRUST MORTGAGE, INC., DEFENDANT.



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

(Docket No. 8)

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS

I. INTRODUCTION

On June 2, 21011, Defendant Suntrust Mortgage, Inc. ("Defendant") filed a motion to dismiss and strike portions of Plaintiffs John Lystad ("Mr. Lystad") and Karen Lystad's ("Ms. Lystad" or, collectively, "Plaintiffs") complaint, and sought a more definite statement concerning Plaintiffs' claims. Specifically, Defendant seeks to dismiss Plaintiffs' third cause of action for violation of the Truth in Lending Act ("TILA") and ninth cause of action for violation of the Fair Credit Reporting Act ("FCRA") pursuant to Fed. R. Civ. P. Rule 12(b)(6). Defendant seeks a more definite statement of Plaintiffs' remaining claims under Fed. R. Civ. P. Rule 12(e) and moves to strike paragraph no. 9 of the complaint under Fed. R. Civ. P. 12(f). The court reviewed the motion and supporting documents and determined that this matter is suitable for decision without oral argument pursuant to Local Rule 230(g).*fn1

For the reasons set forth below, Defendant's motion is GRANTED IN PART and DENIED IN PART.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. Allegations from Plaintiffs' Complaint

Plaintiffs' complaint alleges that they entered into a mortgage and executed a deed of trust on March 28, 2006 (the "2006 loan"). (Doc. 1, p. 11, (Complaint), ¶ 10.) Plaintiffs allege that in 2007, they had financial difficulties and sought loan modification from Defendant. (Doc. 1, p. 11, (Complaint), ¶ 12.) Defendant orally agreed to a 5% interest rate with the arrearage to be capitalized. (Doc. 1, p. 11, (Complaint), ¶ 15.) In January 2008, Plaintiffs received papers from Defendant which did not conform to Plaintiffs' understanding of the agreement and did not significantly lower either the loan payment or interest rate. (Doc. 1, p. 11, (Complaint), ¶¶ 16-17.) Plaintiffs allege that Defendant demanded that they sign the documents; in fear for their house and under duress, they signed the modification (the "2008 loan"). (Doc. 1, p. 11, (Complaint), ¶¶ 18-19.)

Plaintiffs made payments pursuant to the 2008 loan but in August 2008, realized that the principal balance was not being reduced. (Doc. 1, p. 11, (Complaint), ¶ 20-27.) Plaintiffs objected to this lack of principal reduction, and the parties negotiated another loan modification after Plaintiff stopped making payments in an attempt to force Defendant to live up to the agreement. (Doc. 1, p. 11, (Complaint), ¶¶ 30-41.) In July 2009, Plaintiffs allege that Defendant agreed to modify the loan to the originally agreed upon 5% interest rate; Plaintiffs objected that their prior payments had not been applied to the principal, but were informed by Defendant to either sign the new paperwork or Defendant would foreclose on their home. (Doc. 1, p. 11, (Complaint), ¶¶ 43-44.) Plaintiffs signed the paperwork for the loan (the "2009 loan") under duress and began making payments on that loan. (Doc. 1, p. 11, (Complaint), ¶ 45.)

Mr. Lystad suffered a heart attack in 2009 and Plaintiffs allege that the stress and strain caused by Defendant was a major contributing factor. (Doc. 1, p. 11, (Complaint), ¶¶ 46-47.)

B. Procedural History

On January 7, 2011, Plaintiffs filed for Chapter 13 bankruptcy in bankruptcy case no. 11-10201-B-13, and Defendant filed its creditor claim for $538,220.09 with arrearage of $49,540.41. (Doc. 1. 4:2-9; Doc. 5, 2:20-21.) On March 23, 2011, Plaintiffs filed a complaint against Defendant in the bankruptcy proceeding, objecting to the amount sought by Defendant. Plaintiff pled causes of action for (1) objection to claim and request for determination of claim under 11 U.S.C. § 502;

(2) breach of contract; (3) violation of TILA and Implementary Regulation Z; (4) violation of California Predatory Lending Act; (5) fraud, fraudulent concealment and negligent misrepresentation; (6) duress; (7) emotional distress; (8) violation of California Business & Professions Code § 17200; and (9) violation of FCRA.

On April 27, 2011, Defendant filed a motion to withdraw the bankruptcy reference in the instant action so as to transfer the federal and California claims to this court, asserting that those claims are "non-core" bankruptcy claims and that bankruptcy withdrawal would promote efficiency (Doc. 1.) On May 16, 2011, District Judge Lawrence J. O'Neill issued an order granting Defendant's motion to withdraw the bankruptcy reference ...


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