The opinion of the court was delivered by: Gary S. Austin United States Magistrate Judge
FINDINGS AND RECOMMENDATIONS DENYING MOTION TO EXPUNGE LIS
PENDENS (Docs. 32)
Pending before the Court is Michael Tobin and Holly Tobin's ("Defendants") Motion to Expunge Lis Pendens filed on March 27, 2012. (Doc. 32). Defendants filed an additional memorandum citing a case that was published after the filing of the initial motion on April 4, 2012. (Doc. 34). At the request of the parties, the motion was continued to pursue a settlement agreement in this matter. After settlement attempts were unsuccessful, Leif Bergman and Bergman Landscape Inc. ("Plaintiffs"), filed an Opposition to the motion on August 15, 2012 (Doc. 49). Defendants filed a Reply on August 20, 2012. (Doc. 50). The matter was set for hearing on August 28, 2012, at 9:30 am. The Court determined that the matter was suitable for decision without oral argument. The matter was taken under submission and the hearing was vacated.
Shortly after the issuance of the Court's order taking the matter under submission, the parties filed a joint scheduling report wherein the United States indicated that it was considering disclaiming its lien interest in the subject property which is the basis of this Court's jurisdiction. On September 10, 2012, the court held a status conference and determined the motion was still ripe for decision.
Upon a review of the pleadings, it is recommended that Defendant's Motion to Expunge the Lis Pendens be DENIED. Similarly, it is recommended that Defendant's request for attorney's fees and Defendants' request for dismissal of the action also be DENIED.
On September 26, 2011, Plaintiffs filed a complaint against Defendants in the Stanislaus County Superior Court. (Doc. 1 at Ex. A). The complaint seeks foreclosure of mortgage on real properly located at 1711 East Hawkeye Avenue, Turlock, California 95830. The complaint alleges that Plaintiff Leif Bergman is holding a mortgage/lien against the property. The case was removed to this Court by Defendant United States of America on November 9, 2011. (Doc. 1).
The complaint alleges that on June 22, 2009, Defendants delivered a written promissory note ("the note") to Plaintiffs in the principal sum of $205,399.15. (Doc. 1, Ex. B). The promissory note lists Bergman Landscape as the sole Payor.*fn1 Id. at pg. 2. The parties also signed a security agreement, which was recorded in the Stanislaus Superior Court, Doc. 2009-0072405-00 ("Security Agreement") as security for the note. (Doc. 1, Ex.C).
Plaintiffs contends that the security agreement constituted a mortgage and that the parties intended that the property would be hypothecated for full and faithful performance of all obligations under the note. Pursuant to the terms of the note, Defendants promised to make monthly payments of $5,209.45 beginning February 15, 2010, and continuing in subsequent months. The note/mortgage allegedly provides that the if Defendants defaulted, Plaintiffs could demand that all sums owed under the note be paid immediately. The mortgage was duly recorded in the Official Records of Stanislaus County on July 22, 2009.
In the complaint, Plaintiffs allege that Defendants have not paid the amounts owed as required. In accordance with the agreements, Plaintiffs elected to declare the remaining principal and interest payable immediately. The accelerated amount due consists of the principal sum of approximately $209,491.47 plus interest. Plaintiffs further allege that Defendants failed to pay property taxes, assessments, and maintain insurance on the property as required.
Plaintiffs have alleged foreclosure on the mortgage, foreclosure on the equitable mortgage, and reformation as causes of action. They seek the following : $209,491.47 plus interest; attorney's fees; any additional funds necessary to protect their security interest in the property; reformation ab initio to reflect the intention of the parties that the security was pledged to Bergman Landscape, Inc., rather than Leif Bergman; declaratory relief; an order that the subject mortgage be foreclosed; a judgment against Defendants for any deficiency that remains after applying all of proceeds of the sale of the property; costs; and any other just and proper relief.
On September 26, 2011, Plaintiffs recorded a Notice of Pendency of Action, Doc. 2011-0079316-00. (Doc. 32-3, Ex. A). On September 26, 2011, Plaintiffs also filed a Notice of Pendency of Action, Case No. 668828 (Doc. 32-3, Ex. B) in the Stanislaus Superior Court. Defendants filed the instant motion to expunge the lis pendens.
Defendants seek to expunge the lis pendens based on a lack of proper service. They also seek expungement of the lis pendens on the basis that Plaintiffs cannot prevail because Bergman Landscape is not the secured creditor under the security agreement and consequently it has no interest in the real property. Finally, Defendants argue that Bergman Landscape Inc. lacks a valid contractor's license and is therefore prohibited from collecting on this debt.
In addition to the expungement of the lis pendens, Defendants request attorneys' fees for bringing the motion, as well as dismissal of this action pursuant to Chambers v. Nasco, 501 U.S. 32 (1991). Defendants assert that Plaintiffs engaged in egregious conduct including failing to serve Defendants with the lis pendens and luring Defendants into signing a security agreement which mortgages their home without their knowledge.
In opposition, Plaintiffs contend the Motion to Expunge the Lis Pendens should be denied because Defendants were actually served with the Notice of Lis Pendens but refused service. Moreover, any ambiguity with regard to the identification of Mr. Leif Bergman named in the security agreement can be addressed through ordinary rules of contractual interpretation under California law, the remedy of reformation, or the remedy of equitable mortgage as the intent of the parties is clear from the document. Finally, Bergman Landscape Inc., holds a contractor's license and Plaintiff Leif Bergman is the responsible managing officer. Plaintiffs request that if the Court is ...