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THOMAS E. ALBORG (State Bar No. 056425)
MARK D. EPSTEIN (State Bar No. 168221)
ALBORG, VEILUVA & EPSTEIN LLP
E-FILED
May 25, 2007 2:35 PM
200 Pringle Avenue, Suite 410 KIRI TORRE
Chief Executive Officer
3 Walnut Creek, CA 94596 Superior Court of CA, County of Santa Clara
Telephone: (925) 939-9880 Case #1-04-CV-032895 Filing #G-3290
4 Facsimile: (925) 939-9915 By C. Fujihara, Deputy
5 Attorneys for Plaintiffs
RAFAEL LICEA, SHAWN SHERBURNE,
6 MANUEL NUNGARAY,
and all those similarly situated
7
8
SUPERIOR COURT OF THE STATE OF CALIFORNIA
9
COUNTY OF SANTA CLARA
10
ALBORG, VEILUVA & EPSTEIN LLP
11
TEL: (925) 939-9880 P FAX: (925) 939-9915
Case No. 104CV032895
WALNUT CREEK, CALIFORNIA 94596
RAFAEL LICEA, SHAWN SHERBURNE,
200 PRINGLE AVENUE, SUITE 410
12
MANUEL NUNGARAY, individually and on FIRST AMENDED COMPLAINT FOR
13 behalf of all similarly situated persons, DAMAGES AND RELATED RELIEF
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Plaintiffs,
AT
14 (CLASS ACTION)
ATTORNEYS
/
15 vs.
16 FIELDSTONE MORTGAGE COMPANY, a
corporation, FIELDSTONE INVESTMENT
17 CORPORATION, a corporation, CALIFORNIA
HOME & MORTGAGE, a corporation, RALPH
18 HODGEN, an individual, VERONICA P.
CAZAREZ, an individual, and DOES 1 through
19 500, inclusive,
20 Defendants.
/
21
Plaintiffs RAPHAEL LICEA, SHAWN SHERBURNE, AND MANUEL NUNGARAY
22
allege, on behalf of themselves and all persons similarly situated, as follows:
23
PARTIES
24
1. Plaintiff RAPHAEL LICEA (“LICEA”) is, and was at all times mentioned herein,
25
a resident of the County of Contra Costa, California. LICEA is an individual consumer who in or
26
about December of 2002, obtained refinancing on his home located at 1323 Emeric Avenue, San
27
Pablo, California (“Licea Residence”).
28
1 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 2. Plaintiffs SHAWN SHERBURNE and MANUEL NUNGARAY (collectively
2 “SHERBURNE and NUNGARAY”) are residents of the County of Alameda, California, who in
3 or about February 2004, obtained mortgage loan financing to purchase their home located at
4 22103 Vista Del Plaza, # 12, Hayward, California 94541 (“Sherburne/Nungaray Residence”).
5 3. Plaintiffs are informed and believe, and on that basis allege that defendant
6 Fieldstone Mortgage Company is and was, at all times relevant hereto, a Maryland corporation
7 operating as a residential mortgage lender doing business in California, maintaining a business
8 office at 7777 Greenback Lane, Suite 205, in Citrus Heights, California. Fieldstone Mortgage
9 Company maintains a website at www.fmcmortgage.com. Plaintiffs are further informed and
10 believe, and on that basis allege that Fieldstone Mortgage Company is an operating subsidiary of
ALBORG, VEILUVA & EPSTEIN LLP
11 Defendant Fieldstone Investment Corporation, a Maryland corporation, doing business in
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 California. Defendant Fieldstone Investment Corporation directly and indirectly controls all
13 lending activities of Defendant Fieldstone Mortgage Company. Defendants Fieldstone Mortgage
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14 Company and Fieldstone Investment Corporation shall be collectively referred to as
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15 “FIELDSTONE.”
16 4. Plaintiffs are informed and believe, and on that basis allege that defendant
17 California Home & Mortgage is and was, at all times relevant hereto, a corporation qualified and
18 doing business in the State of California as a mortgage broker, licensed by the Department of Real
19 Estate. Defendant Ralph Hodgen is and was, at all relevant times hereto, an individual, licensed
20 as a real estate broker by the California Department of Real Estate under license number
21 00967807. Defendant Hodgen is and was at all times relevant hereto, the sponsoring broker for
22 Defendant California Home & Mortgage, as required under the laws and regulations of the
23 California Department of Real Estate. Defendant Veronica P. Cazarez is and was, at all times
24 relevant hereto, an individual licensed as a real estate agent by the California Department of Real
25 Estate under license number 01343382, working under the supervision of Defendant Hodgen,
26 pursuant to the laws and regulations of the California Department of Real Estate. Defendants
27 California Home & Mortgage, Hodgen and Cazarez will be collectively referred to as
28 “CALIFORNIA HOME.” LICEA is informed and believes that at all times relevant,
2 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 CALIFORNIA HOME has maintained an office at 1759 Landess Ave., Suite D, in the City of
2 Milpitas, County of Santa Clara, California, 95035, as its principal place of business.
3 5. Plaintiffs are ignorant of the true names and capacities of Defendants sued herein
4 as DOES 1 through 500, inclusive, and therefore sues those Defendants by such fictitious names.
5 Plaintiffs will amend this Complaint to allege their true names and capacities when ascertained.
6 6. Plaintiffs are informed and believe and thereon allege that each of the fictitiously
7 named defendants is responsible in some manner for the occurrences herein alleged and that
8 plaintiffs’ damages as herein alleged were proximately caused by such occurrences.
9 AGENCY ALLEGATIONS
10 7. Plaintiffs are informed and believe and thereon allege that at all times herein
ALBORG, VEILUVA & EPSTEIN LLP
11 mentioned defendant FIELDSTONE was the authorized agent of CALIFORNIA HOME and
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 their “Doe” co-defendants not yet named, and in doing the things hereinafter mentioned were
13 acting within the course and scope of their authority as such agents and employees with the
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14 permission and consent of their co-defendants, and each ratified and approved the conduct set
ATTORNEYS
15 forth herein.
16 8. LICEA is informed and believes and thereupon alleges that there exists, and at all
17 times herein mentioned there existed, an agency relationship between FIELDSTONE and
18 CALIFORNIA HOME concerning the refinance of LICEA’s home, such that all acts of any of the
19 parties were the acts of FIELDSTONE. LICEA is informed and believes that said agency
20 relationship is confirmed by the acts and conduct of all of said persons and entities, in arranging
21 the LICEA real estate loan described below, and is further evidenced by a written agreement,
22 commonly referred to as a Loan Broker Agreement, entered into between said Defendants, and
23 described more specifically supra.
24 FACTUAL ALLEGATIONS
25 A. The Licea Loan Transaction
26 9. In or about November of 2002, LICEA sought to refinance his personal residence
27 through CALIFORNIA HOME. CALIFORNIA HOME is, and were at all relevant times,
28 licensed real estate loan brokers or agents who, pursuant to California law and regulations, acted
3 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 as fiduciaries to LICEA. FIELDSTONE was aware that CALIFORNIA HOME were the
2 fiduciaries of LICEA.
3 10. LICEA, like most California consumers, sought through such fiduciaries to
4 refinance his Personal Residence at the lowest possible cost, including but not limited to securing
5 the lowest available interest rate, and the lowest loan fees. In addition, LICEA, like most
6 California consumers, sought through such fiduciaries to avoid adverse loan terms, including but
7 not limited, to a prepayment penalty.
8 11. CALIFORNIA HOME and FIELDSTONE cooperatively arranged and funded a
9 first and a second mortgage loan secured by LICEA’s Personal Residence in the total amount of
10 $310,000. LICEA received two Good Faith Estimates (“GFE”) of settlement costs from
ALBORG, VEILUVA & EPSTEIN LLP
11 FIELDSTONE, dated December 23, 2002. True and correct copies of said GFEs are attached as
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 a group as Exhibit 1. As stated in FIELDSTONE’s website, the GFE is supposed to detail “all
13 the fees and charges associated with getting your loan”.
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14 12. The GFE for the first mortgage loan, at page one, referenced a “Mortgage Broker
ATTORNEYS
15 Fee” of $6,587.50, with an asterisk, followed by a statement at the bottom of the GFE “ADDT’L
16 BROKER COMPENSATION PAID BY LENDER 0-3%”. The same GFE, on the first page,
17 referenced an “Underwriting Fee” of $949, a “Courier Fee” of $20, a “Tax Related Service Fee”
18 of $65, “Recording Fees” of $80, and a “Flood Certification Fee” of $13. The GFE for the first
19 mortgage loan did not reference an $800 “Processing Fee” or a $150 “Administration Fee” that
20 LICEA paid to the CALIFORNIA HOME at closing. The second page of the GFE referenced
21 interest payments and loan terms, including the loan amount, interest rate, taxes and insurance
22 payments. This first GFE stated in pertinent part: “The information provided below reflects
23 estimates of the charges which you are likely to incur at the settlement of your loan.” The GFE
24 was signed by LICEA on December 26, 2002, as part of the loan closing process.
25 13. The second GFE addressed the second mortgage loan. On the first page, the GFE
26 referenced no mortgage broker fee, an “Underwriting Fee” of $299, “Recording Fees” of $25, and
27 a “Flood Certification Fee” of $5. The second page of the GFE referenced interest payments and
28
4 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 loan terms, including the loan amount, interest rate, taxes and insurance payments. It also
2 contained the same sentence concerning estimates of charges referenced in Paragraph 12 above.
3 14. LICEA’s FIELDSTONE mortgage loan transaction closed on or about January 2,
4 2003. At the date of closing, LICEA instead paid the following loan fees, which are reflected on
5 the Final Closing Statement:
6 Mortgage Broker Fee to California Home $ 6,587.50
Processing Fee to California Home 800.00
7 Administration Fee to California Home 150.00
Underwriting Fee to Fieldstone 949.00
8 Underwriting Fee (Second Mortgage) to Fieldstone 299.00
9 Total: $8,785.50
10 In addition, the Final Closing Statement listed a fee described as “Mtg Broker Fee fr FMC to
ALBORG, VEILUVA & EPSTEIN LLP
11 CALIFORNIA HOME & MORTGAGE” in the amount of $2,635, and referenced said payment
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 as “P.O.C.” or paid outside of closing. On the Final Closing Statement, this fee was not
13 referenced as a credit or debit to the borrower, but was instead listed in parentheses. A true and
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14 correct copy of said Final Closing Statement is appended as Exhibit 2.
ATTORNEYS
15 15. LICEA is informed and believes, and thereupon alleges that FIELDSTONE and
16 CALIFORNIA HOME secretly agreed in writing on or before December 18, 2002 that in addition
17 to, and separate from, the fees that LICEA would pay to CALIFORNIA HOME in connection
18 with the loan, referenced in paragraph 14 above, FIELDSTONE would pay CALIFORNIA
19 HOME a second and additional mortgage broker fee. FIELDSTONE described that second
20 mortgage broker fee as “compensation from FMC” on the final closing statement, and paid it to
21 CALIFORNIA HOME in the amount of $2,635, equaling one percent (1%) of the first mortgage
22 loan amount. Thus, CALIFORNIA HOME received a total of $10,172.50 in compensation in
23 connection with the LICEA loan, represent approximately 3¼ percent of the face amount of the
24 total loan amount.
25 16. LICEA is also informed and believes that FIELDSTONE was aware that LICEA
26 would be required to pay an $800 Processing Fee and a $150 Administration Fee to
27 CALIFORNIA HOME at the time FIELDSTONE issued the GFEs for the two loans it issued to
28 LICEA but elected not to disclose those fees on the GFEs.
5 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 B. The Sherburne/Nungaray Loan Transaction
2 17. In or about January of 2004, SHERBURNE and NUNGARAY sought a mortgage
3 loan to finance their purchase of the Sherburne/Nungaray residence in Hayward through their
4 mortgage broker, David Carl Anderson of Community Home Loans in San Ramon, California.
5 Mr. Anderson, the principal broker of Community Home Loans under whose license Mr.
6 Anderson works, Mark Steven Vanderpool, and the business entity Community Home Loans shall
7 hereinafter be referred to collectively as “COMMUNITY HOME LOANS.” COMMUNITY
8 HOME LOANS is, and at all relevant times was, a licensed real estate loan broker or agent who,
9 pursuant to California law and regulations, acted as fiduciaries to SHERBURNE and
10 NUNGARAY. FIELDSTONE was aware that COMMUNITY HOME LOANS was the fiduciary
ALBORG, VEILUVA & EPSTEIN LLP
11 of SHERBURNE and NUNGARAY.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 18. SHERBURNE and NUNGARAY, like most California consumers, sought through
13 to obtain mortgage financing to purchase their residence, through their fiduciary mortgage broker,
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14 at the lowest possible cost, including but not limited to securing the lowest available interest rate,
ATTORNEYS
15 and the lowest dollar amount of loan fees. In addition, SHERBURNE and NUNGARAY, like
16 most California consumers, sought through their fiduciary to avoid adverse loan terms, including
17 but not limited, to a prepayment penalty.
18 19. FIELDSTONE funded a first and a second mortgage loan secured by the
19 Sherburne/Nungaray Residence totaling $315,000. In connection with the two mortgage loans
20 from FIELDSTONE, SHERBURNE and NUNGARAY received several GFEs from both
21 COMMUNITY HOME LOANS and FIELDSTONE between January 13, 2004 and the date their
22 loan transaction closed as follows:
23 a. The first two GFEs were prepared by COMMUNITY HOME LOANS on
24 or about January 13, 2004, and reflected that SHERBURNE and NUNGARAY would pay
25 several fees and costs in connection with the closing of the two loans, including, inter alia, an
26 $800 “Processing Fee” to COMMUNITY HOME LOANS, for a total of $10,755.23 in estimated
27 settlement costs.
28
6 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 b. On or about January 27, 2004, FIELDSTONE prepared another GFE
2 which also reflected that SHERBURNE and NUNGARAY would pay an $800 “Processing Fee”
3 to COMMUNITY HOME LOANS, but which showed that SHERBURNE and NUNGARAY
4 would only pay a total of $7,816.22 in estimated settlement costs.
5 c. Two days later, on or about January 29, 2004, FIELDSTONE prepared a
6 second GFE which showed the identical estimated settlement costs as did the GFE of January 27,
7 2004.
8 d. Finally, on or about February 9, 2004, FIELDSTONE prepared a third
9 GFE, which did not show the $800 “Processing Fee” that SHERBURNE and NUNGARAY
10 ended up paying to COMMUNITY HOME LOANS at the close of escrow, and which
ALBORG, VEILUVA & EPSTEIN LLP
11 inaccurately showed that SHERBURNE and NUNGARAY would only pay a total of $5,120.90
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 in estimated settlement costs when in fact, SHERBURNE and NUNGARAY paid the $800
13 “Processing Fee” to COMMUNITY HOME LOANS, and a total of $10,877.79 in settlement
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14 costs at the close of escrow, more than twice the amount of settlement costs that were shown on
ATTORNEYS
15 the operative GFE.
16 20. Copies of all of the GFEs that are referenced in paragraph 19 above are attached
17 to this complaint Exhibit 3, the text of which is incorporated herein by reference. None of the
18 GFEs prepared by COMMUNITY HOME LOANS or FIELDSTONE disclosed that
19 FIELDSTONE had agreed to pay COMMUNITY HOME LOANS compensation in the amount
20 of $5,670, or two points based on the amount of the first $283,500 loan, in addition to the $2,835
21 mortgage broker fee that SHERBURNE and NUNGARAY agreed to pay COMMUNITY
22 HOME LOANS. Plaintiffs are informed and believe and on that basis allege that FIELDSTONE
23 knew that it had agreed to pay $5,670 in additional compensation to COMMUNITY HOME
24 LOANS based on the interest rate and terms on which the loan had been locked, since January 13,
25 2004, or earlier.
26 21. Instead, the GFEs that were prepared by FIELDSTONE showed an asterisk next
27 to the $2,835 “Mortgage Broker Fee” that SHERBURNE and NUNGARAY had agreed to pay
28 COMMUNITY HOME LOANS, followed by the following statement at the bottom of the GFE:
7 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 “ADDT’L BROKER COMPENSATION PAID BY LENDER 0-3%”. The GFEs prepared by
2 FIELDSTONE stated in pertinent part: “The information provided below reflects estimates of the
3 charges which you are likely to incur at the settlement of your loan.” The last GFE prepared by
4 FIELDSTONE on February 9, 2004, was signed by SHERBURNE and NUNGARAY on
5 February 10, 2004, three days before the close of escrow.
6 22. SHERBURNE’s and NUNGARAY’s FIELDSTONE mortgage loan transaction
7 closed on or about February 13, 2004. At the date of closing, SHERBURNE and NUNGARAY
8 paid the following loan fees, among others, which are reflected on the Final HUD-1 Settlement
9 Statement:
10 Brokerage Fee to Community Home Loans $2,835.00
Processing Fee to Community Home Loans 800.00
ALBORG, VEILUVA & EPSTEIN LLP
11 Underwriting Fee to Fieldstone 949.00
TEL: (925) 939-9880 P FAX: (925) 939-9915
(Second) Underwriting Fee to Fieldstone 299.00
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12
Total: $4,883.00
13
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In addition, the Final Settlement Statement listed on the third page, a fee described as “Broker
AT
14
ATTORNEYS
Comp 2.000% fr Lender POC $5,670 to Community Home Loans.” Plaintiffs are informed and
15
believe that the reference to “POC’ in that statement meant “paid outside of closing.” This fee
16
was not referenced as a credit or debit to the borrower on the Final HUD-1 Settlement Statement.
17
A true and correct copy of said Final HUD-1 Settlement Statement is appended as Exhibit 4.
18
23. SHERBURNE and NUNGARAY are informed and believe, and thereupon allege
19
that FIELDSTONE and COMMUNITY HOME LOANS secretly agreed in writing well before
20
FIELDSTONE issued the February 9, 2004 GFE, and as early as January 13, 2004, that in
21
addition to, and separate from, the fees that SHERBURNE and NUNGARAY would pay to
22
COMMUNITY HOME LOANS in connection with the loans referenced in paragraph 19 above,
23
FIELDSTONE would pay COMMUNITY HOME LOANS the second and additional mortgage
24
broker fee. Thus, COMMUNITY HOME LOANS was paid a total of $8,505.00 in broker fee
25
compensation in connection with the SHERBURNE and NUNGARAY loans, representing
26
approximately 2.7 percent of the total loan amount.
27
24. SHERBURNE and NUNGARAY are also informed and believe that
28
FIELDSTONE was aware that SHERBURNE and NUNGARAY would be required to pay an
8 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 $800 Processing Fee to COMMUNITY HOME LOANS at the time FIELDSTONE issued the
2 last GFE on February 9, 2004, but deliberately chose not to disclose that fee on the GFE.
3 C. Defendant Fieldstone’s Uniform and Standard Practices
4 25. Plaintiffs are informed and believe and thereupon allege that FIELDSTONE have,
5 and at all material times had, standard and uniform practices requiring all licensed California
6 mortgage brokers with whom FIELDSTONE transacts business, including but not limited to
7 defendants CALIFORNIA HOME and COMMUNITY HOME LOANS and their sponsoring
8 brokers Hodgen and Vanderpool, to enter into a standardized written agreement identified as a
9 “Mortgage Broker Agreement” before FIELDSTONE would do business with said mortgage
10 brokers. A true and correct copy of said standard-form Mortgage Broker Agreement is appended
ALBORG, VEILUVA & EPSTEIN LLP
11 hereto as Exhibit 5.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 26. Unknown to plaintiffs, and pursuant to the express provisions of paragraph seven
13 (7) of the standard Fieldstone Mortgage Broker Agreement appended as Exhibit 5,
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14 FIELDSTONE secretly agreed with CALIFORNIA HOME and COMMUNITY HOME LOANS
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15 that FIELDSTONE would pay them second mortgage broker fees, the amount of which would be
16 determined according to the final terms of the loans that were to be booked for LICEA and
17 SHERBURNE and NUNGARAY. The terms of the loans that would affect the amounts of the
18 second mortgage broker fees that brokers were to receive from FIELDSTONE included, but were
19 not limited to, the interest rates, whether the loans had a prepayment penalties and if so, the
20 length of the prepayment penalty terms and dollar amount of prepayment penalties. In short, the
21 more revenue that the loans would yield for FIELDSTONE, and thus the less favorable the loan
22 terms were for LICEA and SHERBURNE and NUNGARAY, the more that FIELDSTONE
23 agreed to pay their brokers as the second additional mortgage broker fees.
24 27. The additional mortgage broker fees that CALIFORNIA HOME and
25 COMMUNITY HOME LOANS received from FIELDSTONE were, in actuality, paid by LICEA
26 and SHERBURNE and NUNGARAY because those plaintiffs were unsuspectingly duped into
27 accepting loan terms that were less favorable than the terms that they qualified for, which
28 translated into LICEA and SHERBURNE and NUNGARAY paying substantially more money to
9 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 FIELDSTONE over the duration of their loans, including, in the case of LICEA, a substantial
2 $8,596.63 prepayment penalty when he refinanced his FIELDSTONE loans in June 2004.
3 28. The additional mortgage broker fees that CALIFORNIA HOME and
4 COMMUNITY HOME LOANS received in connection with the LICEA and SHERBURNE and
5 NUNGARAY loans were part of the total loan funds that FIELDSTONE transferred to the
6 escrow companies who handled the loan transactions, at or before the close of escrow, and they
7 should have been paid to LICEA and to SHERBURNE and NUNGARAY through escrow, who
8 were the rightful owners of those funds, rather than to the brokers outside of closing. Instead,
9 FIELDSTONE unilaterally diverted the additional mortgage broker fees to CALIFORNIA
10 HOME and COMMUNITY HOME LOANS.
ALBORG, VEILUVA & EPSTEIN LLP
11 29. To insure that nature and purpose of FIELDSTONE’s agreement to compensate
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 CALIFORNIA HOME and COMMUNITY HOME LOANS with the second additional mortgage
13 broker fee payments and the effects those payment had on the terms of LICEA’s and
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14 SHERBURNE’s and NUNGARAY’s loans remaining secret, in violation of the brokers’ fiduciary
ATTORNEYS
15 duties to their clients, FIELDSTONE engaged in the following course of conduct:
16 a. FIELDSTONE intentionally concealed and/or otherwise failed to disclose
17 to LICEA and to SHERBURNE and NUNGARAY at the time FIELDSTONE issued the GFEs
18 in connection with their loans, that FIELDSTONE had already agreed to pay CALIFORNIA
19 HOME and COMMUNITY HOME LOANS, as much as 30 days prior to closing, and well in
20 advance of FIELDSTONE’s issuance of the GFEs, that FIELDSTONE would pay CALIFORNIA
21 HOME a second additional mortgage broker fee of $2,365 and COMMUNITY HOME LOANS a
22 second additional mortgage broker fee of $5,670. FIELDSTONE also intentionally concealed
23 and/or otherwise failed to disclose to LICEA that it would be paying CALIFORNIA HOME
24 additional undisclosed “processing” and “administration” fees totaling $950, and intentionally
25 concealed and/or otherwise failed to disclose to SHERBURNE and NUNGARAY that they
26 would be paying COMMUNITY HOME LOANS an additional “processing” of $800.
27 FIELDSTONE did so even though it had written confirmation of all of the amounts that were to
28 be paid to the brokers in connection with the loans at least several days before FIELDSTONE
10 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 issued its last GFEs in connection with the LICEA loans and the SHERBURNE and
2 NUNGARAY loans.
3 b. FIELDSTONE intentionally used the abbreviated and ambiguous phrase
4 “ADD’L BROKER COMPENSATION PAID BY LENDER 0-3%” in an ambiguous and
5 contradictory manner in order to mask and conceal the fact that the fee it paid to CALIFORNIA
6 HOME, COMMUNITY HOME LOANS, and other approved California mortgage brokers, for
7 the purpose of creating an incentive to the brokers and to compensate them for locking borrowers
8 into more expensive loans that yielded more revenue for FIELDSTONE;
9 c. FIELDSTONE included specific provisions in the standard Mortgage
10 Broker Agreement, at paragraph 13 and elsewhere, that required California brokers, including
ALBORG, VEILUVA & EPSTEIN LLP
11 CALIFORNIA HOME and COMMUNITY HOME LOANS, to keep secret the existence, nature,
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 purpose, and effect of the compensation scheme that rewarded the brokers for locking their
13 borrowers into loan terms that were more remunerative for FIELDSTONE and more expensive
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14 for the borrowers;
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15 d. FIELDSTONE intentionally failed to include as part of its website at which
16 consumer information is provided (identified as www.fmcmortgage.com) any definition,
17 description, or explanation of FIELDSTONE’s practice of paying second mortgage broker fees to
18 the mortgage loan brokers, or of the fact that FIELDSTONE pays such fees to mortgage brokers
19 who arrange loans with terms that are more lucrative for FIELDSTONE, yet are less favorable
20 terms than the borrowers qualify for. This intentional misrepresentation and concealment
21 included, but was not limited to, a failure to provide any explanation, description or definition of
22 the term mortgage broker fee, yield spread premium, or broker rebate. At the same time, the
23 FIELDSTONE website provided definitions of hundreds of other terms, many of which do not
24 even appear in any consumer loan disclosures.
25
26
27
28
11 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 CLASS ALLEGATIONS
2 (As to FIELDSTONE Only)
3 30. LICEA, SHERBURNE and NUNGARAY, and PLAINTIFF CLASS hereby
4 incorporate by reference Paragraphs 1 through 31, inclusive, as if the same were fully set forth
5 herein.
6 31. The instant action seeks class-wide restitution, compensatory and punitive
7 damages, as well as declaratory and injunctive relief, as against FIELDSTONE and DOES 1
8 through 500, inclusive, on behalf of all individuals who obtained residential mortgage loans from
9 Fieldstone Mortgage Company between December 23, 2000 and July 21, 2006, inclusive, where
10 FIELDSTONE paid the mortgage broker additional compensation or a yield spread premium,
ALBORG, VEILUVA & EPSTEIN LLP
11 except for the following individuals who are excluded from the class: (1) all directors, officers,
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 employees and agents of Fieldstone Investment Corporation or any of its subsidiaries, and (2) the
13 judge assigned to this action and any member of his immediate family.
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14 32. LICEA, SHERBURNE and NUNGARAY, and other persons similarly situated
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15 (“PLAINTIFF CLASS” or “class members”) include California borrowers whose loans were
16 obtained through mortgage brokers who were paid additional compensation by FIELDSTONE,
17 from Debember 23, 2000 through July 21, 2006.
18 33. FIELDSTONE customarily and regularly paid, and continues to pay, mortgage
19 broker fees to approved California mortgage brokers, including but not limited to CALIFORNIA
20 HOME and COMMUNITY HOME LOANS, in return for “premium” loans that yield more
21 revenue for FIELDSTONE through higher interest rates and prepayment penalties, among other
22 things. Such loans contained terms that were unnecessarily adverse to borrowers in that the
23 borrowers qualified for loans with terms that were more financially favorable for the borrowers.
24 Such “premium” loan terms, including but not limited to the higher interest rates, also known as
25 “above-par” rates, and prepayment penalties were the consideration paid by the borrowers for
26 such second, additional mortgage broker fee payments made by FIELDSTONE to their approved
27 California mortgage loan brokers.
28
12 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 34. FIELDSTONE customarily and regularly paid, and continues to customarily and
2 regularly pay, such second, additional mortgage broker fees to California mortgage brokers who
3 executed the standard form Mortgage Broker Agreement identified as Exhibit 5.
4 35. FIELDSTONE customarily and regularly used GFEs in the forms attached as
5 Exhibit 1 and Exhibit 3, which were intentionally vague, ambiguous and deficient with respect to
6 disclosing FIELDSTONE’s payment of second "Mortgage Broker Fees" to brokers.
7 FIELDSTONE customarily and regularly obscures and conceals the amount of the second
8 additional mortgage broker fee it pays to California mortgage brokers, such as CALIFORNIA
9 HOME and COMMUNITY HOME LOANS, by using the terms and phrases such as "*ADDT’L
10 BROKER COMPENSATION PAID BY LENDER 0-3%" at the bottom of the GFE and failing
ALBORG, VEILUVA & EPSTEIN LLP
11 to list the second mortgage broker fee as additional compensation in the body of the GFE, while
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200 PRINGLE AVENUE, SUITE 410
12 at the same time it lists the borrower’s payment of a mortgage broker fee in the body of the GFE.
13 FIELDSTONE committed these acts, knowing that the GFE language set forth above is
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14 ambiguous, confusing, and insufficient to fully inform borrowers of the nature, purpose, and effect
ATTORNEYS
15 of the additional compensation that FIELDSTONE pays to brokers. FIELDSTONE did so even
16 when it already knew the amount of additional compensation it was going to pay to the broker, or
17 that it had enough information to reasonably estimate the dollar amount of that sum.
18 36. FIELDSTONE further customarily and regularly failed to disclose on the GFE
19 other fees charged by loan brokers, including but not limited to mortgage loan broker
20 “processing” fees, “administration” fees, and other similar broker charged fees, as well as third
21 party service provider fees, even though said fees were known, or could reasonably be estimated
22 by FIELDSTONE, based on separate written submissions made by the approved mortgage
23 brokers and other service providers.
24 37. As a result of the foregoing conduct by FIELDSTONE, LICEA, SHERBURNE
25 and NUNGARAY, and PLAINTIFF CLASS have been locked into mortgage loans with higher
26 interest rates, unnecessary prepayment penalties, and other adverse loan terms which generated
27 additional revenue for FIELDSTONE. FIELDSTONE, in turn, paid a portion of the anticipated
28 additional revenue to be generated by these adverse loan terms as kickbacks to California
13 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 mortgage brokers, including CALIFORNIA HOME and COMMUNITY HOME LOANS, in the
2 form of the additional second mortgage broker fees. FIELDSTONE has made substantial
3 increased profits from the higher interest payments and prepayment penalties paid by borrowers,
4 or from higher sales income from loans that FIELDSTONE sold in the secondary mortgage
5 market.
6 38. LICEA and SHERBURNE and NUNGARAY bring this class action as against
7 FIELDSTONE pursuant to California Civil Code of Procedure §382 on behalf of himself and all
8 persons, natural or legal, who obtained wholesale (brokered) mortgage loans from
9 FIELDSTONE, secured by California real estate from December 2001 through the present. At all
10 times herein mentioned, wherein LICEA and SHERBURNE and NUNGARAY seek relief as
ALBORG, VEILUVA & EPSTEIN LLP
11 against FIELDSTONE, it shall be construed that such relief is requested on behalf of LICEA and
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 SHERBURNE and NUNGARAY individually and on behalf of those named individuals as
13 representatives of and for the class which they represent.
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14 39. The PLAINTIFF CLASS consists of members so numerous that the class action
ATTORNEYS
15 proceeding is the best available form of proceeding. Joinder or other alternative proceedings are
16 impracticable. The name and address of each class member is presently unknown to LICEA and
17 SHERBURNE and NUNGARAY, but can be readily ascertained from the business records of
18 FIELDSTONE.
19 40. Beginning at an exact date unknown to plaintiffs, FIELDSTONE has paid to
20 approved mortgage brokers, including CALIFORNIA HOME and COMMUNITY HOME
21 LOANS, monies that it has identified by terms such as “mortgage broker fee,” “yield spread
22 premium,” “premium pricing,” and/or “broker rebate,” among other possible terms (hereinafter
23 collectively referred to as “second additional mortgage broker fee”), which rightfully belonged to
24 the class members. FIELDSTONE has paid such monies to the brokers based on the fact that
25 brokers have locked the borrowers into “premium” loans with adverse financial terms, and thereby
26 received substantial secret and unwarranted profits through sale of such loans for a higher price
27 on the secondary market, and/or collection of higher interest rates, prepayment fees, and the like.
28
14 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 41. Said conduct by FIELDSTONE includes uniform and consistent acts of fraud by
2 concealment, non-disclosure, distortion, and otherwise, as well as breach of contract, conversion,
3 interference with contractual relations, interference with prospective economic advantage, and
4 related actionable conduct, all confirmed by standard written documents in the possession of
5 FIELDSTONE and/or its agents.
6 42. There is a well-defined community of interest in the questions of law and fact
7 involved affecting members of the PLAINTIFF CLASS to be represented as against
8 FIELDSTONE. The common or similar issues of law and fact, supported by standardized
9 documents and guidelines of FIELDSTONE, which predominate over individual and particular
10 issues in this action include, but are not limited to, the following:
ALBORG, VEILUVA & EPSTEIN LLP
11 a. Each member of the PLAINTIFF CLASS entered into a written California
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 mortgage loan agreement with FIELDSTONE;
13 b. Each member of the PLAINTIFF CLASS used a California mortgage
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14 broker, approved by FIELDSTONE, to procure the FIELDSTONE loan on his or her behalf, and
ATTORNEYS
15 each such California mortgage broker entered into a standard written Mortgage Broker
16 Agreement with FIELDSTONE through which it was paid second additional mortgage broker
17 fees resulting from the borrowers being locked into “premium” loans that generate additional
18 revenue for FIELDSTONE;
19 c. FIELDSTONE calculated the second additional mortgage broker fees and
20 otherwise described compensation it paid to approved California mortgage brokers based on
21 uniform and standardized pricing sheets, which pricing was memorialized on standard forms
22 prepared and approved by FIELDSTONE;
23 d. FIELDSTONE unilaterally administered and made payments of the second
24 additional mortgage broker fee and otherwise described compensation it paid to approved
25 California mortgage brokers, as part of the total loan funding in each California loan transaction
26 using standard wholesale rate sheets, and standard guidelines;
27 e. FIELDSTONE knew, or could reasonably calculate at the time of issuance
28 of the GFE to the borrower, the dollar amount of the second additional mortgage broker fee it
15 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 was paying to the approved California mortgage broker on each loan they funded, but
2 consistently, regularly and intentionally failed to do so;
3 f. FIELDSTONE customarily and regularly paid the second additional
4 mortgage broker fee based on the present value of the anticipated additional revenue it expected
5 to earn from the loans with terms that were adverse to the borrowers (including but not
6 necessarily limited to higher interest rates and prepayment penalties) to approved California
7 mortgage brokers, rather than the borrowers, even though the additional second mortgage broker
8 fee was actually part of the total loan funds, and were paid for by the borrower through higher
9 interest payments, prepayment penalties, and other adverse loan terms;
10 43. Proof of common facts and legal doctrine by LICEA and SHERBURNE and
ALBORG, VEILUVA & EPSTEIN LLP
11 NUNGARAY as representatives of the PLAINTIFF CLASS will determine the claim of each
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200 PRINGLE AVENUE, SUITE 410
12 member of the PLAINTIFF CLASS and the class action proceeding will provide a practical basis
13 for determination of all interests of the parties, prevent inconsistent adjudication, maximize
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14 judicial economy, and is superior to all other available methods of fair and efficient adjudication of
ATTORNEYS
15 said claims.
16 44. LICEA and SHERBURNE and NUNGARAY, as the named representatives, have
17 claims that are typical and representative of the class claims, and there are no inconsistent, or
18 competing claims or interests of PLAINTIFF CLASS members.
19 45. Absent a class action, FIELDSTONE will continue to do said wrongful acts and
20 omissions and will retain the benefits of their aforesaid wrongdoing.
21 JURISDICTION AND VENUE
22 46. This action is properly brought in the State of California and in the County of
23 Santa Clara, because defendants maintain minimal contacts in this State and are actively doing
24 business in this state, and because CALIFORNIA HOME maintains an office in the City of
25 Milpitas, County of Santa Clara, as its principal place of business.
26 CLASS CLAIMS
27
28
16 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 FIRST CAUSE OF ACTION
2 (Actual Fraud and Intentional Misrepresentation as Against FIELDSTONE)
3 47. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
4 incorporate by reference Paragraphs 1-46, inclusive, as if the same were fully set forth herein.
5 48. FIELDSTONE made repeated false representations to LICEA, SHERBURNE and
6 NUNGARAY, and the PLAINTIFF CLASS by preparing false, deceptive and misleading GFEs,
7 as exemplified by the GFE issued on December 23, 2002 in connection with LICEA’s loan
8 transaction, attached as part of Exhibit 1, and on February 9, 2004 in connection with
9 SHERBURNE’s and NUNGARAY’s loan transaction, attached as part of Exhibit 3. These
10 GFEs intentionally failed to disclose fees and charges then expressly known to FIELDSTONE,
ALBORG, VEILUVA & EPSTEIN LLP
11 and that constituted additional secret second mortgage broker payments that would be made by
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 FIELDSTONE to CALIFORNIA HOME and COMMUNITY HOME LOANS.
13 49. On or about November 25, 2002, one month before issuing its GFE on its first
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14 mortgage loan to LICEA, FIELDSTONE confirmed secretly in writing with LICEA’s mortgage
ATTORNEYS
15 broker, CALIFORNIA HOME, that LICEA pre-qualified for the specific terms of the two
16 FIELDSTONE loans, contingent on the satisfaction of certain conditions. FIELDSTONE’s
17 standard “Wholesale Prequalification Worksheet” was prepared on November 25, 2002 by
18 FIELDSTONE’s employee Nicole Millard, located at their Concord, California facility. A true
19 and correct copy of said Wholesale Prequalification Worksheet is attached as Exhibit 6.
20 50. Exhibit 6 contains an express statement that FIELDSTONE will pay a one
21 percent (1%) “rebate” for the specified loans, which represents one hundred and one percent
22 (101%) of the loan amount, as expressly identified in said Exhibit 6. Exhibit 6 was prepared by
23 FIELDSTONE approximately one month before FIELDSTONE prepared the GFE which
24 intentionally and fraudulently failed to reference and actively concealed any such mortgage broker
25 fee or rebate payment.
26 51. On or about December 18, 2002, five days before issuing its GFE in connection
27 with the LICEA loan, FIELDSTONE received two standard-form FIELDSTONE documents
28 which had been completed by CALIFORNIA HOME. Both of these documents, captioned
17 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 “Broker/Correspondent Demand & Document Order,” separately referenced each of the two
2 loans being arranged through FIELDSTONE for LICEA. True and correct copies of said Broker
3 Demand documents are attached as a group as Exhibit 7.
4 52. The first document in Exhibit 7 references the first mortgage, and identifies all
5 broker fees, including a 2.5% “mortgage broker fee” of $6,587.50 to be paid by LICEA, a
6 “Processing” fee of $800 to be paid by LICEA, and an “Administration” fee of $150 to be paid by
7 LICEA. In addition, the form references “Compensation from FMC 1%= $2635.” The form
8 totals these fees at an astounding $10,172.50 in loan fees for principal loan amounts totaling
9 $310,000. Despite FIELDSTONE’s receipt of this standard-form five days before it prepared the
10 GFE on the first mortgage loan to LICEA, FIELDSTONE intentionally and fraudulently
ALBORG, VEILUVA & EPSTEIN LLP
11 concealed all such loan fees on the GFE for the LICEA loan, with the sole exception of the 2.5%
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 mortgage broker fee that CALIFORNIA HOME charged to LICEA.
13 53. SHERBURNE and NUNGARAY are informed and believe that on or about
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14 January 13, 2004, almost one month before FIELDSTONE issued the its last GFE on February 9,
ATTORNEYS
15 2004, and one month before escrow closed on their FIELDSTONE loans, a loan submission form
16 and other documents that FIELDSTONE received from COMMUNITY HOME LOANS in
17 connection with SHERBURNE’s and NUNGARAY’s loan application confirmed in writing that
18 SHERBURNE and NUNGARAY qualified for the specific terms of the two loans that
19 FIELDSTONE made to those borrowers, contingent on the satisfaction of certain conditions.
20 FIELDSTONE’s standard “Loan Submission Form” was received by FIELDSTONE
21 representative, Paula Hultz, which references the fact that COMMUNITY HOME LOANS would
22 receive a two-point rebate in connection with the loans to SHERBURNE and NUNGARAY,
23 based on terms noted in the Loan Submission Form. A true and correct copy of said Loan
24 Submission Form is attached as Exhibit 8.
25 54. The Loan Submission Form attached as Exhibit 8 also reflected the fact that the
26 first loan to SHERBURNE and NUNGARAY would have a two-year prepayment penalty.
27 SHERBURNE and NUNGARAY are informed and believe that the existence of the two-year
28 prepayment penalty term was driven by the fact that COMMUNITY HOME LOANS was to
18 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 receive the two-point rebate. Despite FIELDSTONE’s receipt of this standard-form well before
2 it prepared any of the five GFEs that FIELDSTONE prepared in connection with the loans to
3 SHERBURNE and NUNGARAY, FIELDSTONE intentionally and fraudulently concealed the
4 rebate it had agreed to pay COMMUNITY HOME LOANS on five version of the GFE that it
5 prepared.
6 55. FIELDSTONE knew that the information contained in its GFEs was incomplete,
7 inaccurate, false and misleading at the time they provided the GFEs to SHERBURNE and
8 NUNGARAY. Alternatively, FIELDSTONE made the aforesaid misrepresentations recklessly
9 without knowing or having any reasonable basis to believe that they were true.
10 56. FIELDSTONE made the aforesaid misrepresentations with an intent to defraud
ALBORG, VEILUVA & EPSTEIN LLP
11 LICEA and SHERBURNE and NUNGARAY, and made the same misrepresentations with the
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12 intent to defraud the other class members, and for the purpose of inducing the PLAINTIFF
13 CLASS to rely upon those misrepresentations in agreeing to enter into their loan agreements with
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14 FIELDSTONE based on plaintiffs’ reasonable belief that the GFE represented a true and fair
ATTORNEYS
15 representation of the likely estimated expenses associated with FIELDSTONE’s loans. Such
16 fraudulent conduct induced LICEA, SHERBURNE and NUNGARAY, and PLAINTIFF CLASS
17 to close mortgage loan transactions, not knowing that they would be charged additional fees and
18 expenses, or that additional compensation would be paid to their mortgage brokers at close of
19 escrow as a result of plaintiffs having been locked into loans with terms less favorable than other
20 available loans for which LICEA, SHERBURNE and NUNGARAY, and the members of the
21 PLAINTIFF CLASS qualified. The result of this conduct by FIELDSTONE was to substantially
22 increase the costs of the loan to the borrowers.
23 57. FIELDSTONE knew that by delaying disclosure of additional loan fees and
24 expenses, and by delaying the disclosure of its payment of a second additional mortgage broker
25 fee to loan brokers such as CALIFORNIA HOME and COMMUNITY HOME LOANS, it was
26 impossible for LICEA, SHERBURNE and NUNGARAY, or the PLAINTIFF CLASS to
27 recognize or understand the existence, amount and import of such fees, since the limited
28 disclosure of such fees in the future would be buried within a huge number of documents that
19 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 would presented to LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS for
2 execution at closing.
3 58. FIELDSTONE engaged in such fraudulent conduct to obtain loans that generated
4 more revenue, and thus loans that were more valuable to FIELDSTONE, in that the loans either
5 could be sold in the secondary loan market at substantially higher amounts and or they would
6 generate substantial interest, penalty and/or fee income to FIELDSTONE if FIELDSTONE
7 continued to hold and service the loans in its own loan portfolio.
8 59. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS were
9 unaware of the falsity of the aforesaid representations, or the impact of those false and fraudulent
10 misrepresentations, and justifiably acted in reliance upon the aforesaid false representations.
ALBORG, VEILUVA & EPSTEIN LLP
11 60. In addition to restitution of the increased interest, prepayment penalties and/or
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WALNUT CREEK, CALIFORNIA 94596
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12 other fees and penalties they paid as a result of the adverse loan terms that resulted in the payment
13 of additional second mortgage broker fees by FIELDSTONE, LICEA, SHERBURNE and
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14 NUNGARAY, and the PLAINTIFF CLASS are also entitled to exemplary and punitive damages
ATTORNEYS
15 against FIELDSTONE for such intentional and reprehensible conduct.
16 61. Plaintiffs are also entitled to an award of attorney fees under CCP §1021.5 and any
17 other relevant statutes.
18 SECOND CAUSE OF ACTION
19 (Fraud by False Promise As Against FIELDSTONE)
20 62. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
21 incorporate by reference Paragraphs 1-61, inclusive, as if the same were fully set forth herein.
22 63. At the time of entering into mortgage loan contracts with LICEA, SHERBURNE
23 and NUNGARAY, and the PLAINTIFF CLASS, FIELDSTONE made express and specific
24 promises concerning material matters, including but not limited to the total estimated costs and
25 fees associated with said loans, as set forth in the GFEs attached as Exhibit 1 and Exhibit 3.
26 64. FIELDSTONE made the aforesaid promises with an intent to defraud LICEA,
27 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS, by inducing LICEA,
28 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS to rely upon these false
20 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 promises, and proceed to close their California mortgage loans, knowing that LICEA,
2 SHERBURNE and NUNGARAY and the PLAINTIFF CLASS would not be able to review the
3 huge number of documents presented to them at closing for review and/or execution.
4 65. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS were
5 unaware of FIELDSTONE’s intention not to perform the aforesaid promises, and they justifiably
6 acted in reliance upon these promises.
7 66. As a direct and proximate result of FIELDSTONE’s false promises, LICEA,
8 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS have been damaged and are
9 entitled to restitution and compensatory damages in an amount to be determined according to
10 proof.
ALBORG, VEILUVA & EPSTEIN LLP
11 67. LICEA, SHERBURNE and NUNGARAY, and PLAINTIFF CLASS are also
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 entitled to exemplary and punitive damages against FIELDSTONE for such fraudulent and
13 reprehensible conduct.
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14 68. Plaintiffs are also entitled to an award of attorney fees under CCP §1021.5 and any
ATTORNEYS
15 other relevant statutes.
16 THIRD CAUSE OF ACTION
17 (Fraud by Concealment As Against FIELDSTONE)
18 69. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
19 incorporate by reference Paragraphs 1-68, inclusive, as if the same were fully set forth herein.
20 70. At the time of entering into the mortgage loan contracts with LICEA,
21 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS, FIELDSTONE concealed or
22 suppressed material facts concerning loan fees and expenses, and separate and second mortgage
23 broker fee payments by FIELDSTONE to California mortgage brokers, which FIELDSTONE
24 were under a duty to disclose to plaintiffs.
25 71. FIELDSTONE were also under a duty of good faith and fair dealing, as well as
26 federal and state statutory duties, to provide early disclosure of all fees and expenses payable by
27 LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS, or payable by
28 FIELDSTONE to any third party.
21 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 72. At the time of entering into the loan contracts, FIELDSTONE intentionally
2 concealed or suppressed these known facts and expressly breached its duties with the intent to
3 defraud LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS.
4 73. At the time of entering into the loan contracts, LICEA, SHERBURNE and
5 NUNGARAY, and the PLAINTIFF CLASS were unaware of the concealed and suppressed facts
6 and duties breached by FIELDSTONE. LICEA, SHERBURNE and NUNGARAY, and the
7 PLAINTIFF CLASS would not have acted as they did if they had known of the concealed or
8 suppressed facts and breached duties.
9 74. As a direct and proximate result of FIELDSTONE’s intentional concealment and
10 suppression, LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS have been
ALBORG, VEILUVA & EPSTEIN LLP
11 damaged and are entitled to restitution and compensatory damages in an amount to be determined
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WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 according to proof.
13 75. LICEA, SHERBURNE and NUNGARAY and the PLAINTIFF CLASS are also
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14 entitled to exemplary and punitive damages against FIELDSTONE for such fraudulent and
ATTORNEYS
15 reprehensible conduct.
16 76. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS are also
17 entitled to an award of attorney fees under CCP §1021.5 and any other relevant statutes.
18 FOURTH CAUSE OF ACTION
19 (Negligent Misrepresentation As Against FIELDSTONE)
20 77. LICEA, SHERBURNE and NUNGARAY and the PLAINTIFF CLASS hereby
21 incorporate by reference Paragraphs 1-76, inclusive, as if the same were fully set forth herein.
22 78. At the time of entering into mortgage loan contracts with LICEA, SHERBURNE
23 and NUNGARAY, and the PLAINTIFF CLASS, FIELDSTONE made false representations as to
24 past or existing material facts, including, but not limited to, a failure to list estimated loan fees and
25 costs incurred in obtaining the mortgage loans, and the higher costs associated with loans on
26 which FIELDSTONE paid a kickback to loan brokers of which FIELDSTONE were aware.
27 79. FIELDSTONE made the aforesaid representations without reasonable grounds for
28 believing them.
22 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 80. FIELDSTONE made the aforesaid representations with the intent to induce
2 LICEA and the PLAINTIFF CLASS to rely on those representations.
3 81. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS were
4 unaware of the falsity of the aforesaid representations, and justifiably acted in reliance upon the
5 truth of such representations.
6 82. As a direct result of FIELDSTONE’s wrongful acts and omissions, LICEA,
7 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS have been damaged and are
8 entitled to restitution and compensatory damages in an amount to be determined according to
9 proof.
10 FIFTH CAUSE OF ACTION
ALBORG, VEILUVA & EPSTEIN LLP
11 (Intentional Interference with Contractual and Fiduciary Relations
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 As Against FIELDSTONE)
13 83. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
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14 incorporate by reference Paragraphs 1-82, inclusive, as if the same were fully set forth herein.
ATTORNEYS
15 84. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS entered
16 into contractual relations with California mortgage brokers, including CALIFORNIA HOME and
17 COMMUNITY HOME LOANS, in order for said mortgage brokers to find and assist in
18 arranging the best available mortgage loans for LICEA, SHERBURNE and NUNGARAY, and
19 the PLAINTIFF CLASS on the best available terms.
20 85. CALIFORNIA HOME, COMMUNITY HOME LOANS, and other California
21 mortgage brokers are, by operation of California law, fiduciaries and agents of borrowers such as
22 LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS. As fiduciaries,
23 California mortgage brokers owe the highest duties of loyalty, good faith, and fair dealing solely
24 to LICEA and the PLAINTIFF CLASS. FIELDSTONE was and is aware of such fiduciary
25 relationships between borrowers and approved California mortgage brokers.
26 86. FIELDSTONE intentionally interfered with such fiduciary relationships between
27 California mortgage brokers, including CALIFORNIA HOME and LICEA, COMMUNITY
28 HOME LOANS and SHERBURNE and NUNGARAY, and between other California mortgage
23 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 brokers who procure FIELDSTONE loan on behalf of the PLAINTIFF CLASS, by demanding
2 that as a condition to arranging loans through FIELDSTONE, all approved California mortgage
3 brokers must enter into a secret and separate standard-form written Loan Broker Agreement,
4 identified in form as Exhibit 3. Said Loan Broker Agreement contains terms and provisions
5 which are adverse to the interests of LICEA, SHERBURNE and NUNGARAY, and the
6 PLAINTIFF CLASS, and promote and encourage California mortgage brokers to breach their
7 fiduciary duties to borrowers, including LICEA, SHERBURNE and NUNGARAY and the
8 PLAINTIFF CLASS, and constitute a clear and serious intentional interference with the special
9 fiduciary relationship which exists under California law between borrowers and loan brokers. The
10 offending provisions include, but are not limited to, the following:
ALBORG, VEILUVA & EPSTEIN LLP
11 a. FIELDSTONE included a provision in the Mortgage Broker Agreement at
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 paragraph 1(c) that makes a loan package submitted by an approved loan broker “fully assigned”
13 to, and the property of, the lender. Such transfer of ownership of documents and information
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14 prevents California mortgage brokers from submitting the same documents to other lenders, and
ATTORNEYS
15 discourages active competition for the best available loan terms;
16 b. FIELDSTONE included a provision in the standard Mortgage Broker
17 Agreement at paragraph 7 by which FIELDSTONE pay California mortgage brokers secret
18 compensation, solely in accordance with the secret and undisclosed pricing policies of
19 FIELDSTONE. Further, FIELDSTONE prohibits CALIFORNIA HOME and all other approved
20 California mortgage brokers from entering into any agreement with borrowers concerning any
21 form of compensation which is (1) not disclosed to FIELDSTONE, and (2) not approved by
22 FIELDSTONE. These provisions of FIELDSTONE’s standard-form Mortgage Broker
23 Agreement secretly control all compensation between borrowers and their fiduciaries, approved
24 California mortgage brokers. This conduct constitutes an interference with basic and critical
25 aspects of the fiduciary relationship between LICEA and the PLAINTIFF CLASS, and their
26 fiduciaries, including CALIFORNIA HOME, and other FIELDSTONE-approved California
27 mortgage brokers.
28
24 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 c. FIELDSTONE included a provision in the standard Mortgage Broker
2 Agreement at paragraph 7 which requires FIELDSTONE-approved California mortgage brokers
3 to pay back all money received from FIELDSTONE in secret mortgage broker fees, if the
4 FIELDSTONE mortgage is satisfied through a refinance within twelve (12) months after close of
5 escrow, but only if the approved California mortgage broker assists the borrower in such
6 refinance. This provision expressly and severely contradicts and otherwise interferes with
7 approved California mortgage brokers’ fiduciary duties to borrowers and prospective borrowers
8 in refinancing FIELDSTONE’s existing mortgages within one year after closing. Further, in
9 recent financial markets where rates have been consistently declining, this prohibition secretly
10 limited and continues to limit the number of mortgage brokers able to assist California consumers
ALBORG, VEILUVA & EPSTEIN LLP
11 in competitively arranging refinance loans.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 d. FIELDSTONE included a provision in the Mortgage Broker Agreement at
13 paragraph 13 that makes the terms and provisions of the Mortgage Broker Agreement, as well as
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14 the manner in which all loans arranged and priced to consumers, including all pricing materials,
ATTORNEYS
15 and all related matters, completely and permanently confidential. Such provisions interfere with
16 the basic fiduciary duties of CALIFORNIA HOME and approved California mortgage brokers to
17 LICEA and the PLAINTIFF CLASS, which duties include the duties of full and complete
18 disclosure, good faith, and fair dealing in allowing borrowers to know and select rates and terms
19 best suited to their needs, at the lowest possible cost and expense to such consumers. Instead,
20 such provision encourages secret payments and kickbacks, and more expensive loans with higher
21 closing costs.
22 e. FIELDSTONE included a provision in the Mortgage Broker Agreement at
23 paragraph 13 which expressly prohibits CALIFORNIA HOME and all other approved California
24 mortgage brokers from soliciting any FIELDSTONE mortgage loan borrower, including LICEA
25 and the PLAINTIFF CLASS, concerning a refinance, prepayment, or modification of any
26 FIELDSTONE mortgage loan. Such provision emasculates CALIFORNIA HOME and other
27 approved California mortgage brokers from assisting borrowers, pursuant to their fiduciary duties,
28
25 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 in arranging the best available loan, and secretly limits and proscribes competition in the
2 marketplace for the lowest priced loans for the consuming public.
3 87. By virtue of the foregoing, FIELDSTONE have interfered, and presently continue
4 to intentionally interfere with the unique fiduciary and contractual relationship which exists
5 between LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS and
6 FIELDSTONE’s approved California mortgage brokers. Said interference with contractual and
7 fiduciary relations has caused serious injury and damage to LICEA, SHERBURNE and
8 NUNGARAY, and the PLAINTIFF CLASS, according to proof at time of trial.
9 SIXTH CAUSE OF ACTION
10 (Breach of Fiduciary or Quasi-Fiduciary Duty As Against FIELDSTONE)
ALBORG, VEILUVA & EPSTEIN LLP
11 88. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 incorporate by reference Paragraphs 1-87, inclusive, as if the same were fully set forth herein.
13 89. FIELDSTONE secretly and expressly controlled and continue to control all
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14 compensation payment to approved California mortgage brokers, including CALIFORNIA
ATTORNEYS
15 HOME and COMMUNITY HOME LOANS, through the confidential Mortgage Broker
16 Agreement previously identified as Exhibit 3. Further, FIELDSTONE secretly controlled and
17 continue to control many other aspects of approved loan brokers’ fiduciary functions, including
18 the ability to refinance loans with existing borrowers.
19 90. By virtue of said complete and full control of all approved mortgage broker
20 compensation, and further control of other material aspects of approved California mortgage
21 brokers’ fiduciary duties to LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
22 CLASS, FIELDSTONE usurped and expressly and intentionally assumed all duties and
23 responsibilities of approved California mortgage brokers, and were and are at all times relevant
24 hereto, the fiduciaries of LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
25 CLASS.
26 91. As fiduciaries to LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
27 CLASS, FIELDSTONE were obligated to promptly and fully disclose all fees and costs paid by
28 LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS to any party, including
26 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 but not limited to approved mortgage loan brokers. FIELDSTONE also were obligated to
2 promptly and fully disclose all fees they paid to any third party, including but not limited to
3 payment of mortgage broker fees to CALIFORNIA HOME, COMMUNITY HOME LOANS,
4 and all other approved California mortgage brokers.
5 92. FIELDSTONE, as fiduciaries to LICEA, SHERBURNE and NUNGARAY, and
6 the PLAINTIFF CLASS, had a further duty to obtain from LICEA, SHERBURNE and
7 NUNGARAY, and the PLAINTIFF CLASS knowing consent to all terms and conditions of the
8 mortgage loan, and any compensation paid to any party.
9 93. FIELDSTONE, as fiduciaries to LICEA, SHERBURNE and NUNGARAY, and
10 the PLAINTIFF CLASS, had a further duty to obtain the best available loans on the best available
ALBORG, VEILUVA & EPSTEIN LLP
11 terms for LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 94. FIELDSTONE breached their fiduciary duties to LICEA, SHERBURNE and
13 NUNGARAY, and the PLAINTIFF CLASS in failing to promptly and fully disclose all fees and
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14 costs associated with LICEA’s, SHERBURNE and NUNGARAY’s and the PLAINTIFF
ATTORNEYS
15 CLASS’ loans, by failing to obtain full knowing consent to all terms and conditions of the
16 mortgage loans arranged through approved California mortgage brokers, and in failing to obtain
17 the best available loan terms for LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
18 CLASS.
19 95. By virtue of said material and numerous breaches of fiduciary duty, FIELDSTONE
20 are obligated to disgorge all moneys received and all profits gained at the expense of LICEA,
21 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS. LICEA, SHERBURNE and
22 NUNGARAY, and the PLAINTIFF CLASS are further entitled to recover all consequential
23 damages flowing from said breaches, according to proof at time of trial.
24 96. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS are also
25 entitled to an award of attorney fees under CCP §1021.5 and any other relevant statutes.
26 SEVENTH CAUSE OF ACTION
27 (Breach of Contract As Against FIELDSTONE)
28 97. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
27 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 incorporate by reference Paragraphs 1-96, inclusive, as if the same were fully set forth herein.
2 98. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS entered
3 into contracts with FIELDSTONE, through CALIFORNIA HOME and COMMUNITY HOME
4 LOANS, and other approved California mortgage brokers, for mortgage loans having certain
5 terms and conditions.
6 99. FIELDSTONE, as to LICEA, agreed to fund two loans, and because of the terms
7 that LICEA unknowingly agreed to through its fiduciary agent, CALIFORNIA HOME, LICEA
8 was entitled to payment of one hundred and one per cent (101%) of the first trust deed amount at
9 close of escrow. FIELDSTONE confirmed that agreement with LICEA’s approved California
10 loan broker, CALIFORNIA HOME, in writing on November 25, 2002, in the Wholesale
ALBORG, VEILUVA & EPSTEIN LLP
11 Prequalification Worksheet, previously identified as Exhibit 4.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 100. FIELDSTONE, as to SHERBURNE and NUNGARAY, agreed to fund two loans,
13 and because of the terms that SHERBURNE and NUNGARAY unknowingly agreed to through
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14 their fiduciary agent, COMMUNITY HOME LOANS, SHERBURNE and NUNGARAY were
ATTORNEYS
15 entitled to payment of one hundred and one per cent (101%) of the first trust deed amount at
16 close of escrow. FIELDSTONE confirmed that agreement with SHERBURNE and
17 NUNGARAY’s approved California loan broker, COMMUNITY HOME LOANS, in writing on
18 January 13, 2004, in the Loan Submission Form, previously identified as Exhibit 8.
19 101. FIELDSTONE wire transferred one hundred and one percent (101%) of the first
20 mortgage loan amount (less its own underwriting fee, and certain third party charges), to the
21 escrow holder before close of escrow, confirming the terms of said contract through said
22 performance.
23 102. FIELDSTONE breached their contractual obligations by unilaterally instructing the
24 escrow holder to pay one percent (1%) of the funded loan amount to CALIFORNIA HOME and
25 COMMUNITY HOME LOANS, and not to LICEA and SHERBURNE and NUNGARAY
26 respectively, through escrow, even though it was LICEA and SHERBURNE and NUNGARAY
27 who paid for said mortgage broker fees in adverse loan terms.
28 103. As a direct and proximate result of FIELDSTONE’s breach of this contract,
28 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 LICEA, SHERBURNE and NUNGARAY and the PLAINTIFF CLASS have been damaged and
2 are entitled to compensatory damages in an amount to be determined according to proof.
3 EIGHTH CAUSE OF ACTION
4 (Conversion As Against FIELDSTONE)
5 104. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
6 incorporate by reference Paragraphs 1-103, inclusive, as if the same were fully set forth herein.
7 105. LICEA had an ownership interest and/or right of possession and/or right to receive
8 the second additional mortgage broker fee paid by FIELDSTONE to CALIFORNIA HOME in
9 the amount of $2,635.00. FIELDSTONE converted that amount by wrongfully paying that sum
10 to CALIFORNIA HOME, resulting in deprivation of LICEA*s rights to his personal property,
ALBORG, VEILUVA & EPSTEIN LLP
11 and resulting in substantial interference with LICEA*s possession or the right thereto.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 106. SHERBURNE and NUNGARAY had an ownership interest and/or right of
13 possession and/or right to receive the second additional mortgage broker fee paid by
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14 FIELDSTONE to COMMUNITY HOME LOANS in the amount of $5,6670.00. FIELDSTONE
ATTORNEYS
15 converted that amount by wrongfully paying that sum to COMMUNITY HOME LOANS,
16 resulting in deprivation of SHERBURNE’s and NUNGARAY’s rights to their personal property,
17 and resulting in substantial interference with SHERBURNE*s and NUNGARAY’s possession or
18 the right thereto.
19 107. FIELDSTONE’s acts and omissions were knowingly performed with the intent to
20 interfere with, and deny LICEA*s and SHERBURNE’s and NUNGARAY’s rights to said sum.
21 108. As a direct result of FIELDSTONE’s conversion of LICEA’s and SHERBURNE
22 and NUNGARAY’S property, LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
23 CLASS have been damaged and are entitled to damages and relief as set forth herein.
24 NINTH CAUSE OF ACTION
25 (Unfair, Deceptive and Misleading Business Practices As Against FIELDSTONE)
26 109. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
27 incorporate by reference Paragraphs 1-110, inclusive, as if the same were fully set forth herein.
28
29 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 110. FIELDSTONE’s intentional failure to promptly disclose all fees and expenses in its
2 GFE, their failure to pay to LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF
3 CLASS all mortgage broker fees paid for by LICEA, SHERBURNE and NUNGARAY, and the
4 PLAINTIFF CLASS in adverse loan terms, the repeated breaches of FIELDSTONE’s duties,
5 including contractual and fiduciary duties, were intentional and wrongful acts, and were done with
6 conscious disregard of the legal rights of LICEA, SHERBURNE and NUNGARAY, and the
7 PLAINTIFF CLASS.
8 111. FIELDSTONE’s conduct constitutes unfair, and unlawful “predatory lending” in
9 California, as that term has been defined by the California Mortgage Brokers Association
10 (CMBA), a leading California real estate industry association composed of licensed California
ALBORG, VEILUVA & EPSTEIN LLP
11 mortgage brokers, many of whom are approved California mortgage brokers of FIELDSTONE.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 In August of 2004, the CMBA released its official definition of predatory lending, advising the
13 public through its website and other press releases that such definition would assist consumers in
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14 avoiding “falling victim to predatory lending practices.” The CMBA definition is as follows:
ATTORNEYS
15 “Predatory lending is defined as intentionally placing consumers in
loan products with significantly worse terms and/or higher costs
16 than loans offered to similarly qualified consumers in the region for
the primary purpose of enriching the originator and with little or no
17 regard for the costs to the consumer.”
18 As the CMBA stated in its press release, a copy of which appears on their website, and is attached
19 as Exhibit 6, “Getting a loan can be the most important financial transaction in a person’s life,
20 and we want to be sure that efforts to deliver the American Dream do not become a nightmare
21 due to dishonest predatory lending practices....”.
22 112. FIELDSTONE has engaged in such unfair, deceptive predatory lending practices
23 as are more specifically alleged in this complaint, and as defined by its approved California
24 mortgage brokers’ industry association and industry peers, and based on the established customs
25 and practices as defined by the CMBA predatory lending definition.
26 113. The acts and practices, including the information contained on its public website,
27 of FIELDSTONE were, and are, likely to mislead the general public and therefore constitute
28
30 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 unfair or fraudulent business practices within the meaning of California Business and Professions
2 Code §§17200 and 17500.
3 114. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS are
4 informed and believe and thereon allege that FIELDSTONE will continue to engage in predatory
5 lending practices, including continuing to defraud, to misappropriate and convert, to falsely
6 promise, to conceal material facts, to consistently and blatantly breach the provisions of the Real
7 Estate Settlement and Procedures Act, 12 U.S.C. §2601 et seq. (“RESPA”), to breach its express
8 contract with borrowers, and to interfere in borrowers’ relationships with mortgage brokers, and
9 to falsely advertise at its website, as elsewhere, in this wrongful and unlawful fashion unless
10 otherwise enjoined by this Court. This Court has jurisdiction to issue a permanent injunction
ALBORG, VEILUVA & EPSTEIN LLP
11 because restraint is necessary to prevent a multiplicity of judicial proceedings.
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 115. LICEA and SHERBURNE and NUNGARAY bring this claim on behalf of
13 themselves and the PLAINTIFF CLASS.
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14 116. In determining and assessing charges to class members, and engaging in other
ATTORNEYS
15 practices herein alleged, FIELDSTONE have engaged in unfair, deceptive, and/or misleading
16 business practices. Such predatory lending practices include, but are not limited to, converting
17 money owed to LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS,
18 intentionally and fraudulently concealing fees and costs until close of escrow to prevent borrowers
19 from selecting other lenders, interfering with fiduciary and contractual relations between LICEA,
20 SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS, and CALIFORNIA HOME,
21 COMMUNITY HOME LOANS and other approved California mortgage brokers.
22 FIELDSTONE committed these acts for its profit, and to insure that loans arranged through
23 approved California mortgage brokers could not be refinanced or satisfied, except under certain
24 circumstances. FIELDSTONE further fraudulently induced LICEA, SHERBURNE and
25 NUNGARAY, and the PLAINTIFF CLASS to enter into unfavorable loans, with adverse loan
26 terms, and controlled LICEA’s, SHERBURNE and NUNGARAY’s, and the PLAINTIFF
27 CLASS’s mortgage brokers by secretly requiring FIELDSTONE’s approval of all broker
28 compensation, and otherwise secretly controlling said approved California mortgage loan brokers’
31 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 conduct. Such practices violate provisions of California Business and Professions Code §§
2 17200, et seq. and 17500, et seq.
3 117. The aforesaid practices by FIELDSTONE are likely to deceive, and have already
4 deceived, class members and other members of the public. Unless enjoined, such conduct will
5 continue.
6 118. As a direct and proximate result of such unfair, deceptive, and/or misleading
7 business practices, LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS have
8 been damaged in amounts according to proof and are entitled to relief as set forth herein.
9 TENTH CAUSE OF ACTION
10 (Accounting As Against FIELDSTONE)
ALBORG, VEILUVA & EPSTEIN LLP
11 119. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS hereby
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 incorporate by reference Paragraphs 1-118, inclusive, as if the same were fully set forth herein.
13 120. In the course of FIELDSTONE’s lender relationships with LICEA, SHERBURNE
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14 and NUNGARAY, and the PLAINTIFF CLASS, FIELDSTONE received money, and paid
ATTORNEYS
15 money to third party mortgage brokers, a substantial portion of which is presently due to class
16 members from Defendant Fieldstone as alleged in this complaint.
17 121. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS do not
18 presently know the exact amount of money due and owing from FIELDSTONE, and cannot
19 ascertain this amount without an accounting of the amounts collected by FIELDSTONE.
20 122. LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS are
21 entitled to an accounting of the aforementioned amounts collected and/or paid by FIELDSTONE
22 for the purpose of determining the amounts actually collected, and the reasons therefor, and for
23 the purpose of recapturing the amount owed to LICEA, SHERBURNE and NUNGARAY, and
24 the PLAINTIFF CLASS.
25
26
27
28
32 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 NON-CLASS CLAIMS
2 ELEVENTH CAUSE OF ACTION
3 (Actual Fraud As Against CALIFORNIA HOME)
4 123. LICEA hereby incorporates by reference Paragraphs 1-122, inclusive, as if the
5 same were fully set forth herein.
6 124. LICEA hired CALIFORNIA HOME to be his mortgage loan broker in November
7 of 2002. LICEA has limited ability to read and write in English, and has little if any knowledge of
8 the real estate lending business, and specifically the manner in which loans are originated. LICEA
9 hired CALIFORNIA HOME, and in accordance with California law, retained CALIFORNIA
10 HOME as his express and exclusive loan agents, and acting for his benefit as his fiduciaries.
ALBORG, VEILUVA & EPSTEIN LLP
11 125. In the course and scope of acting as his fiduciaries, CALIFORNIA HOME made
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 the following representations to LICEA:
13 a. That CALIFORNIA HOME would obtain from all their available loan sources
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14 the best real estate loan, including a loan or loans with the best available interest rate, and the best
ATTORNEYS
15 available terms, for LICEA;
16 b. That CALIFORNIA HOME would receive no fees or other compensation for
17 any source except as expressly disclosed in writing and knowingly agreed to by LICEA before
18 loan closing;
19 c. That CALIFORNIA HOME were independent contractors and not agents nor
20 fiduciaries of LICEA;
21 d. That CALIFORNIA HOME only offered “retail loans” to LICEA, even though
22 they were obtaining “wholesale loan” rates from various lenders;
23 e. That CALIFORNIA HOME had the right and authority to have LICEA
24 unilaterally execute a document captioned “Mortgage Loan Origination Agreement,” a copy of
25 which is attached as Exhibit 7, and that its terms were consistent with California law, and the
26 express relationships that CALIFORNIA HOME had with various approved wholesale lenders,
27 including FIELDSTONE;
28 f. That CALIFORNIA HOME would expressly disclose orally and in writing all
33 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 available options concerning lenders, and available loans, so that LICEA could understand his
2 various loan options, and select the best available loan, and negotiate the lowest acceptable
3 payment for services rendered by CALIFORNIA HOME to LICEA, as his sole and
4 exclusive agent.
5 126. CALIFORNIA HOME’ representations as set forth above were false, and known
6 to be false, by CALIFORNIA HOME.
7 127. The true facts were as follows:
8 a. CALIFORNIA HOME did not use their best efforts to obtain from all their
9 available loan sources the best real estate loan for which LICEA qualified, including the best
10 available interest rate, and the best available terms, for LICEA;
ALBORG, VEILUVA & EPSTEIN LLP
11 b. CALIFORNIA HOME received secret, undisclosed fees from FIELDSTONE
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 that were not knowingly agreed to by LICEA;
13 c. CALIFORNIA HOME were not independent contractors, but were actual
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14 agents and fiduciaries of LICEA under express California law;
ATTORNEYS
15 d. CALIFORNIA HOME were not licensed to offer, and did not offer “retail
16 loans” from their own funds, but instead were the agents and fiduciaries of LICEA in arranging a
17 wholesale loan through FIELDSTONE.
18 e. CALIFORNIA HOME, as the agents and fiduciaries of LICEA had no right or
19 authority to have LICEA unilaterally execute a document captioned “Mortgage Loan Origination
20 Agreement,” a copy of which is attached as Exhibit 7. Said document contained knowingly false
21 and misleading information concerning the relationship between LICEA and CALIFORNIA
22 HOME, and intentionally failed to disclose that CALIFORNIA HOME received secret, additional
23 compensation because LICEA agreed to an unnecessary prepayment penalty;
24 f. CALIFORNIA HOME did not expressly disclose orally and in writing all
25 available options concerning lenders, and available loans, or associated fees they would charge to
26 LICEA until the day of close of escrow, with the express intent of unilaterally arranging an
27 unfavorable loan, and secretly charging and collecting numerous additional fees, including a
28 “processing” fee, and “administration” fee, and a 2.5% mortgage broker fee, as well as a secret
34 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 rebate payment directly from FIELDSTONE of $2,635. LICEA had no opportunity to review
2 and consider various loan options, and select the best available loan, as well as negotiate the
3 lowest acceptable payment for services payable to CALIFORNIA HOME’ agent. Instead,
4 CALIFORNIA HOME unilaterally selected the lender, and loan terms, that benefitted them in
5 huge fees, all to LICEA’s detriment.
6 128. LICEA was unaware of the falsity of the aforesaid representations, or the impact
7 of those false and fraudulent misrepresentations, and justifiably acted in reliance upon the
8 aforesaid false representations.
9 129. LICEA is entitled to exemplary and punitive damages against CALIFORNIA
10 HOME for such intentional and reprehensible conduct.
ALBORG, VEILUVA & EPSTEIN LLP
11 TWELFTH CAUSE OF ACTION
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 (Breach of Fiduciary Duty As Against CALIFORNIA HOME)
13 130. LICEA hereby incorporates by reference Paragraphs 1-129, inclusive, as if the
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14 same were fully set forth herein.
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15 131. Pursuant to California law, CALIFORNIA HOME were express fiduciaries of
16 LICEA, and owed him the highest duties of good faith, fair dealing, full disclosure, including the
17 duty to consider the interests of LICEA above their own.
18 132. As fiduciaries to LICEA, CALIFORNIA HOME were obligated to promptly and
19 fully disclose all fees and costs to be paid by LICEA to CALIFORNIA HOME. CALIFORNIA
20 HOME also were obligated to promptly and fully disclose all fees paid by FIELDSTONE to
21 CALIFORNIA HOME, and to disclose any agreement, as well as the terms of such agreement,
22 which might in any way impact, harm, or impair CALIFORNIA HOME’ ability to act as the
23 express and exclusive fiduciaries of LICEA.
24 133. CALIFORNIA HOME, as fiduciaries to LICEA, had a further duty to obtain from
25 LICEA knowing consent to all terms and conditions of the mortgage loan, and any compensation
26 paid to any party.
27 134. CALIFORNIA HOME, as fiduciaries to LICEA, had a further duty to obtain the
28 best available loans on the best available terms for LICEA.
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FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 135. CALIFORNIA HOME breached their fiduciary duties to LICEA by committing
2 fraud as alleged above, by failing to promptly and fully disclose all fees and costs associated with
3 LICEA’s loans, by failing to obtain full knowing consent to all terms and conditions of the
4 mortgage loans arranged through FIELDSTONE, and in failing to obtain the best available loan
5 terms for LICEA.
6 136. By virtue of said material and numerous breaches of fiduciary duty, CALIFORNIA
7 HOME are obligated to disgorge all moneys received and all profits gained at the expense of
8 LICEA. LICEA is further entitled to recover all consequential damages flowing from said
9 breaches, according to proof at time of trial.
10 137. Said multiple breaches of fiduciary duties by CALIFORNIA HOME were intentional
ALBORG, VEILUVA & EPSTEIN LLP
11 and malicious, and LICEA is entitled to recovery of punitive damages for such reprehensible
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 conduct.
13 THIRTEENTH CAUSE OF ACTION
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14 (Negligent Misrepresentation As Against CALIFORNIA HOME)
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15 138. LICEA hereby incorporates by reference Paragraphs 1-137, inclusive, as if the
16 same were fully set forth herein.
17 139. At the time of entering into mortgage loan contracts with LICEA, CALIFORNIA
18 HOME made false representations as to past or existing material facts, including, but not limited
19 to, a failure to obtain the best available loan from approved lenders, a failure to list estimated loan
20 fees and costs incurred in obtaining the mortgage loans, and the higher costs associated with loans
21 on which FIELDSTONE paid a kickback to CALIFORNIA HOME.
22 140. CALIFORNIA HOME made the aforesaid representations without reasonable
23 grounds for believing them.
24 141. CALIFORNIA HOME made the aforesaid representations with the intent to
25 induce LICEA to rely on those representations.
26 142. LICEA was unaware of the falsity of the aforesaid representations, and justifiably
27 acted in reliance upon the truth of such representations.
28
36 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
1 143. As a direct result of CALIFORNIA HOME’ wrongful acts and omissions as
2 alleged above, LICEA has been damaged and is entitled to compensatory damages in an amount
3 to be determined according to proof.
4 PRAYER
5 WHEREFORE, LICEA, SHERBURNE and NUNGARAY, and the PLAINTIFF CLASS
6 pray for judgment against FIELDSTONE as follows:
7 1. For general damages in an amount to be determined at trial;
8 2. For special damages in an amount to be determined at trial;
9 3. For disgorgement of all of FIELDSTONE’s profits during the time of, or as a
10 result of, Defendants’ wrongful acts or omissions;
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11 4. For exemplary and punitive damages;
TEL: (925) 939-9880 P FAX: (925) 939-9915
WALNUT CREEK, CALIFORNIA 94596
200 PRINGLE AVENUE, SUITE 410
12 5. For attorneys* fees pursuant to California Code of Civil Procedure §1021.5, and
13 otherwise;
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14 6. For the costs of suit herein incurred;
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15 7. For imposition of a constructive trust upon the aforesaid general damages;
16 8. For an Order of this Court enjoining Defendants, and each of them, and their
17 agents, servants and employees, and all persons acting under, in concert with, or for them, from
18 misrepresenting or concealing the manner in which loan fees, and specifically mortgage broker
19 fees, processing fees, administration fees, or any other lender fee shall be disclosed and how and
20 to whom it is to be paid; and
21 9. For other and further relief as the Court may deem just and proper.
22 WHEREFORE, LICEA prays for judgment against CALIFORNIA HOME on non-class
23 claims as follows:
24 1. For general damages in an amount to be determined at trial;
25 2. For special damages in an amount to be determined at trial;
26 3. For disgorgement of all of Defendants* profits during the time of, or as a result of,
27 Defendants’ wrongful acts or omissions;
28 4. For exemplary and punitive damages;
37 900053.pldg.1st Amended Complaint.FINAL.mde-tea.wpd
FIRST AMENDED COMPLAINT
E-Filed: May 25, 2007 2:35 PM, Superior Court of CA, County of Santa Clara, Case #1-04-CV-032895 Filing #G-3290
