Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01669/USCOURTS-azd-2_08-cv-01669-4/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1601 Truth in Lending

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

George L. Mortensen and Erna H.

Mortensen, husband and wife,

Plaintiffs, 

vs.

Home Loan Center, Inc. (HLC), a

California corporation, dba Lending Tree

Loans; RLI Insurance Company, an

Illinois corporation; Kenneth J. Block,

designated broker for HLC; and Anthony

Gutierrez, a Senior Mortgage Banker

with HLC,

Defendants. 

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No. CV08-1669-PHX-NVW

ORDER

In June 2005, Plaintiffs entered into a purchase agreement with William Lyon Homes

(“WLH”) to buy a single-family home located in Surprise, Arizona (“Residence”). Plaintiffs

purportedly contacted HLC to determine whether HLC could offer a home loan with a lower

interest rate or monthly payment than the loan being offered by WLH’s preferred lender,

Duxford Financial (“Duxford”). An HLC Senior Mortgage Banker, Anthony Gutierrez,

allegedly informed Plaintiffs that he could find a loan better than the Duxford loan. Plaintiffs

were pre-approved by HLC for a loan amount of $255,000. Plaintiffs decided to use an HLC

loan (“Loan”) to purchase the Residence, closing escrow on August 18, 2005. 

Plaintiffs commenced this action on August 14, 2008, by filing a pro se complaint

against Defendants in Arizona state court. Dkt. #1-2 at 5-41. Plaintiffs allege that HLC

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Defendants’ request for oral argument is denied because the issues have been fully

briefed and oral argument will not aid the Court’s decision. See Lake at Las Vegas Investors

Group, Inc. v. Pac. Dev. Malibu Corp., 933 F.2d 724, 729 (9th Cir. 1991); Partridge v.

Reich, 141 F.3d 920, 926 (9th Cir. 1998).

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misrepresented and failed to disclose certain terms of the Loan, including the annual

percentage rate and a prepayment penalty provision. Id. ¶¶ 32-34. Plaintiffs further allege

that they wish to sell the Residence due to a family member’s poor health but are unable to

do so in the current real estate market due in part to the Loan’s prepayment penalty and

negative amortization. Id. ¶¶ 36-40. The complaint asserts four claims: violations of the

Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. (counts one and three), breach of

fiduciary duty (count two), and relief under HLC’s surety bond (count four). Id. ¶¶ 8-86.

On January 16, 2009, the Court issued an order granting in part and denying in part

Defendants’ motion to dismiss. Dkt. #22. The Court dismissed Mr. Mortensen’s TILA

claims and the claim for rescission under TILA (count one). Id. at 3-4. The Court denied

the motion with respect the breach of fiduciary duty claim (count two), Mrs. Mortensen’s

claim for damages under TILA (count three), and the bond claim (count four). Id. at 4-7.

Plaintiffs have filed a motion for leave to amend the complaint pursuant to Rule 15

of the Federal Rules of Civil Procedure. Dkt. #33. The motion has been fully briefed.

Dkt. ##37, 38. For reasons that follow, the Court will grant the motion in part and deny it

in part.1

Rule 15 declares that courts should “freely give leave [to amend] when justice so

requires.” Fed. R. Civ. P. 15(a). The Supreme Court has instructed that “this mandate is to

be heeded.” Foman v. Davis, 371 U.S. 178, 182 (1962). Rule 15’s “liberality in granting

leave to amend is not dependent on whether the amendment will add causes of action or

parties.” DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987).

Plaintiffs seek to add as defendants Anthony Hsieh, a “designated officer” of HLC,

and Billy Bolden, a “responsible party” for HLC. Dkt. #33-2 ¶¶ 6-7. Plaintiffs allege that

Hsieh and Bolden breached fiduciary duties owed to Plaintiffs by, among other things,

allowing Gutierrez to induce Plaintiffs to forego the Duxford loan without fully

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understanding Plaintiffs’ financial situation. Id. ¶ 86. Defendants contend that the proposed

amendment is futile because corporate officers owe fiduciary duties solely to the corporation

(Dkt. #37 at 4), but the Court previously has determined that the complaint does not, as a

matter of law, fail to state a claim for breach of fiduciary duty. Dkt. #22 at 6; see Standard

Chartered PLC v. Price Waterhouse, 945 P.2d 317, 335 (Ariz. Ct. App. 1997) (the existence

of a fiduciary duty is generally a question of fact); see also Dawson v. Withycombe, 163 P.3d

1034, 1051 (Ariz. Ct. App. 2007) (corporate officers may be personally liable where they had

knowledge of the misrepresentation and acquiesced in it). Defendants further contend that

HLC’s officers owed no fiduciary duties to Plaintiffs because HLC is a mortgage banker, not

a mortgage broker. Dkt. #37 at 4-5. This argument is better suited for a summary judgment

motion. See Dkt. #22 at 7 n.2. The Court will grant Plaintiffs leave to add Hsieh and Bolden

as defendants to the breach of fiduciary duty claim. Because this case is nearly a year old

already, and in light of the October 2, 2009 discovery deadline (Dkt. #30 ¶ 4), the Court will

require Plaintiffs to serve process on Hsieh and Bolden by August 28, 2009.

Plaintiffs also seek to add as defendants Countrywide Home Loan Servicing, L.P.,

BAC Home Loan Servicing, L.P., and Bank of America, National Association (collectively,

“BAC defendants”). Dkt. #33-2 ¶¶ 10-12. Plaintiffs assert that the BAC defendants will

need to consent to any modification of the Loan and therefore are proper parties under

Rule 19. Dkt. #34 at 4-5. Plaintiffs assert no claim against the BAC defendants, nor have

they shown that the BAC defendants are necessary parties. The Court will deny the motion

to amend with respect the BAC defendants.

Plaintiffs seek leave to add claims for misrepresentation and concealment of facts

(count one) and commingling of funds (count five) under A.R.S. § 6-947. Dkt. #33-2 ¶¶

74-83, 112-14. Defendants do not oppose those proposed amendments, but rather reserve

the right to address the new claims in motions brought under the Federal Rules of Civil

Procedure. Consistent with the liberal amendment policy of Rule 15(a), the Court will grant

the motion to amend with respect to the claims for misrepresentation and concealment of

facts and commingling of funds.

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IT IS ORDERED:

1. Plaintiffs’ motion for leave to file first amended complaint (Dkt. #33) is

granted in part and denied in part as set forth in this order.

2. Plaintiffs shall file an amended complaint consistent with this order by

August 12, 2009.

3. Plaintiffs shall serve process on the new defendants by August 28, 2009. 

DATED this 17th day of August, 2009.

Case 2:08-cv-01669-NVW Document 40 Filed 08/17/09 Page 4 of 4