Jul 13 09 07:34p

Anthony & Angela Martin

SUMMONS

(CITACION JUDICIAL)

NOTICE TO DEFENDANT:

(AVISO AL DEMANDADO):

DOWNEY SAVINGS AND LOAN ASSOCIATIOK; FCr LENDER SERVICES INC.; And Does 1 through 50 Inclusive

YOU ARE BEING SUED BY PLAINTIFF:

(LO EsrA DEMANDANDO EL DEN/ANDANTE):

ANTHONY 1. MARTIN

2095789801

p.1

SUM·100

FlJR COIJRTUSE DIlLY (SOLO PI'oRA US 0 DE LA CORTE)

NOTICEl You have been sued. The court may decide against you without your being heard unless you respond within 3D days. Read the information below.

You have:30 CALENDAR DAYS after this summons and legal papers are served on you to file a wriUen response at this court and have a copy served on the plainliff. A letter or phone call will not protect you. Your written response must be in proper legal form if you want the court to hear your case. There may be a court form that you can lise for your response. You can lind these court forms and more information at the California Courts On line Self-H e Ip Ce nter ( www.courtinfo.ca .gov/selfhelp), your county law library, or the courthouse nearest yo u. If you can not pay the filing fee, ask the court clerk for a tee waiver form. If you do 110t file your response 011 time, you may lose the case by default, and your wages, money. and property may be taken without further warning from the court.

There are other legal requirements. You may wanllo call an attorney right away. If you do not know an attorney, you may want to call an attorney referral service. If you cannot afford an attorney, you may be eligible 'or free legal services from a nonprofit legal services program. You can locate these nonprofit groups at the California Legal Services Web site jwww.lawhe/pcalifornia.org), the California Courts Online Self-Help Center

(WWI'I/. courlinfo.cB.gov/selfllelp), or l:Jy contacting your local court or county bar association. NOTE: The court has a statutory lien for waived fees and costs on any se1tlement or arbitration award of $10,000 or more in a civil case. The court's lien must be paid before the court will dismiss the case. [AVrSO! Lo nan aemendedo. Sl no responde demro cfe 30 dies, 101 corte pue-de- decidir en su oontra sin escucber su version Lea la informaci6n a con unuecioo.

Tiene 30 DIAS DE CALENDARIO aosoue« de que ie entreguen esra citaclan y papeles legales para presente« una respueste porescrito en €Isla corte y recer aue se entregue una copia 81 demandante. Unil carta 0 una Iramada leletOnica no 10 protegen. Su resoueste por escrito tiene que ester en tocmeto legal correcto 51 desea que procesen su caso en la cone. Es pasible que haya un formulario que us/ed pueda user para su respuests. Puede enconlrarestos formularios de la carts y mas intormacj6n en el Centro de Ayuda de las Cortes de Ceiitornie (www.sucorte.ca.gov). en ia biblioieca de leyes de su condado 0 en la corte que fe quede mas cerca. Si no puede pagar la cuota de presentacion, plda a/ secratario de Ie corte que Ie de un formu/ario rie exenci6n de paga de cuotas, Si no prosente su tespueste 8 tiampo, puede perder ef caso por incump/imienio y /a corte te pOOm quitsr su sue/do, dinero y bienes sin mas advertencia.

Hay olras requisitoe fegales. Es racomendab/e que Ilame a un abogado inmediatamente. Si no conoce a un abogarJo. puede llemer a un servicio de remisi6n a abogados. SI no puede pagar a un abogado, es posible que cumpla r:on los requisites para obtener servido» legales gratuilos de un programs de servicios [egales sin iine« de lucro. Pusde encontrar estos grupos sin fines de luero en ei sitio web de CaHfamia Legal Services, (Www.lawhelpcalifornia.org), en el Centro de Ayuda de las Cortes rie California, (www.sucorte.ca.gov) 0 poniimaose en (:ontacfo con la ccrre a e/ co/egio de abogados locales. AVISO: Par ley, la corte liens derecho a roctemer las cooras y los costas exentos por imponer un gravamen sobre cualquier recuoerecio« de $10,0006 mas de vetor reclb/da mea/ante un ecverdo 0 una concesior. de arbitrajfJ Sil un case de derecho civil. Tiene que p?gar el gravamen de io corle antes de aue la corte puede aosecner el caso.

The name and address of the court is: (EI nombre y direcci6n de la corte es):

Superior Court of California, County of Stanislaus 801 10th Street, 4th Floor, Modesto, CA 95354

The name, add ness, and telephone number of plaintiff's attorney, or plaintiff without an attorney, is:

(EJ nombre, fa dire-eeion y el numero de teletono oe! abogado del cfemandante, 0 del demandante que no tien« abogado, es):

Anthony 1. Martin 1312 Harbour Town Lane, Modesto, CA 95357

DATE: Clerk, by

(Fecha) JUl 0 9 2009 (Secretano)

CASE NUMBER (NUm~'o ;jet C~~Q)~

643135

R05APARAG

r Deputy (Adjunto)

(For proof of service of this summons, use Proof of Service of Summons (form POS·OiO).)

(Para prueba de enirega de esia citation use ef formurario Proof of Service of Summons, (pOS-atO)). NOTICE TO THE PERSON SERVED: You are served

1. c:::::J as an individual defendant.

2. c:::::J as the person sued under the fictitious name of (specify);

[SEAL]

3. c:::::J on behalf of (specify);

under: D CCP 416.10 (corporation)

D CCP 416.20 {defunct corporation) D CCP 416.40 (association or partnership)

D other (specify);

4. D by personal delivery on (date):

D D D

CCP 416.60 (minor)

CCP 416.70 (conservatee)

CCP 416.90 (authorized person)

Form Adopted for Mandalmy use Jucir;ial Council 'O( C;;3li~omj6 SUM·1DD [R.v. Juy 1.2~o91

SUMMONS

Pa 01011

Cod. of Civil Procedure §§ 412.:'0,465 wwwt;:ot,J.mn/o.r;;a.golt

American Le-galHa1, Inc. W'NY.',FOffilsWO/"kf!ow,lC::om

Jul 13 09 07:35p

Anthony & Angela Martin

2095789801

p.2

ATIORNEY OR PARTY WITHOUT ATIORNEY (NAME, ADDRESS, PHONE) FOR COURT USE ONL Y
COURT GENERA TED f I LED
Attorney for;
lUI 09 2009
SUPERIOR COURT OF CALIFORNIA, COUNTY OF STANISLAUS u L
Street Address: City Towers Bldg., 801 10th St, 41<1 Floor, Modesto, CA 95354 CLER:< OF TH E SUPERIOR COURT
Civil Clerk' Office: 801 10lh Street, 41h Floor, Modesto, CA 95354 COUNTY OF STMJlSLAIJS
BY r;f':(/, p~·~~G
'II-..j1...,JX ,...",,~
PlaintifffPetitioner: ,21, ,,+he' "J 0 "-ACt -\ i '\ DEPUTY
DefendantJRespondent: bC->">-;'''-j "'~o,,,; "~j~ .~ I-C'C, n (.\ ,~; '~:"oC I c.A.'c.l j -: .~ oS'. ~, .
NOTICE OF CASE MANAGEMENT CONFERENCE CASE NUMBER
643135 1. NOTICE is given that a Case Management Conference has been scheduled as follows:

Date: _....:...I_\ __._/_C_,_\ _,_f"""C,-,c_,_I Time: __9___Q_Q____@pM

This case is assigned to Judge rlURL W. JOHNSON. ,Dept.23._, for all purposes, including trial. *Departrnent 21 is located at 801 10th Street, 6th Floor, Modesto, CA 95354

*Departments 23 & 24 are located at 80lI0th Street, 4th Floor. Modesto, CA 95354

All filings, including cases assigned to Department 21, shall be filed in the Clerk's Office at the City Towers,

4th FloQr address.

You have 30 calendar days to file a written response with this court after the legal papers and the summons were served on you. You must also serve a copy of your written response on the plaintiff.

2. You must file and serve a completed Case Management Conference Questionnaire at least fifteen (15) days before the case management conference.

3. You must be familiar with the case and be fully prepared to participate effectively in the case management conference.

4. At the case management conference the court may make pretrial orders, including the following:

a. An order establishing a discovery schedule.

b. An order referring the case to arbitration.

c. An order dismissing fictitious defendants.

d. An order scheduling exchange of expert witness information.

e. An order setting subsequent conferences and the trial date.

f. Other orders to achieve the goals of the Trial Court Delay Reduction Act (Gov. Code, § 68600 et seq.),

Date:

JUL 092009

Clerk, by _R_O_S_A_PA_RA_G Deputy

eva

-·SANCTIONS--

If you do not file the Case Management Questionnaire required by local rule, or attend the case management conference or participate effectively in the conference, the court may impose sanctions (including dismissal of the case, striking of the answer, and payment of money),

3(09

Jul 13 09 07:35p

Anthony & Angela Martin

2095789801

CM-010
AT'"W~EV E!f PARTY IMTHOUT A TIORNEY (Nome, Sto!& &r"~ ,.nd <Odd"''''; I _ OOIJRT lISE OIlll.Y
I-'-' A TTH NY J, MARTIN . '
13 12 Harbour Town Lane
Mcdesto, California, 95357 F I LED
TELEPHOHE 110" F4XNO" 09 Z009
"'TTORNEY FOR (riame): In Pro Per JUL
SUPERIOR COURT OF CAUFORNlA, COUHlY OF STt1WlOWERs
STREET ADDRESS: 800 11th Street CLERt< O~ THE SUPERICR COURT
r.lAlLINGADDRESS: 800 11th Street ~~L CLERK'S OFFICE cou rHY OF STANISLAUS
CllYAND2IPCODE: Modesto, California 10TH STREET, 4TH FLO a ~ 8'{ _. ROSA_B-\RbG_ ____
6RANCii NAME, IVl.UU[;,;> IVJ .... A. ;,~~:lq Q[PUTY
CASE NAME: .,..__.._.- "", ...... ._ . _.,---_._.
ANTHONY 1. MARTIN VS. DOWNEY SAVINGS -
CIVlLCASE COVER SHEET Complex Case Designation GA$E NUMBER: 64 3 1 35
[';rl Unlimited =:J Limltecl D CQunter D Joinder
(Amounl (Amount Filed with first appearance by defendan1 JUDGE:
demanded demanded is
exceeds $25,000) $25,000 or less) (Cal. Rules of COU[( rule 3,402) OEPT: p,3

"""'T'"l

- p"" ......

~ t:::l'

r-:-~_:---_-;---;---;-:::-:-:-;;::-:-;;-:-_!!/t~em~s~1:::-~6~b~e~io~w~m~us~t::b~e:;;CD~mp~{e~t~e:;d::(see~~I:!nstru~~ctJ~on:.:.s~a~n~Jl~a::.;g~e:_:2~~,:_, .~

1, Check one box below for the case type that best describes this 'case:

Carolract Provisionally Complex Civil Litigation 1-,..,

o Breach of contradlwammty (06) (Cal. Rules of Coult., rules 3.400-3.403) '~

:::::=J Rule 3,740 =lleclion$ (09) D AntitrusVTrElde ragulation (03) ~

CJ Other collections (09) D Constructioo defecl (10)

D Insurance ccverage (18) 0 Mass tort (40)

D other contract (37) D Securities liliQEltiDn (2SJ

Real Proparty D Environmeotavr oxic lort (30)

D Eminenl domainllnverse 0

cordcrnnaticn (14)

D 'WrongflJ evk:Uon (33) [ZJ Other real property (2S) Unlawfu i Detainer D Commercial (31 ~ D Re.;ldenUal (3:2) D Dro;Js OB) Judici111 fWvlew o Asset forf'citure (05) D PetiliDn re: arbltratlon award (11) D Wri'. of mandate (a2)

Auto Tort o Auto(22)

D Uninsured motoflst(46)

Other PI/PDIWD IPersonallnJuryfProperl;i Damage/Wrongful Oiath) Tort

D Asbestos (04)

D Product Ilabllily (24)

D Medical malpractice (45)

o Other PIIPOMID (23)

Insurance coverage daims arn;ing from the above listad prollisionally complex case types (41)

Non-PlTPDrND (Other) Tort

o 3usiness tort/unfair business practice (07) D Civll rights (O8)

o Del'amooon (13)

D Fraud (16)

D Intellectual property (19) D Professional negligence (25) D Other non-PIlPDIWD tort (3~

Mls~lIlIneOU8 Civil Petition

o Partnership and corporate govemance (21) D Other petition (nol Sf]eCifie1 aboveJ (43)

Enforcument of Judgment

D Enforcement of judgment (20)

MisceJlanoOtls Civil Complaint D RICO (27)

o Other complaint (not specified Ilbove) (42)

~Ioyment

U Wrongful termination (36) D Otner employment (15)

2. This case is is not complex under rule 3.400 of the Califomia Rules of Court. If the case is complex, mark tile

factors requiring exceptional judicial management:

a,D large number of separately represented parties b. D Extensive motion practice raising difficult or novet

issues that will be lime-consuming to resolve

c. D Substantial amount of documentary evidanco

3, Remedies sought (chfJck all that apply): a.[ZJ monetary b. D nonmonetary; declaratory or injunctive relief 4_ Number of causes of action (specify): 10

:5. This case 0 is WIS not a class action suit.

6. If there ars any known related cases, file aoc serve 3 notice of relatsd case. ('fou may use fa

Date: July 09,2009 ANTHONY 1. MARTIN

d. D La rge number of witnesses

e, D Coordination with related actions pending in one or more courts if! other counties, states, or countries, or In a federal court

f D Substantial postjudqment jucicial supervision

c,Dpunilive

[rYPE OR PR,m N"M5~

NonCE '" Plaintiffmu~t file this cover sheet with the first paper filed in the action Dr proceeding (except small daims cases or cases TIled uncer the Probate Code, Family Code, or Welfare and lnetltuticrs Code). (Cal. Rules of Court, rule 3.220.) Failure to file may result in sanctions,

• File this cover sheet in addition to any cover sheet required by local court rule,

• Ifth is case Is complex under rule 3.400 et seq, of the California Rules of Court, you must serve a copy of this cover sheet on all other parties to the action or proceeding,

• Unless this is a collections case under rule 3,74D or a complex case, this cover sheet will be used for stalisUcai purposes ont ,

.1 of 2

FOI1]l Adopted tor M""QstQry Use Judia..1 Council <II cor;r.,.ml. CM-Dl0 IRev, .AlI~ 1. 2OC71

CIVIL CASE COVER SHEET

Cel RlJIo. O! ~<t, hJlIl$ 2,;jO. 3,22C. a,4<Y.!-:l. ... 03. ~.741l; Col. S!.mdal1l' of Ju_ Admln!slrd~n, 01<1,3,10 w.vw.-cwlftnrI:J-.CB.ggv A.meflc::ar'll~aniet. Inc, W'NYf.fDmlSWorldJow.com

Jul 13 09 07:35p

Anthony & Angela Martin

2

Defendant (s).

3

Anthony J, Martin

1312 Harbour Town Lane Modesto, California 95357 Plaintiff, In Pro Per

Tel: 209.578.9801

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5

2095789801

F j LED

JUL 09 200g

CLERK OF THE SUPERIOR COURT G[)U NTY OF ST!\J>USlAUS

BY Jas/.\. R~f'..t.G

-" ............ -~--- __ 4_

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SUPERIOR COURT FOR THE STATE OF CALIFORNIA IN AND FOR THE C'OVNTY OF STANISLAUS

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ANTHON'f J. :MARTIN

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Plaintiff,

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v.

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DO\Ai1\"EY SAVINGS AND LOAN ASSOCL4. TION; FeI LENDER SERVICES IKe.

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Hi

and DOES 1 through 50 inclusive

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CASE NO: 6 4 3 1 3 5

COMPLAINT FOR:

FILED BY FAX

(1) Fraudulent Omissions

(2) Violation of Bus. & Prof. Code §17200, et seq. - "Unfair" and "Fraudulent" Business Practice; (3) Breach of Contract; and

(4) Tortuous Breach of the Covenant of Good Faith and Fair Dealing.

(5) Quiet Title

(6) Injunction

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G ENERAL ALLEGATION

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pA

1. Plaintiff Anthony J. Martin. is a resident of the County of STANISLAUS and the

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owner of certain real property (hereinafter referred to as "the Property") located at 1312 Harbour

Town Lane, Modesto, California, 95357 and more particularly described as:

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Complaint

Jul 13 09 07:36p

Anthony & Angela Martin

2095789801

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2

Complaint

Lot 6 in Block 15017 of "The Carolinas" As pn Map FHed February 29, 2000 in Volume 38 of Maps, At Page 96. Certificate of Correction Recorded July 24, 2000, As Instrument No. 59888, Official Records.

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APN: 082-14-09-000

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I.

INTRODUCTION

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1. This is an action pursuant to the California's Unfair Competition Law (hereinafter "UeL"), Business and Profession Code §17200, et. seq., and other statutory and common law causes of action. Plaintiff, Anthony J. Martin, bring this action against Defendants, DOWNEY SAVINGS AND LOAN ASSOCIATION; Fel LENDER SERVICES INC., and Does 1-10 (collectively "Defendants"), based on Defendants' fraudulent concealment, breach of contract, and unfair business practices in connection with selling to Plaintiff Option Adjustable Rate Mortgage (hereinafter "ARlv1") loans.

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II.

THE PARTIES

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2.

Plaintiffs, Anthony J. Martin, (hereinafter "Plaintiff') are, and at all times relevant

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to this Complaint, were individuals residing in Modesto, California. On or about 02/09/2006, Plailluffpurchased his existing home loan and entered into an Option AMi loan Agreement with Defendants. The Option ARM loan was secured by Plaintiff primary residence.

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3.

Defendant (8) DOWNEY SAVINGS AND LOAN ASSOCIA nON'; is A Federal

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Saving Bank licensed to do, and is doing business in California. At all relevant times hereto, DOWNEY SAvlNGS AND LOAN ASSOCIA TIO:.\f, FeI LENDER SERVICES INC., was and is engaged in the business of promoting, marketing, distributing and selling the Option Ann Loans that are the subject of this Complaint. DOV.T)\,~EY SAVlNGS AND LOAN ASSOCIATION, and Fer LENDER SERvlCES INC., transacts business in California and at all relevant times promoted, marketed, distributed, and sold Option Arm loans throughout California. DOVi'NEY SAVINGS AND LOAN ASSOCIATION, FeI LENDER SERVICES INC .. has significant contacts with STANISLAUS, California, and the activities complained of herein occurred, in whole or in part, in STANISLAUS, California.

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Jul 13 09 07:36p

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Anthony & Angela Martin

2095789801

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2

At all times herein mentioned, each Defendant was the co-conspirator, agent,

4. At all times mentioned herein, Defendants, and each of them, were engaged in the

business of promoting, marketing, distributing, selling, servicing, owning, or are and were the

3

assignees of the Option ARM loans that are the subject of this Complaint, throughout California, including STANISLAUS, California,

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5.

Plaintiffs are informed, believe, and thereon allege that each and all of the

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aforementioned Defendants are responsible in some manner: either by act or omission, strict liability, fraud, deceit, fraudulent concealment. negligence, respondent superior, breach of contract or otherwise, for the occurrences herein alleged, and that Plaintiff injuries as herein alleged, were proximately caused by the conduct of Defendants.

6. Plaintiffs are informed, believe, and thereon allege, that at all times material hereto

and mentioned herein, each of the Defendants (both named and DOE Defendants) sued herein

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were the agent, servant, employer, joint venture, partner. division, O"TIer, subsidiary, alias. assignee and/or alter-ego of each Df the remaining Defendants and were at all times acting within the purpose and scope of such agency, servitude, joint venture, division, ownership, subsidiary, alias, assignment, alter-ego, partnership or employment and with the authority, consent, approval and ratification of each remaining Defendant.

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19 servant" employee: assignee and/or joint venture of each of the other Defendants and was acting 20 within the course and scope of said conspiracy, agency. employment, assignment and/or joint 21 venture and with the permission and consent of each of the other Defendants.

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8. Plaintiffs are informed, believe, and thereon allege. that Defendants DO\VNEY

SA'HNGS AND LOAN ASSOCIATION, FeI LENDER SERVICES INC., and Does 1-10, and each of them, are, and at all material times relevant to this Complaint, performed the acts alleged herein and/or otherwise conducted business in California, Defendants, and each of them, are corporations or other business entities, form unknown, have, and are doing business in this judicial district.

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3

Com plaint

Jul 13 09 07:37p

Anthony & Angela Martin

2095789801

p.7

2

Complaint

9. Plaintiffs are informed, believe, and thereon allege, that Does I through 10,

3

inclusive, are securitized trusts, equity funds, collateralized debt obligations (hereinafter "CDO"), CDO underwriters, CDO trustees, hedge funds or other entities that acted as additional lenders,

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loan originators and/or assignees to the loans which are the subject of this action. Plaintiff will seek leave of the Court to replace the fictitious names of these entities with their true names when

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they are discovered.

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10.

The true names and capacities, whether individual, corporate, associate or

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otherwise, of Defendants Does 1- through 10, inclusive, and each of them, are unknown to Plaintiff at this time, and Plaintiff therefore sue said Defendants by such fictitious names. Plaintiff

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allege, on information and belief, that each Defendant is responsible for the actions herein alleged.

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Plaintiff will seek leave of Court to amend this Complaint when the names of said Doe Defendants

have been ascertained.

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11.

Plaintiffs are informed, believe, and thereon allege, that at all times relevant during

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the liability period, that Defendants, and each of them, including without limitation those

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Defendants herein sued as Does, were acting in concert or participation with each other, or were joint participants and collaborators in the acts complained of, and were the agents or employees of the others in doing the acts complained of herein, each and all of them acting within the course

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and scope of said agency and/or employment by the others, each and all of them acting in concert

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one with the other and all together.

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III.

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JURISDICTION AND VENUE

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12. This Court has diversity subject matter jurisdiction over this action In that the

24 Defendant (s), transacted business within this Judicial District.

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13.

This Court has personal jurisdiction over the parties in this action by the fact that

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Defendants are either individuals who reside in this District within California or are corporations duly licensed to do business in California,

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4

Jul 13 09 07:37p

Anthony & Angela Martin

2095789801

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2

Complaint

3

14. Venue is proper within this Court, because a substantial part of the events and

omissions giving rise to the claims occurred in this district, and because there is personal jurisdiction in this district aver named Defendants because they regularly conduct business in this judicial distric1.

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IV.

FACTS COMMON TO ALL CAUSES OF ACTI01'l

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15. Defendant, OO\VNEY SAVINGS AND LOAN ASSOCIATION, Fer LENDER

SERVICES INC., sells a variety of home loans which include: conventional fixed rate, conventional ARM, 2nd mortgage fixed, home equity lines of credit, FHA., VA, and nonconforming loans. The ARM or adjustable rate mortgages are the loans that are the subject of this Corn plaint.

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16.

The instant action anses out of residential mortgage loan transactions in which

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Defendants failed to disclose pertinent information in a clear and conspicuous manner to Plaintiff, in writing, as required by law.

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This action also concerns Defendants' unlawful, fraudulent and/or unfair business

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acts or practices. Defendants engaged in a campaign of deceptive conduct and concealment aimed at maximizing the num ber of consumers who would accept this type of loan in order to maximize Defendants' profits, even as Defendants knew their conduct would cause many of these consumers to lose their homes through foreclosure.

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Plaintiffs, along with thousands of other similarly situated consumers. were sold an

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Option ARl\1 home loan by Defendants. The Option ARM loan sold to Plaintiff is a deceptively devised financial product. The loan has a variable rate feature with payment caps. The product was sold based on the promise of a low, fixed interest rate. when in fact Plaintiff was charged a different, much greater interest rate than promised. Further. Defendants disguised from Plaintiff the fact that Defendants' Option ARM loan was designed to, and did, cause negative amortization to occur. Further still, once lured into these loans, consumers cannot easily extricate themselves

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Jul 13 09 07:37p

Anthony & Angela Martin

2095789801

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4 5

Complair.t

from these loans. For a substantial number of Defendants' Option ARM loans, Defendants 2 included a stiff and onerous prepayment penalty making it extremely difficult to extricate 3 themselves from the loans.

19.

The Option ARM loan Defendants sold to Plaintiff violates the Truth in Lending

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Act (hereinafter "TILA"). TILA is supposed to protect consumers; it mandates certain disclosures be made by lenders. to borrowers concerning the terms and conditions of their home loans. Defendants failed to make these disclosures in connection with the Option ARM loan sold to Plaintiff.

20. At all times relevant, Defendants promoted their Option AAA-I loan product to

consumers, including Plaintiff. in a false or deceptive manner. Defendants promoted to the general public a loan which would provide a very low, fixed interest rate for a period of three (3) years to five (5) years and no negative amortization. Defendants used this "teaser" rate to lure Plaintiff into purchasing Defendants' Option AR._\! 1000 product. However, the low fixed rate was illusory, a false promise. Plaintiff and others similarly situated did not receive the benefit of the low rate promised to them. Once signed on to Defendants' loan, the interest rate applied to Plaintiff loans was immediately and significantly increased.

21. Plaintiffs and others similarly situated were consumers who applied for a mortgage

loan through Defendants. During the loan application process. in each case, Defendants, promoted advertised, and informed Plaintiff that in accepting these loan terms, Plaintiff would be able to lower their mortgage payment and save money. Defendants initiated this scheme in order 10 maximize the amount of the loans issued to consumers and to maximize Defendants' profits.

22. Based on the Defendants' representations, and the conduct alleged. herein, Plaintiff

agreed to finance their primary residence through Defendants' Option AMI loan. Plaintiff was told they were being sold a home loan with a low interest rate of between 1 % and 3% (the "teaser" rate), and that the interest rate was fixed for the first three (3) to five (5) years of the loan. Defendants al so informed Plaintiff, and Plaintiff were lead to believe, that if they made payments based on the promised low interest rate, which were the payments reflected in the written payment

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Jul 13 09 07:38p

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Anthony & Angela Martin

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10

Complaint

schedule provided to them by Defendants, the loan was a no negative amortization home loan. 2 Plaintiff payments were to be applied to their principal loan balances as well as to interest.

23.

After, the purported three (3) to five (5) year fixed interest period, Plaintiff

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reasonably believed, based on the representations contained in the documents Defendants provided to Plaintiff, that they would be able to refinance their loan and get a new loan before their scheduled payments increased. However, the payment schedule provided by Defendants failed to disclose, and by omission failed to inform, these consumers that due to the negative amortization that was purposefully built into these loans, Plaintiff would be unable to refinance their homes as there would be little or no equity left to refinance.

24. Plaintiffs believed these facts to be true because that is what the Defendants wanted

consumers: to believe. Defendants aggressively marketed their product as a fixed, low interest home loan. Defendants knew that if marketed in such a manner, their Option ARM loan product would be a hugely popular profitable product for them. Defendants also knew, however, that they were marketing their product in a false and deceptive manner. While Defendants trumpeted their low, fixed rate loans to the public. Defendants knew their promise of low, fixed interest was illusory.

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In fact, Defendants' Option ARl\·f loan possessed a low, fixed 1278.33 but not a

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]0\\1, fixed interest rate. Unbeknownst to Plaintiff, the actual interest rate they were charged on their loans was not fixed, was not the low teaser interest rate stated in the loan documentation and was in fact considerably higher than the going market rates. And, after purchasing Defendants' Option ARM loan product. Plaintiff did not actually receive the benefit ofthe low, teaser rate at all 10 some cases, or at best, received that rate for only a single month. Immediately, thereafter, Defendants III every instance and for every loan, increased the interest rate they charged consumers. The now-increased interest charges incurred by Plaintiff over and above the fixed interest payment rate were added to the principal balance on their home loans in ever increasing increments, substantially reducing the equity in these borrowers' homes.

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26. In stark contrast to this reality, Defendants, through the standardized loan contracts

they created and supplied to Plaintiff: stated that negative amortization was only a possibility and would occur only if the payments were not sufficient. Defendants concealed and failed to disclose the fact that the loan as presented and designed, in fact, guaranteed negative amortization. Defendants failed to disclose and omitted the objectively material fact that negative amortization would occur if the consumer followed the payment schedule set forth by Defendants in the loan documents. This information was objectively material and necessary for consumers to make an informed decision because this would have revealed that the loan's principal balance would

s

increase if the payment schedule was followed, thereby rendering it impossible to refinance the 10

loan at or around the time the prepayment penalty expired and/or by the time the interest and

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payment rates re-set. In this respect, Defendants utterly failed to place any warning on the Truth and Lending Disclosure Form about negative amortization.

27. At all times relevant, once Plaintiff accepted Defendants' Option AR1\f loan

contract, they had no viable option by which to extricate themselves from these loans because a substantial majority of these Option ARM loan agreements included a draconian pre-payment penalty for a period of up to three (3) years.

28. The Option ARlv! loans sold by Defendants all have the following uniform

characteristi c s:

a) There is an initial low interest rate or "teaser" rate that was used to entice the Plaintiff into entering into the loan. The rate offered was typically 1 %-3%;

b) The loan has with it a corresponding low payment schedule. The marketing of the loan with the above teaser was intended to misleadingly portray to consumers that the low payments for the first three (3) to five (5) years were a direct result of the low interest rate being offered;

c) The initial payments in the required disclosures were equal to the low interest rate being offered. The purpose was to assure that if someone were to calculate what the payment would be at the low offered interest rate, it corresponded to the 8

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Complaint

29.

payment schedule. This portrayal was intended to further mislead consumers into believing that the payments were enough to cover principal and interest;

d) TIle payment has a capped annual increase on the payment amount; and

e) And for a substantial number of the loans, the loans included a prepayment penalty preventing the consumers from securing a new loan for a period of up to three (3) years.

Defendants uniformly failed to disclose and by ornrssion failed to inform

8

consumers, including Plaintiff, in a clear and conspicuous manner that the fixed "teaser" rate 9

offered by Defendants 'Was actually never applied to their loans, or, at best, was only applied for

10

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

thirty (30) days. Thereafter, the true interest charged on the loans was significantly higher than the promised, advertised rate.

30. Defendants uniformly failed to disclose and by onussion failed to infonn

consumers, including Plaintiff, that the payments set forth in Defendants' schedule of payments were insufficient to cover the actual charges and that this was, in fact, a loan that would cause the Plaintiff to lose equity they have in their horne.

31. Defendants' uniformly failed 10 disclose and by omission failed to inform

consumers, including Plaintiff, that when the principal balance increased to a certain level, they would no longer have the option of making the fixed interest payment amount.

32. Disclosing whether a payment will result in negative amortization is of critical

importance to consumers. If the disclosed payment rate is insufficient to pay both principal and interest, one of the consequences of negative amortization is a loss of equity. Defendants are and at all times relevant hereto have been aware that clear and conspicuous disclosure of the actual interest rate and a payment rate sufficient to avoid negative amortization and the concomitant loss of equity is extremely important material information.

3J. At all times relevant, Defendants, and each of them, knew or should have known,

or were reckless in knowing, that: 0) the payment rate provided to Plaintiff was insufficient to I pay both interest and principal; (ii) that negative amortization was substantially certain to occur if 9

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2

3

Plaintiff made payments according to payment schedule provided by Defendants; and (iii) that Loss of equity and/or loss of Plaintifl' residence was substantially certain to ocelli' if PLaintiff made payments according to the: payment schedule provided by Defendants.

34. In spite of its knowledge, Defendants marketed its ARM loans as a product that

would provide Plaintiff with a low interest rate for the first three (3) to five (5) years of the loan, and at all times relevant. failed to disclose and/or concealed by making partial representations of material facts when Defendants had exclusive knowledge of material facts that negative

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amortization was certain to occur.

This concealed and omitted information was not known to

Plaintiff and which, at all times relevant, Defendants failed to disclose and/or actively concealed by making such statements and partial, misleading representations to Plaintiff and all others similarly situated. Because the ARM loans did not provided a low interest rate disclosed by Defendants was insufficient to pay both principal and interest, negative amortization occurred.

35.

The true facts about Defendants' ARl\l loans is that they do not provide the low

interest rate promised, and are certain 10 result in negative amortizations

36. Disclosure of a payment rate that is sufficient to pay both principal and interest on

the loans is of critical importance to consumers. If the disclosed payment rate is insufficient to pay both principal and interest, one of the consequences is that negative amortization or loss of equity will occur. Defendants are and at time relevant hereto have been aware that the ability of the disclosed payment rate to pay both principal and interest so as to avoid negative amortization is one of the most im portant terms of a loan.

37. To this day, Defendants continue to conceal material information from consumers,

and the public, that: (i) the payment rate provided to Plaintiff is and Was insufficient to pay both principal and interest (ii) if the disclosed payment schedule is followed, Plaintiff 'will suffer negative amortization; and (iii) loss of equity and/or possession of the property is substantially certain to occur if the disclosed payment schedule is followed. Nevertheless, Defendants have

18 19 20 21 22 23 24 25 26 27

refused to clearly and conspicuously disclose to Plaintiff the existence of this important material 28

information and the injury caused thereby, including but not limited 10 the loss of equity.

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Complaint

38. In the end, the harm caused by Defendants' failures to disclose and orrnssions

2 grossly outweighs any benefit that could be attributed to them.

39.

Knowing the truth and motivated by profit and market share, Defendants have

knowingly and willfully engaged in the acts and/or omissions to mislead and/or deceive Plaintiff and others similarly situated.

40. The ARl'vl loans have resulted and will continue to result in significant loss and

damage to Plaintiff, including but not limited to the loss of equity Plaintiff (8) have or had in their homes.

41. The facts which Defendants misrepresented and concealed, as alleged in the

preceding paragraphs. were material to the decisions about \ ...... hether to purchase the AR.11 loans in that Plaintiff and others similarly situated would not have purchased these loans but for Defendants' unlawful, unfair, fraudulent and/or deceptive acts and/or practices as alleged herein.

42.

Defendants engaged in the unlawful, unfair, fraudulent, untrue and/or deceptive

marketing scheme to induce consumers to purchase their ARlvlloans.

43. Defendants' unlawful, unfair, fraudulent" untrue and/or deceptive acts and lor

practices were committed with willful and wanton disregard for whether or not Plaintiff or others similarly situated would, in fact, receive a home loan that would actually provide the low interest and payment rate, as promised, for the first three (3) years of the loan that is sufficient to pay both principal and interest.

44. Upon information and belief and at all times relevant, Defendants possessed full

knowledge and information concerning the above facts about the ARM loans, and otherwise marketed and sold these ARM loans in the Stale of California.

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45.

The Fraudulent Conduct Of Defendant Was As Follows:

a) Defendants engaged in unfair business practices aimed at deceiving Plaintiff before and during the loan process;

b) Defendants, by and through their officers, employees, and agents tailed to disclose that the interest rate actually charged on these loans was higher 11

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than the rate represented and promised to Plaintiff;

c) Defendants, by and through their officers, employees and agents concealed

omitted and/or otherwise failed to disclose information;

d) Defendants failed to disclose the true variable nature of interest rates on

adjustable rate mortgage 10[1u8 and adjustable rate home equity loans;

e) Defendants failed to properly disclose the process by which negative

amortization occurs, ultimately resulting in the recasting of the payment

structure oyer the remaining lifetime of the loans;

f) Defendants' failure to apply Plaintiff' payments to principal as promised in the form Notes constitutes a breach of contract, including a breach of the

covenant of good faith and fair dealing;

g) Defendants' conduct in immediately raising the interest rate On consumers'

loans so that no payments were made to the principal balance constitutes breach of the covenant of good faith and fair dealing;

h) Defendants' marketing plan and scheme misleadingly portrayed or implied that these loans were fixed rate loans, when Defendants knew that only the periodic payments were fixed (for a time) but that interest rates were not, in

fact, "fixed;"

i) Plaintiff are entitled to damages;

,j) Plaintiff are entitled to punitive damages; and k) Plaintiff is entitled to rescission,

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Cornolaint

46. 47.

V.

FlRST CAUSE OF ACTION Fraudulent Omissions (Against All Defendants)

Plaintiffs incorporate all preceding paragraphs as though fully set forth herein.

As alleged herein, pursuant to TILA, 15 US. C. §1601, et seq., Regulation Z (12

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10

C.F.R. §226) and the Federal Reserve Board's Official Staff Commentary, Defendants had a duty to disclose to Plaintiff: (i) the actual interest rate being charged on the Note(s), (ii) that negative amortization would occur and that the "principal balance will increase": and (iii) that the initial interest rate on the note was discounted,

11 12 13 14 15 16 17 18 19 20

4&.

Defendants further had a duty 10 disclose to Plaintiff, (i) the actual interest rate

being charged on the Note(s), (ii) that negative amortization 'V .... ould occur and that the "principal balance will increase": and (iii) that the initial rate on the note was discounted, based upon Defendants partial representations of material facts when Defendants had exclusive knowledge of material facts that negative amortization was certain to occur.

49.

The Note(s) state at paragraph 3(A) "1 will pay principal and interest by making

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payments every month" [and] "I will make these payments every month until I have paid all Principal and Interest and any other charges described below that I may owe under this Note." And in paragraph SeA), under the heading 'BORROWER'S F AlLURE TO PAY AS REQUIRED," the Notet s) state "[tjhe amount of the late charge will be five percent (5%) of my overdue payment of Principal and Interest.'! However, the true facts are that the payments scheduled provided by Defendants were completely insufficient to pay both interest and principal. In fact, the payment amounts provided in the TlLDS were not eveu sufficient to pa.y enough

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············r···················

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Complaint

interest to avoid negative amortization which, under the terms of the Note(s) was absolutely 2 certain to occur.

so.

The Notet s) further state, at paragraph 3(B) "As of the date of this 'Note, my

"Minimum Payment' of principal and interest is SI278.33. This amount will rema.in the same for the first 60 monthly payments due under this Note." However, the flue facts are that the payment schedule provided by Defendants were completely insufficient to pay both interest and principal, In fact, the payment amounts provided in the TILDS were not even sufficient to pay enough interest to avoid negative amortization which, under the terms of the Note(s) was absolutely certain 10 occur.

5 6 7 8 9

10 11 12 13 14 15 16 17

51. The: Note{s) further state, at paragraph 3(C) that "my Minimum Payment may be

less than the amount of the interest portion of the monthly payment ... " And, "If this occurs, each month that my Minimum Payment is less than the interest portion, the Note Holder will subtract the amount of that payment from the amount of the interest portion and will add the difference to my unpaid principal." However, the payment schedules provided by Defendants in the TILDS were absolutely incapable of covering the amount of interest due and therefore these statements were false in that it omitted this material fact.

52.

The Note(s) list an interest rate and a payment amount based on that initial interest

18

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rate. However, the TILDS Defendants gave to Plaintiff include the schedule of payments (including that initial payment rate) but yet disclose a different interest rate. In truth, the payment schedule stated in the TILDS is wholly unrelated to the true interest rate being charged on the loans and, at all times relevant during the liability period, Defendants failed to disclose, and by omission failed to inform Plaintiff of this important material information.

53. The aforementioned omitted information was not known to Plaintiff and which, at

all times relevant, Defendants failed 10 disclose and/or actively concealed by making such

26

statements and partial, misleading representations to Plaintiff and all others similarly situated. 27

Because the Option A~11oans did not provide a low interest rate for the first three (3) to five (5)

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3

years of the Note, and the payment rate disclosed by Defendants was insufficient to pay both principal and interest, negative amortization occurred.

54. Defendants, and each of them, failed to disclose, and by omission failed to inform

Plaintiff that (i) the payment rate provided to Plaintiff on the.TILDS was insufficient to pay both principal and interest; (ii) that negative amortization was absolutely certain to occur if Plaintiff made payments according to the payment schedule provided by Defendants; and (iii) that loss of equity and/or loss of Plaintiff 'residence was substantially certain to occur if Plaintiff residence was substantially certain to occur if Plaintiff made payments according to the payment schedule provided by Defendants.

55. As alleged herein, Defendants had a duty to disclose to Plaintiff, and at all times

relevant, failed to disclose and/or concealed material facts by making partial representations of some material facts when Defendants had exclusive knowledge of material facts, including but not limited to, (i) the disclosed interest was not the actual interest rate charged on the Note(s), (ii) that negative amortization was certain to occur, and (iii) that the initial rate was discounted. The concealed and omitted information was not known to Plaintiff and which, at all times relevant, Defendants failed to disclose and/or actively concealed by making such statements and partial, misleading representations to Plaintiff and all others similarly situated. Because the Option ARM loans did not provide a low interest rate for the first three (3) to five (5) years of the Note, and the payment rate disclosed by Defendants was insufficient to pay both principal and interest, negative amortization occurred.

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56.

From the inception of the Option ARM loan scheme. 'Until the present, Defendants

have engaged in a purposeful and fraudulent scheme to omit material facts knO'\\TI solely to them, and not reasonably discoverable by Plaintiff , regarding the true facts concerning the actual interest rate charged on the loans, that negative amortization that was certain to occur, and that the initial interest rate, in fact, was discounted, all of which Defendants were duty bound to clearly and conspicuously disclose to Plaintiff in the TILDS.

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• • • • • • • • • • • •• ••• ,... •• • _. •••••••• • • • ••• ,.... • T •••••• • •••••• , ••• ,.... •••••• ••• ,. • ••• - •••• _. •••• •••• • ~ ••••••• '

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S7. Defendants have known from the inception of their Option ARM loan scheme that

these loans, (i) do not provide the promised initial interest rate tor the first three (3) to five (5) years of the Note, (ii) that negative amortization would occur ant! that Plaintiff principal balances would increase, and (iii) that the initial interest rate was discounted and did not accurately reflect the interest that consumers were being charged on the loans.

58. Defendants purposefully and intenti.onally devised this Option ARM loan scheme

to defraud and/or mislead consumers into believing that these loans would provide a low-interest rate loan, for the first three (3) to five (5) years of the note and that if they made their payments according to the payment schedule provided by Defendants that it would be sufficient to pay both principal and interest.

59. The omitted information, as alleged herein, was material to PLaintiff in that had the

12

information been disclosed. Plaintiff would not have entered into the loans.

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60. As a direct and proximate result of Defendants' failure to disclose and omission of

material facts, as alleged herein, Plaintiff has suffered damages, which include, but are not limited to the loss of equity Plaintiff had in their homes prior to entering these loans.

61.

The wrongful conduct of Defendants, as alleged herein, was willful, oppressive,

18 immoral, unethical, unscrupulous, substantially injurious, malicious and in conscious disregard for 19 the well being of Plaintiff. and others similarly situated. Accordingly, Plaintiff: and the others

20 similarly situated seek punitive damages against Defendants in an amount to deter Defendants

21 from similar conduct in the future.

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62.

"THEREFORE, Plaintiff is entitled to all legal and equitable remedies provided by

law, including but not limited to actual damages, exemplary damages prejudgment interest and costs.

16

Com plaint

attorney general against all Defendants for their unfair, fraudulent and/or deceptive business acts 10

and/or practices pursuant to California Business and Professions Code §17200, et. seq., which

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.......... , .... " .... ", ", ..

, , .

VI.

SECOND CAUSE OF ACTION Violation of California's Unfair Competition Law

Business & Professions Code § 1720C, et. seq., "Unfair" and "Fraudulent" Business Acts or Practices

(Against All Defendants)

63. 64.

Plaintiffs incorporate all preceding paragraphs as though fully set forth herein. Plaintiffs bring this cause of action on themselves, and in their capacity as a private

prohibits all unfair and/or fraudulent business acts and/or practices.

65. Plaintiffs assert these claims as they are a representative of an aggrieved group and as private attorney general on behalf of the general public and other persons who have expended funds that the Defendants should be required to payor reimburse under the equitable and restitutionary remedies provided by Califorma Business and Professions Code § 17200, et. seq.

66. The instant claim is predicated on the generally applicable duty of any contracting

party to not misrepresent material facts, and on the duty to refrain from unfair and deceptive business practices. The Plaintiff hereby seeks to enforce a general proscription of unfair business practices and the requirement to refrain from deceptive conduct. The instant claim is predicated on duties that govern anyone engaged in any business and anyone contracting with anyone else.

67. At all times relevant, Defendants engaged in a pattern of deceptive conduct and

concealment aimed at maximizing the number of borrowers who would accept their Option ARM loan. Defendants, and each of them, marketed and sold Plaintiff a deceptively devised financial product. Defendants marketed and sold their Option ARl\I loan product to consumers including Plaintiff, in a false or deceptive manner. Defendants marketed and advertised to the general public through brochures, flyers and other substantially identical marketing material, a loan which appeared to have a very low, fixed interest rate for a period of three (;:)) to five (5) years and no

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Complaint

negative amortization. Further, Defendants disguised from Plaintiff the fact that Defendants' . Option ARM loan was designed to, and did, cause negative amortization to occur.

68. Defendants lured Plaintiff into Option ARJvl loan with promises of low fixed

interest. Once Plaintiff entered into these loans Defendants switched the interest rate charged on the loans to a much higher rate than the one they advertised and promised to Plaintiff After entering these loans, Plaintiff could not escape because Defendants purposefully placed into these loans an extremely onerous prepayment penalty that made it prohibitively expensive tor consumers to extricate themselves from these loans. Thus, once on the hook, consumers could nat escape from Defendants loans.

69. Plaintiffs were consumers who applied for a mortgage loan through Defendants.

During the loan application process, in each case, Defendants uniformly promoted, advertised, and informed Plaintiff that in accepting these loan terms, Plaintiff would be able to lower their mortgage payment and save money.

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70.

Defendants promoted their Option ARIvl loan as having a low fixed interest rate,

i.e., typically between 1 % and J%. However, Defendants did not disclose that this was just a "teaser" rate, the purpose of which "vas to get consumers to enter into the loan agreements with Defendants. Defendants did not disclose to Plaintiff that the "teaser" rate was not the fixed rate that Defendants would actually charge Plaintiff on their outstanding loan balances.

71,

Based on the Defendants' representations and conduct, Plaintiff agreed to finance

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their primary residence through Defendants' Option ARM loan. Plaintiff-was told they were being sold a home loan with a low interest rate, fixed for the first three (3) to five (5) years of the loan. Plaintiff were also lead to believe that i.f they made payments based on this advertised interest rate, and the payment schedule provided 10 them by Defendants, the loan was a no negative amortization home loan. After, the fixed interest period Plaintiff was told their rate "may" change. And Plaintiff believed they would then be able to re-finance to another home loan. Plaintiff believed these facts to be trne because that is what the Defendants wanted consumers to believe

,

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that is what Defendants lead consumers to believe.

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Complaint

s 4 5 6

72. Defendants aggressively sold their product as: a fixed low interest home loan.

Defendants knew that if marketed in such a manner, their Option ARM Joan product would be a hugely popular and profitable product for them. Defendants also knew, however, that they were marketing their product in a false and deceptive manner. While Defendants trumpeted their low, fixed rate loans to the public, Defendants knew, however, that this was not entirely true.

73. In tact, Defendants' Option ARM loan possessed a low, fixed payment but not a

low, fixed interest rate. Unbeknownst to Plaintiff, the actual interest rate they were charged on their loans was not fixed. After purchasing Defendants' Option ARM loan product, Plaintiff never

7

8 9

actually received the benefit of the low advertised interest rate, or, in some cases, consumers 10

received the low rate for just a single month. Immediately, thereafter, Defendants in every 11

instance and for every loan increased the interest rate they charged Plaintiff. Once Plaintiff

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13 14 15 16

accepted Defendants' Option ARM loan, they had no viable option to extricate themselves because of these loan agreements included a draconian pre-payment penalty.

74. Defendants perpetrated a bait and switch scheme on Plaintiff

Defendants.'

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conduct and failure to disclose Ihe whole truth about the loan's interest rate and to describe the loan as having a fixed interest rate was deceptive and unfair. Defendants initiated thi s scheme in order to maximize the amount of the loans issued to consumers and to maximize Defendants' profits.

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75.

The acts, misrepresentations, omissions, and practices, Defendants alleged above

constitute unfair, and/or fraudulent business acts and/or practices 'within the meaning of California Business and Professions Code § ] 7200, et. seq.

76.

By engaging in the above-described acts and practices. Defendants have committed

24

i one or more acts of un fair competition within the meaning ofCal£(orniaBusiness and Professions

Code § 17200, et, seq.

77,

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Defendants' conduct, as fully described above. was likely to deceive members of

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the consuming public, and at all times, Defendants' failures 10 disclose and omission of material facts have been and continue to be unfair, fraudulent, untrue and/or deceptive.

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Complaint

78. Defendants misconduct as alleged herein gave Defendants an unfair competitive

advantage over their competitors.

79. As a direct and proximate result of the aforementioned acts, Defendants, and each

of them, received monies and continues to hold the monies expended by Plaintiff and others similarly situated who purchased the ARIVI loans as described herein.

80.

In addition to the relief requested in the Prayer below, Plaintiff seek the imposition

ofa constructive trust over, and restitution of, the monies collected and realized by Defendants.

S l. The harm to Plaintiff. members of the general public and others similarly situated outweighs the utility of Defendants policies, acts and/or practices and. consequently Defendants' conduct herein constitutes an unlawful business act or practice within the meaning of California Business and Professions Code § 17200, et. seq.

82.

The unfair" deceptive and/or fraudulent business practices of Defendants, as fully

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described herein, present a continuing threat to members of the public to be mislead and/or deceived by Defendants' AR_\I loans as described herein. Plaintiff and other members of the general pub lie have no other remedy of law that will prevent Defendants' mi sconduct as alleged herein from occurring and/or reoccurring in the future.

83. As a direct and proximate result of Defendants' unfair and/or fraudulent conduct

alleged herein, Plaintiff have lost thousands if not millions of dollars of equity in their homes. Plaintiff is direct victims of the Defendants' unlawful conduct, and each has suffered injury in fact, and has lost money or property as a result of Defend ants' unfair competition.

84. "!HEREFORE, Plaintiff is entitled to equitable relief, including restitution,

restitutionary disgorgernent of all profits accruing to Defendants because of their unfair, fraudulent, and deceptive acts and/or practices, attorneys fees and costs, declaratory relief, and a permanent injunction enj oining Defendants from their, fraudulent and deceitful activity.

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••••• _ ••••• L ••••• c •• " ._ c

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Complaint

VIL

THIRD CAUSE OF ACTION

Breach of Contract

4

(Against All Defendants)

Plaintiffs incorporate all preceding paragraphs as though fully set forth herein.

5

85.

6

86. Plaintiffs entered into a written home Loan agreement - the contract or Note - with

Defendants. The Note was drafted by Defendants and could not be modified by Plaintiff The Note describes terms and respective obligations applicable to the parties herein.

87. The Note describes Plaintiff interest rate on the loan as a low interest rate, typically

between 1% and 3%. In addition, as required by federal law. the Defendants provided a Truth in Lending Disclosure concerning the home loan agreement that shows a payment schedule based on that low 1% to 3% interest rate. For the first three (3) to five (5) years the payment schedule shows that Plaintitf' monthly payment obligations to Defendants are the exact payments necessary to payoff all principal and interest during the terms of the loans if, indeed, the interest rate actually charged by Defendants on the loans was the low interest rate promised.

8&. Defendants drafted the Note and did not allow Plaintiff any opportunity to make

changes to the Note and due to Defendants' superior bargaining position, the Note was offered on a take it or leave it basis. As such, the Notes at issue are contracts of adhesion.

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89,

Defendants expressly and/or through their conduct and actions agreed that Plaintiff

21

monthly payment obligations would be sufficient to pay both the principal and interest owed on the loans. Defendants breached this agreement and never applied any of Plaintiff payments to principal.

90, The written payment schedules prepared by Defendants, and applicable to Plaintiff

, loans. show that the payment amounts owed by Plaintiff to Defendants in year one are exactly equal to the amount required to pay off the loan if, indeed, the interest acmally charged on the loan was the low interest rate promised. If the Defendants did as promised, the payments would have been sufficient to pay both principal and interest amounts.

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Complaint

91. Instead, Defendants immediately raised Plaintiff interest rates and applied no part

2 of Plaintiff payments were applied to the principal balances on their loans. In fact, because

Defendants charged more interest than was agreed to and payments, as disclosed by Defendants, were, at all times relevant, insufficient to cover the interest charge and thus principal balances increased (which is the negative amortization built into the loan).

92. Defendants breached the written contractual agreement by failing to apply any

portion of Plaintiff monthly payments towards their principal loan balances.

93. Plaintiff, on the other hand, did all of those things the contract required of them.

Plaintiff made monthly payments in the amount required by the terms of the Note and reflected in the payment schedule prepared by Defendants.

94. As a result of Defendants' breach of the agreement, Plaintiff has suffered harm.

PLaintiff has incurred additional charges to their principal Ioan balance, Plaintiff have incurred and will continue to in incur additional interest charges on the principal loan balance and surplus interest added to Plaintiff' principal loan balance, Furthermore, Defendants" breach has placed Plaintiff principal loan balances 'to increase and limited these consumers ability to make their future house payments or obtain alternative home loan financing.

95. At all times relevant, there existed a gross inequality of bargaining power between the parties to the ARl\i loan contracts. At all times relevant, Defendants unreasonably and unconscionably exploited their superior bargaining position and foisted upon Plaintiff extremely harsh, one-sided provisions in the contract, which Plaintiff extremely harsh, one-sided provisions in the contract, which Plaintiff were not made aware of and did not comprehend (e.g., Defendants' fraud and failures to clearly and conspicuously disclose as alleged herein). and which attempt to severely limit Defendants' obligations under the contracts at the expense of Plaintiff . as alleged herein. As a result of these extremely harsh, one-sided provisions, including but not

26

limited to the provisions which seek to limit the "teaser" interest rate for one month or less, these 27

provisions are unconscionable and therefore unenforceable.

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Complaint

96. \VHEREFORE, Plaintiff is entitled to declaratory relief compensatory damages

2 proximately caused by Defendants' breach of contract as alleged herein, pre-judgment interest, ;;. cost of suit and other relief as the Court deems just and proper.

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IIX.

FOURTH CAUSE OF ACTION

Tortuous Breach of Implied Covenant of Good Faith and Fair Dealing (Against All Defendants)

97. Plaintiffs incorporate all preceding paragraphs as though fully set forth herein.

98. Defendants entered into written agreements with Plaintiff based on representations Defendants made directly and indirectly to Plaintiff about the terms of their loans.

99.

Defendants expressly represented to Plaintiff that they would provide loans secured

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by Plaintiff homes, and that the loans would have a fixed interest rate at promised low interest rate for a period of three (3) to five (5) years.

100. Defendants also represented that if Plaintiff made the monthly payments in the amount prescribed by Defendants that no negative amortization would occur. The Note expressly states and/or implies that Plaintiff monthly payment obligation will be applied to pay both principal and interest owed on the loan. The Note further states that for each monthly payment Plaintiff interest shall be paid before principal.

10 1. The written payment schedules prepared by Defendants, and applicable to Plaintiff , loans. show that the payment amounts owed by Plaintiff to Defendants in year one are exactly equal to the amount required to pay off the loan if indeed, the interest actually charged on the loan was the I01V interest rate promised. If the Defendants acted as it promised, the payments would have been sufficient to pay both principal and interest.

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102. Instead, Defendants immediately raised Plaintiff interest rate and applied no part of 27

Plaintiff payment to principal. In fact, because Defendants charged more interest than was

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disclosed and agreed to in the loans, Plaintiff' payments were insufficient to cover the interest 23

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Complaint

that Defendants charged resulting in an increase in (he amount of principal Plaintiff owed on their 2 homes.

3 103. Defendants unfairly Interfered with Plaintiff rights to receive the benefits of the 4 contract. These loans will cost Plaintiff thousands of dollars more than represented by

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Defendants. Plaintiff did not receive the fixed low interest rate home loan promised them by Defendants. Defendants have caused Plaintiff to lose equity in their homes and therefore have denied Plaintiff the enjoyment, security of one of their most important investments.

104. Plaintiffs. on the other hand, did all of those things the contract required of them.

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Plaintiff made monthly payments in the amount required by the terms ofthe Note and reflected in 10

the payment schedule prepared by Defendants. 11

105. At an times relevant, Defendants unreasonably denied Plaintiff the benefits

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promised to them under the telTI1S of the Note, including but not limited to a low interest rate for the first three (3) 10 five (5) years of the loan, and clear and conspicuous disclosure of a payment amount sufficient to pay both principal and interest so as to avoid negative amortization and other failures to comply with the disclosure requirements managed by TILA, 15 U.S.c. § 1601, et seq., Regulation Z and Official Staff Commentary issued by the

Federal Reserve Board.

106. Knowing the truth and motivated by profit and market share, Defendants have knowingly and willfully breached the implied covenant of good faith and fair dealing by engaging in the acts and/or omissions to mislead and/or deceive Plaintiff and others similarly situated alleged herein.

107. Defendants' tortuous breaches, as: alleged herein were committed with willful and wanton disregard for whether or not Plaintiff or others similarly situated would actually receive a home loan that would provide the promised low interest and payment rate tor the first three (3) to five (5) years of the loan sufficient to pay both principal and interest.

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Complaint

108. Upon information and belief and at all times relevant, Defendants possessed full 2 knowledge and information concerning the above facts about the ARM loans, and otherwise sold 3 these ARk! loans in the State of California.

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109. Defendants" placing of their corporate and/or individual profits over the rights of others is particularly vile, base, contemptible, and wretched and said acts and/or omissions were performed on the part of officers, directors, and/or managing agents of each corporate Defendant and/or taken with the advance knowledge of the officers, directors, and/or managing agents who authorized and/or ratified said acts and/or omissions. Defendants thereby acted with malice and complete indifference to and/or conscious disregard for the rights and safety of others, including Plaintiff and the General Public.

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110. At all times relevant, Defendants' conduct, as alleged herein, were malicious, oppressive, and/or fraudulent.

111. As a result of Defendants' conduct, Plaintiff has suffered harm. Plaintiff has incurred additional charges to their principal loan balance. Plaintiff have incurred and will continue to incur additional interest charges on the principal loan balance and surplus interest added to Plaintiff principal loan balance. Furthermore, Defendants' breach has caused andlor otherwise placed Plaintiff in danger of losing their homes 'through foreclosure and, as a direct and proximate result of said misconduct. caused Plaintiff' principal loan bal ances to increase limiting these consumers' ability to make their future house payments or obtain alternative home loan financing.

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IX.

FIFTH CAUSE OF ACTION QrIT TITLE

(As Against All Defendants)

112. Plaintiff incorporates Paragraphs 1 through 45 of the General Allegations as though

such have been fully set forth herein.

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Com plaint

113. Plaintiff is the sole owner of certain real properly as stated in Paragraph L of the.

2 General Allegations.

114. Plaintiff Anthony J. \.far1in, and was seased by deed oftitle to the SUBJECT PROPERTY on or about, 02/09/2006 which deed forms the basis of her right to claims of title in the SUBJECT PROPERTY, and which deed was recorded in the Office of the County Recorder, in the County of STANISLAUS State of California.

115. Plaintiff Anthony J. Martin, was seised by a grant deed, on or about, 02/09/2006,

which forms the basis of her right to claims of title in the SUBJECT PROPERTY. and which deed was recorded in the Office of the County Recorder, in the County of STA~ISLAVS, State of

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California.
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116. x.

SIXTH CAUSE OF ACTION IN.nJCTION

(As Against All Defendants)

Plaintiff allege that Defendants DOWNEY SAVINGS AND LOAN

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ASSOCIATION Fer LENDER SERVICES INC.

, and Does 1-10 have no such rigbt, title or

interest in the estate of the Property in that if a Trustee's sale is proposed it will be fraudulent or otherwise in violation of federal and state law and transfer no rights to Defendants.

117. Defendants have wrongfully interfered with or threaten to interfere with Plaintiff's use and enjoyment of the Property in that they threaten to dispossess them.

118. Defendants don't have, possess, or have in its control, nor have any whereabouts of the original Note and Deed of Trust signed by Plaintiff with its original signature affixed to the same, witnessed before a Notary with his/her original signature and stamped seal.

119. Defendants' threats to dispossess Plaintiff of their home will continue unless and

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., , , .

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Cornplalnt

until enjoined or restrained by this Honorable Court.

120. Failure to enjoin or restrain Defendants will cause Plaintiff grave and irreparable

3 harm as she will be deprived of the use and enjoyment of unique property.

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12L Plaintiff has no adequate remedy at law for the threatened and continuing conduct of an impending Trustee's sale. The sale of Plaintiff's home will not be properly compensated by an award of money damages.

122. Plaintiff further alleges that the conduct herein described is of such a nature and character to give her title to the Property

123. "!HEREFORE~ Plaintiff is entitled to declaratory reliet: all damages proximately caused by Defendants' breach of the implied covenant of good faith and fair dealing as alleged herein, punitive damages. pre-judgment interest, costs of suit and other relief as the Court deems just and proper,

PRAYER FOR RELIEF

"'lIEREFORE, Plaintiff prays for judgment against each Defendant, Jointly and

severally, as follows:

A. For actual damages according to proof:

B. For compensatory damages as permitted by law;

C. For consequential damages as permitted by law;

D. For statutory damages as permitted by law;

E. For punitive damages as permitted by law;

F. For rescission:

G. For equitable relief, including restitution;

H. For restitution disgorgement of all profits Defendants obtained as a result of their unfair competition;

I. For interest as permitted by law,

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2B

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.............. " ...

...... .. , _ , - - .

1

••••• ••••••• _._ •• L" •• " •••••• ,_ • , ••••••••••••• " ,_ ••••• __ .,", •• "'.'" ., ••••••

J. For Declaratory Relief;

K. A Mandatory Injunction and order, requiring Defendant to Reinstate Plaintiffs On title

to their Property. and a restraining order preventing Defendants and his, hers, or its agents, employees, officers, attorneys, and representatives from engaging in or

performing any of the Following acts: (i) offering, or advertising this property for sale

and (ii) attempting to transfer title to this property.

L. For reasonable attorneys' fees and costs; and M, For such other relief as is just and proper.

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DA TED July 9, 2009
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Anthony J. Martin Plaintiff, In Pro Per

2B

Complaint

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Complaint

VERIFICA nON

I, Anthony J. Martin, declare:

I am the Plaintiff of record, I have read the within pleading, and on information and belief, believe that the matters therein to be true and on that ground allege that the matters stated therein are true. Executed in Modesto, California

DATED: Ju1y 9, 2009

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