Judge Colin Leis, Case 22AHCV00649 2022-09-30 Tentative Ruling

The court considered the moving papers, response, and reply filed in connection with the order to show cause.

Plaintiffs Eva Neumann (“Neumann”) and Jianying Wu filed this action on September 7, 2022, against Defendant Selene Financing, LP (“Selene”) and U.S. Bank Trust National Association, as Trustee for ABS Loan Trust V (“US Bank”). The complaint asserts causes of action for (1) violation of Civil Code § 2923.5; (2) violation of Civil Code § 2924(a)(1); (3) violation of Civil Code § 2923.6(c), (4) violation of Civil Code § 2923.7, (5) violation of Civil Code § 2924.9, (6) violation of Civil Code § 2924.10, (7) violation of Business and Professions Code section 17200, (8) cancellation of written instruments, and (9) wrongful foreclosure.

This action arises out of the foreclosure sale of Plaintiffs’ home, the real property located at 661 W. Lemon Avenue, Arcadia, California 91007. Plaintiffs executed a Note on May 23, 2007 in favor of Bank of America for the principal amount of $411,000. (Fox Decl., ¶ 9, Ex. A.) The Deed of Trust for the mortgage loan was recorded on June 28, 2007. (Plaintiffs’ Ex. A; Fox Decl., ¶ 10, Ex. B.) On May 22, 2019, the Trustee recorded a Notice of Default and indicating that Plaintiffs had been in default since March 1, 2016. (Fox Decl., ¶ 12, Ex. D.) Servicing of the mortgage was transferred to Selene on or about May 1, 2020. (Fox Decl., ¶ 13, Ex. E.) On June 27, 2022, the Trustee recorded a Notice of Trustee’s Sale of the Property. (Plaintiffs’ Ex. L; Fox Decl., ¶ 20, Ex. L.) On August 24, 2022, the home was sold at a foreclosure sale. (Fox Decl., ¶¶ 21-22, Exs. M, N.)

On September 12, 2022, pursuant to an ex parte application filed by Plaintiffs, the court issued a temporary restraining order prohibiting Defendants from recording a Trustee’s Deed Upon Sale against Plaintiff’s home. The court also issued an order to show cause why a preliminary injunction should not be issued.

“To obtain a preliminary injunction, a plaintiff ordinarily is required to present evidence of the irreparable injury or interim harm that it will suffer if an injunction is not issued pending an adjudication of the merits.” (White, supra, 30 Cal.4th at p. 554.) “In evaluating interim harm, the trial court compares the injury to the plaintiff in the absence of an injunction to the injury the defendant is likely to suffer if an injunction is issued.” (Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 633.)

The court finds that Plaintiffs have established irreparable injury or harm. Plaintiffs contend that they will suffer irreparable injury if the foreclosure process is completed by allowing the recordation of a Trustee’s Deed Upon Sale.

A preliminary injunction must not issue unless it is “reasonably probable that the moving party will prevail on the merits.” (San Francisco Newspaper Printing Co. v. Superior Court (1985) 170 Cal.App.3d 438, 442.) The “likelihood of success on the merits and the balance-of-harms analysis are ordinarily ‘interrelated’ factors in the decision whether to issue a preliminary injunction.” (White v. Davis, supra, 30 Cal.4th at p. 561.) “The presence or absence of each factor is usually a matter of degree, and if the party seeking the injunction can make a sufficiently strong showing of likelihood of success on the merits, the trial court has discretion to issue the injunction notwithstanding that party's inability to show that the balance of harms tips in his favor.” (Ibid.)

On an order to show cause why a preliminary injunction should not issue, the burden is on the plaintiff to show all elements necessary to support issuance of a preliminary injunction. (O’Connell v. Superior Court (2006) Cal.App.4th 1452, 1481.)

Plaintiffs contend that they are likely to succeed on their claims for violations of the Homeowner Bill of Rights (“HBOR”). In support, Plaintiffs offer evidence that Neumann applied for a loan modification, but she never received a letter appointing a single point of contact, a 5-day acknowledgement of the application, requests for missing or additional documents, the “QWR,” or a debt validation. (Neumann Decl., ¶ 4.) Neumann applied for a loan modification “review” on or about July 19, 2022. (Neumann Decl., ¶ 6, Ex. N.) Neumann has not received any communications from Selene regarding a final decision on the loan modification application. (Neumann Decl., ¶ 7.) Plaintiffs argue that these actions (or omissions) constitute violations of the HBOR for the following reasons:

· Civil Code section 2923.6, subdivision (c) prohibits recording a notice of sale or conducting a trustee’s sale during the time a complete first lien loan modification application is pending.

· Civil Code section 2923.7 requires lenders or servicers to establish a single point of contact with the borrower.

· Civil Code section 2924.9 requires servicers to send a written communication to the borrower that contains foreclosure prevention alternatives within five business days after recording a notice of default.

· Civil Code section 2924.10 requires servicers to provide written acknowledgement of the receipt of modification applications within five business days of such receipt.

Selene counters that none of these violations are actionable because Plaintiffs underwent a full modification review that resulted in denial. Pursuant to Civil Code section 2924.12, subdivision (a), before a trustee’s deed upon sale has been recorded, a borrower may bring an action for injunctive relief to enjoin a material violation of Civil Code sections 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. Any such injunction shall remain in place until the court determines that the servicer has corrected and remedied the violation(s). (Civ. Code, § 2924.12(a)(2).) Moreover, a mortgage servicer is not liable for violations that it has corrected and remedied prior to the recordation of the trustee’s deed upon sale. (Civ. Code, § 2924.12(c).) Although there is no competent evidence (from Plaintiffs) that Plaintiffs’ application was received, assessed, and denied, Plaintiffs’ moving papers argue that Plaintiffs applied for a modification in January 2022, that they were offered a trial payment plan (“TPP”), that they made the first two payments but missed a third payment, and that the TPP offer was then canceled. (Mot., p. 4:10-17.) More important, these facts about the TPP are made in Plaintiffs’ verified complaint. Therefore, it is Plaintiffs’ burden as the moving party for a preliminary injunction to explain how these facts do not render the HBOR claims defective. Plaintiffs allege in the complaint that they discussed “the denial of the permanent modification” with someone, presumably Selene. (Compl., ¶ 25.) And although Plaintiffs contend that they should have been sent a denial letter and an opportunity to dispute the denial, Plaintiffs point to no statute that requires this.

Based on the evidence presented, the court finds that Plaintiffs have failed to establish a likelihood of success on the merits of their HBOR claims. Plaintiffs base their unfair business practices claim (Business and Professions Code section 17200), the cancellation of instruments claim, and the wrongful foreclosure claim, in part, on the alleged HBOR violations. Because Plaintiffs have not demonstrated that they are likely to succeed on any of their HBOR claims, the court finds that the unfair business practices claim, the cancellation claim, and the wrongful foreclosure claim are unlikely to succeed to the extent that they are based on HBOR violations.

The causes of action for unfair business practices, cancellation of instruments, and wrongful foreclosure are also based, in part, on violations of Civil Code section 2923.5, Civil Code section 2924(a)(1), Civil Code section 2934a(a)(1), and Civil Code section 2924a(e)[1]. (Compl., ¶¶ 78(e), 88, 91.)

First, because the foreclosure sale has already taken place, a violation of Civil Code section 2923.5 is non-actionable. (Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 235 [“There is nothing in section 2923.5 that even hints that noncompliance with the statute would cause any cloud on title after an otherwise properly conducted foreclosure sale. We would merely note that under the plain language of section 2923.5, read in conjunction with section 2924g, the only remedy provided is a postponement of the sale before it happens.”].)

Second, Civil Code section 2924(a)(1) authorizes a notice of default to be filed by the trustee, but “only at the direction of the person or entity that currently holds the note and the beneficial interest under the deed of trust—the original beneficiary or its assignee—or that entity’s agent.” (Yvanonva v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 927.) Plaintiffs argue that the beneficiary could not have authorized the recording of the notice of default because it was “never put into the subject trust before the closing date of the trust.” (Mot., p. 9:6-8.) But the court finds no irregularity with the notice of default. On November 28, 2018, an assignment of the deed of trust was recorded, assigning the beneficial interest in the deed of trust to Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust, not Individually but as Trustee for Pretium Mortgage Acquisition Trust (“Wilmington”). (Plaintiffs’ Ex. E.) The May 22, 2019 notice of default shows that the beneficiary is Wilmington. (Fox Decl., ¶ 12, Ex. D.) As noted by Selene, Plaintiffs submitted a number of recorded documents (primarily assignments of deeds of trust) as exhibits, but almost all of the documents are unrelated to the operative deed of trust dated June 28, 2007. (Selene’s Resp., pp. 6:15-7:6.)

Third, Civil Code sections 2934a(a)(1) and 2934a(e) renders a foreclosure sale void if a trustee is substituted in without a properly recorded substitution of trustee. The original trustee was PRLAP, Inc. (Plaintiffs’ Ex. A.) On May 8, 2019, a substitution of trustee was recorded substituting Clear Recon Corp. for PRLAP, Inc. (Fox Decl., ¶ 11, Ex. C.) Clear Recon Corp. is the trustee on the notice of default. (Fox Decl., ¶ 12, Ex. D.) The court finds no irregularity here, either.

Accordingly, the court finds that Plaintiffs have failed to show likelihood of success on the merits of their claims for unfair business practices, cancellation of written instruments, and wrongful foreclosure.[2]

Weighing the likelihood of irreparable injury to Plaintiffs if the foreclosure process is completed with the fact that Plaintiffs have failed to show that they are likely to succeed on their claims, the court concludes that a preliminary injunction is not merited.

Based on the foregoing, the court denies Plaintiffs’ motion for preliminary injunction and the temporary restraining order is hereby dissolved.

[1] There is no Civil Code section 2924a(e). The court presumes that Plaintiffs mean Civil Code section 2934a(e).

[2] Incidentally, the court also notes that it is unclear whether Selene, as the mortgage servicer, or U.S. Bank, evidently a non-party to the loan/deed of trust, are the proper parties against which to direct an order to enjoin the recordation of a Trustee’s Deed Upon Sale.

EVA NEUMANN , et al.; Plaintiffs, vs. SELENE FINANCING, L.P. , et al., Defendants.	Case No.:	22AHCV00649

	Hearing Date:	September 30, 2022

	Time:	8:30 a.m.

	[TENTATIVE] ORDER RE: ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION