Judge James C. Chalfant, Case 22STCV38723 2023-02-21 Tentative Ruling

Natalie Blanco-Mirsky v. Selene Finance LP, Wintrust Mortgage, and MTC Financial, Inc., 22STCV38723

Tentative decision on application for preliminary injunction: off calendar

Plaintiff Natalie Blanco-Mirsky (“Blanco-Mirsky”) applies for a preliminary injunction enjoining Defendants Selene Finance LP (“Selene”), Wintrust Mortgage (“Wintrust”), and MTC Financial, Inc. (“MTC”) from proceeding with the foreclosure sale of 2128 W 82nd St., Los Angeles CA, 90047 (“Property”).

The court has read and considered the moving papers and Defendant Selene’s supplemental declaration (no opposition or reply was filed) and renders the following tentative decision.

Plaintiff Blanco-Mirsky commenced this proceeding on December 12, 2022. The operative pleading is the First Amended Complaint (“FAC”) filed on February 15, 2023 alleging causes of action for (1) injunctive relief under Civil Code section 2924.12, (2) violations of Civil Code section 2923.6, (3) negligent misrepresentation, (4) fraud and deceit via intentional fraudulent misrepresentation, (5) violations of Business and Professions Code (“Bus. & Prof. Code”) section 17200 et. seq, and (6) general negligence. The FAC alleges in pertinent part as follows.

On December 27, 2019, Blanco-Mirsky executed a Deed of Trust for a first position mortgage against the Property. Selene is the current beneficiary and the mortgage servicer tasked with the day-to-day servicing of the subject loan.

Defendants failed to disclose material facts about the loan, such as the rate of interest, how the interest rate would be calculated, what the amortization schedule would be, the risks and disadvantages of the loan, the prepayment penalties, or the maximum amount of the monthly loan payment.

When Blanco-Mirsky’s business declined after a forced shutdown in response to the COVID-19 pandemic, it became difficult to maintain monthly mortgage payments. In May 2020, she contacted Selene to ask for help with the mortgage. She spoke to representative Norma Metcalf (“Metcalf”), who told her that laws were being passed to protect homeowners in similar situations due to the pandemic. Blanco-Mirsky qualified for a foreclosure alternative program. Metcalf told her to fill out and submit a Selene hardship application via email. She submitted this loan modification application with supporting financial documentation in July 2020. Two days later, Metcalf confirmed that Selene had received the application and would not advance foreclosure proceedings while the application was in review.

In the months that followed, Selene continuously sent requests for additional documentation that was the same documentation Blanco-Mirsky already had submitted. She still complied with all requests, as Selene acknowledged each time. During this period, Defendants continued to advance the foreclosure of the Property, and interest accrued to the point where the default amount became impossible for Blanco-Mirsky to cure.

On June 21, 2022, Defendants recorded a Notice of Default (“NOD”). On September 20, 2022, they recorded a Notice of Trustee’s Sale (“NTS”) despite the loan modification application still being in review. On January 4, 2023, Blanco-Mirsky received a letter stating that Selene denied her loan modification application for insufficient income. The letter did not state the monthly gross income and property value used to calculate the net present value. It also did not include a statement that the borrower may obtain all of the inputs used in the net present value calculation upon written request to the mortgage servicer.

The denial letter gave Blanco-Mirsky the right to file an appeal by January 22, 2023. She filed an appeal on January 20, 2023, but Defendants continued to advance foreclosure proceedings.

Blanco-Mirsky applied for relief under the California Mortgage Relief Program. She was approved for an $80,000 grant payable directly to Selene. Selene refused to accept it because this was not the full default amount. Had Selene reviewed the loan modification application in good faith and in a timely manner, the default amount would have been less than it is now and less than $80,000. Instead of working with Blanco-Mirsky, Defendants Selene and Wintrust decided to take advantage of the severe financial hardship stemming from the government-mandated shutdown of her business to foreclose and acquire the Property.

On February 13, 2023, Blanco-Mirsky filed for bankruptcy. This was one day before she otherwise would have lost her home in a trustee sale.

Blanco-Mirsky seeks a temporary restraining order (“TRO”), preliminary injunction, and permanent injunctions to prohibit Defendants from conducting a trustee’s sale of the Property. She also seeks compensatory, special, and general damages and restitution in an amount to be proven at trial, as well as civil, statutory, and punitive damages and attorney’s fees and costs.

On January 30, 2022, this court granted Blanco-Mirsky’s ex parte application for a TRO and Order to Show Cause (“OSC”) re: preliminary injunction enjoining foreclosure of the Property based solely on compliance with Civil Code section 2923.6(e)(2); the foreclosure could proceed if Defendants first provided proof of compliance.

On February 9, 2023, counsel for Selene and Wintrust filed a Notice and Acknowledgement of Receipt for the Complaint, Summons, and TRO.

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act. See Comfort v. Comfort (1941) 17 Cal.2d 736, 741. McDowell v. Watson (1997) 59 Cal.App.4th 1155, 1160.^{^[1]} It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al. (1939) 13 Cal.2d 424.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. See Scaringe v. J.C.C. Enterprises, Inc. (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp. (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).^{^[2]} Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. Ancora-Citronelle Corp. v. Green, 41 Cal.App.3d 146, 150. Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. See CCP §527(a). For this reason, a pleading alone rarely suffices. Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007). The burden of proof is on the plaintiff as moving party. O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist. (1992) 8 Cal.App.4th 1554, 1565. The concept of "inadequacy of the legal remedy" or "inadequacy of damage dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist. (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital (1994) 25 Cal.App.4th 628, 636. Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. Doe v. Wilson (1997) 57 Cal.App.4th 296, 304. The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Thornton v. Carlson (1992) 4 Cal.App.4th 1249, 1255.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn. (1992) 11 Cal.App.4th 916, 920.

On December 27, 2019, Blanco-Mirsky had her Deed of Trust for the Property recorded and secured a first lien mortgage loan. Blanco-Mirsky Decl., ¶7. The Property is owner-occupied and is her primary residence. Blanco-Mirsky Decl., ¶¶ 8-9.

In 2020, the government deemed Blanco-Mirsky’s business non-essential and ordered its shutdown. Blanco-Mirsky Decl., ¶10. This made it difficult to maintain monthly mortgage payments. Blanco-Mirsky Decl., ¶11. In May 2020, she contacted Selene to ask for help with the mortgage. Blanco-Mirsky Decl., ¶12.

She spoke to representative Metcalf, who claimed to be her single point of contact with Selene. Blanco-Mirsky Decl., ¶¶ 13-14. Metcalf told her that laws were being passed to protect homeowners in similar situations due to the pandemic and that Blanco-Mirsky qualified for a foreclosure alternative program. Blanco-Mirsky Decl., ¶¶ 15-16. Metcalf told her to fill out and submit a Selene hardship application via email. Blanco-Mirsky Decl., ¶16. She submitted this loan modification application in July 2020. Blanco-Mirsky Decl., ¶17. Two days later, Metcalf confirmed that Selene deemed the application complete and would not advance foreclosure proceedings while the application was in review. Blanco-Mirsky Decl., ¶¶ 18-22.

In the months that followed, Selene continuously sent requests for additional documentation that were for the same documentation Blanco-Mirsky already had submitted. Blanco-Mirsky Decl., ¶23. She still complied with all requests, and Selene acknowledged it each time only to ask for them again a few weeks later. Blanco-Mirsky Decl., ¶¶ 24-26.

During this period, Defendants continued to advance the foreclosure of the Property, and interest accrued to the point where the default amount became unattainable for Blanco-Mirsky. Blanco-Mirsky Decl., ¶¶ 29-30. Defendants had delayed the processing of the loan modification application to manufacture a scenario where foreclosure became inevitable. Blanco-Mirsky Decl., ¶31.

On June 21, 2022, Defendants recorded an NOD. Blanco-Mirsky Decl., ¶32, Ex. A. It listed the amount of the default as $114,802.77 as of June 17, 2022. Blanco-Mirsky Decl., ¶32, Ex. A. Blanco-Mirsky had 90 days before Selene could set a date of sale for the Property. Blanco-Mirsky Decl., ¶32, Ex. A. In that time, she could request an itemization of the entire amount to pay, which could be less than the amount of the default. Blanco-Mirsky Decl., ¶32, Ex. A.

On September 20, 2022, Defendants recorded an NTS set for October 25, 2022. Blanco-Mirsky Decl., ¶33, Ex. B. At the time, the loan modification application was still in review. Blanco-Mirsky Decl., ¶33.

On January 4, 2023, Blanco-Mirsky received a denial letter stating that her loan modification application was denied for insufficient income. Blanco-Mirsky Decl., ¶¶ 34-35, Ex. C. The letter claimed that the decision was based on information in a report from the listed consumer reporting agencies or from an affiliate or outside source other than a consumer reporting agency. Blanco-Mirsky Decl., ¶¶ 34-35, Ex. C. Blanco-Mirsky had the right to make a written request for disclosure of the nature of such information thereby obtained. Blanco-Mirsky Decl., ¶¶ 34-35, Ex. C. The denial letter did not itself state the monthly gross income and property value used to calculate the net present value. Blanco-Mirsky Decl., ¶35. It also did not include a statement that the borrower may obtain all of the inputs used in the net present value calculation upon written request to the mortgage servicer. Blanco-Mirsky Decl., ¶35.

The denial letter gave Blanco-Mirsky the right to file an appeal by January 22, 2023. Blanco-Mirsky Decl., ¶36, Ex. C. She filed an appeal on January 20, 2023. Blanco-Mirsky Decl., ¶¶ 37-38, Ex. D. Despite this fact, the trustee sale of the Property is still scheduled for January 31, 2023. Blanco-Mirsky Decl., ¶¶ 39, 47, Ex. E. As of the ex parte application, Blanco-Mirsky had not received a decision on her appeal. Blanco-Mirsky Decl., ¶40.

Blanco-Mirsky applied for relief under the California Mortgage Relief Program. Blanco-Mirsky Decl., ¶42. She was approved for an $80,000 grant payable directly to Selene. Blanco-Mirsky Decl., ¶42. Although this would have drastically reduced the default amount owed, Selene refused to accept it. Blanco-Mirsky Decl., ¶¶ 43-44.

On January 30, 2023, counsel for Selene emailed counsel for Blanco-Mirsky Selene’s letter that formally denied the appeal of its denial of her loan modification application. Labarre Decl., ¶2, Ex A. The letter said that she was ineligible for the reasons in the previous letter. Labarre Decl., ¶2, Ex A. It reiterated that it used information in a report from the listed consumer reporting agencies or from an affiliate or outside source other than a consumer reporting agency. Labarre Decl., ¶2, Ex A. These consumer reporting agencies played no part in the appeal decision. Labarre Decl., ¶2, Ex A.

Plaintiff Blanco-Mirsky seeks a preliminary injunction enjoining the Defendants from proceeding with foreclosure sale of the Property.

The FAC alleges that Blanco-Mirsky has filed for bankruptcy. The court has not been given notice of bankruptcy or an automatic stay. If she is in bankruptcy, this application and any foreclosure is stayed.

If for some reason Blanco-Mirsky is not in bankruptcy, the application is moot. In granting the TRO/OSC, the court determined that she only showed a probability of success on a claim for breach of Civil Code section 2923.6(e)(2), which prevents a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent from conducting a trustee’s sale until the later of 15 days after the denial of an appeal. Selene emailed Blanco-Mirsky a letter denying her appeal on January 30, 2023. Labarre Decl., ¶2, Ex A. Per Civil Code section 2923.6(e)(2), Defendants may conduct a trustee’s sale 15 days after the denial of the appeal. The OSC is therefore moot.

Because the court is uncertain whether Plaintiff is in bankruptcy, the OSC is taken off calendar rather than denied as moot.

^{^[1]}The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction--one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

^{^[2]}However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).