Judge James C. Chalfant, Case Number: 24STCV09252, Date: 2024-06-11 Tentative Ruling

Plaintiff Rasheeda Garner (“Garner”) applies for a preliminary injunction enjoining Defendant Bank of America N.A. (“Bank”) from foreclosing on the real property located at 2923 S Victoria Ave., Los Angeles, CA 90016 (“Property”).

The court has read and considered the moving papers, opposition,[1] and reply and renders the following tentative decision.

Plaintiff Garner commenced this proceeding on April 12, 2024. Garner filed the First Amended Complaint (“FAC”) on April 25, 2024, against Defendants Bank, Val-Chris Investments, Inc. (“Val-Chris”), and California TD Specialists (“CA TD”), alleging causes of action for violation of (1) Civil Code section 2923.6, (3) Civil Code section 2923.7, (3) Civil Code section 2924c, and (4) Bus. & Prof. Code sections 17200 et seq. The verified FAC alleges as follows.

On August 22, 2003, Plaintiff Garner inherited the Property and has resided in it for over 20 years.

On August 2, 2007, Garner took out a loan for $520,000 and concurrently executed a Deed of Trust (“DOT”) as security for the note. Defendant Bank is the servicer of the loan.

On March 23, 2023, Garner took out a second position loan for $430,000 with Defendant Val-Chris.

In May or June 2023, Garner’s ability to pay the loans was impacted. She contacted Bank and requested forbearance on its loan. Bank granted Plaintiff a three-month forbearance on her loan. In September 2023, Garner called Bank to request an extension to her forbearance period. A representative from Bank informed Garner over the phone that she would be approved for an extension. She was later informed that she had been denied an extension.

On August 15, 2023, Garner requested a reinstatement demand from Val-Chris. On November 30, 2023, a Notice of Default (“NOD”) was recorded on the Property for the Val-Chris loan. After the NOD was recorded, Garner asked Val-Chris to refinance the loan. She was informed that Val-Chris would look into refinancing her loan, but eventually it refused.

In December 2023 or January 2024, Garner submitted a loan modification application to Bank. Since then, Bank has been requesting documents periodically from Garner and she has complied by sending more documentation.

On March 6, 2024, Garner secured a lender to refinance both loans and received a letter of intent for a payoff. However, on March 14, 2024, a Notice of Trustee’s Sale (“NOS”) was recorded on the property for the Bank loan. Garner was under the impression that she was in active loan modification review with Bank. After the NOS was recorded by Bank, the lender Garner which had intended to refinance both loans backed out.

On March 20, 2024, Plaintiff received a reinstatement calculation from Bank with an offer good through April 17, 2024.

On March 21, 2024, Defendant Val-Crhis recorded a NOS on the Property. Defendant CA TD is the Trustee.

On March 22, 2024, Plaintiff sent a letter to Bank informing it that she is in active modification review, has been responding to each request for information, and that she would like to work out a loan modification plan. On April 5, 2024, Bank requested more documentation, and she submitted the information on April 11, 2024. To date, Garner has never received a modification denial letter from Bank and has continuously been asked to provide more documentation.

On April 15, 2024, Garner requested a second reinstatement demand from Defendant Val-Chris to reinstate the loan. She received a demand for payoff from Val-Chris totaling $499,851.21 to be paid by April 30, 2024. Garner’s agent informed Val-Chris that she was requesting a reinstatement demand, not a payoff demand. Val-Chris would not offer a reinstatement on the loan because the sale was within five business days.

Deficiencies in Bank’s Loan Assistance Department have deprived Garner of the chance to cure her loan’s delinquency and be evaluated for a loan modification. Deficiencies in Val-Chris’ loan department have left Garner’s attempts at reinstatement have gone unanswered. As a result of both failures, she stands to lose her home.

On April 16, 2024, the court granted Garner’s ex parte application for temporary restraining order (“TRO”) enjoining Bank’s trustee sale set to occur on April 18, 2024, and issued an order to show cause re: preliminary injunction (“OSC”).

According to proofs of service on file, Bank was personally served with the Summons and Complaint on April 15, 2024. The moving papers were served on Bank via email on April 17, 2024. There are no proofs of service on file for Defendants Val-Chris and CA TD.

On April 25, 2024, Bank requested a continuance of the OSC hearing under CCP section 527(d)(4). The request was granted and the OSC hearing was continued to the instant date.

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.[2] 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).[3] 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, (1974) 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 damages” 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.

Garner inherited the Property on August 22, 2003, and she has resided in it for over 20 years. Garner Decl., ¶4.

On August 2, 2007, Garner took out a loan for $520,000 and concurrently executed a DOT as security for the note. Garner Decl., ¶5. Defendant Bank is the servicer of the loan. Garner Decl., ¶5.

In May or June 2023, Garner requested from Bank, and was granted, a three-month forbearance on her loan. Garner Decl., ¶7. In September 2023, Garner requested an extension to her forbearance period and was told over the phone by a Bank representative that she would be approved for an extension. Garner Decl., ¶7. Later, she was denied an extension. Garner Decl., ¶7.

On December 7, 2023, Bank recorded a NOD on the Property. Garner Decl., ¶8, Ex. A.

In December 2023 or January 2024, Plaintiff submitted a loan modification application to Bank. Garner Decl., ¶9. Bank periodically has requested documents from Garner, and she complied by sending more documents. Garner Decl., ¶9.

On March 14, 2024, a NOS was recorded on the Property. Garner Decl., ¶10, Ex. B.

On March 20, 2024, Garner received a reinstatement calculation from Bank of $19,986.88, good through April 17, 2024. Garner Decl., ¶11, Ex. C.

On March 22, 2024, Bank sent a letter to Bank stating that she is in active modification review, has been responding to each request for information, and that she would like to work out a loan modification plan. Garner Decl., ¶12, Ex. D. Bank has not responded to any correspondence from Garner. Garner Decl., ¶12.

On April 5, 2024, Bank requested more documentation and Garner submitted the requested information on April 11, 2024. Garner Decl., ¶13.

To date, Garner has never received a modification denial letter and has continuously been asked to provide more documentation. Garner Decl., ¶14.

Garner now stands to lose her home on April 18, 2024 at the foreclosure sale. Garner Decl., ¶¶15, 17.

Garner filed a voluntary petition in bankruptcy court on April 29, 2024. RJN Ex. 1. Garner’s bankruptcy schedules were filed on May 13, 2024. RJN Ex. 2. Garner’s Chapter 13 bankruptcy plan was filed on May 13, 2024. RJN Ex. 3.

Plaintiff Garner seeks to enjoin Bank’s foreclosure sale of the Property. Bank opposes.

Bank cites federal bankruptcy law as follows.[5] Opp. at 3-4. The ownership rights of the debtor in the property of the estate are limited. In re Aneiro, (Bankr. S.D. Cal. 1987) 72 B.R. 424, 429-30 (citation omitted). “As a general matter, upon the filing of a petition for bankruptcy, ‘all legal or equitable interests of the debtor in property’ become the property of the bankruptcy estate and will be distributed to the debtor’s creditors. [11 U.S.C.] section 541(a)(1).” Rousey v. Jacoway, (20050 544 U.S. 320, 325.

A Chapter 13 debtor has concurrent standing with the bankruptcy trustee to pursue state claims. Calvin v. Potter, (ND. Ill. 2009) 2009 WL 2588884 at *2. However, a Chapter 13 debtor has standing to prosecute legal claims only to the extent the debtor brings those claims for the benefit of the estate, and not for the debtor’s benefit. Miller v. Greenleaf Orthopaedic Assoc., (N.D. Ill. 2012) 2012 WL 4049409 at *6. "A Chapter 13 debtor . . . has standing to bring a claim in his own name for the benefit of the bankruptcy estate, but not for his own personal benefit. Where, as here, a Chapter 13 debtor has not disclosed legal claims in his bankruptcy proceeding, he cannot claim to be bringing them for the benefit of his estate." King v. Indiana Harbor Belt R.R. Co., (N.D. Ind. Mar. 30, 2018) 2018 U.S. Dist. LEXIS 54288, 2018 WL 1566821 at *3.

Bank argues that Garner’s Bankruptcy Plan does not reference this lawsuit and does not specify that any non-exempt proceeds from the lawsuit will be distributed among the unsecured creditors. As such, Garner is attempting to pursue the claims for her own benefit, rather than that of the estate. Opp. at 3-4.

Garner replies that Rousey v Jacoway was a Chapter 7 bankruptcy case, and a Chapter 13 debtor has concurrent standing with the bankruptcy trustee to pursue state claims. Calvin v. Potter, (ND. Ill. 2009) 2009 WL 2588884 at *2. A Chapter 13 bankruptcy estate encompasses all property, including legal claims, acquired after the petition is filed and before the case is closed. Rainey v. United Parcel Service, Inc., (7th Cir. 2012) 466 F. App'x 542, 544. Debtors have an ongoing duty to disclose and schedule newly acquired assets while the bankruptcy case is open. Id. at 544. Reply at 2.

Under bankruptcy rules, a voluntary petition, list, schedule, or statement may be amended by the debtor as a matter of course at any time before the case is closed. Garner’s bankruptcy case is open and can still be amended. On May 31, 2024, the 341(a) Meeting of Creditors was continued to June 25, 2024. The schedules in Garner’s bankruptcy case are in the process of being amended and there is no confirmed plan yet. Therefore, Plaintiff has standing. Reply at 2-3.

Garner may have the right to amend her Schedules and Bankruptcy Plan, but she has yet to do so. She also fails to explain why this case was not listed on them initially. As of right now, Garner lacks standing to pursue a preliminary injunction.

A preliminary injunction may not issue without some showing of probability of success. Doe v. Wilson, supra, 57 Cal.App.4th at 304. Garner asserts that Bank violated the Homeowners Bill of Rights (“HOBR”) by recording a NOS before providing her with a written determination on her loan modification application (Civil Code §2923.6) and failing to provide her with a single point of contact (Civil Code §2923.7). She further asserts that she is likely to prevail on her unfair business practice claim (Bus. & Prof. Code §17200).

Bank argues that the HOBR does not apply to “[a]n individual who has filed a case under Chapter 7, 11, 12, or 13 of Title 11 of the United States Code and the bankruptcy court has not entered an order closing or dismissing the bankruptcy case, or granting relief from a stay of foreclosure.” Civil Code §2920.5(c)(2)(C). Since Garner is currently engaged in an active Chapter 13 bankruptcy, she cannot avail herself to the protections of the HOBR. Opp. at 6.

Garner replies that she can assert HOBR claims that arose when she was not in bankruptcy. In Morris v. JP Morgan Chase Bank, N.A., (“Morris”) (2022) 78 Cal.App.5^th 279, the court noted that, for HBOR to apply, the plaintiff would need to allege that she was not in active bankruptcy during the relevant time because section 2920.5(c)(2)(C) excludes an individual who is pursuing such a proceeding from the definition of a “borrower” authorized to bring claims asserting HBOR violations. Id. at 289. The court determined that the borrower adequately alleged that she was a statutorily recognized “borrower” under the HBOR because the bank’s violations occurred in between the borrower’s second and third bankruptcies, and its resumption of the foreclosure process and the loan servicer’s conduct of the sale took place after the stay was lifted on the third bankruptcy. Id. at 297. Reply at 5.

Garner filed for Chapter 13 bankruptcy on April 29, 2024, three weeks after filing this lawsuit. Bank’s violations occurred prior to her bankruptcy filings, and she is protected under the HBOR. Reply at 5.

Garner in part miscites Morris, which was referring to the trial court’s ruling when it stated that the plaintiff would need to allege that she was not in active bankruptcy. Id. at 289. Nonetheless, the appellate court’s analysis supports Garner by stating that the HOBR provisions apply to a borrower (Civil Code §3924.12(a)), the definition of a “borrower” excludes a person in bankruptcy (Civil Code §2920.5(c)(1)), and the plaintiff could make a HOBR claim for the periods she was not in active bankruptcy. Id. at 298-99. Based on Morris, if Garner has concurrent standing with the bankruptcy trustee to pursue state claims, she can pursue HOBR claims that arose when she met the definition of borrower under Morris.

Civil Code section 2923.6 provides that if a borrower submits a complete application for a first lien loan modification offered by the bank or loan servicer, the bank may not record a notice of default, notice of sale, or conduct a trustee’s sale while the application is pending. Civil Code §2923.6(c). An application is complete when all documents required by the bank are submitted within a reasonable time frame specified by the bank. Civil Code §2923.6(h); Valbuena v. Ocwen Loan Servicing, LLC, (2015) 237 Cal.App.4^th 1267, 1273. Before proceeding with foreclosure, the bank must make a written determination that the borrower is not eligible for a loan modification and must give the borrower at least 30 days from the written denial to appeal and provide evidence that the determination was in error. Civil Code §2923.6(d). If there is an appeal, the bank must deny the appeal and wait another 15 days to proceed with foreclosure. Civil Code §2923.6(e)(2). The anti-dual tracking provisions do not apply to borrowers who have already been evaluated for a modification unless the borrower documents a material change in financial circumstances. Civil Code §2923.6(g).

Garner presents evidence that she inherited the Property and has resided there for 20 years. She submitted a complete loan modification package to Bank in December 2023 or January 2024 and has been in active loan modification review since then. She has received numerous requests for more information and has provided the information requested. She has yet to receive a denial of her loan modification application. Despite this fact, Bank recorded an NOS on March 14, 2024. Garner concludes that this is a per se violation of Civil Code section 2923.6. App. at 4-5.

Bank responds that Civil Code section 2923.6 only applies to a complete loan modification application and an application is not complete until the borrower has supplied all required documents within a reasonable timeframe. Civil Code §2923.6(h). Bank argues that Garner does not allege that she submitted a complete loan application, and the fact that she is still submitting documents indicates otherwise. Opp. at 4-5.

It is true that Garner does not expressly state that the loan modification application she submitted in December 2023 or January 2024 was complete. The court would like to have seen the application itself attached as an exhibit to evaluate its completeness. On the other hand, there is no evidence or even an indication from Bank that the application is not complete. The fact that Bank has periodically asked Garner for documents does not mean the application is incomplete. Lenders are notorious for asking for the same documents repeatedly.[6]

Although it is barely true, Garner has shown a reasonable probability of success on the merits that she has a claim under Civil Code section 2923.6.

Civil Code section 2923.7 requires that the mortgage servicer establish a single point of contact for a borrower who requests a foreclosure prevention alternative. That single point of contact is responsible for communicating the process, coordinating receipt of all required documents, and having access to individuals with the ability to stop foreclosure proceedings when necessary.

Garner asserts that she was never provided with a single point of contact, both for her loan modification application and for all its statutory duties. Mot. at 5. She provides no evidence on this issue. Bank argues that the active review of her loan application suggests otherwise. Opp. at 5.

Garner has not shown a reasonable probability of success on her claim under Civil Code section 2923.7.

Garner alleges a cause of action for violation of Business and Professions Code section 17200. This section prohibits any unlawful, unfair, or fraudulent business practice. Each of the three prongs is an independent basis for relief. Smith v. State Farm Mutual Automobile Insurance Co., (2001) 93 Cal.App.4^th 700, 718. Unlawful conduct is defined as any practice forbidden by law. Farmers Ins. Exchange v. Superior Court, (1992) 2 Cal.4^th 377, 383. A business practice is unfair when it violates the spirit of a law, or an established public policy. People v. Casa Blanca Convalescent Homes, Inc., (1984) 159 Cal.App.3d 509, 530.

Because Garner is likely to prevail on her claims under Civil Code section 2923.6, she is also likely to prevail on her claim under the unfair competition law. Bank argues that Garmer must establish injury-in-fact by the loss of money or property (Opp. at 7), but it is self-evident that she has done so because she will lose the Property.

The court must balance the irreparable harm that Garner is likely to sustain if the injunction is denied as compared to the harm that Bank is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., supra, 63 Cal.App.4th at 1402; Pillsbury, Madison & Sutro v. Schectman, supra, 55 Cal.App.4th at 1283.

Garner alleges that she will suffer irreparable harm if the foreclosure sale is permitted to go forward because she stands to lose her residence. The law presumes that the loss of a personal residence is irreparable harm. App. at 7-8. Bank, on the other hand, will not suffer any loss beyond a delay in the foreclosure should it prevail in the lawsuit.

The application for preliminary injunction is denied because Garner lacks standing to present her claim. If she cures the defect in her bankruptcy before the hearing, the preliminary injunction will be granted.

If so, the court must impose a bond on Garner for the preliminary injunction. The purpose of a bond is to cover the defendant’s damages from an improvidently issued injunction. CCP §529(a). In setting the bond, the court must assume that the preliminary injunction was wrongly issued. Abba Rubber Co. v. Seaquist, (“Abba”) (1991) 235 Cal.App.3d 1, 15. The attorney’s fees necessary to successfully procure a final decision dissolving the injunction also are damages that should be included in setting the bond. Id. at 15-16. While Abba reasoned that the plaintiff’s likelihood of prevailing is irrelevant to setting the bond, a more recent case disagreed, stating that the greater the likelihood of the plaintiff prevailing, the less likely the preliminary injunction will have been wrongly issued, and that is a relevant factor for setting the bond. Oiye v. Fox, (2012) 211 Cal.App.4^th 1036, 1062. The court has authority to waive a bond if it determines that the principal is indigent and unable to obtain sufficient sureties. CCP §995.240; Conover v. Hall, (1974) (court has the power to dispense with bond requirements intended to protect an adversary’s financial interests). If a bond is required, the court will discuss the amount of the bond with the parties at the hearing.

[1] Bank failed to provide the court with a courtesy copy of its opposition, including its 82-page Request for Judicial Notice, in violation of the Presiding Judge’s First Amended General Order on Electronic Filing. Bank’s counsel is admonished to provide courtesy copies in all future matters in this case.

[2] 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.

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

[4] Bank’s request for judicial notice of Garner’s bankruptcy filings (Exs. 1-3) is granted. Evid. Code §452(d).

[5] The parties address this standing argument by citing to federal cases without providing hard copies to the court. While CRC 3.1113(i) does not mandate hard copies of non-California authority without a court order, it is a good practice to provide them to the court.

[6] Bank notes (Opp. at 5-6) that a HOBR violation will not support a preliminary injunction unless it is material. Civil Code §2924.12(a)(1). A material violation is one where “the alleged violation affected a plaintiff's loan obligations or the modification process.” Cornejo v. Ocwen Loan Servicing, LLC, (E.D. Cal. 2015) 151 F.Supp.3d 1102, 1113. Plainly, Bank’s failure to act on Garner’s loan modification application before foreclosure is a material violation.