Judge Mitchell L. Beckloff, Case Number: 23STCV17477, Date: 2023-09-06 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 23STCV17477, Date: 2023-09-06 Tentative Ruling

Plaintiffs, Christopher M. Peterson and Carolina L. Petersen, seek a preliminary injunction enjoining Defendant, Trinity Financial Services, LLC, from “pursuing a non-judicial foreclosure/trustee’s sale of Plaintiffs’ residence . . . .” (Ex Parte App. 2:5.) Plaintiffs also seek an order requiring Defendant to “rescind the Notice of Default it recorded on title to Plaintiffs’ residence . . . .” (Id. at 1:25.) Defendant opposes Plaintiffs’ request.

Defendant’s evidentiary objections: Objections 2, 3, 4, 5, 11 and 13 are sustained. The balance of the objections are overruled.

On June 2, 2006, Plaintiff Christopher M. Peterson,[1] borrowed $95,000 from Alliance Bancorp (AB) and executed a deed of trust to secure the loan. The deed of trust was subordinate to another home loan. (Plaintiff Decl. ¶ 4.)

The deed of trust reflected Plaintiff as the borrower, AB as the Lender and the Mortgage Electronic Registration Systems, Inc. (MERS) “solely as nominee” for AB. (RJN Ex. 1.)

Soon after AB filed for bankruptcy protection, Plaintiff stopped receiving periodic statements for the loan. (Plaintiff Decl. ¶ 6.)

The Chapter 7 trustee filed his final account in the bankruptcy court on January 31, 2020. The trustee’s final account indicates he abandoned assets valued at over $14 million during the bankruptcy. (RJN Ex. 7.)

On September 2, 2015, MERS, as nominee for AB, assigned its beneficial interest in the deed of trust to USDV WH-1, LLC. (RJN Ex. 5.)

On October 21, 2015, USDV WH-1, LLC assigned its beneficial interest in the deed of trust to Defendant. (RJN Ex. 6.)

On May 10, 2023, Defendant substituted a new trustee, Entra Default Solutions, LLC (Entra), under the deed of trust. On June 1, 2023, Entra recorded a Notice of Default (NOD) indicating Plaintiff owed $189,030.63 on the note as of May 30, 2023.

On July 26, 2023, Plaintiffs filed a complaint alleging (1) slander of title; (2) cancellation of instruments; (3) violation of the homeowner bill of rights (HBOR); (4) violation of the Rosenthal Fair Debt Collection Practices Act (Rosenthal Act); (5) violation of the Fair Debt Buying Act (Fair Debt Buyer’s Acts); (6) violation of the Unfair Competition Law; (7) negligence; and (8) declaratory relief.

On August 15, 2023, this court issued its temporary restraining order enjoining any non-judicial foreclosure sale and set a hearing on an order to show cause why a preliminary injunction shall not issue.

The standards governing a preliminary injunction are well known. “[A] court will deny a preliminary injunction unless there is a reasonable probability that the plaintiff will be successful on the merits, but the granting of a preliminary injunction does not amount to an adjudication of the merits.” (Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 866.) “The function of a preliminary injunction is the preservation of the status quo until a final determination of the merits.” (Ibid.)

As the parties recognize, “Trial courts traditionally consider and weigh two factors in determining whether to issue a preliminary injunction. They are (1) how likely it is that the moving party will prevail on the merits, and (2) the relative harm the parties will suffer in the interim due to the issuance or nonissuance of the injunction.” (Dodge, Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 Cal.App.4th 1414, 1420.) “[T]he greater the . . . showing on one, the less must be shown on the other to support an injunction.” (Ibid. [quoting Butt v. State of California, (1992) 4 Cal.4th 668, 678].) The burden of proof is on the plaintiff as the moving party “to show all elements necessary to support issuance of a preliminary injunction.” (O'Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.)

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.) A plaintiff seeking injunctive relief must also show the absence of adequate damages remedy at law. (Code Civ. Proc., § 526, subd. (a)(4).)

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 Code Civ. Proc., § 529, subd. (a); City of South San Francisco v. Cypress Lawn Cemetery Ass’n. (1992) 11 Cal. App. 4th 916, 920.)

Plaintiffs argue they will prevail on the merits of their claims under the HBOR, slander of title and cancellation, the Rosenthal Fair Debt Collection Practices Act (RFDCPA) and Business and Professions Code section 17203. In large part, Plaintiffs’ claims are based on the notion Defendant has shown it has no legitimate interest in the deed of trust. Plaintiffs also argue assuming Defendant owns the note and deed of trust, Defendant violated the monthly account statement requirements of the Truth in Lending Act (TILA) at Regulation Z, 12 C.F.R. section 1026.5 by charging interest during those periods when Defendant (or its predecessors) did not provide Plaintiff with monthly statements. (Memo 2:15.)

It is undisputed Plaintiff is in default of his obligations under the loan. The NOD indicates Plaintiff owes more than $189,0000 on the note. Plaintiffs have provided no specific evidence otherwise and are silent on the issue. In fact, Plaintiffs do not allege how many payments, if any, they made on the loan obligation.

As noted, Plaintiffs’ action is grounded in their challenge to the various assignments of the deed of trust made after AB’s bankruptcy filing, and Defendant’s authority to initiate a non-judicial foreclosure. Plaintiffs claim: “It is clear that Trinity is trying to pull a fast one on the Court and Plaintiffs as it would not be possible for Trinity to have acquired this loan in the manner in claims to have acquired it.” (Reply 2:14-16.)

The law does not generally allow a preemptive attack on a non-judicial foreclosure. (Saterbak v. JPMorgan Chase Bank, N.A. (2016) 245 Cal.App.4th 808, 814.) Plaintiffs’ reliance on Yvanova v. New Century Mortgage Corp. (2016) 62 Cal.4th 919, 924 [Yvanova] is unavailing. Yvanova is “expressly limited to the post-foreclosure context.” (Saterbak v. JPMorgan Chase Bank, N.A., supra, 245 Cal.App.4th at 815.) “California courts do not allow [] preemptive suits because they ‘would result in the impermissible interjection of the courts into a nonjudicial scheme enacted by the California Legislature.’ ” (Id. at 814. See also Jenkins v. JPMorgan Chase Bank, N.A. (2013) 216 Cal.App.4th 497, 513; Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1155.)

Thus, to the extent Plaintiffs’ claims turn on Defendant’s authority to foreclosure based on an alleged invalid assignment, Plaintiffs are not entitled to relief.

Plaintiffs contend Defendant failed to comply with the requirements of the HBOR. More specifically, Plaintiffs argue Defendant “violated the HBOR at Civil Code § 2924.17(a) . . . .” (Memo 6:6.) Plaintiffs also assert Defendant violated Civil Code section 2924.17, subdivision (b).) Memo 6:11.) Plaintiffs state:

Plaintiffs’ residence is an “owner-occupied residential real property containing no more than four dwelling units” as defined by Civil Code § 2924.15(a) and they are “borrowers” as defined by Civil Code § 2920.5(c)(1). Trinity is a “mortgage servicer” as defined by Civil Code § 2920.5(a). Trinity’s conduct in attempting to collect from Plaintiffs and foreclosing on their home is therefore subject to the requirements of the HBOR. (Memo 6:15-19.)

Plaintiff claims Defendant “failed to meet the requirements of section 2924.17(a) as the Assignments of the Deed of Trust, Substitution, and Notice of Default it recorded on title were not accurate or supported by competent and reliable evidence.” (Memo 6:20-22.) Further, Plaintiffs allege Defendant “failed to review competent and reliable evidence to substantiate its right to foreclose, including the loan status and loan information, prior to recording the Assignments, Substitution and Notice of Default.” (Memo 6:22-24.)

Plaintiffs’ claim under the HBOR is unsupported by admissible evidence; in fact, Plaintiffs do not explain how Defendant “failed to meet the requirements” of the statute. (Memo 6:20.) Plaintiffs have provided no evidence concerning Defendant, or the steps taken by Defendant, if any, prior to initiating the non-judicial foreclosure process—issues directly relevant to their statutory claims. (Civ. Code, § 2927.17, subd. (a) [NOD “shall be accurate and complete and supported by competent and reliable evidence”], subd. (b) [before filing NOD “mortgage servicer shall ensure that it has reviewed competent and reliable evidence to substantiate the borrower’s default”].)

While Plaintiffs claim, Defendant’s “representations in the Assignment that the Loan and deed of trust were assigned in 2016 are false, . . .” there is no admissible evidence to support Plaintiffs’ assertion. Further, Plaintiffs do not demonstrate Defendant’s claim Plaintiff owes $189,030.63 as of May 30, 2023 is false; they offer no contrary analysis about missed payments, costs and expenses. (Reply 2:21-23.) They merely assert the NOD’s statements are false. (Memo 8:1-5.) Certainly, Plaintiffs cannot dispute Plaintiff borrowed money from AB, Plaintiff is in default on his obligations under the note.

Without admissible evidence to support their HBOR claim, Plaintiffs cannot prevail on the claim.

[To the extent Plaintiffs’ HBOR claim is based on an invalid assignment, as discussed earlier, such preemptive attack on a non-judicial foreclosure is not authorized under the law.]

Plaintiffs’ claim of slander of title and for cancellation of the deed of trust all turn on their position Defendant recorded false documents. (Memo 7:9-16 [“statements in those recorded documents are false”].) Again, Plaintiffs have not provided any admissible evidence the assignments, substitution of trustee or the NOD are false. Moreover, there is no dispute the loan is in default. This claim is also grounded in their belief Defendant has no authority to foreclose—an unpermitted preemptive attack on a non-judicial foreclosure sale as discussed earlier.

Further, even assuming Plaintiffs are legally entitled to make a preemptive attack on Defendant’s non-judicial foreclosure (even though they are not), the evidence they present is incomplete and therefore unpersuasive to demonstrate an improper assignment in favor of Defendant.

The trustee’s final account (RJN Ex. 7) does not support Plaintiffs’ underlying assumption AB owned the deed of trust “when the bankruptcy terminated in 2020.” (Memo 2:10.) Very little can be discerned from the trustee’s final account. (RJN Ex. 7.) The trustee’s final account does reveal the trustee abandoned property valued at over $14 million. (RJN Ex. 7.) It also reveals the trustee marshaled gross receipts of nearly $11 million. (RJN Ex. 7.) Thus, Plaintiffs do not demonstrate AB still “owned [the loan] when the bankruptcy terminated in 2020.” (Memo 2:10.)

Accordingly, Plaintiffs fail to demonstrate any ability to prevail on their slander of title or cancellation claims.

Again, Plaintiffs base their claim on Defendant’s acts of initiating a non-judicial foreclosure sale “when the sale of the residence was not permitted by law.” (Memo 8:20.) The court assumes Plaintiffs again rely on an allegedly invalid assignment. Plaintiffs’ claims are insufficiently developed. (See Saltonstall v. City of Sacramento (2015) 234 Cal.App.4th 549, 588. [“When a point is asserted without argument and authority for the proposition, ‘it is deemed to be without foundation and requires no discussion by the reviewing court.”])

While Plaintiffs purportedly rely on Civil Code sections 1788.13 and 1788.14 as grounds for their claims Defendant has violated the debt collection law, they provide no evidence of specific provisions of the sections violated by Defendant or evidence to support such violations. That is, Plaintiffs provide no evidence or analysis Defendant “falsely represent[ed] that Plaintiffs’ debt may be increased by the addition of fees when such fees could not be legally added to the existing debt,” (Memo 8:20-22) or that Defendant “attempt[ed] to collection from Plaintiffs amounts it allegedly incurred in collecting from Plaintiffs and other expenses such as late and foreclosure fees and interest, when not permitted by law.” (Memo 8:22-24.) Plaintiffs’ claims based on Civil Code section 1788.17 are similar. (See also Reply 5:6-6:5 [general law discussion].)

As Plaintiffs provide no cogent argument with supporting evidence, the court finds Plaintiffs have not demonstrated a likelihood of success on the merits of their claims.[2]

Plaintiffs’ reliance on Business and Professions Code section 17203 is unavailing given the claim is derivative of their other unpersuasive claims. That is, Plaintiffs contend Defendant’s alleged violations of “the HBOR, Rosenthal Act, Fair Debt Buyer’s Act, and other conduct” justifies injunctive relief. (Memo 10:10-11.) As Plaintiffs have not established a likelihood of success on the merits of those claims, they do not do so under Business and Professions Code section 17203.

Petitioner suggests the amount owed by Plaintiff as alleged in the NOD is inaccurate based on “TILA at Regulation Z, 12 C.F.R. § 1026.41(e)(6)(i)(B), . . . .” (Memo 2:17-18.) Plaintiffs explain: “a creditor may not retroactively assess fees or interest on a loan after ceasing delivery of periodic statements.” (Memo 2:18-19.) Plaintiffs argue: “[e]ven assuming that the Loan was assigned to [Defendant], Plaintiffs would not owe $189,030.63 as of May 30, 2023, as that includes interest accruing from 2008 to 2023.” (Memo 2:18-20.) Defendant does not address the claim.

Plaintiffs have provided no evidence, however, AB or any entity thereafter holding the note charged off the loan. In fact, Plaintiffs conceded “the ‘charge off’ exemption” does not apply. (Reply 3:9.) Plaintiffs otherwise provide no authority to suggest interest may not accrue on a loan where a lender fails to provide periodic statements as required by TILA. Plaintiffs provide no discussion of remedies available to them based on any failure to provide Plaintiff with periodic monthly statements of account.

On the evidence and argument provided, the court finds Plaintiffs have not demonstrated their claims under TILA support the causes of action in their complaint.

Based on the foregoing, the court finds Plaintiffs have demonstrated no ability to prevail on the merits of their claims. The court finds Plaintiffs claim are unsupported by the admissible evidence and the legal arguments asserted.

The second part of the preliminary injunction analysis requires the court to evaluate the harm the plaintiff is likely to sustain if the preliminary injunction is denied compared to the harm the defendant is likely to suffer if the injunction is issued. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70.) “However, ‘[a] trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim.’ ” (Law School Admission Council, Inc. v. State of California (2014) 222 Cal.App.4th 1265, 1280 [quoting Butt v. State of California (1992) 4 Cal.4th at 678].)

Defendant provides no discussion concerning the balance of harms. Accordingly, Defendant concedes the issue.

Plaintiffs argue if the court does not enjoin a nonjudicial foreclosure sale they will lose their home and be irreparably harmed. Plaintiffs also note Defendants will not suffer any financial harm as the property will serve as security for Plaintiff’s obligation.

While the court finds the balance of harms tips in favor of Plaintiffs, Plaintiffs are not entitled to a preliminary injunction here because they have not demonstrated any likelihood of success on the merits of their claims. (Law School Admission Council, Inc. v. State of California, supra, 222 Cal.App.4th at 1280.)

Based on the balancing of the likelihood of success on the merits and the parties’ competing harms, the court finds Plaintiffs have not demonstrated entitlement to a preliminary injunction during the pendency of the litigation. While Plaintiffs have demonstrated the balance of harm weighs in their favor, Plaintiffs have not demonstrated any ability to prevail on the merits of their claim.

[1] The court’s references to a single Plaintiff are to Plaintiff Christopher M. Peterson. At the time of the loan at issue herein, the property securing the loan was the sole and separate property of Plaintiff, a married man.

[2] Plaintiffs assert Defendant violated Civil Code sections 1788.10, subdivision (e), 1788.13, and 1788.17. Plaintiffs do not provide any factual analysis to support their contention. That is, Plaintiffs provide no analysis of the underlying note or deed of trust to explain why, for example, late fees, interest and foreclosure costs could not be added to the underlying debt.