Bryan W. Hummel and Sandra M. Dahl Living Trust v. Rushmore Loan Managaement LLC et al

Filing 19

ORDER granting 18 Motion for TRO. TRO shall remain in effect until 6/15/2017 at 12:00 PM. Preliminary Injunction Hearing set for 6/14/2017 at 3:00 PM before the Honorable David G. Campbell, 401 W. Washington St., Courtroom 603, Phoenix, AZ 85003. Signed by Judge David G Campbell on 6/2/2017.(DGC, nvo)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Bryan W. Hummel and Sandra M. Dahl
Living Trust,

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Plaintiff,

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No. CV-17-08034-PCT-DGC
ORDER

v.
Rushmore Loan Management, LLC and
DiTech Financial, LLC,

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Defendants.

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The Brian W. Hummel and Sandra M. Dahl Living Trust (the “Trust” or

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“Plaintiff”) has filed a motion for temporary restraining order (“TRO”) seeking to enjoin

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Defendant Rushmore Loan Management, LLC from conducting a trustee’s sale of a home

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owned by the Trust scheduled for Monday, June 5, 2017. Doc. 18. For the following

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reasons, the Court will grant the TRO.

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I.

Background.

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Plaintiff is a living trust organized under the laws of Arizona. Doc. 1, ¶ 2. The

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Trust was created on September 19, 2007, and a certificate of trust was recorded with the

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Mohave County, Arizona Recorder’s Office (“Mohave County”) on October 22, 2007.

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Id. Plaintiff’s counsel Peter Dahl serves as successor trustee to the Trust. Id., ¶ 1. The

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Trust owns property located at 2692 Avenida Grande, Bullhead City, Arizona (the

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“Property”). Id. Defendants Ditech Financial, LLC and Rushmore are both foreign

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LLCs registered in the state of Delaware with offices in Maricopa County, Arizona. Id.,

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¶¶ 4-5.

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On June 26, 2004, Bryan Hummel and Sandra Dahl (collectively “Borrowers”)

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entered into a “mortgage/deed of trust/security deed/note” on the Property. Id., ¶ 7. The

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deed of trust (“DOT-1”) listed First National Bank of Arizona as the mortgage lender and

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Mortgage Electronic Registration Systems, Inc. (“MERS”) as the beneficiary. Id. On

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August 17, 2005, Borrowers entered into a second deed of trust (“DOT-2”) with

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Countrywide Bank. Id., ¶ 9. On August 25, 2005, DOT-2 was recorded in Mohave

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County. Id. On September 8, 2005, Borrowers paid off all debts secured by DOT-1 and

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obtained a “deed of release and reconveyance” from MERS, which was recorded in

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Mohave County. Id., ¶ 8.

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On February 26, 2007, Borrowers entered into a third deed of trust (“DOT-3”)

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with MERS as the beneficiary. Id., ¶ 11. On March 14, 2007, Borrowers paid off all

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debts secured by DOT-2 and obtained a “deed of release and reconveyance” from

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Countrywide Bank, which was recorded in Mohave County. Id., ¶ 10. On March 30,

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2007, DOT-3 was recorded in Mohave County. Id., ¶ 11.

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On September 19, 2007, Borrowers executed a warranty deed conveying the

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Property to the Trust “for consideration.”

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conveyance was recorded in Mohave County. Id. On February 21, 2008, Borrowers, “in

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their individual capacity and as husband and wife,” entered into another mortgage and

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deed of trust agreement (“DOT-4”) with Countrywide. Id., ¶ 15. On March 4, 2008,

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DOT-4 “was recorded with the Maricopa County Recorder.” Id. (emphasis in original).

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On March 17, 2008, Borrowers paid off all debts secured by DOT-3, and secured a deed

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of release and reconveyance from MERS, which was recorded in Mohave County.

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Id., ¶ 12.

Id., ¶ 13.

On October 22, 2007, this

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In January 2009, Borrowers “in their individual capacity defaulted on their

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obligations under [DOT-4.]” Id., ¶ 17. On February 17, 2009, Countrywide invoked the

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acceleration clause contained in the mortgage contract that accompanied DOT-4. Id. On

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May 25, 2011 – three years after entering into DOT-4 with Borrowers, and nearly four

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years after the Property was conveyed to the Trust – Countrywide recorded DOT-4 in

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Mohave County. Id., ¶ 16.

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In 2012, “Countrywide and its successor Bank of America, then assigned [DOT-4]

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to Ocwen Loan Servicing, LLC” (id., ¶ 18), which thereafter assigned DOT-4 to

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Residential Credit Solutions (id., ¶ 19). In September 2016, Residential Credit Solutions

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assigned DOT-4 to Defendant Ditech. Id., ¶ 20. In 2017, Ditech assigned DOT-4 to

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Defendant Rushmore. Id., ¶ 21. Currently, Rushmore “hold[s] [DOT-4] on the subject

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property and claims that it is owed $404,918.11.” Id., ¶ 22. Soon thereafter, Rushmore

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noticed a trustee’s sale for January 17, 2017, to be held at the Mohave County

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Courthouse in Kingman, Arizona. Id., ¶ 24. The trustee’s sale has been postponed on at

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least three occasions – once until February 27, 2017 (id., ¶ 25), then until April 10, 2017

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(Doc. 7), and subsequently until June 5, 2017 (Doc. 18).

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On February 23, 2017, the Trust initiated this action seeking a declaration that the

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Trust is the Property’s lawful owner and that Defendants are precluded from foreclosing

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on the Property because the statute of limitations for doing so has expired. See Doc. 1 at

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4-6. On April 6, 2017, Rushmore filed a motion to dismiss the Trust’s complaint.

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Doc. 13.

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considered by the Court. On June 1, 2017, the Trust filed this motion for a TRO.

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Doc. 18.

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II.

That motion is fully briefed (Docs. 14, 15, 16, 17) and currently being

Legal Standard.

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The standard for issuing a TRO is the same as that for issuing a preliminary

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injunction. Phillips v. Fremont Inv. & Loan, No. CV-09-2585-PHX-GMS, 2009 WL

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4898259, at *1 (D. Ariz. Dec. 11, 2009) (citing Brown Jordan Int’l, Inc. v. The Mind’s

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Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. Haw. 2007)). A plaintiff must show

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that (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm

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without an injunction, (3) the balance of equities tips in its favor, and (4) an injunction is

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in the public interest. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). “[I]f

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a plaintiff can only show that there are ‘serious questions going to the merits’ – a lesser

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showing than likelihood of success on the merits – then a preliminary injunction may still

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issue if the ‘balance of hardships tips sharply in the plaintiff’s favor,’ and the other two

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Winter factors are satisfied.” Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d 1281,

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1291 (9th Cir. 2013) (quoting All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135

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(9th Cir. 2011)). “Serious questions are ‘substantial, difficult and doubtful, as to make

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them a fair ground for litigation and thus for more deliberative investigation.’” Republic

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of the Philippines v. Marcos, 862 F.2d 1355, 1362 (9th Cir.1988) (en banc) (quoting

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Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1952)).

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III.

Analysis.

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The Trust’s complaint contains four counts: (1) Statute of Limitations,

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(2) Declaratory Relief, (3) Slander of Title and Trespass to Real Property, and

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(4) Common Law Fraud. Doc. 1 at 4-6, ¶¶ 1-26. The Trust asserts two reasons that that

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it is likely to succeed on the merits. First, DOT-4, which was effected by Borrowers in

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their individual capacity, “does not have any force and effect on the Trust which

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purchased the [P]roperty for consideration in 2007.” Doc. 18 at 3. Second, the Trust

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“has a reasonable probability of proving that the defendants are prohibited from

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proceeding with the sale as they have delayed 8 years after accelerating the mortgage in

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seeking to foreclose on the property[.]” Id.

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In the pending motion to dismiss, Rushmore argues that the Trust’s claims fail as a

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matter of law. See Doc. 13. Specifically, Rushmore contends that: (1) the Trust lacks

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standing to assert a statute of limitations defense; (2) the Trust’s slander of title and

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trespass claim fails as a matter of law because the Trust does not allege Defendant acted

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with malice, a required element of the claim; (3) the Trust has failed to allege sufficient

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facts to state a claim for fraud; and (4) a claim for declaratory relief cannot stand alone,

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and must be dismissed because all other claims also fail. Id.

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The Court cannot find that the Trust is likely to succeed on the merits of its claims.

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In particular, the Court cannot decide without further research that the Trust’s first

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argument – based on the lender’s failure to record DOT-4 and the Trust’s subsequent

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recording of the warranty deed it obtained from the Borrowers – is completely meritless.

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It is also unclear without further research whether the Trust may assert the statute of

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limitations as a basis for preventing a non-judicial trustee’s sale. The pending motion to

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dismiss may well resolve these issues, but, given the last-minute nature of the TRO

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request, the Court requires additional time to address substantial questions and engage in

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a more deliberative investigation. Republic of the Philippines, 862 F.2d at 1362.

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The Trust owns the Property, and will be irreparably injured if the trustee’s sale

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proceeds. In Arizona, if a homeowner fails to obtain a TRO enjoining a trustee’s sale, the

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homeowner “waive[s] all defenses and objections to the sale.” A.R.S. § 33-811(C).

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The balance of hardships tips sharply in Plaintiff’s favor. While Plaintiff will be

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irreparably harmed if it loses the Property, Rushmore will only be delayed if the trustee’s

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sale is postponed while the Court considers the merits of the Trust’s claim. What is

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more, the parties have previously agreed to postpone the sale without Court intervention

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several times. See Docs. 1, 7.

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Public policy favors granting the TRO. If the Trust’s claim is correct, a trustee’s
sale of its Property would be unwarranted and improper.

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Because the Trust has raised a serious question, the balance of hardships tips

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sharply in its favor, and the other requirements for a TRO are satisfied, the Court will

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grant a TRO.

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IT IS ORDERED:

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1.

Plaintiff’s Motion for a Temporary Restraining Order (Doc. 18) is granted.

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Defendants are enjoined from proceeding with the trustee’s sale of the real property

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located at 2692 Avenida Grande, Bullhead City, Arizona, 86442.

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2.

This TRO shall remain in effect until 12:00 p.m. on June 15, 2017.

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3.

The Court will hold a preliminary injunction hearing on June 14, 2017, at

3:00 p.m.
Dated this 2nd day of June, 2017.

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