Kathleen Angel Einsenberg v. Citibank NA et al

Filing 129

MINUTES (IN CHAMBERS) - DEFENDANT'S MOTION TO DISSOLVE OR MODIFY THE PRELIMINARY INJUNCTION by Judge Christina A. Snyder: On 2/8/2013, Kathleen Eisenberg filed the instant action in Los Angeles County Superior Court. On 2/25/2013, the Superior C ourt held a hearing regarding the issuance of a preliminary injunction. The Superior Court issued a preliminary injunction against defendants enjoining them from foreclosing upon the Property during the pendency of this action. On 3/13/2013, defendan ts removed the case to this Court. Defendants' motion to dissolve the preliminary injunction 118 is GRANTED. The preliminary injunction will be dissolved on 12/19/2016. If plaintiff can cure the default on her loan before that date, plaintiff may make a new request for a preliminary injunction at which time the Court may reconsider what amount of security is appropriate. Court Reporter: Not Present. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Title

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

Present: The Honorable

Date

‘O’

November 29, 2016

CHRISTINA A. SNYDER

Catherine Jeang

Not Present

N/A

Deputy Clerk

Court Reporter / Recorder

Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

I.

(IN CHAMBERS) - DEFENDANT’S MOTION TO DISSOLVE OR
MODIFY THE PRELIMINARY INJUNCTION (Filed October 21,
2016, Dkt. 118)

INTRODUCTION AND PROCEDURAL HISTORY

On February 8, 2013, Kathleen Eisenberg filed the instant action in Los Angeles
County Superior Court against Citibank, N.A., as trustee for American Home Mortgage
Assets Trust 2006-4 Mortgage-Backed Pass-Through Certificates Series 2006-4
(“Citibank”); Homeward Residential, Inc. (“Homeward”); Power Default Services, Inc.
(“Power”); and Does one through 40, inclusive. Dkt. 1. Plaintiff brings four claims,
namely, (1) rescission, (2) breach of contract, (3) unfair business practices pursuant to
California’s Unfair Competition Law (“UCL”), California Business and Professions Code
§§ 17200 et seq., and (4) declaratory relief. Plaintiff’s complaint seeks to recover
damages and prevent the foreclosure of her home at 25431 Prado De Las Fresas,
Calabasas CA 91302 (“the Property”).
On February 8, 2013, the Los Angeles Superior Court issued a Temporary
Restraining Order enjoining foreclosure on the Property. Dkt. 1 at 74. On February 25,
2013, the Superior Court held a hearing regarding the issuance of a preliminary
injunction. Dkt. 1 at 62. Defendants failed to oppose the preliminary injunction or
appear for the hearing. Id. The Superior Court issued a preliminary injunction against
defendants enjoining them from foreclosing upon the Property during the pendency of
this action. Id. The Superior Court ordered a bond in the amount of $50,000, which was
undertaken by Helen W. Eisenberg in favor of plaintiff. Dkt. 118-1.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

On March 13, 2013, defendants removed the case to this Court. Dkt. 1. On
August 29, 2016, defendants filed a motion to dismiss the operative Second Amended
Complaint (“SAC”). Dkt. 109.
Prior to a hearing on defendants’ motion to dismiss, on October 21, 2016,
defendants filed a motion seeking dissolution or modification of the preliminary
injunction issued in this action. Dkt. 118.
On October 31, 2016, the Court held a hearing on the motion to dismiss and
distributed a tentative order granting defendants’ motion to dismiss plaintiffs first and
third claims. Plaintiff’s counsel indicated that his client may be able to allege additional
details which would cure the defects identified by the Court. Accordingly, the Court
dismissed the first and third claims for relief and ordered plaintiff’s counsel to file a
declaration within ten days explaining whether or not the identified defects could be
cured. Dkt. 121.
On November 1, 2016, plaintiff filed an opposition to defendants’ motion to
dissolve or modify the preliminary injunction. Dkt. 120. On November 7, 2016,
defendants filed a reply. Dkt. 122.
On November 10, 2016, plaintiff’s counsel filed a declaration indicating that he
believed the defects in the SAC could be cured in the filing of a further amended
complaint. Dkt. 123. Counsel further indicated that he would file a Third Amended
Complaint (“TAC”) no later than November 21, 2016. Plaintiff has not filed a TAC.
II.

BACKGROUND

This case arises out of defendants’ attempts to foreclose on the Property. SAC ¶ 1.
On July 27, 2006, plaintiff executed a note for approximately $2.2 million in favor of
non-party American Home Mortgage (“AHM”), which was secured by a deed of trust to
the Property. Id. ¶ 9. At some subsequent point in time, Citibank, N.A. (“Citibank”)
acquired AHM’s interest in the note. Id.
At some subsequent point in time, Citibank acquired AHM’s interest in the note.
Id. Plaintiff alleges that prior to executing the note, none of AHM’s agents disclosed
certain material and misleading aspects of the note. Id. ¶¶ 11-12. Specifically, plaintiff
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

alleges that the “dire consequences of her negative amortization loan were never
explained,” and that:
On the contrary, in or about early July 2006, AHM specifically orally
represented and promised to Plaintiff that [1] the initial interest rate of
2.65% would remain in effect for six months, [2] that the monthly payment
would not increase by more than 10% per year during the first five years of
the loan, [3] unless the loan balance increased by more than 25%, which, it
stated would take at least three years, and [4] that any negative amortization
charges would be reasonable and not excessive.
Id. ¶ 11. Plaintiff alleges that these oral representations were false and misleading.
Plaintiff alleges that the loan documents, which she signed, were presented to her
the night before escrow was scheduled to close. Id. ¶ 10. Plaintiff further alleges that the
loan papers were not explained to her and that she was not able to review them or have
them reviewed by an attorney or other advisor. Id. Plaintiff also alleges that she signed
the documents “under the duress of having to obtain a loan to complete her purchase of
the Property without losing deposits of approximately $200,000 if escrow was not closed
by in or about July 2006.” Id.
At some point before August 7, 2012, plaintiff defaulted on the note. On August 7,
2012, plaintiff and defendant Citibank entered into a Forbearance Agreement (“the
Agreement”). Id. ¶ 23, Ex. 3. The terms of this agreement provided that plaintiff would
make three monthly payments to Citibank in the amount of $14,033.38, and that in
exchange, Citibank would not initiate a trustee’s sale during the months covered by the
agreement. Id. ¶ 24. The Agreement provides that:
[i]f, upon the Expiration of the Forbearance, Borrower is unable to fully cure
the Default, Lender shall consider the Borrower and Loan for any available
and appropriate foreclosure prevention option (“Foreclosure Prevention
Option”) in accordance with lender’s then current policies and procedures.
Borrower acknowledges that Lender has not guaranteed or assured and
hereby does not guarantee and assure Borrower that Borrower and the Loan
will qualify or be accepted by Lender for any Foreclosure Prevention
Option.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

Id. As part of the Agreement, the parties agreed that Citibank would be permitted
to initiate new foreclosure proceedings if the borrower remained in default and did
not qualify for a “Foreclosure Prevention Option.” Id. ¶ 6.
Plaintiff alleges that she timely made the first two monthly payments under the
Agreement, but that contrary to the terms of the Agreement, Citibank conducted a
trustee’s sale in September 2012. Id. ¶ 25. After the sale was conducted, Citibank
allegedly refused to accept the third monthly payment due under the Forbearance
Agreement. Id. ¶ 29. While Citibank rescinded the trustee’s sale on September 28, 2012,
plaintiff alleges that they still refused to accept her third monthly payment following the
rescission. Id. ¶ 27. Additionally, plaintiff alleges that Citibank will not attempt in good
faith to offer her a reasonable loan modification. Id. ¶ 29.
During the pendency of this action, the parties have engaged in negotiations over
plaintiff’s loan. Both parties agree that on August 28, 2015, Citibank offered a loan
modification to plaintiff, however, plaintiff did not accept Citibank’s offer. See Mot. Ex.
4 (showing the terms of the loan modification offer).
III.

DISCUSSION
Firmness and stability must no doubt be attributed to continuing
injunctive relief based on adjudicated facts and law, and neither the plaintiff
nor the court should be subjected to the unnecessary burden of reestablishing what has once been decided. Nevertheless the court cannot be
required to disregard significant changes in law or facts if it is ‘satisfied that
what it was been doing has been turned through changing circumstances into
an instrument of wrong.’

Sys. Fed'n No. 91, Ry. Emp. Dep't, AFL-CIO v. Wright, 364 U.S. 642, 647 (1961) (citing
United States v. Swift & Co., 286 U.S. 106, 114, 52 S. Ct. 460, 462, 76 L. Ed. 999
(1932)).1
1

Both parties erroneously rely upon California law regarding the modification of a
preliminary injunction. However, once removed to federal court, review of a state court’s
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

Defendants contend that the injunction must be modified because of changes in
circumstances applicable to this case. Specifically, defendants contend that they have
made a loan modification offer to plaintiff, which plaintiff rejected, and that defendants
continue to pay taxes and insurance for the Property while plaintiff has resided in the
Property for over four years without making any rent or mortgage payments. Defendants
argue that plaintiff continues to be unjustly enriched by the preliminary injunction
because it allows plaintiff to live in a luxurious home without paying any of the
obligations ordinarily imposed on homeowners. Defendants aver that they have
expended over $216,174 in property taxes and insurance costs since September 2012 and
that they will continue to incur such expenses on a monthly basis as long as the injunction
remains in effect.
In response, plaintiff argues that the balance of hardships weighs in her favor
because she risks the permanent loss of her home whereas defendant’s monetary loss may
be protected against by a bond. Plaintiff further avers that defendants have refused to
disclose how certain portions of the modification offer were calculated.
Entitlement to injunctive relief pending trial depends upon the balance of hardships
resulting from the injunction, or lack thereof, and plaintiff’s likelihood of success on the
merits. Furthermore, a preliminary injunction is only intended as temporary security for
“performance of a future order which may be entered by the court. Its issue presupposes
or assumes . . . that a decree may be entered after trial on the merits enjoining and
restraining the defendants from certain future conduct.” De Beers Consol. Mines v.
United States, 325 U.S. 212, 219 (1945). The preliminary injunction must relate to the
remedies available pursuant to plaintiff’s claims. “The relationship between the
preliminary injunction and the underlying complaint is sufficiently strong where the
preliminary injunction would grant ‘relief of the same character as that which may be
granted finally.’” Pac. Radiation Oncology, LLC v. Queen's Med. Ctr., 810 F.3d 631,
636 (9th Cir. 2015) (quoting De Beers Consol. Mines, 325 U.S. at 220).
The Superior Court issued the instant injunction without opposition after a hearing
wherein defendants failed to appear. Plaintiff’s injunctive relief is based upon two of her
injunction is governed by federal law. Granny Goose Foods, Inc. v. Bhd. of Teamsters &
Auto Truck Drivers Local No. 70 of Alameda Cty., 415 U.S. 423, 441 (1974).

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

original claims, namely, plaintiff’s claim for breach of the Agreement and plaintiff’s
claim for breach of the UCL.
The Court has repeatedly dismissed plaintiff’s UCL claim without prejudice for
failure to state a claim upon which relief may be granted. Plaintiff was ordered to file
any further amendment to the pleadings no later than November 21, 2016, and only if
plaintiff believed she would be able to cure the defects identified in the Court’s prior
order. Plaintiff failed to do so. Accordingly, the Court need not evaluate whether or not
plaintiff may be entitled to a continuing injunction pursuant to plaintiff’s UCL claim.
Plaintiff’s first and third claims for rescission and violation of the UCL claims are
appropriately DISMISSED with prejudice. Accordingly, the dismissal of plaintiff’s
UCL claim with prejudice requires the Court to further evaluate plaintiff’s likelihood of
success on the merits of her claims and whether the existing preliminary injunction
should be dissolved or modified.
Plaintiff’s second claim for breach of contract claim alleges that defendants
breached the Agreement by refusing plaintiff’s third and final forbearance payment,
initiating foreclosure proceedings during the period of the forbearance agreement2, and
breach of the implied covenant of good faith insofar as defendants impliedly agreed to
consider plaintiff for a loan modification3. SAC ¶ 29. Although legal relief is the remedy
typically available under California law for breach of contract, specific performance of an
obligation can also be ordered as a remedy, except in certain circumstances enumerated
by California law. See Cal. Civ. Code §§ 3274, 3384. However, the Agreement only
entitles plaintiff to avoid foreclosure under certain circumstances. Pursuant to the
Agreement, plaintiff alleges that defendants agreed not to initiate or continue foreclosure
during the two months from August 8, 2012, to October 8, 2012, if plaintiff made
payments on August 8, 2012; September 8, 2012; and October 8, 2012. SAC Ex. 3.
Thereafter, pursuant to the Agreement, plaintiff may avoid foreclosure if (1) plaintiff
“fully cure[s] the Default by paying all amounts then presently due and unpaid pursuant
to the Loan,” or (2), if plaintiff is unable to cure the default, defendants agreed to
Although plaintiff acknowledges that these proceedings ceased when defendants
rescinded the September 28, 2016, Trustee’s Deed Upon Sale. SAC ¶ 27.
2

Nothing in the express terms of the Agreement require defendants’ to modify
plaintiff’s loan and defendant has since offered plaintiff a loan modification.
3

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

“consider” plaintiff for a “foreclosure prevention option . . . in accordance with Lender’s
then current policies and procedures.” Id.
The Court has held that plaintiff need not allege tender in order to state a claim for
breach of the Agreement. See Dkt. 89 at 7. Plaintiff may have suffered injury as a result
of defendants’ initiation of foreclosure proceedings during the forbearance period.
However, it does not appear that the Agreement enables plaintiff to avoid foreclosure
indefinitely without curing her default, nor is plaintiff entitled to a permanent injunction
enjoining foreclosure in the future. Specific performance of the Agreement does not
preclude defendants from initiating foreclosure proceedings over four years after the
expiration of the parties’ two-month agreement unless plaintiff intends to cure the default
on her loan.
The requirement of tender “is premised upon the equitable maxim that a court of
equity will not order that a useless act be performed.” Barrionuevo v. Chase Bank, N.A.,
885 F. Supp. 2d 964, 969 (N.D. Cal. 2012) (citing Arnolds Mgmt. Corp. v. Eischen, 158
Cal.App.3d 575, 578–79 (1984)). Courts acknowledge that the applicability of the tender
requirement depends upon principles of equity and that the tender rule ordinarily will not
apply to cases where a plaintiff challenges the foreclosing entity’s authority to foreclose.
See Barrionuevo, 885 F. Supp. 2d at 969 (tender rule does not apply where plaintiff
“contest[s] not only irregularities in sale notice or procedure, but the validity of the
foreclosure in the first place. Courts have declined to require tender in just such
circumstances”); see also Mabry v. Superior Court, 185 Cal. App. 4th 208, 225 (2010)
(contrasting the situation where “by definition, there is no way that a foreclosure sale can
be avoided absent payment of all the indebtedness” with the purpose of plaintiff’s
statutory claims requiring that certain foreclosure procedures be used to avoid foreclosure
altogether).
Plaintiff here does not challenge defendants’ authority to foreclose, but argues that
doing so would violate the Agreement. However, pursuant to the forbearance agreement,
defendants expressly preserved the right to renew foreclosure proceedings unless plaintiff
cured her default by October 8, 2012. Although defendants’ alleged initiation of
foreclosure proceedings during the period of the forbearance agreement may have
constituted breach of the Agreement, plaintiff does not explain why she continues to be
entitled to prospective relief from foreclosure in the absence of her UCL claim. Unlike
other possible causes of action that may challenge a foreclosure’s validity, nothing in the
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES – GENERAL
Case No.

2:13-cv-01814-CAS (JPRx)

Date

Title

‘O’

November 29, 2016

KATHLEEN EISENBERG V. CITIBANK NA; ET AL.

Agreement suggests it was intended to permit plaintiff to avoid foreclosure without being
required to cure a default on her loan. See Hamilton v. Wilmms, 2016 WL 1436407, at
*4 (E.D. Cal. Apr. 12, 2016) (concluding that after trial and in the absence of tender,
plaintiff is limited to monetary damages from breach of similar forbearance agreement).
To the extent plaintiff’s right to injunctive relief depends upon her breach of
contract claim, it would be inequitable to leave the preliminary injunction in place
without modification. In light of plaintiff’s limited rights pursuant to the Agreement, the
dismissal of plaintiff’s UCL claim, the substantial period of time that has elapsed since
the expiration of the forbearance agreement, and the rejection of defendants’ loan
modification offer, the preliminary injunction is appropriately DISSOLVED unless
plaintiff, pursuant to the Agreement, cures her default on the existing loan.
IV.

CONCLUSION
Defendants’ motion to dissolve the preliminary injunction is GRANTED.

The preliminary injunction will be dissolved on December 19, 2016. If plaintiff
can cure the default on her loan before that date, plaintiff may make a new request for a
preliminary injunction at which time the Court may reconsider what amount of security is
appropriate.
IT IS SO ORDERED.
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Initials of Preparer

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CMJ

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