Jonathan Startz v. JPMorgan Chase Bank N.A. et al

Filing 43

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION 26 by Judge Otis D. Wright, II . (lc). Modified on 5/19/2017 (lc).

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O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 Plaintiff, 12 13 14 15 16 Case № 2:16-cv-09627-ODW (PLA) JONATHAN STARTZ, ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION [26] v. JPMORGAN CHASE BANK, N.A.; QUALITY LOAN SERVICE CORPORATION; and DOES 1–30, inclusive, Defendants. 17 I. 18 INTRODUCTION 19 Plaintiff Jonathan Startz moves for a preliminary injunction to enjoin 20 Defendants from foreclosing on real property that Plaintiff owns. (ECF No. 26.) 21 After reviewing the papers filed in support of and in opposition to the Motion, the 22 Court deems the Motion appropriate for decision without oral argument, Fed. R. Civ. 23 P. 78(b); C.D. Cal. L.R. 7-15, and thus VACATES the hearing date on this Motion. 24 Moreover, for the reasons discussed below, the Court DENIES the Motion. 25 II. FACTUAL BACKGROUND 26 In 2007, Plaintiff and his wife Marie Startz obtained a mortgage from 27 Washington Mutual Bank (later sold to Chase) to purchase property in Westlake 28 1 Village, California. (Compl. ¶ 9; Bouvee Decl., Ex. A at 17.)1 In or around July 2 2015, after falling behind on his mortgage payments, Plaintiff called Chase and 3 requested a payment plan to help him bring his payments current. Chase instructed 4 Plaintiff to submit a written Request for Mortgage Assistance. (Compl. ¶¶ 10–11.) 5 Plaintiff subsequently submitted such a Request (“RMA #1”), along with various 6 supporting documentation, to Chase. (Id.) On January 25, 2016, Chase sent Plaintiff 7 a letter informing him that it had finished its review of RMA #1 and identified options 8 for which Plaintiff was and was not eligible. (Id. ¶ 17, Ex. 3; Bouvee Decl., Ex. A.) 9 The letter indicated that Plaintiff was eligible for short sale assistance or a deed-in-lieu 10 of foreclosure, but that he was not eligible for any loan modification or mortgage 11 forgiveness programs. (Bouvee Decl., Ex. A at 9–10.) 12 Shortly thereafter, Plaintiff contacted Chase and again requested a payment plan 13 for the amount that he was in arrears. (Compl. ¶ 18.) Chase “responded that they 14 would look into the matter and get back to him.” (Id.) On March 1, 2016, Chase sent 15 a letter to Plaintiff stating that Plaintiff must submit a further written Request for 16 Mortgage Assistance along with a list of specific documents on or before March 31, 17 2016. (Compl. ¶ 19, Ex. 4.) Four days later, Plaintiff submitted the further Request 18 (“RMA #2”) along with “all requested information” to Chase. (Id. ¶ 20.)2 On May 19 24, 2016, Chase sent a letter to an attorney retained by Plaintiff indicating that it still 20 required a proof of occupancy for the “additional customer,” and that Plaintiff must 21 submit this documentation on or before June 16, 2016. (Id. ¶ 26, Ex. 7.) On June 23, 22 2016, Plaintiff’s attorney sent Chase a letter stating that the “additional customer”—to 23 the extent that Chase was referring to Marie Startz—no longer lives at the property, 24 for she and Plaintiff were in the divorce process and the property would be awarded to 25 Plaintiff as his separate property. (Id. ¶ 28, Ex. 9.) 26 27 28 1 Because Plaintiff has verified his complaint, the allegations constitute evidence. See Schroeder v. McDonald, 55 F.3d 454, 460 (9th Cir. 1995). 2 On March 14, 2016, Chase recorded a notice of default against the property. (Compl. ¶ 22.) However, Chase later rescinded that notice of default. (Id. ¶ 27, Ex. 8.) 2 1 On July 18, 2016, Defendant Quality Loan Service (“QLS”) recorded a notice 2 of default against the property. (Id. ¶ 29, Ex. 10.) Plaintiff’s attorney subsequently 3 informed Chase on two occasions that the notice was unlawfully recorded because 4 Plaintiff’s loan modification application was still outstanding. (Id. ¶¶ 30–31, Ex. 11– 5 12.) On September 16, 2016, Chase sent Plaintiff’s attorney a letter indicating it was 6 “currently” reviewing the loan “for any available payment assistance options,” and 7 that it suspended foreclosure activity on the home pending this review. The letter 8 indicated that Chase “still require[d] further documentation to prove that our 9 customers currently occupy the subject property, and an appraisal needs to be 10 completed.” (Bouvee Decl., Ex. B.) The letter further declined to rescind the March 11 10, 2016 notice of default3 because Plaintiff’s loan payments were not current. (Id.) 12 On November 14, 2016, QLS recorded a notice of trustee’s sale, scheduling the 13 sale date for December 9, 2016. (Id. ¶ 32, Ex. 13.) Four days later, Chase sent a letter 14 to Plaintiff’s attorney indicating that it had finished reviewing RMA #2, and that it 15 had again determined that Plaintiff was eligible for only short sale assistance or a 16 deed-in-lieu of foreclosure, and not for any loan modification program. (Bouvee 17 Decl., Ex. D at 33–39.) On December 2, 2016, Plaintiff filed this action in the 18 Ventura Superior Court and immediately sought a temporary restraining order to 19 enjoin the foreclosure sale. (Not. of Removal, Exs. E–H.) It is unclear whether or not 20 the state court granted the application, but nonetheless it appears that the sale never 21 went forward. 22 On December 5, 2016, Chase sent a letter to Plaintiff’s attorney denying that the 23 loan was dual-tracked, stating that “[a]s of November 9, 2016, our request for proof of 24 occupancy was still outstanding,” and thus Chase did not have a complete 25 modification package. (Bouvee Decl., Ex. C.) Further, the letter stated that Chase 26 “d[id] not have records showing we denied our client’s payment assistance review on 27 28 3 It appears that Chase was actually referring to the July 2016 Notice of Default since the March 2016 notice of default was previously rescinded. 3 1 July 18, 2016,” and that at the time they were “still reviewing our client for payment 2 assistance programs.” (Id.) 3 On December 29, 2016, Chase removed this action to federal court. (ECF No. 4 1.) On March 24, 2017, QLS recorded a further notice of trustee’s sale, which set a 5 sale date of April 25, 2017. (Klein Decl., Ex. A.) On April 20, 2017, Plaintiff filed an 6 ex parte application for a temporary restraining order seeking to enjoin the April 25 7 foreclosure sale. 8 foreclosure sale until May 25, 2017, so that Plaintiff’s application could be fully 9 briefed as a motion for preliminary injunction. (ECF No. 28.) The Court thus set a 10 briefing schedule on the Motion. (ECF No. 29.) Chase filed a timely opposition to 11 the Motion, but Plaintiff did not file a timely reply. (ECF No. 38.) Plaintiff’s Motion 12 is now before the Court for decision. 13 (ECF No. 26.) III. Chase responded that it would postpone the LEGAL STANDARD 14 A court may enter a preliminary injunction where the moving party shows: (1) 15 a likelihood of success on the merits; (2) a likelihood that the moving party will suffer 16 irreparable harm absent preliminary injunctive relief; (3) that the balance of equities 17 tips in the moving party’s favor; and (4) that preliminary injunctive relief is in the 18 public interest (the “Winter factors”). Winter v. Nat’l Res. Def. Council, Inc., 555 19 U.S. 7, 20 (2008). “Under Winter, plaintiffs must establish that irreparable harm is 20 likely, not just possible, in order to obtain a preliminary injunction.” Alliance for the 21 Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011) (original emphasis). In 22 the Ninth Circuit, “‘serious questions going to the merits’ and a hardship balance that 23 tips sharply toward the plaintiff can [also] support issuance of an injunction, assuming 24 the other two elements of the Winter test are also met.” Id. at 1132, 1135 (holding that 25 the “sliding scale” test remains viable “so long as the plaintiff also shows that there is 26 a likelihood of irreparable injury and that the injunction is in the public interest”). 27 28 IV. DISCUSSION Plaintiff asserts the following claims in his Complaint: (1) dual-tracking of the 4 1 loan in violation of the California Homeowners Bill of Rights Act (“HBOR”), Cal. 2 Civ. Code § 2923.6(c), and 12 C.F.R. § 1024.41; (2) failure to post the notice of 3 trustee’s sale on the property in violation of HBOR, Cal. Civ. Code § 2924f(b)(3); and 4 (3) injunctive relief. (ECF No. 1-2.) The Court finds that while the foreclosure may cause Plaintiff irreparable harm, 5 6 none of the other Winter factors favor granting a preliminary injunction. 7 A. Likelihood of Prevailing on Merits 8 1. 9 HBOR prohibits a lender from dual-tracking a loan as follows: Claim 1: Dual Tracking 19 If a borrower submits a complete application for a first lien loan modification . . . [the] trustee . . . shall not record a notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A . . . trustee . . . shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs: (1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired. (2) The borrower does not accept an offered first lien loan modification within 14 days of the offer. (3) The borrower accepts a written first lien loan modification, but defaults on, or otherwise breaches the borrower’s obligations under, the first lien loan modification. 20 Cal. Civ. Code § 2923.6(c). “For purposes of this section, an application shall be 21 deemed ‘complete’ when a borrower has supplied the mortgage servicer with all 22 documents required by the mortgage servicer within the reasonable timeframes 23 specified by the mortgage servicer.” Cal. Civ. Code § 2923.6(f). If a lender dual 24 tracks a loan, the court may enjoin “any trustee’s sale . . . until the court determines 25 that the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent has 26 corrected and remedied the violation or violations giving rise to the action for 27 injunctive relief.” Cal. Civ. Code § 2924.12(b). 10 11 12 13 14 15 16 17 18 28 Here, neither Plaintiff’s allegations nor any evidence Plaintiff submits shows 5 1 that either the operative notice of default or the operative notice of trustee’s sale was 2 recorded while a complete application was pending review. Contrary to Plaintiff’s 3 assertions, it appears Plaintiff did in fact receive Chase’s written response to RMA #1 4 in January 2016, wherein Chase determined that Plaintiff was ineligible for loan 5 modification assistance. (Bouvee Decl., Ex. A.) With respect to RMA #2, Plaintiff 6 did not submit a complete application to Chase. Chase informed Plaintiff that it 7 required proof of occupancy for the “additional customer” (presumably Marie Startz) 8 on or before June 16, 2016; however, Plaintiff did not provide this information before 9 that date. While Plaintiff sent a letter to Chase approximately one week later 10 indicating that Ms. Startz no longer lived at the property, HBOR requires that Plaintiff 11 provide all information supporting a loan modification application “within the 12 reasonable timeframes specified by the mortgage servicer.” 13 § 2923.6(f) (emphasis added). Because Plaintiff failed to provide such information by 14 the date specified by Chase, the application was not complete, and “[w]ith no 15 complete application submitted, the HBOR provides no impediment to foreclosure.” 16 Valentino v. Select Portfolio Servicing, Inc., No. 14-CV-05043-JCS, 2015 WL 17 1906122, at *4 (N.D. Cal. Apr. 24, 2015) (loan was not dual-tracked where 18 homeowner failed to submit required documentation to lender within time specified 19 by lender). Thus, QLS’s recordation of the notice of default in July 2018 did not 20 constitute dual-tracking. For the same reason, the operative notice of trustee’s sale, 21 recorded on March 24, 2017, was not the result of dual-tracking. The Court also notes 22 that Chase formally denied the incomplete RMA #2 in writing in November 2016 23 anyway, which was long before it recorded the March 2017 notice of trustee’s sale. Cal. Civ. Code 24 While Chase does not discuss the issue, the Court is also troubled by Plaintiff’s 25 submission of RMA #2 almost immediately following Chase’s denial of RMA #1. 26 Under HBOR, “[i]n order to minimize the risk of borrowers submitting multiple 27 applications for first lien loan modifications for the purpose of delay, the mortgage 28 servicer shall not be obligated to evaluate applications from borrowers who have 6 1 already been . . . evaluated . . . consistent with the requirements of this section, unless 2 there has been a material change in the borrower’s financial circumstances since the 3 date of the borrower’s previous application and that change is documented by the 4 borrower and submitted to the mortgage servicer.” Cal. Civ. Code § 2923.6(g). Here, 5 the Court cannot find any evidence that Plaintiff’s financial circumstances 6 substantially changed between the two applications, and the relatively short timeframe 7 between the two applications suggest there was no such change. Thus, the Court 8 doubts that Chase had any obligation to even consider the second application. 9 Finally, as to Plaintiff’s claim under 12 C.F.R. § 1024.41, Plaintiff does not 10 indicate which of the myriad subsections of that regulation Chase allegedly violated. 11 The Court declines to independently review and determine Chase’s compliance with 12 each and every requirement of § 1024.41. 13 2. 14 HBOR requires that the lender post the notice of trustee’s sale “in a 15 conspicuous place on the property to be sold at least 20 days before the date of sale.” 16 Cal. Civ. Code § 2924f(b)(3). However, HBOR does not provide for injunctive relief 17 based on a violation of this section. See Cal. Civ. Code § 2923.6. Moreover, the 18 notice of trustee’s sale that was operative at the time Plaintiff filed the complaint is no 19 longer operative, and Plaintiff does not suggest that Chase violated this section with 20 respect to the most recently-recorded notice of trustee’s sale. Thus, the purported 21 violation of this section is not a basis on which to enjoin the foreclosure. 22 B. Claim 2: Failure to Post Notice of Trustee’s Sale Irreparable Harm 23 Plaintiff argues that the foreclosure of his property constitutes an immediate and 24 irreparable harm. “Several courts have determined that the loss of one’s residence 25 through foreclosure constitutes irreparable injury.” De Vico v. U.S. Bank, No. CV 12- 26 08440 MMM FFMX, 2012 WL 10702854, at *5 (C.D. Cal. Oct. 29, 2012); Nichols v. 27 Deutsche Bank Nat. Trust Co., No. CIV. 07CV2039-L NLS, 2007 WL 4181111, at *3 28 (S.D. Cal. Nov. 21, 2007); Dumas v. First N. Bank, No. CIV.S-10-1523 LKK/DA, 7 1 2011 WL 567358, at *2 (E.D. Cal. Feb. 15, 2011); Lane v. CitiMortgage, Inc., No. 2 2:14-CV-02295-KJM, 2014 WL 6670648, at *6 (E.D. Cal. Nov. 21, 2014) (“Loss of a 3 principal residence is normally sufficient to establish irreparable harm.”); but see 4 Mandrigues v. World Sav., Inc., No. C 07-4497 JF (RS), 2009 WL 160213, at *3 5 (N.D. Cal. Jan. 20, 2009) (“[W]hether a particular foreclosure constitutes irreparable 6 harm turns in part on the reasons for foreclosure.”). Chase argues that this property is 7 not Plaintiff’s principal residence, and submits a lease agreement purporting to show 8 that Plaintiff leased the premises to other persons for portions of 2015 and 2016. 9 However, Chase does not submit a declaration that authenticates the lease, and Chase 10 cites no authority for the dubious proposition that the lease is subject to judicial notice 11 simply because a signature on it appears similar to Plaintiff’s. See generally Fed. R. 12 Evid. 201. Thus, for the purposes of this Motion, the Court concludes that Plaintiff 13 has established this prong of the Winter test. 14 C. Equities and Public Interest 15 The Court concludes that neither the equities nor the public interest favor an 16 injunction here. In Chase’s January 2016 response to Plaintiff’s RMA #1, Chase 17 noted that Plaintiff had already failed to make eleven mortgage payments. (Bouvee 18 Decl, Ex. A at 18.) Indeed, in the July 2016 notice of default, Chase indicates that 19 Plaintiff was $132,816.13 in arrears. Plaintiff makes no showing that he is willing or 20 able to bring his loan payments up to date. While ejection from one’s home is 21 certainly a distressing prospect, no lender can be expected to indefinitely forgive 22 missed payments for a debt that the homeowner has no reasonable prospect of 23 satisfying. See Lane, 2014 WL 6670648, at *6. Thus, the Court cannot conclude that 24 either the equities or the public interest are in Plaintiff’s favor. 25 /// 26 /// 27 /// 28 /// 8 1 2 3 V. CONCLUSION For the reasons discussed above, the Court DENIES Plaintiff’s Motion for a Preliminary Injunction. (ECF No. 26.) 4 5 IT IS SO ORDERED. 6 7 May 19, 2017 8 9 10 11 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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