Irigoyen v. First Guarantee Financial Corporation et al

Filing 11

ORDER GRANTING Temporary Restraining Order and Setting Briefing Schedule. Plaintiff is ordered to Post a Bond in the amount of $2500 no later than 3:30 pm on July 8, 2011. Plaintiff shall notify defendants forthwith. Hearing on OSC re Preliminary Injunction is set for 7/18/2011 at 03:00 PM in Courtroom 2 (AWI) before Chief Judge Anthony W. Ishii. signed by Chief Judge Anthony W. Ishii on 7/6/2011. (Nazaroff, H)

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IN THE UNITED STATES DISTRICT COURT FOR THE
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EASTERN DISTRICT OF CALIFORNIA
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BERNADETTE IRIGOYEN, personally )
and on behalf of all similarly situated,
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Plaintiff,
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v.
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FIRST GUARANTY FINANCIAL
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CORPORATION, et al.,
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Defendants.
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____________________________________)

1:11-CV-1096 AWI MJS
ORDER ON PLAINTIFF’S
MOTION FOR TEMPORARY
RESTRAINING ORDER
(Doc. No. 7)

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This case stems from a deed of trust obtained by Plaintiff Bernadette Irigoyen

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(“Plaintiff”), through her mortgage broker Defendant Westchester Funding (“Westchester”), from

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Defendant First Guaranty Financial Corp. (“FGF”).1 The deed of trust is secured by real property

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located in Clovis, California. Irigoyen alleges violations of 18 U.S.C. § 1961 (“RICO”),

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California Business and Professions Code § 17200, California Civil Code § 2923.1, California

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Civil Code § 2923.5, common law unjust enrichment, and injunctive relief. Currently pending

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before the Court is Plaintiff’s ex parte application for a temporary restraining order. For the

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reasons that follow, the Court will grant Irigoyen’s motion and set a briefing schedule for a

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preliminary injunction.

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As the style of the case indicates, Plaintiff is attempting to bring this case as a class action.

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ALLEGATIONS & BACKGROUND

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From the verified complaint, Plaintiff contends Westchester offered to obtain refinancing

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in the sum of $464,000, to be secured by Plaintiff’s family residence located on 2816 Keats Ave.,

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Clovis, California (“the Property”). Westchester knew that the true value of the Property was

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about 60% of the amount to be refinanced. Despite knowing the true value, Westchester

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arranged the loan through FGF, with the $464,000 to be secured by a deed of trust. As part of a

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scheme, FGF agreed to provide kickbacks or other consideration to Westchester for the making

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of loans (to be secured by real estate) which both defendants know or have reason to know would

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be defaulted.

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In September 2010, Plaintiff defaulted on the loan.

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On December 1, 2010, Plaintiff hired a real estate forensic loan document firm to

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recommend options for Plaintiff in her efforts to keep her home and avoid foreclosure. On

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December 7, 2010, Defendant Aurora Loan Services, LLC acknowledged the request for loan

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documentation from the real estate firm, and complied with the request.

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On January 19, 2011, Defendant Cal-Western Reconveyance Corp. (“Cal-Western”),

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without having been substituted in as trustee under the deed of trust, commenced foreclosure

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proceedings by recording a Notice of Default in the Fresno County Recorder’s office. See

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Complaint Ex. C. The Notice of Default indicates that, pursuant to California Civil Code §

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2923.5(b), the provisions of California Civil Code § 2923.5 did not apply. See id. Neither FGF

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nor anyone acting on its behalf contacted Plaintiff either personally or telephonically 30 days

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before recording the Notice of Default.

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On February 3, 2011, FGF and Defendant Mortgage Electronic Registration Systems, Inc.

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mailed Plaintiff a non-recorded Substitution of Trustee, that substituted Cal-Western as the

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trustee under the Deed of Trust.

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On April 20, 2011, Cal-Western recorded a Notice of Trustee Sale in the Fresno County

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Recorder’s Office. The Trustee Sale was noticed for May 10, 2011, but was subsequently moved

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to July 11, 2011, at 9:00 a.m. at the Fresno County Courthouse breezeway.

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Plaintiff filed this lawsuit on July 1, 2011. On July 5, 2011, Plaintiff filed this request for
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a temporary restraining order (“TRO”), as well as a motion for preliminary injunction. A

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certificate of service for the TRO and motion for preliminary injunction also was filed on July 5,

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2011.

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As part of the TRO request, Plaintiff submitted a declaration that indicates inter alia: (1)

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she contacted the real estate firm to conduct a forensic audit in order to find out if something had

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gone wrong in the financial process and/or to explore possible options to avoid foreclosure; (2)

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she has no information that the firm is a company which assists people who simply want to get

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extra time after they decide to leave their homes in order to extend the foreclosure process; (3)

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the Property is her residence and she has never had the intention of abandoning it or avoiding

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paying for it; and (4) before the notice of default was filed, none of the defendants contacted her

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for the purpose of exploring options to avoid foreclosure, rather, the only contact was constant

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and persistent demands for immediate payment. See Courts’s Docket Doc. No. 8-1.

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LEGAL STANDARD
Under Rule 65(b), a court may issue an ex parte temporary restraining order only if: (1) it

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clearly appears . . . that immediate and irreparable injury, loss, or damage will result to the

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applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the

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applicant’s attorney certifies to the court in writing the efforts, if any, which have been made to

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give the notice and the reasons supporting the claim that notice should not be required. Fed. R.

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Civ. Pro. 65(b); Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006). Rule

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65(b)’s requirements are “stringent,” and temporary restraining orders that are granted ex parte

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are to be “restricted to serving their underlying purpose of preserving the status quo and

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preventing irreparable harm just so long as is necessary to hold a hearing, and no longer.”

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Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 438-39 (1974); McCord,

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452 F.3d at 1131.

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The substantive standard for granting a temporary restraining order is the same as the

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standard for entering a preliminary injunction. Bronco Wine Co. v. U.S. Dep't of Treasury, 997

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F.Supp. 1309, 1313 (E.D. Cal. 1996); Lockheed Missile & Space Co. v. Hughes Aircraft Co.,
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887 F.Supp. 1320, 1323 (N.D. Cal. 1995); see also Welker v. Cicerone, 174 F.Supp.2d 1055,

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1062 (C.D. Cal. 2001). A plaintiff seeking a preliminary injunction must establish: (1) that he is

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likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of

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preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in

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the public interest. Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008); Park

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Vill. Apt. Tenants Ass'n v. Mortimer Howard Trust, 636 F.3d 1150, 1160 (9th Cir. 2011).

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“Injunctive relief . . . must be tailored to remedy the specific harm alleged.” Park Vill., 636 F.3d

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at 1160.

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DISCUSSION
A temporary restraining order is warranted. First, Plaintiff has shown a likelihood of

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success on her claim under California Civil Code § 2923.5(a). That section requires that, 30 days

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before a notice of default is filed, the mortgagee, beneficiary, or authorized agent “shall contact

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the buyer in person or by telephone in order assess the borrower’s financial situation and explore

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options for the borrower to avoid foreclosure.” Cal. Civ. Code. § 2923.5(a); Argueta v. J.P.

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Morgan Chase, 2011 U.S. Dist. LEXIS 41300, *18-*20 (E.D. Cal. Apr. 11, 2011); Paik v. Wells

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Fargo Bank, N.A., 2011 U.S. Dist. LEXIS 3979, *7-*12 (N.D. Cal. Jan. 13, 2011); Mabry v.

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Superior Ct., 185 Cal.App.4th 208, 220 & n.6 (2010). The remedy for a violation of § 2923.5 is

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postponement of the foreclosure sale until there has been compliance with the statute. Argueta,

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2011 U.S. Dist. LEXIS 41300 at *18-*20; Paik, 2011 U.S. Dist. LEXIS 3979 at *7-*12; Mabry,

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185 Cal.App.4th at 223. Plaintiff’s declaration shows that § 2923.5 was not followed. While

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there are exceptions to following § 2923.5(a)’s requirement of contacting a buyer, the allegations

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in the complaint and in Plaintiff’s declaration indicate that Plaintiff did not contact a firm whose

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primary business is advising people who have decided to leave their homes on how to extend the

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foreclosure process and avoid their contractual obligations.2 Cf. Cal. Civ. Code § 2923(b),

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The allegations in the complaint also suggest that Plaintiff may have a valid claim for breach of fiduciary
duty under California Civil Code § 2923.1. However, that cause of action is alleged against only W estchester. At
this time, it is unclear whether this cause of action would form basis of a TRO. In light of the likelihood of success
demonstrated in connection with the § 2923.5 claim, the Court need not address the issue at this time. Additionally,
Plaintiff contends that she has a likelihood of success on her RICO claim. However, Plaintiff has made an
insufficient showing in her TRO application that she has a likelihood of success under RICO.

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(h)(2).

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Second, without the TRO, Plaintiff would suffer irreparable harm. As stated above, the

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remedy for a violation of § 2923.5 is postponement of the foreclosure sale. However, once a

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foreclosure sale occurs, there is no relief available under § 2923.5. See Mehta v. Wells Fargo

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Bank, N.A., 737 F.Supp.2d 1185, 1194 (S.D. Cal. 2010). Further, since a violation of § 2923.5

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does not place a cloud on the title, see Mabry, 189 Cal.App.4th at 223, the possible loss of

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Plaintiff’s right to the Property would not be reparable. See Washington v. National City Mortg.

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Co., 2011 U.S. Dist. LEXIS 52067, *15-*16 (N.D. Cal. May 13, 2011) (“The loss of one’s home

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through foreclosure generally is considered sufficient to establish irreparable harm.”). Plaintiff

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has sufficiently demonstrated irreparable harm. See Paik, 2011 U.S. Dist. LEXIS 3979 at *12-

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*13.

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Third, with respect to the balancing of the equities and the public interest, the

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Defendant’s interests are secured by the deed of trust. Further, the Court will order that a

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security be filed, so as to protect the Defendants from any damages that might be sustained as a

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result of the TRO. See Fed. R. Civ. Pro. 65(c). Additionally, there does not appear to be a great

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risk or danger that the elderly Plaintiff, who resides at the property, will herself damage the

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Property. Also, given the showing that has been made, and given that the remedy is

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postponement of the foreclosure sale, it does not appear that the statutory notice requirements

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have been followed, and Plaintiff is entitled to vindicate her statutorily required notice. See Paik,

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2011 U.S. Dist. LEXIS 3979 at *13-*14.

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Finally, since the trustee sale is set to occur on July 11, 2011, at 9:00 a.m., the Court does
not believe that further notice, beyond the certificate of service filed by Plaintiff, is practicable.

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CONCLUSION
Plaintiff moves for a TRO that would restrain defendants from conducting a trustee sale

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for the Property on July 10, 2011. After considering the application, Plaintiff has sufficiently

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established a likelihood of success, irreparable injury, and that the balance of hardships and

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public interest weigh in her favor. Further, considering the short time until the trustee’s sale,
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additional notice and opportunity to be heard is not practical. As such, the Court will grant

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Plaintiff’s request for a temporary restraining order.

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Accordingly, IT IS HEREBY ORDERED that:

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1.

Plaintiff’s motion for a temporary restraining order is GRANTED;

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2.

Defendants are RESTRAINED from proceeding with the Trustee Sale, currently set for

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July 11, 2011, at 9:00 a.m., of the property located at 2816 Keats Ave., Clovis, California,

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until further order of the Court;

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3.

Defendants shall appear on July 18, 2011, at 3:00 p.m. in Courtroom No. 2 and SHOW

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CAUSE why a Preliminary Injunction should not be granted that restrains and enjoins

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Defendants from proceeding with a Trustee Sale of the property located at 2816 Keats

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Ave., Clovis, California;3

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4.

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Defendants shall file an opposition to Plaintiff’s motion for preliminary injunction on or
by 3:00 p.m. on July 12, 2011;

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Plaintiff shall file a reply on or by 5:00 p.m. on July 14, 2011;

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Plaintiff shall file a security in the amount of $2,500.00 (two thousand five hundred

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dollars) no later than 3:30 p.m. on July 8, 2011;
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Should Plaintiff fail to timely file the above security, then Plaintiff’s motion for

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temporary restraining order SHALL BE DEEMED TO BE DENIED IN FULL and

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Defendants will be under no restraint with respect to the July 11, 2011 Trustee’s Sale; and

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8.

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Plaintiff shall forward a copy of this order to Defendants immediately, and shall file with
the Court a certificate of service of this order on Defendants.

IT IS SO ORDERED.

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Dated:
ciem0h

July 6, 2011
CHIEF UNITED STATES DISTRICT JUDGE

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As part of the briefing, both parties shall address the propriety of an injunction based on the alleged
violation by W estchester of its fiduciary duties owed to Plaintiff in its capacity as a mortgage broker.

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