Beltran et al v. Accubanc Mortgage Corporation et al

Filing 4

ORDER Denying Plaintiff's Request For Temporary Restraining Order (Doc. # 3 ), signed by Chief Judge Anthony W. Ishii on 3/14/2012. (Fahrney, E)

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IN THE UNITED STATES DISTRICT COURT FOR THE

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EASTERN DISTRICT OF CALIFORNIA

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RALPH BELTRAN, RUBY ANN
BELTRAN,

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Plaintiffs,
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v.
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ACCUBANK MORTGAGE CORP.;
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NATIONAL BANK OF INDIANA; PNC, )
N.A.; CAL-WESTERN
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RECONVEYANCE CORP.,
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Defendants
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____________________________________)

1:12-cv-0287 AWI BAM
ORDER DENYING
PLAINTIFF’S REQUEST FOR
TEMPORARY RESTRAINING
ORDER
Doc. # 3

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This is an action, currently presumed to be in diversity, by plaintiffs Ralph and Ruby
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Beltran (“Plaintiffs”) against Accubank Mortage Corporation, National Bank of Indiana, PNC,
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N.A. and Cal-western Reconveyance Corporation (“Defendants”). Presently before the court is a
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request by Plaintiffs for a Temporary Restraining Order (“TRO”) to prevent the sale upon
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foreclosure of their home in Newman, California. Because Plaintiffs’ complaint fails to, among
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other things, state a claim upon which relief can be granted, the court will proceed to rule on
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Plaintiffs’ request in the shortest possible time and leave time for Plaintiffs’ to amend their
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complaint if they so desire.
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FACTUAL BACKGROUND
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Plaintiffs’ request for TRO contains no facts upon which a decision could be based; the
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court therefore bases its decision upon what facts can be gleaned from the Complaint. Plaintiffs

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allege they purchased the subject property on April 21, 2004. The court presumes for purposes

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of this decision that the April 21 date is also at or near the date of execution of the mortgage at

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issue in this action. Doc. #1 at ¶ 6. Plaintiffs allege their mortgage passed through a series of

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financial institutions in turn, ending with an entity called PNC, National Association. Plaintiffs’

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major factual contention with regard to the mortgage is that it was “sliced and diced into

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Mortgage Backed Securities (MBS) and sold on Wall Street to investors.” Plaintiffs allege the

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“securitization” of their mortgage happened without their knowledge or consent. In the process,

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Plaintiffs contend the promissory note was separated from the mortgage. Plaintiffs also allege

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facts pertaining to the registration and tax status of various of the financial institutions through

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which their mortgage is alleged to have passed. Plaintiffs allege that defendant Cal-Western

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Reconveyance “recorded a Notice of Default with the Stanislaus County Recorder on November

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23, 2011.

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Plaintiffs allege two claims for relief. The first alleges “Broken Chain of Title” by which

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the court interprets Plaintiffs to mean that the promissory note was separated from, or not in

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physical possession of the party now seeking to enforce the Deed of Trust. The court presumes

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the party seeking to enforce is Cal-Western Reconveyance. Plaintiffs second claim for relief

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alleges violation of the Truth In Lending Act (“TILA”) 15 U.S.C. § 1635(a) and violation of

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Regulation Z, § 226.15(b).

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LEGAL STANDARD
Because Defendants were electronically notified of Plaintiff’s intent to seek a temporary

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restraining order at the earliest possible time, and because Plaintiffs’ request for TRO does not

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specifically request the TRO be granted ex parte, the court finds Plaintiff’s request is not ex parte

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within the meaning of the Local Rule. Requests for temporary restraining orders which are not

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ex parte and are noticed to the opposing party are governed by the same general standards that

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govern issuance of a preliminary injunction. See, Motor Vehicle Board of Cal. v. Orrin W. Fox,

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434 U.S. 1345, 1347 n. 2, (1977); Los Angeles Unified School District v. United States District

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Court, 650 F.2d 1004, 1008 (9th Cir. 1981); Century Time Ltd. v. Interchron, 729 F. Supp. 366,

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368 (S.D.N.Y. 1990). Under the so-called "traditional" standard, an injunction may be had if the

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court determines that (1) the moving party will suffer irreparable injury if the relief is denied; (2)

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there is a strong likelihood that the moving party will prevail on the merits at trial; (3) the

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balance of potential harm favors the moving party; and (4) the public interest favors granting

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relief. International Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 822 (9th Cir.1993).

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Under the "alternative" standard, an injunction properly issues when a party demonstrates either:

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(1) a combination of probable success on the merits and the possibility of irreparable injury if

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relief is not granted; or (2) the existence of serious questions going to the merits combined with a

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balancing of hardships tipping sharply in favor of the moving party. Id. The requirement for

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showing a likelihood of irreparable harm increases or decreases in inverse correlation to the

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probability of success on the merits, with these factors representing two points on a sliding scale.

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United States v. Nutri-cology, Inc., 982 F.2d 394, 396 (9th Cir.1985).” Earth Island Institute v.

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U.S. Forest Service, 351 F.3d 1291, 1310 (9 Cir. 2003). In addition, “to prevail on a motion for

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preliminary injunctive relief, the moving party must establish a relationship between the injury

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claimed in the motion and the conduct giving rise to the complaint.” Lebron v. Armstrong, 289

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F. Supp. 2d 56, 61 (D. Conn. 2003).

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DISCUSSION

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Although loss of property through foreclosure is an irreparable harm, Plaintiffs must be

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able to show at least some likelihood of success on the merits. For the reasons that follow, the

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court will find that Plaintiffs’ Complaint fails to state a cognizable claim. In the absence of any

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basis upon which relief can be granted, the court is not able to grant a temporary or preliminary

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restraining order.

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I. “Broken Chain of Title

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Plaintiffs’ first claim for relief appears to be a variation of the

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“Show-me-the-note” type of claim that is familiar in this court but that is invariably defeated by

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the structure of California’s non-judicial foreclosure statutes. Under well established California

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law, physical possession and legal status as holder of a note are distinct concepts. The holder of

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the note is the party entitled to enforce it. See In re Kang Jin Hwang, 393 B.R. 701, 707 (Bankr.

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C.D. Cal. 2008). The general language of the complaint occasionally suggests that Plaintiffs

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doubt GMAC’s legal status as holder of the note. However, Plaintiffs’ factual allegations only

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refer to physical possession. The court finds that Plaintiffs’ complaint is limited to claims that

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GMAC lacks physical possession of the note.

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Under California law, physical possession is irrelevant. “Financing or refinancing of real

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property is generally accomplished in California through a deed of trust. The borrower (trustor)

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executes a promissory note and deed of trust, thereby transferring an interest in the property to

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the lender (beneficiary) as security for repayment of the loan. The deed of trust is recorded to

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give notice to future lenders and purchasers that the property is encumbered by an outstanding

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loan. Legal title to the property is held by a trustee until the loan is repaid in full.” Bartold v.

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Glendale Federal Bank, 81 Cal. App. 4th 816, 821 (Cal. App. 4th Dist. 2000).

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“The statutory scheme can be briefly summarized as follows. Upon default by the trustor,

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the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale (Cal. Civ.

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Code §2924). The foreclosure process is commenced by the recording of a notice of default and

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election to sell by the trustee (Cal. Civ. Code §2924). After the notice of default is recorded, the

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trustee must wait three calendar months before proceeding with the sale (Cal. Civ. Code

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§2924(b)). After the 3-month period has elapsed, a notice of sale must be published, posted and

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mailed 20 days before the sale and recorded 14 days before the sale (Cal. Civ. Code §2924f). The

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trustee may postpone the sale at any time before the sale is completed (Cal. Civ. Code

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§2924g(c)(1)). If the sale is postponed, the requisite notices must be given (Cal. Civ. Code

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§2924g(d)). The conduct of the sale, including any postponements, is governed by Civil Code

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section 2924g. The property must be sold at public auction to the highest bidder (Cal. Civ. Code

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§2924g(a)).” Moeller v. Lien, 25 Cal. App. 4th 822, 830 (Cal. App. 2d Dist. 1994), citations

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omitted.

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To initiate the foreclosure process, “The trustee, mortgagee, or beneficiary, or any of their

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authorized agents shall first file for record, in the office of the recorder of each county wherein

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the mortgaged or trust property or some part or parcel thereof is situated, a notice of default.”

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Cal. Civ. Code §2924(a)(1). California law is clear in stating, “Where a power to sell real

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property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the

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payment of money, the power is part of the security and vests in any person who by assignment

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becomes entitled to payment of the money secured by the instrument. The power of sale may be

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exercised by the assignee if the assignment is duly acknowledged and recorded.” Cal. Civ. Code

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§2932.5 (italics added). Trustees regularly foreclose on behalf of assignees for the original

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beneficiary. See, e.g. Block v. Tobin, 45 Cal. App. 3d 214, 218 (Cal. App. 1st Dist. 1975). When

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a mortgage, along with the corresponding deed of trust, physical transfer of the note is not

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required. See, e.g. In re Golden Plan of Cal., Inc., 829 F.2d 705, 708-11 (9th Cir. Cal. 1986)

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(agreement transferring proceeds of note, including hiring agent to handle monthly payment

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collections and potential foreclosure proceedings, but no physical transfer of mortgage note was

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nevertheless a sale).

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Pursuant to the foregoing discussion, the court must conclude that the bare allegation that

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the promissory note and the deed of trust were separated and that the note is no longer held by

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the trustee or the trustee’s agent fails to state any basis for a claim. From Plaintiffs’ Complaint

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the court can read or infer three facts. First, Plaintiffs executed a promissory note and a deed of

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trust; second, a notice of default was filed; third, Cal-Western Reconveyance appears to be the

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agent of the deed of trust beneficiary and, as such, is legally entitled to carry out the foreclosure

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sale. The court notes that in Plaintiffs’ second claim for relief, in paragraph 21 of the Complaint,

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Plaintiffs allege that “none of the Defendants in this action are beneficiaries or representatives of

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the beneficiary.” The claim appears to be tied to Plaintiffs’ erroneous belief that it is not possible

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to transfer the deed of trust when the deed is separated from the promissory note. As discussed

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above, this is not the case. As noted above, Plaintiff has the burden to show at least some

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probability of success on the merits. To the extent there could possibly be any other basis for

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Plaintiffs’ contention that the deed of trust has not been effectively transferred, Plaintiffs have the

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burden to adduce facts that would tend to show this contention is true. Plaintiffs’ “Broken Chain

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of Title” claim fails to establish the required probability of success on the merits.

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II. TILA and Regulation Z Claim

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Plaintiffs’ claim for violation of Truth In Lending Act (“TILA”), 15 U.S.C. § 1635(a), is
basically not intelligible. The statute cited, 15 U.S.C. § 1635(a) and its regulatory counterpart,

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12 C.F.R. § 226.15, deal with the right of rescission of a mortgagor. So far as the court can

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discern from the Complaint, there are no facts pertaining to rescision or to the provision of the

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required notices and forms to the mortgagor under “Regulation Z.” The facts alleged under

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Plaintiffs’ second claim for relief appear to restate Plaintiffs’ allegations that their mortgage was

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separated from the note through the process of securitization. Plaintiffs allege the “loan was sold

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or transferred without notifying the Plaintiff in writing,” Doc. # 1 at ¶ 22, however Plaintiffs’ fail

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to state how their duty to make payments as obligors under the deed of trust is altered in any way

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by the various transfers of the deed of trust. See Moseley v. Citimortgage, Inc., 2011 WL

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5175598 (D. Wash. 2011) at *7 (securitization merely creates a separate contract, distinct from

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the borrower’s debt obligations under the note and does not change the relationship of lender and

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borrower in any way).

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Plaintiffs’ second claim for relief also alleges Plaintiffs “sent a Qualified Written Request

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to Cal-Western Reconveyance by certified mail.” Doc. # 1 at ¶ 23. The Real Estate Settlement

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Procedures Act (“RESPA”) provides that a borrower who wishes to challenge or question the

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status of his or her account may send a Qualified Written Request (“QMR”) to the loan servicer

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identifying his or her account number and setting forth any contentions that the account is in

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error or may seek other information provided sufficient information is provided. 12 U.S.C. §

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2705(e)(1)(B). The loan servicer is required to respond by providing certain information within

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sixty days of the date of delivery of the QMR. 12 U.S.C. § 2705(e)(2).

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Here, Plaintiffs have provided no information as to the nature of their QMR and have not

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alleged the failure to respond within the required time period. The court notes that not all letters

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directed to a loan servicing agency from borrowers necessarily qualify as QMR’s and

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consequently the obligation of the loan servicer to respond is not automatically triggered simply

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because a letter is sent by a borrower to his or her loan servicer. Again, as the moving party,

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Plaintiffs have the burden to show they have some probability of success on the merits. To

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simply allege they sent a letter to their loan servicer without any explanation of the nature of the

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inquiry does not satisfy that burden.
Finally, Plaintiffs Complaint makes some allegations regarding the fact that “three

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Defendants violated California Laws by not registering with the State to avoid paying taxes.”

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Doc. # 1 at ¶ 28. Plaintiffs have failed to explain how the registration status of Defendants

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would have any effect on their obligation to pay their loan.

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Based on the foregoing discussion, the court finds Plaintiffs have failed to show any

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probability of success on the merits of any of their claims against Defendants. Issuance of

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temporary restraining orders is therefore not warranted. Plaintiffs’ request for issuance of

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Temporary Restraining orders is therefore DENIED.

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IT IS SO ORDERED.

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Dated:
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March 14, 2012
CHIEF UNITED STATES DISTRICT JUDGE

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