Lane v. CitiMortgage, Inc.

Filing 24

ORDER signed by Judge Kimberly J. Mueller on 11/20/14. The law requires Lane make a "clear showing" a preliminary injunction is proper. Lopez, 680 F.3d at 1072, which she has not done. The temporary order enjoining the defendants and their agents from conducting a trustee sale of plaintiff's residence located at 6771 Mt. Murphy Road, Coloma, California is DISSOLVED. The request for a preliminary injunction is DENIED. (Kastilahn, A)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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MELODY LANE,

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Plaintiff,

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No. 2:14-cv-02295-KJM-KJN

v.

ORDER

CITIMORTGAGE, INC., et al.,

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Defendants.

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The court previously granted plaintiff Melody Lane’s ex parte application for a

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temporary restraining order and ordered defendant, CitiMortgage, Inc. (Citi), to show cause why

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the court should not issue a preliminary injunction. Lane seeks an injunction to prevent Citi from

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conducting a trustee’s sale of her home at 6771 Mount Murphy Road, Coloma, California, the

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“subject property.” The parties presented their arguments at a hearing on November 7, 2014.

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Rando Rodriguez appeared for Melody Lane, and Robert Yap appeared for Citi. For the reasons

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described below, the court DISSOLVES the restraining order and DENIES the request for a

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preliminary injunction.

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I.

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BACKGROUND
The story behind Lane’s ex parte application is not complicated, but the applicable

law turns on a precise sequencing of events. On March 4, 2004, Lane obtained a loan for
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$290,000, secured by a first-lien deed of trust on the subject property. Defs.’ Opp’n 3:2-5

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(Opp’n), ECF No. 18. In early 2011, Lane lost her job. First Am. Compl. (Compl.) ¶ 11, ECF

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No. 6. She missed a mortgage payment in May 2012, id. ¶ 12, and made her last payment the next

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month, Opp’n 3:10. In July 2012, Citi demanded payment and requested Lane contact Citi about

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alternatives to foreclosure. Compl. ¶ 13. The next month, Lane sent Citi a letter requesting

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assistance and completed an online customer assistance form; Citi did not respond. Id. ¶¶ 14, 15.

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On November 27, 2013, Citi again informed Lane her mortgage payment was due

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and that she was entitled to request certain information from Citi. Opp’n at 6:2-8; Dickey Decl.

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Ex. A, at 4, 6, ECF No. 18-1. On March 24, 2014, Citi recorded a notice of default for the subject

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property. Opp’n 3:15-16. On June 27, 2014, a notice of a trustee’s sale was recorded. Id. 3:16-17.

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The sale was initially scheduled for July 31, 2014. Id. 3:17-18.

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On June 23, 2014, Lane received a letter from Citi requiring Lane submit an

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application for a loan modification no later than seven business days before a scheduled

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foreclosure sale. Compl. ¶ 21. Lane alleges she returned a completed application for loan

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modification both on the same day and again on July 13, 2014. Id. ¶¶ 21, 23-24. On July 21,

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2014, Lane contacted Citi, and a representative informed her Citi required additional paperwork.

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Id. ¶ 27. Lane alleges she faxed the requested additional paperwork the same day. Id. A trustee’s

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sale did not take place on July 31, 2014, as initially planned. On August 7, 2014, Lane received a

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letter from Citi indicating it had valued her property at $450,000. Id. ¶ 34. Lane, however, alleges

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the value of her home was $750,000. Id. On August 8, 2014, Lane received a letter from Citi,

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dated August 5, 2014, denying her application for a loan modification. Id. ¶ 35. It informed her

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Citi had assumed her income was zero. Id. Lane alleges her income is about $2,000 per month. Id.

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¶ 35. On August 13, 2014, Lane contacted Citi and informed it of the alleged inaccuracies in

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Citi’s valuation of her home and of her income. Id. ¶ 37.

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On August 28, 2014, Lane appealed her denial for a loan modification. Id. ¶ 39. To

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her appeal she “attached written proof of the inaccurate values used in [Citi’s] denial” of her

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application for a loan modification. Id. On September 5, 2014, Citi notified Lane her appeal was

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denied because it was “unable to create an affordable payment without changing the terms of your
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loan beyond the requirements of the program.” Opp’n 4:4-6; Dickey Decl. Ex. F, at 29, ECF

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No. 18-1. On October 1, 2014, she filed a complaint in this court, ECF No. 1, and then amended it

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on October 3, 2014, ECF No. 4. Also on October 1, she filed an ex parte request for a temporary

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restraining order to enjoin the trustee’s sale of her home, then scheduled for October 8, 2014.

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Pl.’s Ex Parte App. TRO (TRO App.) 3:3-4, ECF No. 7. In her ex parte application and amended

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complaint, Lane stated Citi had not denied her appeal for a loan modification. TRO App. at

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3:10-25; Compl. ¶¶ 47-48. Her application contended a TRO was appropriate because she was

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likely to succeed on the merits of a claim under California Civil Code section 2923.6(c), the

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Homeowner’s Bill of Rights (HBOR), which required Citi complete its review of her application

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for a loan modification before conducting a trustee’s sale. Id. at 4:20-6:15.

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On October 7, 2014, the court granted Lane’s ex parte application for a Temporary

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Restraining Order enjoining Citi from conducting a trustee’s sale of her home, relying on Lane’s

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representation that her appeal remained pending. TRO App. at 3:10-25; Compl. ¶¶ 47-48; Order

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2:16-26, ECF No. 12. A hearing was set for October 14, 2014. Order 4:14-15, ECF No. 12. On

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October 10, 2014, Citi filed an unopposed ex parte application to continue the hearing. Defs.’

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Ex Parte Appl. 7:2-6, ECF No. 13; Notice Non-Opp’n, ECF No. 14. The court continued the

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hearing to November 7, 2014. ECF No. 17. Citi filed its opposition to a preliminary injunction on

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October 24, 2014, Opp’n at 9:13. Lane filed her reply on October 31, 2014. Pl.’s Reply (Reply),

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ECF No. 22.

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In her Reply, Lane argued for the first time that a preliminary injunction should

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issue based on the likely success of her claim for negligence. Reply at 1:24-2:20. At the hearing

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on November 7, Ms. Lane’s counsel conceded she had received the September 5 denial but said

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he had not learned this until Citi filed its opposition.

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Lane has established neither her likely success on the merits of a claim under

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section 2923.6(c) nor the existence of serious questions going to the merits of such a claim.

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Because the remaining factors relevant to a motion for a preliminary injunction at best weigh only

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partially in her favor, the court dissolves the temporary restraining order and denies a preliminary

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injunction.
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II.

REQUEST FOR JUDICIAL NOTICE

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The court grants Citi’s request for judicial notice. Req. Jud. Notice (RJN), ECF

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No. 19. A court may take judicial notice of a “fact that is not subject to reasonable dispute

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because it . . . can be accurately and readily determined from sources whose accuracy cannot

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reasonably be questioned.” Fed. R. Evid. 201(b). Matters of public record are generally subject to

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judicial notice. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001), overruled on

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other grounds, Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119, 1125 (9th Cir.2002). The deed

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of trust, RJN Ex. 1, ECF No. 19, notice of default, id. Ex. 2, and notice of trustee’s sale, id. Ex. 3,

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are matters of public record, and proper subjects of judicial notice. Screen captures from websites

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may also be proper subjects of judicial notice, provided the proponent meets its burden under

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Federal Rule of Evidence 201. See, e.g., Lanini v. JPMorgan Chase Bank, No. 13-00027, 2014

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WL 1347365, at *3 (E.D. Cal. Apr. 4, 2014) (taking judicial notice of a document on the Federal

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Deposit Insurance Corporation’s website because it reflected official acts and the parties did not

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dispute its accuracy). Because the plaintiffs do not dispute the accuracy of the screen capture

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from www.qualityloans.org, RJN Ex. 4, ECF No. 19, the court takes judicial notice that a

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trustees’ sale of the subject property is scheduled for November 24, 2014.

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III.

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DISCUSSION
A.

Standard: Preliminary Injunctions
“A preliminary injunction is an extraordinary remedy never awarded as of right,”

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Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008), and “should not be granted

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unless the movant, by a clear showing, carries the burden of persuasion,” Lopez v. Brewer,

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680 F.3d 1068, 1072 (9th Cir. 2012) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)

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(emphasis in original)). The purpose of a preliminary injunction is to preserve the status quo and

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the rights of the parties until a final judgment can be issued. U.S. Philips Corp. v. KBC Bank N.V.,

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590 F.3d 1091, 1094 (9th Cir. 2010). “A plaintiff seeking a preliminary injunction must establish

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[1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the

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absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an

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injunction is in the public interest.” Winter, 555 U.S. at 20 (2008).
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The Ninth Circuit has “also articulated an alternate formulation of the Winter test.”

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Farris v. Seabrook, 677 F.3d 858, 864 (9th Cir. 2012). That formulation is referred to as the

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“serious questions” or the “sliding scale” approach: “‘serious questions’ going to the merits and a

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balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary

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injunction, so long as the plaintiff also shows that there is a likelihood of irreparable injury and

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that the injunction is in the public interest.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d

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1127, 1135 (9th Cir. 2011). See also id. at 1131-32 (“[T]he ‘serious questions’ approach survives

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Winter when applied as part of the four-element Winter test.”). “In other words, ‘serious questions

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going to the merits’ and a hardship balance that tips sharply toward the plaintiff can support

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issuance of an injunction, assuming the other two elements of the Winter test are also met.” Id. at

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1132. Under the “serious questions” approach to a preliminary injunction, “[t]he elements of the

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preliminary injunction test must be balanced, so that a stronger showing of one element may

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offset a weaker showing of another.” Lopez, 680 F.3d at 1072. Irrespective of its approach, a

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court must balance the competing alleged harms while considering the effects on the parties of the

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granting or withholding of the injunctive relief. Winter, 555 U.S. at 24. In exercising that

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discretion, a court must also consider the public consequences of the extraordinary remedy. Id.

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In ruling on a preliminary injunction, the court may rely on declarations, affidavits,

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and exhibits, among other things. Johnson v. Couturier, 572 F.3d 1067, 1083 (9th Cir. 2009); see

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also Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984) (“The trial court may give

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even inadmissible evidence some weight, when to do so serves the purpose of preventing

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irreparable harm before trial.”). Such evidence need not conform to the standards for a summary

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judgment motion. Bracco v. Lackner, 462 F. Supp. 436, 442 n.3 (N.D. Cal. 1978). “The urgency

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necessitating the prompt determination of the preliminary injunction; the purpose of a preliminary

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injunction, to preserve the status quo without adjudicating the merits; and the [c]ourt’s discretion

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to issue or deny a preliminary injunction are all factors supporting the considerations of

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affidavits.” Id. And “[t]he weight to be given such evidence is a matter for the [c]ourt’s

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discretion, upon consideration of the competence, personal knowledge and credibility of the

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affiant.” Id.; see also Oakland Tribune, Inc. v. Chronicle Pub. Co., Inc., 762 F.2d 1374, 1377
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(9th Cir. 1985) (in ruling on a motion for preliminary injunction, the “weight to be given each

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[affiant’s] statement is in the discretion of the trial court”).

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B.

Likelihood of Success

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Lane’s ex parte application is founded on an alleged violation of section 2923.6(c)

Section 2923.6(c)

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of the California Civil Code. That section forbids a lender from conducting a foreclosure sale in

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certain circumstances. When a borrower “submits a complete application for a first lien loan

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modification” the lender or servicer may not conduct a trustee’s sale while the application is

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pending. Cal. Civ. Code § 2923.6(c). Neither may the lender or servicer conduct a trustee’s sale

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until after it “makes a written determination that the borrower is not eligible for a first lien loan

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modification, and any appeal period pursuant to subdivision (d) has expired,” or other events

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occur, which are not relevant here. Id. § 2923(c)(1). Subdivision (d) allows a borrower thirty

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days to appeal a denial of an application for a first-lien loan modification. Id. § 2923.6(d). In

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addition, if the lender or servicer denies the application, it may not conduct a trustee’s sale until

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the later of two events relevant here: (1) thirty-one days elapse after the borrower is notified its

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application was denied; and (2) fifteen days elapse after the lender or servicer denies the

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borrower’s appeal. Id. § 2923.6(e).

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Here, Citi recorded a notice of default on March 24, 2013, RJN Ex. 2, at 20, and

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recorded a notice of trustee’s sale of Lane’s home on June 27, 2014, id. Ex. 3, at 24. On July 21,

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2014, Lane submitted material to complete her application for a loan modification. Compl. ¶ 27.

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After a flurry of bewilderingly self-contradictory responses by Citi to Lane, see id. ¶¶ 28-32, on

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July 31, 2014, Citi definitely informed Lane her application was complete. Id. ¶ 33; Dickey Decl.

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Ex. D, at 20, ECF No. 18-1 (“Your application is complete . . . .”). On August 8, 2014, Lane

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received a letter from Citi, dated August 5, 2014, denying her application for a loan modification.

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Compl. ¶ 35. On August 18, 2014, Lane received notice the trustee’s sale was set for September

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8, 2014. Id. ¶ 38. On August 28, 2014, Lane appealed her denial for a loan modification. Id. ¶ 39.

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On September 5, 2014, Citi notified Lane her appeal was denied. Opp’n 4:4-6; Dickey Decl.

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/////
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Ex. F, at 29, ECF No. 18-1. The trustee’s sale was later postponed to October 8, 2014, Compl.

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¶ 38, and then to November 24, 2014, Opp’n 4:7-8; RJN Ex. 4, at 27.

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This sequence of events shows Lane’s application was complete and pending

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between July 21, 2014 and August 5, 2014. It shows her appeal was pending between August 28,

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2014 and September 5, 2014. Citi did not record a notice of default, a notice of trustee’s sale, or

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conduct a trustee’s sale during those periods. Because the trustee’s sale is currently scheduled for

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November 24, 2014, the sale will take place more than fifteen days after Citi denied Lane’s

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appeal on September 5, 2014. Lane is unlikely to succeed on a claim that without an injunction,

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Citi would have conducted a sale while an application for a loan modification or an appeal was

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pending. Neither do these facts raise serious questions going to the merits. At the hearing,

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Ms. Lane’s counsel agreed.

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2.

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Lane’s ex parte application did not include an argument that she was likely to

Negligence

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succeed on the merits of a claim for negligence. In her reply, however, she argues that because

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Citi did not rely on accurate information in its denial of her application for loan modification and

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its denial of her later appeal, it was negligent. Reply at 1-2. As a general rule, parties may not

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raise new legal arguments in reply briefs. State of Nev. v. Watkins, 914 F.2d 1545, 1560 (9th Cir.

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1990). This is particularly true here because Lane relies on no new information, facts, or law

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unavailable to her at the time of her opening brief. Nevertheless, the court disposes of her claim

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here on the merits in an effort “to secure the just, speedy, and inexpensive determination of every

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action and proceeding.” Fed. R. Civ. P. 1.

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To succeed in a negligence claim under California law, Lane must show Citi owed

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her a legal duty and breached that duty, legally and proximately causing her damages. United

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States Liab. Ins. Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586, 594 (1970). In general, a financial

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institution owes a borrower no legal duty of care if the two negotiate as lender and borrower.

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Nymark v. Heart Fed. Sav. & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991). Some exceptions

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exist, and California courts are divided as to their application in cases like this one. Compare,

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e.g., Lueras v. BAC Home Loans Servicing, LP, 221 Cal. App. 4th 49, 67 (2013) (declining to
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impose a duty of care on a bank considering a residential loan modification), with Alvarez v. BAC

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Home Loans Servicing, L.P., 228 Cal. App. 4th 941, 948-49 (2014) (deciding the opposite). The

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California Supreme Court has not resolved this question. This court has held no duty applies

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“when the activities are ‘sufficiently entwined with money lending so as to be within the scope of

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typical money lending activities,’” Lanini, 2014 WL 1347365, at *7 (quoting Lueras, 221 Cal.

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App. 4th at 67)), but the court has not had an opportunity to consider Alvarez.

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And it need not here. Assuming for purpose of argument that Citi owed Lane a

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duty of care when it considered her application for a loan modification and her appeal, Lane is

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neither likely to succeed on the merits of her negligence claim, nor has she raised the required

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“serious questions.” She has not met her burden to show Citi breached its duty to her by denying

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her appeal on the basis of false information. The complaint clearly alleges Lane contacted Citi

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and informed it of alleged inaccuracies in Citi’s valuation of her home and of her income. Id.

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¶ 37. When she appealed Citi’s decision, she “attached written proof of the inaccurate values used

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in [Citi’s] denial” of her application for a loan modification. Id. ¶ 39. On September 5, 2014, Citi

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notified Lane her appeal was denied, not based on valuation of her home, but because it was

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“unable to create an affordable payment without changing the terms of [her] loan beyond the

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requirements of the program.” Dickey Decl. Ex. F, at 29, ECF No. 18-1. In summary, she is

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unlikely to show both a breach of duty and a causal link between that breach and the loss of her

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home.

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C.

Irreparable Harm, the Balance of Equities, and the Public Interest
If a trustee’s sale takes place, Lane would lose her home. Loss of a principal

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residence is normally sufficient to establish irreparable harm, and the court assumes as much

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here. Kilgore v. Wells Fargo Home Mortgage, No. 12-0899, 2012 WL 2195656, at *1 (E.D. Cal.

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June 13, 2012). Nevertheless, such a loss is not dispositive of a motion for a preliminary

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injunction. Alcaraz v. Wachovia Mortgage FSB, 592 F. Supp. 2d 1296, 1301-02 (E.D. Cal. 2009).

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A plaintiff may not use a preliminary injunction to “buy time” and stall a foreclosure sale. Id. at

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1306. Here, Lane has not made a payment on her loan for more than two years and still lives in

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the subject property. The trustee’s sale, originally scheduled for July 31, 2014, has been delayed
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to at least late November. Certainly, ejection from her home is a distressing prospect, but no

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lender should be expected to indefinitely forgive payments to satisfy a debt that now totals more

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than $300,000. Opp’n 7:24-26. Moreover, a preliminary injunction would have no practical

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effect. To impose compliance with California law, an injunction would only be necessary to the

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extent it prevented Citi from conducting a trustee’s sale while Lane’s appeal was pending and

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until at least fifteen days after Citi denied it. Because Citi denied the appeal on September 5,

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2014, a sale on November 24, 2014 would not violate California law.

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Neither does the balance of equities tip in Lane’s favor. If the court were to grant

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an injunction, Citi would be temporarily deprived of the proceeds of the trustee’s sale, but on the

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other hand, it has been awaiting payment on its debt since Lane last made a payment in 2012.

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Although premature foreclosure sales are not in the public’s interest, Lane has not shown the sale

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at issue here would be premature or violate California law. To the contrary, the evidence suggests

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Citi, despite its bumbling, has made a good faith effort to preserve Lane’s homeownership,

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consider a loan modification, and avoid an unnecessary trustee’s sale.

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D.

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Conclusion
The law requires Lane make a “clear showing” a preliminary injunction is proper.

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Lopez, 680 F.3d at 1072, which she has not done. The temporary order enjoining the defendants

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and their agents from conducting a trustee sale of plaintiff’s residence located at 6771

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Mt. Murphy Road, Coloma, California is DISSOLVED. The request for a preliminary injunction

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is DENIED.

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IT IS SO ORDERED.
DATED: November 20, 2014.

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UNITED STATES DISTRICT JUDGE

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