Freeman, et al v. Select Portfolio Servicing, Inc. et al

Filing 10

ORDER signed by Senior Judge William B. Shubb on 6/29/2015 DENYING 2 Motion for TRO. (Donati, J)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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FRANK E. FREEMAN and ARLENE F.
FREEMAN,

CIV. No. 2:15-1359 WBS EFB

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Plaintiffs,
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MEMORANDUM AND ORDER RE:
MOTION FOR TEMPORARY
RESTRAINING ORDER

v.
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SELECT PORTFOLIO SERVICING,
INC.; NATIONAL DEFAULT SERVICING
CORPORATION; THE BANK OF NEW
YORK MELLON FKA THE BANK OF NEW
YORK AS TRUSTEE FOR THE
CERTIFICATEHOLDERS OF THE CWABS,
INC., ASSET-BACKED CERTIFICATES,
SERIES 2005-IM-3; and DOES 1-20,
Defendants.

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----oo0oo---On Friday, June 26, 2015, plaintiffs Frank Freeman and
Arlene Freeman filed an ex parte application for a temporary
restraining order enjoining defendants Select Portfolio
Servicing, Inc. (“SPS”), National Default Servicing Corporation
(“National Default”), and the Bank of New York Mellon (“BNY

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Mellon”) from foreclosing on plaintiffs’ residence at 410 Trotter

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Drive, Vallejo, California 94591 (the “residence”).

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foreclosure sale is scheduled for Monday, June 29, 2015, at 2:30

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p.m.

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opposition to plaintiffs’ motion.

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The court heard arguments at 10:30 a.m. on June 29, 2015.

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I.

(Pls.’ Mot. ¶ 6 (Docket No. 2).)

Defendants submitted an

(Defs.’ Opp’n (Docket No. 5).)

Factual Background

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The

Plaintiffs’ case arises from a loan of $535,000 they
received from Finance America, LLC to purchase the residence.

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(Compl. ¶ 14 (Docket No. 1).)

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Promissory Note and Deed of Trust that were recorded in Solano

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County, California, on August 8, 2005.

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original Deed of Trust listed plaintiffs as the “borrowers,”

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Finance America, LLC as the “Lender,” Julia L. Greenfield, Esq.

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as “Trustee,” and the Mortgage Electronic Registration System

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(“MERS”) as “beneficiary” under the security agreement as nominee

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for the lender. (Compl. ¶ 15, Ex. A.)

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The loan was secured by a

(See Compl. Ex. A.)

The

Finance America, LLC allegedly ceased operations on or

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before August 7, 2006.

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defendants say plaintiffs stopped making payments on their

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mortgage.

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Loans Servicing, LP issued a Notice of Intent to Accelerate on

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February 10, 2010.

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Ex. A (Docket No. 5-1).)

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for loan servicing.

(Compl. ¶ 5.)

(Defs.’ Opp’n at 2.)

Sometime in 2009,

Then-loan servicer BAC Home

(Decl. of Joseph A. Aguilar (“Aguilar Decl.”)
The loan was later transferred to SPS

(See Aguilar Decl. Ex. A.)

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Two years later, MERS assigned a beneficial interest in

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the Deed of Trust along with the Promissory Note to BNY Mellon by

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an Assignment of Deed of Trust recorded in Solano County on March
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29, 2012.

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Assignment of Trust, recorded March 30, 2012, conveying its

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beneficial interest in the Deed of Trust and Promissory Note to

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BNY Mellon.

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(Compl. Ex. B.)

MERS also executed a Corporate

(Compl. Ex. C.)

On January 2, 2015, a Substitution of Trustee was

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recorded appointing National Default as trustee.

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National Default then filed a Notice of Default on January 7,

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2015.

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their payments in an amount of $264,415.65 and warned that their

(Compl. Ex. D.)

(Compl. Ex. E.)

It stated that plaintiffs were behind on

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residence may be sold at foreclosure approximately ninety days

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from the date the notice was recorded.

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(Id.)

National Default attached a “California Declaration of

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Compliance” to the Notice of Default.

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contained several options with checkboxes to one side.

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checkbox is marked, next to a statement certifying that, on July

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14, 2014, contact was made with the borrower to assess the

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borrower’s financial situation and explore options to avoid

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foreclosure as required by California Civil Code section

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2923.55(b)(2).

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(Id.)

That declaration
The first

(Id.)

A foreclosure sale for the residence was originally

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scheduled for June 3, 2015, but that sale was cancelled.

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Mot. ¶ 6.)

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apparently sought an ex parte TRO in Solano County Superior

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Court.1

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(Pls.’

On the day of the original sale, plaintiffs

(See Aguilar Decl. ¶ 3, Ex. B.)

The state court issued

Plaintiffs’ motion does not mention the state court
case or offer it as an explanation for why the original sale date
was cancelled. However, plaintiffs did file a Notice of Related
Cases with their Complaint, informing the court that they had
previously filed a related case in Solano County Superior Court,
Case No. FCS045431. (Docket No. 1-4.)
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a TRO, conditioned on the four requirements that: (1) plaintiffs

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make one month’s mortgage payment by June 16, 2015; (2)

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plaintiffs pay all taxes current on their property by June 16,

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2015; (3) plaintiffs reimburse defendants for all taxes and

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insurance that defendants have advanced on the property by June

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16, 2015; and (4) plaintiff post a $5,000 bond by June 10, 2015.

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(Id.)

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June 17, 2015.

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plaintiffs dismissed the lawsuit without prejudice on June 9,

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2015.

The court then set a hearing for a preliminary junction on
(Id.)

Instead of proceeding to that hearing,

(Id. Ex. C.)

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Defendants rescheduled the foreclosure sale for June

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29, 2015.

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this new sale date.

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how they learned of the new date.

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Plaintiffs say they never received written notice of
(See Pls.’ Mot. ¶ 6.)

They do not explain

On June 25, 2015, plaintiffs filed a Complaint in this

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court asserting five claims: (1) cancellation of instruments

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under California Civil Code section 3412; (2) violation of

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California Business and Professions Code sections 17200 et seq.;

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(3) violation of California Code section 2924(a)(6) and (f)(3);

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(4) violation of California Civil Code sections 2923.5 and

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2923.55; and (5) breach of contract.

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Plaintiffs’ chief argument alleges that MERS’s assignments to BNY

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Mellon are invalid because Finance America, LLC could not have

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assigned a beneficial interest in the Deed of Trust after going

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defunct in 2006.

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allege that National Default was not validly substituted as

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trustee.

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National Default and the resulting foreclosure proceedings are

(Compl. ¶¶ 20-22.)

(Compl. ¶¶ 23-30.)

(Compl. ¶¶ 31-83.)

As a result, plaintiffs

The Notice of Default filed by

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therefore also allegedly invalid.

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(Id. ¶¶ 27-29.)

Plaintiffs further allege they were not contacted by

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SPS on July 14, 2014--contrary to the declaration attached to the

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Notice of Default--and that, in any event, California law

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requires a more substantial affirmation of contact than the

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attached “boilerplate” declaration.

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Defendants also allegedly failed to designate a single point of

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contract, as required by California law.

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II.

(Id. ¶¶ 28, 30, 64.)

(Id. ¶ 65.)

Standard for Temporary Restraining Order

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Federal Rule of Civil Procedure 65 authorizes courts to

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issue preliminary injunctions and temporary restraining orders.

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These orders preserve the relative positions of the parties--the

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status quo--until a full trial on the merits can be conducted.

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See Univ. of Texas v. Camenisch, 451 U.S. 390, 395 (1981).

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A temporary restraining order generally requires the

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same showing as that required for a preliminary injunction.

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Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832,

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839 (9th Cir. 2001).

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likely to succeed on the merits; (2) it is likely to suffer

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irreparable harm in the absence of preliminary relief; (3) the

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balance of equities tips in its favor; and (4) an injunction is

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in the public interest.

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Inc., 555 U.S. 7, 20 (2008); Perfect 10, Inc. v. Google, Inc.,

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653 F.3d 976, 979 (9th Cir. 2011).

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III. Discussion

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A.

A plaintiff must establish that (1) it is

Winter v. National Res. Def. Counsel,

Undue Delay

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Before turning to the merits of plaintiffs’ motion, the

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court finds that denial is warranted on procedural grounds alone.
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Eastern District Local Rule 231(b) states:
In considering a motion for a temporary restraining
order, the Court will consider whether the applicant
could have sought relief by motion for preliminary
injunction at an earlier date without the necessity
for seeking last-minute relief by motion for temporary
restraining order.
Should the Court find that the
applicant unduly delayed in seeking injunctive relief,
the Court may conclude that the delay constitutes
laches or contradicts the applicant’s allegations of
irreparable injury and may deny the motion solely on
either ground.

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E.D. Local Rule 231(b).

Judges in this district have routinely

denied temporary restraining orders in mortgage cases when a
borrower waited until just before the foreclosure sale to request
emergency injunctive relief.

See, e.g., Salazar v. Moynihan,

Civ. No. 2:11-03276 GEB, 2011 WL 6179262, at *1 (E.D. Cal. Dec.
12, 2011) (denying TRO motion filed one day before foreclosure
sale); Mammoth Specialty Lodging, LLC v. We-Ka-Jassa Inv. Fund,
LLC, Civ. No. S10-0864 LKK JFM, 2010 WL 1539811, at *2 (E.D. Cal.
Apr. 16, 2010) (denying TRO motion filed four days before
foreclosure sale).
Here, National Default recorded a Notice of Default on
January 7, 2015, that should have alerted plaintiffs to the
possibility that their home would be sold within ninety days.
(Compl. Ex. D.)

Plaintiffs provide no explanation for why they

waited more than six months to seek emergency relief.

As

explained in Local Rule 238(b), plaintiff’s delay is inconsistent
with their allegation of irreparable injury.
Plaintiffs do argue that defendants did not contact
them before filing the Notice of Default and proceeding with
foreclosure.

Even assuming this to be true, however, plaintiffs
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clearly knew about the Notice of Default and the foreclosure sale

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when they moved for a temporary restraining order in Solano

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County Superior Court on June 3, 2015.

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their decision to wait until June 26, 2015, to request emergency

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relief in this court.

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Yet, they fail to justify

The record before this court supports a finding of

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undue delay.

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the initial foreclosure sale to seek emergency relief in state

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court.

It shows that plaintiffs waited until the day of

(See Aguilar Decl. ¶ 3, Ex. B.)

Plaintiffs then decided

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not to fulfill the conditions set by the state court, which

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conditions this court finds, and counsel for plaintiffs freely

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admits, were entirely reasonable, nor to pursue a more permanent

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resolution there.

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court action and again waited until just before the rescheduled

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foreclosure sale to request relief from this court.

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C; Pls.’ Mot. ¶ 6.)

Instead, plaintiffs dismissed their state

(See id. Ex.

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Plaintiffs’ decision to refile substantially the same

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action in this court rather than to follow through in the state

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court amounts to forum shopping.

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counsel for plaintiffs candidly acknowledged as much.

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concludes that plaintiffs deliberately delayed filing both

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motions in order to frustrate defendants’ legitimate attempts at

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foreclosure.

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B.

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At oral argument on the motion,
The court

Likelihood of Success on the Merits
Even absent a finding of undue delay, plaintiffs have

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failed to demonstrate their entitlement to emergency relief.

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Plaintiffs argue that BNY Mellon could not have received a

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beneficial interest in the Deed of Trust in March 2012 because
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the original lender, Finance America, LLC, allegedly ceased

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operating in 2006.

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unclear how MERS could have assigned a beneficial interest in the

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mortgage six years after Finance America, LLC went out of

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business.

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(See Compl. ¶¶ 20-22.)

To plaintiffs, it is

(Pls.’ Mot ¶ 10; see Compl. Exs. B-C.)
Simply reading the Deed of Trust clears up plaintiffs’

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so-called confusion.

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the “lender,” the Deed of Trust states--in bolded font--“MERS is

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the beneficiary under this Security Instrument.”

Although it names Finance America, LLC as

(Compl. Ex. A

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at 2.)

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IN THE PROPERTY,” the document confirms that “[t]he beneficiary

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of this Security Instrument is MERS (solely as nominee for Lender

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and Lender’s successors and assigns) and the successors and

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assigns of MERS.”

On the third page under the heading “TRANSFER OF RIGHTS

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(Id. at 3.)

This language conforms to the “MERS system” of managing

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mortgages.

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4th 256, 267-68 (1st Dist. 2011) (explaining the MERS system). 2

See Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App.

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The “MERS system” has become common practice in the
mortgage industry. As the Fontenot court explained,
MERS is a private corporation that administers a
national registry of real estate debt interest
transactions.
Members of the MERS System assign
limited interests in the real property to MERS, which
is listed as a grantee in the official records of
local
governments,
but
the
members
retain
the
promissory notes and mortgage servicing rights.
The
notes may thereafter be transferred among members
without requiring recordation in the public records.
. . . Under the MERS System, however, MERS is
designated as the beneficiary in deeds of trust,
acting as “nominee” for the lender, and granted the
authority to exercise legal rights of the lender.
Fontenot, 198 Cal. App. 4th at 267.
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A beneficiary acting as nominee for a lender, such as MERS, “may

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exercise the rights and obligations of a beneficiary of the deed

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of trust, a role ordinarily afforded the lender.”

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California courts have embraced MERS’s ability to assign its

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interest in a Deed of Trust, even when it acts as a nominal

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beneficiary on behalf of a lender.

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Mortgage Assn., 205 Cal. App. 4th 1495, 1502-06 (4th Dist. 2012).

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Accordingly, MERS likely had the authority to transfer a

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beneficial interest to BNY Mellon.

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Id. at 273.

See id.; Herrera v. Fed. Nat.

Plaintiffs point to two California cases in support of

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their argument that MERS lacked the authority to transfer its

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rights in the Deed of Trust: Yvanova v. New Centry Mortg. Corp.,

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226 Cal. App. 4th 495 (2d Dist. 2014); Glaski v. Bank of America,

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218 Cal.App.4th 1079 (5th Dist. 2013).

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address whether a plaintiff has standing to challenge an

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assignment of a note and deed of trust on the basis that defects

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allegedly render the assignment void.

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4th at 109-10; Glaski, 218 Cal. App. 4th at 1099.

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court concludes that MERS likely had the required authority, the

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issue of plaintiffs’ standing to challenge the assignment is

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beside the point.

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However, these cases

See Yvanova, 226 Cal. App.
Because the

Having resolved MERS’s assignment to BNY Mellon, it is

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clear that plaintiffs are not likely to succeed in this action.

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California law allows a “trustee, mortgagee, or beneficiary, or

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any of their authorized agents” to conduct foreclosure.

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Civ. Code § 2924(a)(1).

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2924b(4), a “person authorized to record the notice of default or

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the notice of sale” includes “an agent for the mortgagee or

Cal.

Under California Civil Code section

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beneficiary, an agent of the named trustee, any person designated

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in an executed substitution of trustee, or an agent of that

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substituted trustee.”

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Id. § 2924b(4).

If MERS validly assigned its beneficial interest to BNY

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Mellon, BNY Mellon had the authority to substitute National

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Default as trustee.

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record the Notice of Default and conduct foreclosure.

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plaintiffs’ claims that rely on the theory that MERS could not

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assign a beneficial interest in the Deed of Trust must therefore

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fail.

National Default then had the authority to
All of

(See Compl. ¶¶ 33-34, 39, 41-44, 57, 59, 62-64, 68, 83.)

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Plaintiffs also allege various violations of

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California’s Homeowners Bill of Rights (“HBOR”) during the

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foreclosure process that do not rely on their invalid-assignment

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theory.

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single point of contact as required by California Civil Code

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section 2923.7, and defendants allegedly failed to contact

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plaintiffs before recording a Notice of Default as required by

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California Civil Code section 2923.55.

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Specifically, defendants allegedly failed to designate a

(Compl. ¶¶ 64-65, 71-72.)

Plaintiffs have not demonstrated that they are likely

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to succeed on these claims either.

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from each plaintiff stating that neither was contacted by

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defendants.

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Decl. of Arlene Freeman ¶¶ 7-8 (Docket No. 2-2).)

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declarations are contradicted by the declaration attached to the

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Notice of Default, (see Compl. Ex. D), and a “contact history

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report” provided by defendants that details a conversation

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between an agent of SPS and the borrowers, (see Aguilar Decl. Ex.

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A at 9-10).

They offer only declarations

(See Decl. of Frank Freeman ¶¶ 7-8 (Docket No. 2-1);
These

Accordingly, because plaintiffs’ declarations are
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contradicted by clearly documented evidence plaintiffs’ success

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on on these claims appears highly unlikely, plaintiffs have

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failed to fulfill the first Winter factor.

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C.

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Balance of Equities
A temporary restraining order “is an extraordinary

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remedy never awarded as of right.”

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(citing Munaf v. Geren, 553 U.S. 674, 688 (2008)).

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courts “must balance the competing claims of injury and must

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consider the effect on each party of the granting or withholding

Winter, 555 U.S. at 24

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of the requested relief.”

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In each case,

of Gambell, AK, 480 U.S. 531, 542 (1987)).

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Id. (quoting Amoco Prod. Co. v. Vill.

Here, plaintiffs’ long history of default weighs

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against them.

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payments for sixty-seven months, but they have also placed the

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bank in the position of having to pay plaintiffs’ taxes and

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insurance for the property during that time.

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at 6.)

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requirements that plaintiffs make a mortgage payment and pay

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defendants for their advanced expenses, plaintiffs did not

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comply.

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concludes that the balance of equities favors defendants.

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D.

Plaintiffs have not only failed to make mortgage

(See Defs.’ Opp’n

Moreover, when the state court imposed the reasonable

(See Aguilar Decl. ¶ 5, Exs. B-C.)

The court therefore

The Public Interest
“In exercising their sound discretion, courts of equity

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should pay particular regard for the public consequences in

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employing the extraordinary remedy of injunction.”

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U.S. at 24 (quoting Weinberger v. Romero–Barcelo, 456 U.S. 305,

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312 (1982)).

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preliminary injunction requires [the court] to consider ‘whether

Winter, 555

“The public interest analysis for the issuance of a

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there exists some critical public interest that would be injured

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by the grant of preliminary relief.’”

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Cal., Inc. v. Maxwell–Jolly, 572 F.3d 644, 659 (9th Cir. 2009)

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(quoting Hybritech Inc. v. Abbott Lab., 849 F.2d 1446, 1458 (Fed.

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Cir. 1988)), vacated on other grounds, 132 S.Ct. 1204 (2012).

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Indep. Living Ctr. of So.

Plaintiffs’ failure to make mortgage payments as well

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as pay their taxes and insurance on the residence for sixty-seven

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months runs counter to the public interest.

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would permit plaintiffs to further extend the time they remain in

Preliminary relief

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their residence without paying, to the detriment of defendants

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and the larger community of borrowers who do not ignore their

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financial obligations.

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LLC, 980 F. Supp. 2d 1186, 1211 (E.D. Cal. 2013) (O’Neill, J.)

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(“Granting injunctive relief would be a disservice to public

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interest by allowing plaintiffs to preclude foreclosure after

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their default and without legitimate tender of outstanding

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amounts owed.”).

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See Herrejon v. Ocwen Loan Servicing,

IT IS THEREFORE ORDERED that plaintiffs’ application

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for a temporary restraining order be, and the same hereby is,

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DENIED.

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Dated:

June 29, 2015

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