Habtemariam v. PNC Bank, National Association, et al.

Filing 51

MEMORANDUM AND ORDER signed by District Judge Morrison C. England, Jr on 7/28/17 GRANTING Plaintiff's 45 Motion for Temporary Restraining Order. Pending the Court's determination re a preliminary injunction, Gateway is hereby enjoined fro m engaging in or performing, directly or indirectly, any of the following acts: advertising, selling, transferring, conveying, foreclosing upon, evicting, or any other conduct adverse to Plaintiff re the real property located at 7 Shipman Court in Sa cramento, CA 95823. No bond shall be required. Plaintiff is hereby ordered to file a motion for preliminary injunction on or before 8/3/17. Defendants shall file a written response on or before 8/10/17, and any reply from Plaintiff shall be filed on or before 8/15/17. A hearing on this matter is set for 8/17/17, at 11:00 a.m. in Courtroom 7.(Becknal, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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GENET HABTEMARIAM,

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Plaintiff,

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v.

No. 2:16-cv-01189-MCE-GGH

MEMORANDUM AND ORDER

VIDA CAPITAL GROUP, LLC; US
MORTGAGE RESOLUTION; PNC
BANK; NATIONAL ASSOCIATION;
and DOES 1 to 50, inclusive,
Defendants.

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In bringing this lawsuit, Plaintiff Genet Habtemariam alleges that her real property

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at 7 Shipman Court, Sacramento, California was wrongfully subjected to foreclosure

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proceedings on a Second Deed of Trust that had been cancelled some five years

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previously by the owner of the note, Defendant PNC Bank, N.A. Despite that

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cancellation, Plaintiff alleges the note was sold and ultimately assigned by PNC to

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Defendant Vida Capital Group who proceeded with the foreclosure. Plaintiff seeks to

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clear title to her property and further alleges various improprieties against both

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Defendants. After the resolution of two motions to dismiss from PNC, Plaintiff filed a

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Second Amended Complaint (“SAC”) on July 25, 2017. ECF No. 44. The next day, she

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also filed a Motion for Temporary Restraining Order in which she seeks to enjoin an
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impending August 3, 2017 foreclosure sale by the holder of a promissory note secured

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by a first priority Deed of Trust by Defendant Gateway Bank, FSB (“Gateway DOT”).

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ECF No. 45. For the reasons provided below, that motion is GRANTED and a temporary

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injunction is issued pending a hearing for a preliminary injunction.

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BACKGROUND1

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In 2001, Plaintiff obtained a purchase money loan to buy a house located at
7 Shipman Court in Sacramento, California (“the subject property”). Then, in April of

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2007, she refinanced her initial loan through Gateway Bank FSB and took out a second

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mortgage from National City Bank, an entity which later merged into PNC. Plaintiff’s

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second mortgage was secured by a Second Deed of Trust (“SDOT”) recorded on

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April 17, 2007.

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Some three years later, PNC notified Plaintiff by mail that its SDOT was

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discharged, apparently due to a settlement agreement PNC had reached with various

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agencies of the United States government. PNC effectuated that cancellation by

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sending a 1099-C form approved by the Internal Revenue Service for cancelling a debt.

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Plaintiff received the Form 1099-C on or about June 29, 2010. According to Plaintiff,

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because the Form 1099-C cancelled the amount she owed on the second mortgage, she

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believed it legally released her from any further obligation to pay the debt. Plaintiff

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accordingly reported the debt cancellation as income to the Internal Revenue Service for

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the 2010 calendar year.

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Unbeknownst to Plaintiff, PNC never recorded a release of lien as to its SDOT

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and in fact assigned its purported interest in the loan to Defendant US Mortgage

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Resolution (“UMR”) in approximately March of 2012. UMR, who made no attempt to

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foreclose on the loan, then sold the SDOT to Vida sometime in 2014. When Vida

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Unless otherwise noted, the following recitation of facts is taken, sometimes verbatim, from the
allegations contained in Plaintiff’s SAC.

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contacted Plaintiff in early 2015 in an attempt to collect on the instrument, Plaintiff

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responded by providing Vida with a copy of the Form 1099-C and asserting that the debt

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had been cancelled and was not collectable. Vida nonetheless recorded a Notice of

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Default on the subject property on September 22, 2015, and directed the trustee to

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transfer title to Vida itself through non-judicial foreclosure proceedings which culminated

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in title transfer to Vida by a deed recorded on February 16, 2016.

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Plaintiff responded by commencing this action in state court on April 19, 2016.

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PNC removed Plaintiff’s lawsuit to this Court the same day, citing diversity of citizenship.

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On May 11, 2016, Vida filed an unlawful detainer action against Plaintiff, and Plaintiff

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was given a three-day notice to quit the premises. Rather than comply with that notice,

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Plaintiff removed that second case to this Court and moved to consolidate it with the suit

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she had commenced. The Court granted the motion.

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Gateway has now posted a Notice of Trustee Sale, which sets a sale date of

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August 3, 2017. Pl.’s Br. in Supp. of Mot. for TRO, ECF No. 45, at 3. No payments have

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been made on the Gateway DOT since February 2016 when Vida conducted a trustee

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sale and title to the property passed to Vida. Decl. of Cathy Devlin, ECF No. 46-1, ¶ 4.

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Plaintiff contends that “[o]nce V[ida] foreclosed as a second lien holder, it was required

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to service G[ateway]’s first mortgage.” Pl.’s Br. in Supp. of Mot. for TRO, at 5.

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Furthermore, Plaintiff states that she “did not make payments on the G[ateway]

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mortgage . . . as Plaintiff [is] no longer on the title to the property.” Id. Plaintiff and

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Gateway also apparently entered into an agreement by which Gateway would

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“postpo[]ne filing recording, and/or publishing a Notice of Trustee’s sale on the

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7 Shipman Court, Sacramento, California property until at least ten days after the

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Court . . . issues its ruling on the Defendants’ Motion to Dismiss.” Decl. of Patricia H.

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Lyon, Ex. A, ECF No. 46-2, at 5. The Court ruled on that motion on February 14, 2017.

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STANDARD

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The purpose of a temporary restraining order is to preserve the status quo

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pending the complete briefing and thorough consideration contemplated by full

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proceedings pursuant to a preliminary injunction. See Granny Goose Foods, Inc. v. Bhd.

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of Teamsters, 415 U.S. 423, 438–39 (1974) (“[Temporary restraining orders] should be

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restricted to serving their underlying purpose of preserving the status quo and preventing

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

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Reno Air Racing Ass’n., Inc. v. McCord, 452 F.3d 1126, 1131 (9th Cir. 2006); Dunn v.

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Cate, No. CIV 08-873-NVW, 2010 WL 1558562, at *1 (E.D. Cal. Apr. 19, 2010).
Issuance of a temporary restraining order, as a form of preliminary injunctive

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relief, is an extraordinary remedy, and Plaintiff has the burden of proving the propriety of

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such a remedy. See Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). In general, the

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showing required for a temporary restraining order and a preliminary injunction are the

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same. Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n.7 (9th Cir.

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2001).

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The party requesting preliminary injunctive relief must show that “he is likely to

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

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

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the public interest.” Winter v. Nat. Res. Def. Council, 555 U.S. 7, 20 (2008); accord

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Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir. 2009). The propriety of a TRO

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hinges on a significant threat of irreparable injury that must be imminent in nature.

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Caribbean Marine Serv. Co. v. Baldridge, 844 F.2d 668, 674 (9th Cir. 1988).

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Alternatively, under the so-called sliding scale approach, as long as Plaintiff

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demonstrates the requisite likelihood of irreparable harm and shows that an injunction is

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in the public interest, a preliminary injunction can still issue so long as serious questions

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going to the merits are raised and the balance of hardships tips sharply in Plaintiff’s

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favor. All. for Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-36 (9th Cir. 2011)
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(concluding that the “serious questions” version of the sliding scale test for preliminary

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injunctions remains viable after Winter).

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ANALYSIS

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Gateway argues that Plaintiff cannot demonstrate a likelihood of success on the

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merits because “Plaintiff has not alleged any claims against Gateway in the Complaint

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and has not submitted any evidence to support a claim against Gateway.” Gateway’s

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Opp’n, ECF No. 46, at 5 (emphasis removed). However, Plaintiff has raised serious

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questions concerning the rights and responsibilities of the parties, which supports the

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issuance of a temporary restraining order under the sliding scale approach.

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Furthermore, Plaintiff has demonstrated a likelihood of irreparable harm by alleging that

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she will lose her primary residence if Gateway’s trustee’s sale goes forward.

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Plaintiff has also demonstrated that an injunction is in the public interest, and that

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the balance of hardships tips sharply in her favor. An injunction is in the public interest

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because as it is being used to ensure compliance with an alleged settlement entered into

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by the federal government for the benefit of the public and to ensure compliance with

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state foreclosure law intended to protect the public. The balance of equities tips sharply

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in Plaintiff’s favor as the temporary restraining order merely delays Gateway’s right to

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pursue a trustee’s sale until all parties have been given an opportunity to be fully heard

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on the relative positions of the parties vis-à-vis the Gateway DOT. Similarly, though Vida

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complains that “it has been deprived of any rental income from Plaintiff,” Vida’s Opp’n,

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ECF No. 50, at 3, Vida does not explain how forestalling a foreclosure by Gateway will

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harm Vida.

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Finally, Vida asks the Court to order Plaintiff to put up a bond for the rental value

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of the property. See id. at 4. However, because of uncertainties in the record, the Court

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declines to order a bond prior to a hearing on the matter. Though Plaintiff maintains the

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fair market rental value of the property is $2,000 per month, see Pl.’s Br. in Supp. of Mot.
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for TRO, at 7, the evidence she provides in support is contested, see Gateway’s Opp’n,

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at 6–7. Furthermore, both Gateway and Vida argue that a temporary restraining order

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would deprive them of their right to collect rent from the property, but Vida argues that

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any bond be made payable to it. See Vida’s Opp’n, at 5.

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CONCLUSION

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For the reasons provided, the Court GRANTS Plaintiff’s Motion for Temporary
Restraining Order. ECF No. 45. Pending the Court’s determination regarding a

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preliminary injunction, Gateway is hereby enjoined from engaging in or performing,

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directly or indirectly, any of the following acts: advertising, selling, transferring,

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conveying, foreclosing upon, evicting, or any other conduct adverse to Plaintiff regarding

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the real property located at 7 Shipman Court in Sacramento, California 95823. No bond

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shall be required.

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Furthermore, Plaintiff is hereby ordered to file a motion for preliminary injunction

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on or before August 3, 2017. Defendants shall file a written response on or before

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August 10, 2017, and any reply from Plaintiff shall be filed on or before August 15,

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2017. A hearing on this matter will take place on August 17, 2017, at 11:00 a.m. in

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Courtroom 7.

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IT IS SO ORDERED.
Dated: July 28, 2017

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