Nadaf-Rahrov v. Shellpoint Mortgage Servicing et al

Filing 40

ORDER by Judge Richard Seeborg denying (23) Ex Parte Application in case 3:16-cv-02112-RS; denying (4) Ex Parte Application in case 3:16-cv-06323-RS. (cl, COURT STAFF) (Filed on 11/23/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ENAYATOLLAH NADAF-RAHROV, et
al.,
Plaintiffs,

United States District Court
Northern District of California

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Case No. 16-cv-02112-RS

v.
SHELLPOINT MORTGAGE SERVICING;
BANK OF AMERICA, N.A.; BANK OF
NEW YORK MELLON,

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Defendants.

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ENAYATOLLAH NADAF-RAHROV, et
al.,

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Case No. 16-cv-06323-RS

Plaintiffs,
ORDER DENYING PRELIMINARY
INJUNCTION

v.
SHELLPOINT MORTGAGE SERVICING,
BANK OF NEW YORK MELLON,
Defendants.

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These related cases are part of an effort by plaintiffs to prevent foreclosure on their family

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residence. Ordinarily, the claims and allegations of the second case simply would have been

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added to the first case through an amended complaint. Plaintiffs apparently chose to file a second

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action instead to avoid the additional time obtaining leave to amend might entail. A temporary

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restraining having previously issued, plaintiffs now seek a preliminary injunction in the actions to

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prevent a non-judicial foreclosure sale from going forward during the pendency of the litigation.

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A preliminary injunction is an “extraordinary remedy” that is “never granted as of right.”

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Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). To obtain preliminary relief, a

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plaintiff must “establish that he is likely to succeed on the merits, that he is likely to suffer

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irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor,

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and that an injunction is in the public interest.” Id. at 21-22. The Ninth Circuit has clarified,

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however, that courts in this Circuit should still evaluate the likelihood of success on a “sliding

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scale.” Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1134 (9th Cir. 2011) (“[T]he ‘serious

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questions’ version of the sliding scale test for preliminary injunctions remains viable after the

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Supreme Court’s decision in Winter.”). As quoted in Cottrell, that test provides that, “[a]
preliminary injunction is appropriate when a plaintiff demonstrates . . . that serious questions

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United States District Court
Northern District of California

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going to the merits were raised and the balance of hardships tips sharply in the plaintiff’s favor,”

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provided, of course, that “plaintiffs must also satisfy the other [Winter] factors” including the

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likelihood of irreparable harm. Id. at 1135.

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Here, plaintiffs have not met that test. Defendants assert, and plaintiffs do not dispute, that

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plaintiffs have made no mortgage, tax, or insurance payments on the property for over seven years.

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The gravamen of the first case is a claim that the prior loan servicer, defendant Bank of America,

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“lured” plaintiffs into a default in 2009 by advising them that they could not be considered for a

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loan modification while their payments were current, and then wrongfully initiated foreclosure

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proceedings while a loan modification application was pending. Plaintiffs further contend Bank of

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America subsequently sent them conflicting and erroneous information regarding the amount that

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would be necessary to reinstate the loan. There is no dispute, however, that the foreclosure

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proceedings initiated by Bank of America were terminated and that the Notice of Default was

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rescinded in August of 2014.

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There is also no dispute that the current loan servicer, defendant Shellpoint, processed

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plaintiffs’ application for a loan modification and denied it in November of 2015. Then, because

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there was a question whether plaintiffs had received the denial in time to file a timely appeal,

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Shellpoint issued a renewed denial letter, providing a new 30 day appeal period. Plaintiffs,

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CASE NO.

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16-cv-02112-RS

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however, did not appeal or otherwise respond.

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The foreclosure proceedings at issue now were not initiated until after plaintiffs’ loan

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modification application had been processed and denied, and the extended appeal period had

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expired. While plaintiffs insist that their present predicament still somehow arises out of Bank

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America’s allegedly wrongful conduct in 2009, they have not shown a likelihood of success on

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any claim that the present foreclosure proceedings are invalid or defective based on any such prior

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wrongdoing.

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In the second case, plaintiffs present a theory that Shellpoint’s present calculation of a total
payoff amount of approximately $2.3 million violates a “cap” in the loan documents that
supposedly provided the principal amount of the loan would never exceed $1,725,000— 115% of

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United States District Court
Northern District of California

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the original amount loaned. This argument is frivolous. The original loan—in the amount of $1.5

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million—allowed for “negative amortization.” Plaintiffs were permitted to make monthly

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payments in an amount that was less than the accruing interest. If they did so, the accrued interest

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would be added to the principal balance of the loan—up to a total of $1,725,000. Paying the lesser

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amount was not a breach of the loan agreement. Once the principal loan balance reached that

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threshold, however, plaintiffs were required to make monthly payments in an amount at least equal

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to the accruing interest, and the principal balance would not continue to grow.

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This does not mean, however, that if plaintiffs failed to make those ongoing interest

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payments—thereby breaching the loan agreement—they somehow would be relieved from the

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additional indebtedness, just because the principal loan amount was “capped” at 115%. Rather, at

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that point, missed interest payments became part of the total amount owed (i.e. principal, interest,

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and any other charges allowed under the loan agreements, such as reimbursement for advances on

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taxes and insurance). Accordingly, plaintiffs have made no showing of a probability of success

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on the merits under the second case either. The application for a preliminary injunction is denied

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in both actions.

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CASE NO.

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16-cv-02112-RS

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IT IS SO ORDERED.

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Dated: November 23, 2016
______________________________________
RICHARD SEEBORG
United States District Judge

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United States District Court
Northern District of California

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CASE NO.

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16-cv-02112-RS