Patino et al v. Franklin Credit Management Corporation et al
Filing
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ORDER by Judge Laurel Beeler granting the plaintiff's temporary restraining order and establishing the process forward. ECF Nos. 67 , 69 , 70 . (lblc1S, COURT STAFF) (Filed on 4/5/2017)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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San Francisco Division
United States District Court
Northern District of California
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PENNY L. PATINO,
Case No.16-cv-02695-LB
Plaintiff,
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ORDER GRANTING THE PLAINTIFF’S
TEMPORARY RESTRAINING ORDER
v.
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FRANKLIN CREDIT MANAGEMENT
CORPORATION, et al.,
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Defendants.
Re: ECF Nos. 67, 69, 70
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INTRODUCTION & BACKGROUND
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In this mortgage-foreclosure case, the defendants are moving forward with a trustee’s sale of
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Ms. Patino’s home. The court assumes familiarity with the case’s facts and incorporates by
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reference its order on the defendants’ most recent motion to dismiss.1 To summarize, though, Ms.
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Patino — whose history of mental and physical abuse and cognitive abilities rendered her unable
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to understand the significance of her financial decisions — obtained a $155,571.67 home-equity
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credit line.2 She alleges that, although suffering from a mental disorder, she properly rescinded the
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loan under the Truth in Lending Act (“TILA”).3 But her lender, Cal State 9 Credit Union, refused
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Order – ECF No. 51.
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Second Amended Compl. (“SAC”) – ECF No. 65, ¶¶ 17, 20.
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Id. ¶¶ 21–23.
ORDER — No. 16-cv-02695-LB
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to accept her rescission and returned her check (for the full loan balance) with an “X” and the
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word “void” written on it.4 Ms. Patino’s “post[-]traumatic stress disorder prevented [her] from
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fully understanding this sequence of events, and from fully understanding that no rescission had
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taken place.”5 And because the loan was never cancelled, Ms. Patino “was compelled to continue
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to make her line of equity payments, which payments included principal and interest.”6 Ms. Patino
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thus seeks relief under TILA and asserts additional claims for wrongful foreclosure, unfair
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business practices, breach of contract, intentional and negligent infliction of emotional distress,
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and quiet title. She seeks damages, and declaratory and injunctive relief.
Now, after moving the trustee’s sale multiple times, the defendants are proceeding with the
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sale of Ms. Patino’s home. Ms. Patino seeks a temporary restraining order (“TRO”).7 The court
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United States District Court
Northern District of California
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ordered the defendants to respond (they did),8 and the court held a hearing on the matter. For the
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reasons stated on the record at the hearing, and as described below, the court grants Ms. Patino’s
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TRO.
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LEGAL STANDARD
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A temporary restraining order preserves the status quo and prevents irreparable harm until a
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hearing can be held on a preliminary injunction application. See Granny Goose Foods, Inc. v.
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Brotherhood of Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974). A temporary
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restraining order is an “extraordinary remedy” that the court should award only when a plaintiff
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makes a clear showing that it is entitled to such relief. See Winter v. Natural Res. Defense Council,
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Inc., 555 U.S. 7, 22 (2008). A temporary restraining order may be issued without providing the
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opposing party an opportunity to be heard only if “specific facts in an affidavit or a verified
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Id. ¶ 23.
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Id. ¶ 28.
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Id. ¶ 27.
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See ECF Nos. 67, 69, 70.
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See Opposition – ECF No. 72.
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ORDER — No. 16-cv-02695-LB
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complaint clearly show that immediate and irreparable injury, loss, or damage will result to the
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movant before the adverse party can be heard in opposition.” Fed. R. Civ. P. 65(b)(1)(A).
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The standards for a temporary restraining order and a preliminary injunction are the same. See
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Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush & Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001).
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A movant must demonstrate (1) a likelihood of success on the merits, (2) a likelihood of
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irreparable harm that would result if an injunction were not issued, (3) the balance of equities tips
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in favor of the plaintiff, and (4) an injunction is in the public interest. See Winter, 555 U.S. at 20.
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The irreparable injury must be both likely and immediate. See id. at 22–23. “[A] plaintiff must
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demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief.”
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Caribbean Marine Servs. Co., Inc. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988).
United States District Court
Northern District of California
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Before Winter, the Ninth Circuit employed a “sliding scale” test that allowed a plaintiff to
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prove either “(1) a likelihood of success on the merits and the possibility of irreparable injury; or
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(2) [ ] serious questions going to the merits were raised and the balance of hardships tips sharply
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in its favor.” See Walczak v. EPL Prolong, Inc., 198 F.3d 725, 731 (9th Cir. 1999). In this
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continuum, “the greater the relative hardship to [a movant], the less probability of success must be
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shown.” Id. After Winter, the Ninth Circuit held that although the Supreme Court invalidated the
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sliding scale approach, the “serious questions” prong of the sliding scale survived so long as the
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movant satisfied the other elements for preliminary relief. Alliance for Wild Rockies v. Cottrell,
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632 F.3d 1127, 1131–32 (9th Cir. 2011). Thus, a preliminary injunction may be appropriate when
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a movant raises “serious questions going to the merits” and the “balance of hardships tips sharply
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in the plaintiff’s favor,” provided that the other elements for relief also are satisfied. Id. at 1132,
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1135.
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ANALYSIS
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1. A Temporary Restraining Order is Appropriate to Preserve the Status Quo
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First, the facts alleged in the Second Amended Complaint (“SAC”) raise (at least) serious
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questions going to the merits of Ms. Patino’s claims. The defendants argue the opposite because,
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they say: (1) Ms. Patino signed an interest-reduction agreement that affirmed the loan (defeating
ORDER — No. 16-cv-02695-LB
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her rescission claim) and waived her right to TILA set off and recoupment; (2) she should be
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judicially estopped from making her claims because she did not disclose them in her prior
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bankruptcy filings; and (3) she has unclean hands because she has not made loan payments since
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November 2008, owes $93,909.25 in interest, and did not fully cooperate in earlier ADR
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processes.9
At this stage of the case, the court denies the defendants’ arguments. Ms. Patino argues that the
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interest-reduction agreement is unenforceable. For example, she argues that the agreement is
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unconscionable, there was no intentional waiver, the terms are ambiguous, and she did not have
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the capacity to enter into the agreement. In light of the allegations in the SAC, these arguments are
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potentially meritorious.
United States District Court
Northern District of California
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The court also will not now judicially estop Ms. Patino from asserting her claims. Morris v.
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California, 966 F.2d 448, 453 (9th Cir.1991) (“[J]udicial estoppel is an equitable doctrine invoked
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by a court at its discretion.”) (internal quotations omitted). Judicial estoppel is an equitable
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doctrine that prevents a party from benefitting by taking one position but then later seeking to
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benefit by taking a clearly inconsistent position. Hamilton v. State Farm Fire & Cas. Ins. Co., 270
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F.3d 778, 782 (9th Cir. 2001). It is intended to protect the integrity of the judicial process by
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preventing a litigant from “playing fast and loose with the courts.” Russell v. Rolfs, 893 F.2d 1033,
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1037 (9th Cir. 1990). Courts consider several factors to determine whether to invoke judicial
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estoppel, including: (1) “a party’s later position must be ‘clearly inconsistent’ with its earlier
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position”; (2) the party must have “succeeded in persuading a court to accept that party’s earlier
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position”; and (3) “the party seeking to assert an inconsistent position would derive an unfair
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advantage or impose an unfair detriment on the opposing party if not estopped.” Hamilton v. State
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Farm Fire & Cas. Ins. Co., 270 F.3d 778, 782–83 (9th Cir. 2001) (citing New Hampshire v.
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Maine, 532 U.S. 742, 750–51 (2001)) (internal quotations omitted). On balance, these factors do
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not weigh in favor of judicially estopping Ms. Patino from asserting her claims, at least not at this
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See Opposition at 2–4.
ORDER — No. 16-cv-02695-LB
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stage of the case. This is especially true in light of her mental capacity and the absence of indicia
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of bad-faith, fast-and-loose conduct.
And for similar reasons — particularly the absence of bad faith — the court will not now hold
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that Ms. Patino is barred by unclean hands.
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Second, there is a likelihood of irreparable harm if the TRO is not granted. If the sale goes
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forward, Ms. Patino will lose her home. Any monetary recovery will not necessarily compensate
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her for that harm, and so the loss is irreparable. And this harm is likely and immediate because the
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sale is scheduled for tomorrow, April 6, 2017.
Third, the balance of equities tips strongly in favor of granting the TRO. On one hand, Ms.
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Patino stands to lose her home. On the other hand, the defendants have identified only a single
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United States District Court
Northern District of California
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burden if the TRO is granted: “If the sale on April 6, 2017 does not move forward, the sale cannot
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be postponed any further, and therefore the notice of sale will need to be reset[ and] the
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Defendants will incur additional fees and costs.”10 The balance of equities favors granting the
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TRO.
Fourth, the parties did not identify a public interest implicated by the TRO. The court finds
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that the public interest will not be harmed by stopping the sale of Ms. Patino’s home.
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In sum, Ms. Patino raises “serious questions going to the merits” of her claims and the
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“balance of hardships tips sharply” in her favor. Alliance for Wild Rockies, 632 F.3d at 1132,
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1135. Because she also satisfies the other elements for a TRO, see id., the court grants her
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application.
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2. Process Moving Forward
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At the TRO hearing, the court discussed with the parties the process moving forward. Ms.
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Patino wants to first address the defendants’ anticipated motion to dismiss. The defendants want to
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first brief and hold a hearing on a preliminary injunction. Because this TRO was issued with
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notice to the defendants, the court need not set a preliminary-injunction hearing “at the earliest
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Opposition at 2.
ORDER — No. 16-cv-02695-LB
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