McCloskey et al v. Land Home Financial Services et al

Filing 18

ORDER DENYING TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE RE: PRELIMINARY INJUNCTION by Judge Yvonne Gonzalez Rogers denying 15 Ex Parte Application (fs, COURT STAFF) (Filed on 8/20/2012)

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UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA

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JOHN FRANCES MCCLOSKEY, III, LYNN BAILEY
MCCLOSKEY,
Plaintiff,

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Case No.: 12-CV-2775 YGR
ORDER DENYING TEMPORARY RESTRAINING
ORDER AND ORDER TO SHOW CAUSE RE:
PRELIMINARY INJUNCTION

vs.
LAND HOME FINANCIAL SERVICES, ET AL.,

Northern District of California

United States District Court

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Defendants.
Plaintiffs John Frances McCloskey, III and Lynn Bailey McCloskey (“Plaintiffs”) filed their

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Application for Temporary Restraining Order and Order to Show Case re: Preliminary Injunction

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(Dkt. No. 13) and their Amended Application for Temporary Restraining Order and Order to Show

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Case re: Preliminary Injunction (Dkt. No. 15) on August 17, 2012. Defendants Wells Fargo Bank,
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N.A. (Erroneously Sued As Wells Fargo Bank); Wells Fargo Asset Securities Corporation; HSBC

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Bank USA, N.A., Trustee For Wells Fargo Mortgage Backed Securities 2007-7; and Mortgage

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Electronic Registration Systems, Inc. (“MERS”) filed their opposition (Dkt. No. 16) on August 17,

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2012. This action was reassigned to the undersigned on August 20, 2012. (Dkt. No. 17.)

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The Court having carefully considered the pleadings in this matter and the briefs and
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evidence submitted in support of and in opposition to the request for temporary restraining order, the

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application for a temporary restraining order is DENIED without prejudice to Plaintiffs making a

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sufficient showing in a future application.

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Requests for temporary restraining orders are governed by the same general standards that

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govern the issuance of a preliminary injunction. See New Motor Vehicle Bd. v. Orrin W. Fox Co.,

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434 U.S. 1345, 1347 n.2 (1977); Stuhlbarg lnt'l Sales Co., Inc. v. John D. Brush & Co., Inc., 240

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F.3d 832, 839 n. 7 (9th Cir. 2001). A preliminary injunction is an “extraordinary and drastic

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remedy,” that is never awarded as of right. Munaf v. Geren, 553 U.S. 674, 689-690 (2008) (internal
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citations omitted). Whether seeking a temporary restraining order or a preliminary injunction, a

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plaintiff must establish four factors: (1) that she is likely to succeed on the merits; (2) that she is

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likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities

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tips in her favor; and (4) that an injunction is in the public interest. Winter v. Natural Resources

Northern District of California

United States District Court

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Defense Council. Inc., 555 U.S. 7, 20 (2008).

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With respect to the success on the merits and balance of harms factors, courts will permit a

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plaintiff making a strong showing on one factor to offset a weaker showing on the other, so long as

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all four factors are established. Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1 1 3 5 (9th

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Cir. 2011). For example, if the balance of hardships tips sharply in plaintiff’s favor, she may

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satisfy the likelihood of success factor by showing that there are at least “serious questions”

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favoring the merits of her claim. Id. However, even a lesser showing of a “serious question”

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requires evidence that the plaintiff “has a fair chance of success on the merits.” Sierra On-Line,

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Inc. v. Phoenix Software. Inc., 739 F.2d 1415, 1421 (9th Cir. 1984).

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Here, the irreparable harm to Plaintiffs is clear from the face of the complaint and the papers
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submitted – their home will be sold at a trustee’s sale absent a temporary injunction. The balance of

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hardships appears to tip strongly in their favor. However, Plaintiffs have not offered legal arguments

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and evidence in support of their request for a temporary restraining order even so much as to raise a

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“serious question” in order to establish any likelihood of success on their claims.

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First, Plaintiffs’ arguments in favor of a restraining order rest on the notion that MERS has no

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authority to act as an agent here and Defendants all lack standing to foreclose because the note and

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deed of trust were separated and securitized before they were properly assigned. Such arguments

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have repeatedly been rejected by numerous courts in the Northern District and in the California

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Courts of Appeal. There is no requirement to produce the original note in order to proceed. See,
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e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1186 (N.D. Cal. 2009)

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(“under California law, there is no requirement for the production of an original promissory note

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prior to initiation of a nonjudicial foreclosure”). MERS has repeatedly been held to have a valid

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basis to proceed with foreclosure as nominee for the beneficiary. See Gomes v. Countrywide Home

Northern District of California

United States District Court

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Loans, Inc., 192 Cal. App. 4th 1149, 1156–57 (2011) (no “factual basis to suspect that MERS

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lack[ed] authority to proceed with foreclosure”); Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App.

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4th 256, 270-71 (2011) (MERS as nominee for lender could act with authority to assign interest in

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note, burden on plaintiff to demonstrate lack of authority); Herrera v. Fed. Nat’l Mort. Assoc. 205

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Cal.App.4th 1495, 1505-06 (2012) (same). Recordation of the assignment of an interest in the deed

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of trust is not essential in order to proceed with a foreclosure. See Haynes v. EMC Mortg. Corp., 205

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Cal. App. 4th 329, 336 (2012), review denied (Aug. 8, 2012) (where deed of trust involved, the

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trustee may initiate foreclosure irrespective of whether an assignment of the beneficial interest is

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recorded). The “statutory requirement [Civil Code §2932.5] that an assignment of the beneficial

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interest in a debt secured by real property must be recorded in order for the assignee to exercise the
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power of sale applies only to a mortgage and not to a deed of trust.” Calvo v. HSBC Bank USA, N.A.

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(2011) 199 Cal.App.4th 118, 122 (demurrer properly sustained without leave to amend,

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notwithstanding there being no recording of the lender’s assignment of the deed of trust, and

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assignee and MERS were entitled to invoke the deed’s power of sale provision). Furthermore,

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securitization of a loan is not, per se, improper and does not deprive MERS of a power of sale when

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the note is assigned to a trust pool, as alleged here. See Bascos v. Federal Home Loan Mortg. Corp.

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(C.D.Cal. 2011) 2011 WL 3157063, *6 (plaintiff borrower had no standing to challenge

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securitization of loan); Lane v. Vitek Real Estate Industries Group, 713 F.Supp.2d 1092, 1099

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(E.D.Cal.2010) (“The argument that parties lose interest in a loan when it is assigned to a trust pool
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has also been rejected by numerous district courts.”); Benham v. Aurora Loan Services, 2009 WL

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2880232 at *3 (N.D.Cal. Sept.1, 2009) (“Other courts in this district have summarily rejected the

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argument that companies like MERS lose their power of sale pursuant to the deed of trust when the

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original promissory note is assigned to a trust pool.”).

Northern District of California

United States District Court

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Moreover, Plaintiffs’ only evidence in support of the temporary restraining order is a

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declaration stating that they “believe” that the sale and resale of the original promissory note was not

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legal and that they have “learned” that MERS has been declared “ an illegal business activity,” along

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with the conclusion that they “believe” Defendants have no legal rights in or ownership of the note at

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the current time. (Dkt. 15, Declaration of McCloskeys at ¶¶ 4, 5, 6.)

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Having failed to offer legal arguments or evidence that would raise a serious question on the

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merits of their claims, the Court cannot grant temporary injunctive relief in Plaintiffs’ favor and the

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application must be DENIED.

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IT IS SO ORDERED.
Date: August 20, 2012
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YVONNE GONZALEZ ROGERS
UNITED STATES DISTRICT COURT JUDGE

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