Nguyen v. Bank of America , N.A. et al

Filing 15

Order by Hon. Lucy H. Koh denying 4 Motion for TRO.(lhklc2, COURT STAFF) (Filed on 7/29/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

United States District Court
For the Northern District of California

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TERI H. NGUYEN,

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Plaintiff,
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v.
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BANK OF AMERICA NATIONAL
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ASSOCIATION, JP MORGAN CHASE BANK, )
AND DOES 1 TO 99,
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Defendants.
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)

Case No.: 11-CV-03318-LHK

ORDER DENYING APPLICATION FOR
TEMPORARY RESTRAINING ORDER

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I.

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On July 6, 2011, Plaintiff Nguyen filed a complaint asserting various causes of action

INTRODUCTION

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against Defendants, all arising out of the attempted foreclosure of property located at 15520 Quito

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Road, Monte Sereno, California (the Property). See Dkt. No. 1 (Compl.). In the Complaint,

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Plaintiff states that a Notice of Sale was recorded on June 30, 2011, setting an auction date of

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August 2, 2011. On July 21, 2011, Plaintiff filed an ex parte application for a temporary

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restraining order (TRO). Plaintiff seeks an injunction preventing the foreclosure sale from going

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forward on August 2, 2011. On July 23, 2011, Plaintiff filed a declination to proceed before a

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United States Magistrate Judge. On July 27, 2011, the case was reassigned to the undersigned

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judge. For the reasons set forth below, the Court DENIES Plaintiff’s Application for Temporary

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Restraining Order. Although Plaintiff has filed proof-of-service showing that the Complaint was

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served on the designated agent for service of process for both Defendants, Plaintiff has not filed
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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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proof-of-service of the Application for TRO. Instead, Plaintiff’s attorney filed a statement

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indicating that he mailed the Application to Defendants’ agent for service on July 21, 2011, and

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that he believes the Application should have been received by July 22, 2011. Defendants have not

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yet appeared in this case, and therefore have not received notice via electronic case filing.

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II.

BACKGROUND

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The Court summarizes the relevant factual allegations here. Plaintiff alleges that she is the

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“original owner” of the Property. Compl. ¶ 1. In April, 2007, Plaintiff refinanced her mortgage on

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the property by borrowing $2,500,000 from Washington Mutual Bank, N.A. (WaMu). Compl. ¶

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11. The note was secured by a deed of trust to the Property, and was recorded in the Santa Clara

United States District Court
For the Northern District of California

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County Recorder’s Office on May 1, 2007. Compl. ¶ 12, Ex. 1. Plaintiff also opened a Home

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Equity Line of Credit account with WaMu in the amount of $855,000. Compl. ¶ 12. The credit

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line was also secured by a deed of trust to the Property. Compl. Ex. 2.

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Plaintiff alleges that “in about June 2007” the Note and Deed of Trust were transferred to a

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depositor, WaMu Asset Acceptance Corporation, which in turn deposited the Note and Deed of

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Trust into the “WaMu Mortgage Pass-Through Certificates Series 2007-HY7 Trust.” Compl. ¶ 33.

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Plaintiff alleges that the trustee for the trust was LaSalle Bank National Association. Plaintiff

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states that “whether or not the Note and the DOT [Deed of Trust] were actually delivered” from

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WaMu to the depositor to the trust is unknown. Compl. ¶ 34. Plaintiff also alleges that WaMu

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retained only the servicing rights to the loan, while all other interest was transferred to the trust.

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Compl. ¶ 35.

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Plaintiff alleges that she made payments to WaMu until September 25, 2008, when “WaMu

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was shut down by the government” and the Federal Deposit Insurance Corporation “sold

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WaMu[’s] assets to [Defendant JPMorgan] Chase [Bank] for 1.9 billion.” Compl. ¶ 14. Plaintiff

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alleges that she continued to make loan payments to JPMorgan Chase Bank (Chase), as servicer of

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the loan, until December, 2008, when she suffered a serious health problem and sought loan

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modification. Plaintiff and Chase did not reach an agreement to modify her loan, however.

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On March 27, 2009, Chase executed an Assignment of the Deed of Trust associated with
the $2,500,000 loan to Bank of America National Association, successor by merger to LaSalle
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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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Bank NA as trustee for WaMu Mortgage Pass-Through Certificates Series 2007-HY7 Trust (BoA).

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Compl. ¶ 17. This Assignment is attached as Exhibit 3 to Plaintiff’s Complaint, and was recorded

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on March 30, 2009. Id. The Assignment stated that Chase assigned “all beneficial interest” under

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the Deed of Trust to BoA, and that California Reconveyance Company (CRC) was appointed

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trustee. Compl. Ex. 3.

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On March 30, 2009, Plaintiff alleges that CRC recorded a Notice of Default and Election to

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Sell the Property. Compl. ¶ 18. The Notice of Default states that as of March, 2009, Plaintiff was

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$69,254.20 behind in payments on the $2,500,000 loan. Compl. Ex. 4. Plaintiff alleges that a

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Notice of Trustee’s Sale setting a foreclosure sale for August 4, 2009 was recorded on July 20,

United States District Court
For the Northern District of California

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2009. Although Plaintiff attaches a copy of what appears to be a Notice of Trustee’s sale, the copy

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appended to the Complaint was not recorded. See Compl. Ex. 5. Plaintiff alleges that “a few days

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before the scheduled date of auction,” she filed a Complaint against Chase in state court, and

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applied ex-parte for a TRO to stop the August 4, 2009 auction. Compl. ¶ 21. The state court

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granted the TRO, and set a hearing in January, 2010. Id. Plaintiff asserts that Chase appeared at

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the hearing and argued that it was the owner of the Note, and that the Court denied the motion for

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continued injunction on this basis. Compl. ¶ 22. Following this, Plaintiff alleges that Chase

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scheduled an auction for February 2, 2010, and that Plaintiff responded by transferring title in the

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Property to Rose Court LLC “which was better equipped to deal with foreclosing lenders.” Compl.

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¶ 24. Rose Court LLC then filed for Chapter 11 bankruptcy protection.

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During the bankruptcy proceedings, Plaintiff alleges that BofA (rather than Chase)

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submitted a claim based on the $2,500,000 loan, and filed a Motion for Relief from Stay imposed

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by the bankruptcy proceedings. Compl. Ex. 7. Plaintiff alleges that during these proceedings,

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BofA presented a new assignment of Deed of Trust from Chase dated August 24, 2010, but that

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this assignment was never recorded. Plaintiff alleges that at the same time, she continued to

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negotiate with Chase about a modification to her loan. Compl. ¶ 27. Plaintiff alleges that Chase

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stated it would not consider modification until the bankruptcy was withdrawn, and that “[i]n

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reliance on this representation, in May 2011, the debtor withdrew the Chapter 11 case.” Id. It is

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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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not clear from the complaint what the relationship between Rose Court LLC and Plaintiff is, or

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whether title has been transferred back to Plaintiff from Rose Court LLC.

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Finally, Plaintiff alleges that on June 30, 2011, CRC “as instructed by Chase” recorded a

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new Notice of Sale setting an auction date for August 2, 2011. Compl. ¶ 38. This Notice of Sale is

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attached to the Complaint as Exhibit 12, and states that the outstanding balance on the loan was

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$3,013,405.50 as of June 30, 2011. Compl. Ex. 12. There is no mention of Chase or BofA

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anywhere on the Notice of Sale.
III.

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The standard for issuing a TRO is identical to the standard for issuing a preliminary

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United States District Court
For the Northern District of California

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LEGAL STANDARDS

injunction. Brown Jordan Int’l, Inc. v. Mind’s Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D.

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Haw. 2002); Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co., 887 F. Supp. 1320, 1323

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(N.D. Cal. 1995). “A plaintiff seeking a preliminary injunction must establish 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 preliminary

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relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.”

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Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008). The party seeking the

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injunction bears the burden of proving these elements. Klein v. City of San Clemente, 584 F. 3d

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1196, 1201 (9th Cir. 2009). The issuance of a preliminary injunction is at the discretion of the

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district court. Indep. Living Ctr. v. Maxwell-Jolly, 572 F.3d 644, 651 (9th Cir. 2009).

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Federal Rule of Civil Procedure 65(b)(1) states that a court may issue a temporary

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restraining order without notice to the opposing party only if: “A) specific facts in an affidavit or a

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verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to

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the movant before the adverse party can be heard in opposition; and B) the movant’s attorney

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certifies in writing any efforts made to give notice and the reasons why it should not be required.”

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Additionally, Civil Local Rule 65-1(b) states that, unless relieved by the Court for good cause

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shown, “on or before the day of an ex parte motion for a temporary restraining order, counsel

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applying for the temporary restraining order must deliver notice of such motion to opposing

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counsel or party.”

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IV.

DISCUSSION

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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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In Plaintiff’s Application for TRO, she argues that she can demonstrate a likelihood of

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success on two of the causes of action alleged in her Complaint: 1) whether the “Defendants have

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standing to do what they are doing”; and 2) her claim of Wrongful Foreclosure. Both of these

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claims rest on Plaintiff’s argument that because there is no proof that the original Note was

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transferred to Chase or to BofA, neither entity has the right to foreclose on the Property. However,

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based only on the Complaint and the documents attached to it, it appears that the Note and Deed of

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Trust were transferred from WaMu (the original lender) to BofA, with CRC as trustee. First, in

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June, 2007, WaMu transferred the Note and Deed of Trust to the WaMu Mortgage Pass-Through

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Certificates Series 2007-HY7 Trust, keeping only the servicing rights for itself. Second, in

United States District Court
For the Northern District of California

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September, 2008, Chase bought all of WaMu’s assets, including the servicing rights to Plaintiff’s

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loan. Third, Chase transferred all of its beneficial interest in the loan (meaning the servicing rights)

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to BofA, “successor by merger to LaSalle Bank NA as trustee for WaMu Mortgage Pass-Through

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Certificates Series 2007-HY07 Trust.” Thus, it appears that BofA obtained all but the servicing

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rights to Plaintiff’s $2,500,000 loan when it merged with LaSalle Bank, and obtained the servicing

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rights when Chase assigned them on March 27, 2009.

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Anticipating the argument that Chase obtained servicing rights from WaMu as part of the

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acquisition of WaMu’s assets, and that BofA obtained non-servicing rights through its merger with

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LaSalle Bank, Plaintiff argues that BofA “became a DOT [Deed of Trust] holder without holding

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the note” and that this is “worth nothing.” The problem with this argument is that it appears, based

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on the allegations in Plaintiff’s Complaint, that BofA obtained both the Note and the Deed of Trust

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when it merged with LaSalle Bank NA. While it appears that Chase had no right to continue

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negotiating a loan modification with Plaintiff or to appear in Plaintiff’s state court action after the

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assignment to BofA, Plaintiff has submitted no evidence indicating that Chase is improperly behind

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the August 2, 2011 auction.

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To the extent Plaintiff is arguing that no defendant can foreclose on the property without

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the original Note, this argument is contrary to California law. The Deed of Trust securing the

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$2,500,000 Note contains a power of sale clause, stating that in case of default, the lender may sell

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the property at public auction. See Ex. 1 at 21. The trustee, if granted the power of sale, has the
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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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authority and duty to initiate foreclosure proceedings on the subject property upon the trustor’s

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default. See Lomboy v. SCME Mortg. Bankers, No. C-09-1160 SC, 2009 U.S. Dist. LEXIS 44158,

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at *12 (N.D. Cal. May 26, 2009) (“The trustee has the power and the duty ‘to initiate foreclosure

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proceedings on the property upon the trustor’s default, resulting in a sale of the property.’”); see

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also Hafiz v. Greenpoint Mortg. Funding, 652 F. Supp. 2d 1039, 1043 (N.D. Cal. 2009)

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(“California law does not require possession of the note as a precondition to non-judicial

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foreclosure under a deed of trust . . . Pursuant to section 2924(a)(1) of the California Civil Code the

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trustee of a Deed of Trust has the right to initiate the foreclosure process.”).

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Plaintiff cites four cases in support of the argument that she has demonstrated a likelihood

United States District Court
For the Northern District of California

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of success, but all of them are distinguishable. In Hooker v. Northwest Trustee Servs. Inc., No. 10-

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3111-PA, 2011 U.S. Dist. LEXIS 57005 (D. Or. May 25, 2011), the court found that defendants

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violated an Oregon statute requiring recordation of all trust deed assignments before initiation of

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non-judicial foreclosure proceedings. Hooker, 2011 U.S. Dist. LEXIS 57005 at *12. The Hooker

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court noted that while the original trust deed and note listed one lender, there was no record of how

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the party attempting to conduct the foreclosure sale obtained any interest in the deed of trust. Id. at

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*13. Based on Plaintiff’s allegations, it appears very likely that BofA has the right to foreclose on

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the property, based on its acquisition of the mortgage fund to which Plaintiff’s Note and Deed of

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Trust were transferred. Certainly, the Court has not been presented with evidence of a break in the

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chain of title indicating that BofA (through trustee CRC) cannot foreclose on the Property.

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Likewise, Javaheri v. JPMorgan Chase Bank, N.A., No. CV10-08185 ODW, 2011 U.S.

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Dist. LEXIS 62152 (C.D. Cal. June 2, 2011) is inapposite. As Plaintiff points out, in Javaheri (as

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in this case) the plaintiff’s loan was originated by WaMu. Javaheri, 2011 U.S. Dist. LEXIS 62152

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at *2. Plaintiff alleged that the loan was sold to an investment trust, and that because Chase had no

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proof that it acquired that trust, Chase had no right to enforce the Deed of Trust or Note (despite its

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purchase of WaMu’s assets). The court found that these allegations raised the plaintiff’s right to

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relief “above the speculative level” and refused to dismiss Plaintiff’s wrongful foreclosure claim.

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Id. at 14. First, in this case (as described above) Plaintiff’s own allegations indicate that BofA

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obtained all but the servicing rights to Plaintiff’s Note and Deed of Trust when it merged with
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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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LaSalle Bank, and obtained the servicing rights from Chase via assignment. Second, Plaintiff’s

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burden in an application for TRO (particularly an ex parte TRO) is much greater than her burden in

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stating a claim. That another court concluded that related allegations raised the claims “above the

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speculative level” does not establish a likelihood of success on the merits of Plaintiff’s claim.

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Plaintiff’s final two cited authorities are distinguishable as well. Plaintiff cites a decision

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by the Bankruptcy Panel of the Ninth Circuit applying Arizona law. See Veal v. Am. Home Mortg.

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Servicing Inc., No. AZ-10-1055-MkKiJu, AZ-10-1056-MkKiJu, 2011 Bankr. LEXIS 2158 (B.A.P.

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9th Cir., June 10, 2011). Under Arizona law, the Bankruptcy Panel applied the Uniform

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Commercial Code (UCC) to a mortgage transfer and found that transfer of a mortgage without the

United States District Court
For the Northern District of California

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note is unenforceable. Veal, 2011 Bankr. LEXIS 2158 at *43-44. In California, however, the

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provisions of the California Civil Code governing foreclosures are intended to be “exhaustive.”

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Thus, the UCC and the California Commercial Code requirements cited by Plaintiff do not apply to

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transferring title of a mortgage note. Saugstad v. Am. Home Mortg. Servicing Inc., No. 2:09-CV-

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03516-JAM-KJM, 2010 U.S. Dist. LEXIS 76628, at *11-12 (E.D. Cal. July 29, 2010); Moeller v.

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Lien, 25 Cal. App. 4th 822, 830 (1994). Finally, Plaintiff cites a case in which the court found that

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the party attempting to foreclose on a property had no power to do so when it did not receive an

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assignment of rights until after it initiated foreclosure proceedings. Sacchi v. Mortg. Elec.

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Registration Sys., Inc., No. CV 11-1658 AHM (CWx), 2011 U.S. Dist. LEXIS 68007, at *20-21

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(C.D. Cal. June 24, 2011). Given that Plaintiff’s allegations suggest that BofA obtained rights to

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the Note and Deed of Trust before the most recent foreclosure proceedings were initiated, this case

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is not helpful to the analysis here.

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Plaintiff has failed to carry her burden to demonstrate a likelihood of success on either of

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the claims identified in the TRO Application. The Court recognizes that loss of one’s home

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constitutes irreparable harm, and the irreparable harm factor weighs in favor of an injunction. Saba

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v. Caplan, No. C 10-02113 SBA, 2010 U.S. Dist. LEXIS 76790, at *13-*14 (N.D. Cal. July 6,

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2010). However, the balance of equities does not favor an injunction. Based on the June 30, 2011

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Notice of Sale, it appears that Plaintiff has been living in the Property paying nothing on the loan

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since mid-2009. Plaintiff also admits that since August, 2009, she has successfully put off multiple
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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER

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foreclosure sales by waiting until the eve of the sale and then initiating court action, at least once

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before on an ex parte basis and without notice to the Defendants. Plainly, Plaintiff could have

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served Defendants with the Application for TRO, because Plaintiff filed proofs of service for the

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Complaint. Instead, Plaintiff chose to mail the TRO Application to Defendants, leaving the Court

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uncertain as to whether Defendants are even on notice that the TRO Application was filed. In light

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of all this the Court finds that the balance of equities and the public interest weigh against granting

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Plaintiff’s request. Plaintiff is not entitled to an injunction preventing the August 2, 2011 sale of

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the Property from going forward.

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United States District Court
For the Northern District of California

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V.

CONCLUSION

Plaintiff has failed to carry her burden to demonstrate a likelihood of success on the claims

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identified in the TRO Application. The balance of equities does not favor an injunction.

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Therefore, Plaintiff’s TRO Application is DENIED.

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IT IS SO ORDERED.

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Dated: July 29, 2011

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_________________________________
LUCY H. KOH
United States District Judge

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Case No.: 11-CV-03318-LHK
ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER