Diaz v. Wells Fargo Bank, N.A., successor by merger with Wells Fargo Bank Southwest, N.A., f/k/a Wachovia Mortgage, FSB, f/k/a World Savings Bank, FSB et al

Filing 26

Order by Hon. Lucy H. Koh denying 18 Ex Parte Application.(lhklc1, COURT STAFF) (Filed on 11/25/2013)

1
2
3
4
5
6
7
8
UNITED STATES DISTRICT COURT

9

NORTHERN DISTRICT OF CALIFORNIA

United States District Court
For the Northern District of California

10

SAN JOSE DIVISION

11
12

ARMANDO DIAZ
Plaintiff,

13
14
15

v.
WELLS FARGO BANK, N.A.; CALWESTERN RECONVEYANCE CORP.; and
Does 1 through 20,

16

Defendants.

17
18

)
)
)
)
)
)
)
)
)
)
)

Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR
TEMPORARY RESTRAINING ORDER
AND ORDER TO SHOW CAUSE RE:
PRELIMINARY INJUNCTION

Plaintiff Armando Diaz filed an Ex Parte Application for a Temporary Restraining Order

19

(“TRO”) and Order to Show Cause (“OSC”) Re: Preliminary Injunction on November 25, 2013, to

20

stop the foreclosure sale of his home, which is located in Santa Clara, California. ECF No. 18.

21

Defendant Wells Fargo filed an Opposition to the Plaintiff’s Application. ECF No. 22. Having

22

considered the Application and Opposition, the Court DENIES Plaintiff’s Application for TRO and

23

OSC Re: Preliminary Injunction.

24

I.

25

BACKGROUND
Plaintiff took out a loan for $460,000 from Defendant Wells Fargo’s predecessor, World

26

Savings Bank. ECF No. 22 at 1. The loan was secured by a deed on Plaintiff’s home in Santa

27

Clara. Id. Plaintiff defaulted on the loan by failing to make the December 2012 and subsequent

28

1
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

payments. Id. A Notice of Default was recorded on May 15, 2013. ECF No. 25, Ex. G. A Notice of

2

Sale was recorded on October 1, 2013. ECF No. 25, Ex. H.

3

Plaintiff initially brought this action in Santa Clara County Superior Court on October 8,

4

2013, alleging that Defendants Wells Fargo Bank and Cal-Western Reconveyance Corporation

5

violated the terms of a class action settlement, California Civil Code § 2623.55, and California

6

Business and Professions Code § 17200. ECF No. 1, Ex. A (“Compl.”).

7

Plaintiff’s principal allegation in his Complaint was that Defendants violated the class

8

action settlement in In re: Wachovia Corp. “Pick-A-Payment” Mortgage Marketing and Sales

9

Practices Litig. (“Wachovia”), No. 09-2015, ECF No. 207 (N.D. Cal. May 17, 2011) (final

United States District Court
For the Northern District of California

10

approval order). See Compl. ¶ 11. In that multi-district litigation, plaintiffs alleged that defendants

11

violated the federal Truth in Lending Act (“TILA”), 15 U.S.C. 1601, et. seq,. and various state laws

12

because defendants’ loan documents, which allowed borrowers to choose among various payment

13

levels on their mortgages, did not make adequate disclosures. Wachovia, No. 09-2015, ECF No.

14

207, at 2. The settlement of that case had two components: a cash payment of $178.04 to class

15

members and a set of procedures that obligated Wells Fargo to consider class members for loan

16

modification under federal programs. Id. at 2-3. Judge Fogel, who presided over the Wachovia

17

settlement, retained jurisdiction to enforce its terms. Id. at 4. The Wachovia case has subsequently

18

been reassigned to Judge Seeborg. Wachovia, No. 09-2015, ECF No. 553. Plaintiff’s central

19

allegation in this case is that Defendants violated the Wachovia settlement by not considering

20

Plaintiff, a class member, for a loan modification. Compl. ¶ 14.

21

In his Complaint, Plaintiff further alleged that Defendants violated California Civil Code §

22

2923.55 by recording a Notice of Default against Plaintiff’s property without discussing

23

foreclosure avoidance options with Plaintiff and without informing Plaintiff of his rights under the

24

statute. Compl. ¶¶ 37, 41. Finally, Plaintiff alleged that Defendants violated California Business

25

and Professions Code § 17200 by engaging in unfair and fraudulent conduct. Compl. ¶ 46-67.

26

On October 20, 2013, Plaintiff applied for a temporary restraining order in state court,

27
28

contending that Defendants’ impending trustee sale would violate California Civil Code §
2
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

2923.55(b)(2). ECF No. 23, Ex. I. On October 21, 2013, the Santa Clara County Superior Court

2

issued an order granting Plaintiff a temporary restraining order, which prevented the foreclosure

3

sale scheduled for October 22, 2013. ECF No. 18, Ex. 5. In addition to issuing the TRO, the state

4

court ordered Defendants to show cause as to why a preliminary injunction should not issue. Id.

5

The hearing on the order to show cause was set for November 5, 2013, which was also the date on

6

which the TRO was set to expire. Id.

7

On October 23, 2013, before briefing on the order to show cause in state court began,

8

Defendants removed this action to federal court. ECF No. 1. Defendants assert that there is federal-

9

question jurisdiction, because the case concerns interpretation of an agreement settling a federal

United States District Court
For the Northern District of California

10

case and that there is diversity jurisdiction. Id. On October 30, 2013, Defendants moved to dismiss

11

the Complaint. ECF No. 6.

12

On November 21, 2013, Plaintiff filed an amended complaint. ECF No. 14 (“FAC”). The

13

FAC included not only the three causes of action in the original Complaint, but also added a fourth.

14

The newly added fourth cause of action alleged that Defendants violated California Civil Code §

15

2924.17(b), under which “a mortgage servicer shall ensure that it has reviewed competent and

16

reliable evidence to substantiate the borrower's default and the right to foreclose, including the

17

borrower's loan status and loan information” before the mortgage servicer serves a notice of

18

default, notice of sale, assignment of a deed or trust, or substitution of trustee. In his FAC, Plaintiff

19

alleged that Defendants violated this provision because the Substitution of Trustee and Notice of

20

Trustee’s Sale that Defendants recorded against Plaintiff’s property do not contain the specific

21

language stating that Defendants had reviewed reliable evidence to substantiate the borrower’s

22

default as required by section 2924.17 of the Civil Code. FAC ¶ 75-77. Plaintiff contends that the

23

absence of this specific language suggests that Defendants did not engage in the statutorily

24

mandated review. ECF No. 18 at 4.

25

On November 23, 2013, Plaintiff filed a Motion to Remand this matter to state court,

26

alleging that there is no basis for federal subject-matter jurisdiction. ECF No. 16. On November 25,

27

2013, Plaintiff filed the instant Application for a TRO and OSC Regarding Preliminary Injunction,

28

3
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

in which he states that the trustee’s sale is scheduled for November 26, 2013, at 10 a.m., and that

2

Defendants’ failure to meet the requirements of Civil Code sections 2924.17(b) and 2923.55

3

requires this Court to enjoin any such trustee’s sale. ECF No. 18 at 3-8. Defendants filed an

4

Opposition. ECF No. 22. In the Opposition, Defendants state that the trustee’s sale is scheduled for

5

December 10, 2013. Id. Because there was a discrepancy in the date of the trustee’s sale and

6

because neither party cited anything to support their respective dates of the sale, this Court ordered

7

the parties to resolve the discrepancy by providing supporting documentation that would clarify the

8

date of the trustee’s sale. ECF No. 24. Defendants responded stating that the trustee’s sale had been

9

continued to December 10, 2013, but that there was no available documentation regarding the date

United States District Court
For the Northern District of California

10

of the sale. ECF No. 25. Plaintiff did not respond.

11

II.

12

LEGAL STANDARD
The standard for issuing a temporary restraining order is identical to the standard for issuing

13

a preliminary injunction. Brown Jordan Int’l, Inc. v. Mind’s Eye Interiors, Inc., 236 F. Supp. 2d

14

1152, 1154 (D. Haw. 2002); Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co., 887

15

F.Supp. 1320, 1323 (N.D. Cal. 1995). “A plaintiff seeking a preliminary injunction must establish

16

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

17

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

18

public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008) (emphasis added).

19

The party seeking the injunction bears the burden of proving these elements. Klein v. City of San

20

Clemente, 584 F.3d 1196, 1201 (9th Cir. 2009). The issuance of a preliminary injunction is at the

21

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

22

2009).

23

III.

24

DISCUSSION
“The Court recognizes that loss of a home can constitute irreparable harm.” Tapang v.

25

Wells Fargo Bank, N.A., No. 12-2183, 2012 WL 1894273 (N.D. Cal. May 23, 2012). “However,

26

Plaintiff has failed to carry [his] burden of showing a likelihood of success on the merits of [his]

27

claims, and thus the Court cannot grant [his] request for a TRO.” Id. Plaintiff contends that

28

4
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

Defendants have acted in contravention of two California statutes and that these violations require

2

this Court to issue a TRO. Plaintiff first contends that Defendants have violated section 2924.17(b)

3

of the California Civil Code, which, as discussed above, requires mortgage servicers to ensure that

4

they have reviewed reliable evidence to substantiate the borrower’s default before serving a notice

5

of default or similar document. Plaintiff further contends that Defendants have violated section

6

2923.55(b)(2) of the California Civil Code, which requires a mortgage servicer to contact the

7

borrower to assess the borrower’s financial situation, to explore options of avoiding foreclosure,

8

and to provide other information.
With regard to section 2924.17, Plaintiff’s contention is that none of the documents

10
United States District Court
For the Northern District of California

9

Defendants sent to Plaintiff contains an affirmative statement that Defendants have “ensure[d] that

11

[they have] reviewed competent and reliable evidence to substantiate the borrower's default and the

12

right to foreclose” and that the absence of this statement suggests that Defendants did not review

13

the evidence. Cal. Civ. Code § 2924.17(b); ECF No. 18 at 4. Yet, Plaintiff has not cited any

14

authority suggesting that this statute requires Defendants to affirmatively state that they have

15

complied with this provision. To the contrary, Plaintiff concedes that such language is “commonly

16

added,” not that it is always used. ECF No. 18 at 4.

17

Section 2924.17(b) does not appear to require any specific affirmative statement. Rather, as

18

other courts have found, the statute is designed to prevent “robo-signing.” See Marquez v. Wells

19

Fargo Bank, N.A., No. 13-2819, 2013 WL 5141689 (N.D. Cal. Sept. 13, 2013) (“Section 2924.17

20

prohibits the practice of robo-signing, in which servicers sign foreclosure documents without

21

determining the right to foreclose.”); Sanguinetti v. CitiMortgage, Inc., No. 12-5424, 2013 WL

22

4838765 (N.D. Cal. Sept. 11, 2013) (“Section 2924.17 prohibits ‘robo-signing,’ or executing

23

foreclosure documents without ‘substantiat[ing] the borrower's default and the right to

24

foreclose.’”); Hosseini v. Wells Fargo Bank, N.A., No. 13-2066, 2013 WL 4279632 (N.D. Cal.

25

Aug. 9, 2013) (“Section 2924.17(b) prohibits the practice of ‘robo-signing,’ in which mortgage

26

servicers execute foreclosure documents without ‘substantiat[ing] the borrower's default and the

27

right to foreclose.’”). Here, there is no allegation that Defendants have not reviewed competent and

28

5
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

reliable evidence to substantiate the borrower’s default, nor is there any allegation (let alone

2

evidence) that Defendants have engaged in “robo-signing.” In light of this lack of evidence and the

3

lack of argument that section 2924.17(b) requires Defendants to use certain words in

4

communication with the Plaintiff, the Court finds that Plaintiff is unlikely to succeed on the merits.

5

With regard to section 2923.55(b)(2), Defendants explicitly attached a “Declaration of

6

Compliance” to the Notice of Default. ECF No. 23, Ex. G. This attachment stated that “The

7

mortgage servicer has contacted the borrower pursuant to California Civil Code § 2923.55(b)(2) to

8

‘assess the borrower’s financial situation and explore options for the borrower to avoid

9

foreclosure.’ Thirty (30) days, or more, have passed since the initial contact was made.” Id.

United States District Court
For the Northern District of California

10

Plaintiff contends that he has called into question the validity of this Declaration of Compliance

11

through his own declaration, in which he states, “[p]rior to the recording of the Notice of Default,

12

not a single contact with my mortgage servicer included 1) a discussion of my options to avoid

13

foreclosure, 2) an advisement that I could meet with them within 14 days to discuss my options to

14

avoid foreclosure and assess my finances, and 3) providing me with the free HUD number so I

15

could contact a loan counselor for independent advice.” ECF No. 18, Ex. 2.

16

In other, analogous contexts, courts have held that a declaration attached to the Notice of

17

Default is sufficient to satisfy Defendants’ obligations under California laws that require lenders to

18

contact borrowers. For example, section 2923.5, which requires similar notices to borrowers from

19

lenders, is satisfied by a declaration of compliance with applicable statutory obligations. See, e.g.,

20

Cabanilla v. Wachovia Mortg., No. 12-0228, 2012 U.S. Dist. LEXIS 39270 at *11-12 (C.D. Cal.

21

March 20, 2012) (“Wachovia points to the declaration included in the notice of default sent to the

22

Cabanillas as evidence of their compliance. This declaration states that ‘Wells Fargo Bank, N.A.,

23

has contacted the borrower as set forth in California Civil Code Section 2923.5(a)(2).’ This

24

declaration is sufficient to establish that Wachovia has met its obligations under § 2923.5.”

25

(internal citations omitted)); Kamp v. Aurora Loan Servs., No. 09-0844, 2009 U.S. Dist. LEXIS

26

95245 (C.D. Cal. Oct. 1, 2009) (same); Juarez v. Wells Fargo Bank, N.A., No. 09-3104, 2009 U.S.

27

Dist. LEXIS 110892 (C.D. Cal Nov. 11, 2009) (same).

28

6
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION

1

The Court finds that Plaintiff has not carried his burden of demonstrating why the Court

2

should deviate from this precedent with respect to the section 2923.55(b)(2) claim. The cases

3

stating that a declaration is sufficient to meet defendants’ notice burdens are particularly persuasive

4

because those cases all involved grants of motions to dismiss in favor of defendants, a context in

5

which there is substantial deference to the plaintiffs’ allegations. In contrast, in the TRO context, as

6

here, Plaintiff bears the ultimate burden. As Plaintiff himself concedes in his Application, he has at

7

a minimum “raised serious questions as to whether not [sic] the Defendants’ complied with this

8

code.” ECF No. 18 at 8. “Rais[ing] serious questions” falls substantially below Plaintiff’s burden

9

of showing a likelihood of success on the merits. Because it is likely, based on the case law and the

United States District Court
For the Northern District of California

10

Declaration of Compliance, that Defendants have satisfied their obligations under section

11

2923.55(b)(2), the Court finds that Plaintiff is unlikely to succeed on the merits.

12

IV.

CONCLUSION

13

Because the Court finds that Plaintiff has not met his burden of showing that he is likely to

14

succeed on the merits under either of the two statutes that he alleges Defendants have violated, the

15

Court DENIES Plaintiff’s Application for a TRO and Order to Show Cause Re: Preliminary

16

Injunction.

17

IT IS SO ORDERED.

18

Dated: November 25, 2013

19

_________________________________
LUCY H. KOH
United States District Judge

20
21
22
23
24
25
26
27
28

7
Case No.: 13-CV-04915-LHK
ORDER DENYING APPLICATION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW
CAUSE RE: PRELIMINARY INJUNCTION