U.S. Bank National Association v. Friedrichs et al

Filing 33

ORDER Granting 3 Defendant's Motion For Preliminary Injunction; Setting Briefing Schedule. Plaintiff shall file a supplemental brief by 11/16/2012. Defendant shall file a supplemental response by 11/30/2012. Signed by Judge Gonzalo P. Curiel on 11/9/2012. (All non-registered users served via U.S. Mail Service)(srm)

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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U.S. BANK NATIONAL ASSOCIATION, a
national banking association, as successor-ininterest to the FEDERAL DEPOSIT
INSURANCE CORPORATION, Receiver
for Park National Bank,

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CASE NO. 12cv2373-GPC(KSC)
ORDER GRANTING
DEFENDANT’S MOTION FOR
PRELIMINARY INJUNCTION;
SETTING BRIEFING SCHEDULE

Plaintiff,
vs.

[Doc. No. 3.]

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SANDY K. FRIEDRICHS, an individual; and
DOES 1 through 50, inclusive,

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Defendants.
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On October 15, 2012, Defendant filed an ex parte motion for temporary restraining order and

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preliminary injunction seeking to restrain Plaintiff from foreclosing Defendant’s property located at

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1340 La Mirada Drive, San Marcos, California 92078. (Dkt. No. 3.) On October 18, 2012, the Court

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denied Defendant’s ex parte motion for a temporary restraining order because the Court concluded that

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Defendant had not shown irreparable harm since Plaintiff had moved the sale of the property to

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November 15, 2012. (Dkt. No. 6.) The Court set a briefing schedule as to the motion for preliminary

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injunction. Defendant filed a supplemental brief on October 29, 2012. (Dkt. No. 15.) Plaintiff filed

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a reply on October 31, 2012. (Dkt. No. 16.) On November 9, 2012, the Court held a hearing on the

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motion for preliminary injunction. Brian Tanada appeared on behalf of Plaintiff and Sandy Zappia and

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non-party Albert Zappia appeared pro se. Based on the reasoning below, the Court GRANTS
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Defendant’s motion for preliminary injunction.

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Procedural Background

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On July 13, 2012, Plaintiff U.S. Bank National Association (“U.S. Bank”), as successor to the

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Federal Deposit Insurance Corporation (“FDIC”), as Receiver for Park National Bank (“Park

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National”) filed a complaint in the Superior Court of San Diego against Defendant Sandy Friedrichs

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for appointment of receiver and judicial foreclosure. On September 28, 2012, Defendant Sandy Zappia

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and non-party Albert Zappia, Defendant’s husband, proceeding pro se, removed the case to this Court.

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(Dkt. No. 1.) On October 12, 2012, the case was transferred to the undersigned judge. (Dkt. No. 2.)

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On October 15, 2012, Defendant filed an ex parte motion for temporary restraining order and

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preliminary injunction seeking to restrain Plaintiff from foreclosing Defendant’s business property

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located at 1340 La Mirada Drive, San Marcos, California 92078. (Dkt. No. 3.) On October 18, 2012,

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the Court denied Defendant’s ex parte motion for a temporary restraining order because the Court

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concluded that Defendant had not shown irreparable harm since Plaintiff had moved the sale of the

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property to November 15, 2012. (Dkt. No. 6.) The Court set a briefing schedule as the motion for

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preliminary injunction. Defendant filed a supplemental brief on October 29, 2012. (Dkt. No. 15.)

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Plaintiff filed an opposition on October 31, 2012. (Dkt. No. 16.) Defendant filed a reply on November

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1, 2012. (Dkt. No. 28.)

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Factual Background

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Around April 9, 2007, GreenPoint Mortgage Funding lent Defendant, on a recourse basis, the

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principal sum of $340,000, secured by the property located at 1340 La Mirada Drive, San Marcos, CA

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92078. (Dkt. No. 5-1, Ocepek Decl. ¶¶ 5-6; Ex. 1.) The loan was memorialized in a written

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Promissory Note. (Id.) On April 18, 2007, GreenPoint recorded a “Deed of Trust, Assignment of

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Rents, Security Agreement and Fixture Filing” (“Deed of Trust”) with the San Diego County

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Recorder’s Office. (Id. ¶ 7; Ex. 2.) Defendant executed the Deed of Trust as trustor, to GreenPoint,

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as beneficiary, and to Marin Conveyancing Corp., as trustee. (Id.) According to the title policy issued

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in connection with the Loan, the Deed of Trust constitutes a first priority lien on the Property. (Id. ¶

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7; Ex. 2.)

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On August 1, 2008, Park National recorded an “Assignment of Deed of Trust” whereby
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GreenPoint assigned all of its right, title, and interest in, to and under the Note, Deed of Trust and

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Assignment to Park National. (Id. ¶ 9; Ex. 3.) The loan assignment was notarized on April 25, 2007

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but executed by Patrick Nygard, Assistant VP of GreenPoint, on February 29, 2008.

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On October 30, 2009, the FDIC placed Park National into receivership and assigned the assets

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of Park National, including the Loan, to U.S. Bank. (Id. ¶ 10; Ex. 4.) The Note was assigned from

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GreenPoint to Park National by way of an Endorsement on the last page of the Note. (Id. ¶ 6 ; Ex. 1.)

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When the FDIC closed Park National, the Note was assigned by the FDIC as Receiver for Park

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National to U.S. Bank by way of an Allonge to Note. (Id.) As a result of the Endorsement and

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Allonge, U.S. Bank is the current holder of the Note.

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In late March 2012, non-party Albert Zappia submitted a check in the amount of $287,734.26

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to U.S. Bank as an attempted payoff for the Loan. (Id. ¶ 12; Dkt. No. 1-2 at 55.) The check bore the

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notation “EFT Only for Discharge of Debt.” (Dkt. No. 1-2 at 55.) The check was returned because

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it was written on a closed account. (Dkt. No. 5-1, Ocepek Decl., Ex. 5.)

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A U.S. Bank statement dated April 16, 2012 indicated that the amount due was $0.00. (Dkt.

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No. 1-2 at 57.) In subsequent correspondence, outside counsel for U.S. Bank informed Defendant

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about the insufficient funds and that the loan was in default. (Dkt. No. 1-2 at 59.) Starting in April

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and May 2012, Defendant failed to make her monthly loan payment. (Dkt. No. 501, Ocepek Decl. ¶

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13.) Defendant’s failure to pay the Loan is a default on the obligations for which the Deed of Trust

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is security. (Id.)

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Around June 22, 2012, U.S. Bank recorded a Substitution of Trustee, wherein Beacon Default

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Management, Inc. became the successor trustee under the Deed of Trust. (Id. ¶ 14; Ex. 6.) U.S. Bank

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started non-judicial foreclosure proceedings by recording a notice of default and election to sell around

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June 22, 2012. (Id. ¶ 15; Ex. 7.) Around September 12, 2012, U.S. Bank noticed a trustee’s sale on

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the property for October 18, 2012. (Id. ¶ 16.) The sale has been postponed until November 15, 2012.

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(Id. ¶ 17.)

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Discussion

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To obtain a preliminary injunction, the moving party must show: (1) a likelihood of success

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on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary
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relief; (3) that the balance of equities tips in the moving party’s favor; and (4) that an injunction is in

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

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Under the Ninth Circuit’s “sliding scale” approach, the first and third elements are to be

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balanced such that “serious questions” going to the merits and a balance of hardships that “tips

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sharply” in favor of the movant are sufficient for relief so long as the other two elements are also met.

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Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1134–35 (9th Cir. 2011). A preliminary

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injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the

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plaintiff is entitled to such relief,” Winter, 555 U.S. at 22, and the moving party bears the burden of

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meeting all four Winter prongs. See Cottrell, 632 F.3d at 1135; DISH Network Corp. v. FCC, 653

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F.3d 771, 776–77 (9th Cir. 2011).

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A.

Likelihood of Success on the Merits

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Defendant argues that the Assignment from GreenPoint to Park National Bank is invalid

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because it was not properly notarized. The Assignment was executed on February 29, 2008 by Patrick

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Nygard; however, the Assignment was notarized months earlier in April 2007. (Dkt. No. 5-1, Ex. 3.)

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Defendant cites to California law that states that a document that a notary witnesses must be complete

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at the time of notarization. Cal. Gov’t Code § 8205(a)(2). Therefore, since the Assignment was

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notarized in April 2007 and the document was executed and signed on February 29, 2008, Defendant

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argues the document was not properly notarized and not properly assigned.

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In a declaration, Plaintiff states that the “loan assignment was executed and notarized in April

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2007 and became effective in February 2008 when the sale of the Loan to Park National was

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consummated.” (Dkt. No. 5-1, Ocepek Decl. ¶ 9.) Plaintiff’s declaration does not clarify the

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discrepancy. At the hearing, Plaintiff’s counsel stated that Ocepek’s statements are based on a review

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of the loan documents and not personal knowledge. On its face, there appears to be a discrepancy as

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the Assignment that raises questions as to the validity of the transfer to Park National Bank.

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In addition, Defendant argues that Plaintiff failed to identify the Note ever being owned by

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Lehman Brothers Small Finance (“Lehman Brothers”) and how her loan was later transferred to Park

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National Bank. (Dkt. No. 15, D’s Mem. in Support of Prelim. Injunction, Exs. A, B.) By letter,

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Lehman Brothers informed Defendant that it purchased the Note from GreenPoint as of July 1, 2007.
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(Id.) On March 17, 2008, Park National wrote Defendant indicating that it purchased her loan from

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Lehman Brothers. (Id.) Since there is no mention of Lehman Brothers in Plaintiff’s documents,

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Defendant argues that the assignment to Plaintiff U.S. Bank is not valid as there was a break in the

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chain of ownership. Plaintiff did not address this issue in its reply. At the hearing, Plaintiff’s counsel

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noted that he conducted further research subsequent to the filing of the reply and offered to file a

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supplemental brief.

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Further, Defendant argues that the endorsement of the Note from GreenPoint to Park National

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Bank is not valid because the endorsement fails to provide any identifying information to indicate

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which loan the endorsement is referencing. (Dkt. No. 5-1 at 17.) In opposition, Plaintiff argues that

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an endorsement of a negotiable instrument must be “made on [the] instrument” citing to Cal. Com.

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Code § 3204. According to Plaintiff, the endorsement was on the last page of the Note and thus was

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affixed to the Note.

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Plaintiff’s counsel should brief whether the endorsement at issue is an endorsement or an

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allonge and whether the endorsement and/or allonge was properly affixed to the Note. See Multibank

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2009-1RES-ADC Venture v. San Diego Comm. Hous. Corp., 2011 WL 1044612 (S.D. Cal. 2011)

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(concluding that the evidence did not demonstrate that the allonge was affixed to the note as there was

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no evidence that it was stapled or otherwise attached to the Note).

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Therefore, based on what has been presented to the Court, the Court concludes that Defendant

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has made a sufficient showing of a likelihood of success on the merits as to the validity of the

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Assignment and Note.

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B.

Irreparable Harm to the Moving Party

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Defendant claims that she will suffer economic harm and displacement as her business is

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located at the property in dispute. She states that she has about 20 to 30 employees and the building

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is customized for the production of her company’s goods. Plaintiff argues that Defendant can be

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compensated through monetary damages. The Court concludes that in the short term, Defendant will

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suffer irreparable harm as it would affect her business and employees.

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C.

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Balancing the Equities
In balancing the equities, the Court considers the impact on Plaintiff U.S. Bank. The Court will
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order Defendant to post a bond and require Defendant to make monthly payments in an amount similar

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to what Defendant was paying prior to the default to be deposited into the Clerk of Court’s Registry.

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These measures will limit the harm to Plaintiff and therefore, the balance of equities tip in favor of the

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Defendant.

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D.

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Public Interest
Since the injunction is narrow and limited in scope, the Court finds that the public interest is

a neutral factor.

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Conclusion

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Based on the above, at this time, the Court finds that Plaintiff has demonstrated the factors to

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justify a preliminary injunction. Accordingly, the Court GRANTS Defendant’s motion for preliminary

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injunction pending further briefing by the parties. IT IS HEREBY ORDERED Plaintiff shall file a

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supplemental brief addressing the issues discussed above on or before November 16, 2012. Defendant

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shall file a supplemental response on or before November 30, 2012.

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Defendant shall post a bond with the Clerk of Court in the amount of $100,000 no later than

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November 15, 2012 pursuant to the procedures outlined in Civil Local Rule 65.1.2. Defendant shall

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also deposit with the Registry of the Clerk of Court the amount of $2,100.00 on or before November

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15, 2012 and shall additionally deposit $2,100.00 on a monthly basis to be made by the 15th of every

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month until further order of the Court.

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IT IS SO ORDERED.

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DATED: November 9, 2012

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HON. GONZALO P. CURIEL
United States District Judge

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