v. WELLS FARGO BANK, N.A. et al

Filing 37

ORDER. IT IS ORDERED that the Motion for Preliminary Injunction is DENIED. IT IS SO ORDERED. Signed by Chief Judge Robert C. Jones on 7/5/2011. (Copies have been distributed pursuant to the NEF - MLC)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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JOHN FOLEY,
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Plaintiff,
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vs.
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WELLS FARGO BANK, N.A.,
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Defendant.
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3:10-cv-00702-RCJ-VPC
ORDER

This case arises out of the foreclosure of Plaintiff’s mortgage. A trustee’s sale has

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occurred. The Court has granted a Temporary Restraining Order (“TRO”) against eviction,

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extended that order by stipulation of the parties, and set the present hearing for a preliminary

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injunction. For the reasons given herein, the Court denies a preliminary injunction.

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I.

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FACTS AND PROCEDURAL HISTORY
On July 22, 2005, Plaintiff John Foley gave lender World Savings Bank, FSB (“WSB”) a

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$332,800 purchase money mortgage against the property at 5690 Stillmeadow Dr., Reno, NV

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89502 (the “Property”). (See Deed of Trust (“DOT”) 1–2, July 22, 2005, ECF No. 12-1, at 2).

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Golden West Savings Association Service Co. (“Golden West”) was the trustee, and MERS is

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listed nowhere on the DOT. (See id. 2). On October 26, 2007, Golden West filed a Notice of

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Breach and Default and of Election to Cause Sale (the “NOD”). (See NOD 1–2, Oct. 26, 2007,

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ECF No. 12-1, at 22). The NOD indicated that the mortgage was being accelerated. (See id. 1,

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fourth unnumbered paragraph (“[WSB] . . . does hereby declare all sums secured [by the DOT]

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immediately due and payable . . . .”)).

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Plaintiff and his wife petitioned for Chapter 13 bankruptcy in the Northern District of

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California on February 1, 2008, and a plan was confirmed on May 23, 2008. (See Compl. ¶ 13,

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Oct. 19, 2010, ECF No. 1-2). On September 2, 2008, Bankruptcy Judge Leslie Tchaikovsky

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granted in part Wachovia Mortgage, FSB’s (“Wachovia”)1 motion for relief form automatic stay,

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ordering that the stay would remain in place on three conditions: (1) on August 15, 2008,2 the

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debtors would begin tendering regular monthly payments plus one-sixth of a payment each

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month to Wachovia; (2) the debtors would be completely current on the mortgage no later than

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close of business on February 27, 2009; and (3) the debtors would thereafter continue regular

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monthly payments. (See Adequate Protection Order 2, Sept. 2, 2008, ECF No. 12-1, at 25). On

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February 17, 2010, Judge Tchaikovsky terminated the automatic stay as to Wachovia,

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specifically indicating that it was “no longer restrained from completing its pending foreclosure

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initiated pursuant to the Notice of Default recorded on November 07, 2007 . . . .” (Order

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Terminating Automatic Stay 2, Feb. 17, 2010, ECF No. 12-1, at 30 (emphasis added)).3

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Cal-Western Reconveyance Corp. (“Cal-Western”), as Wachovia’s power of attorney,

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substituted itself as trustee on October 29, 2008. (See Substitution of Trustee, Oct. 29, 2008,

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ECF No. 12-1, at 35). Cal-Western noticed a trustee’s sale for May 10, 2010, (see Notice of

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Trustee’s Sale, Apr. 12, 2010, ECF No. 12-1, at 37), which did not occur, and it noticed a second

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sale for September 7, 2010, (see Notice of Trustee’s Sale, Aug. 9, 2010, ECF No. 12-1, at 40), on

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which date it sold the Property to Wachovia, (see Trustee’s Deed Upon Sale, Sept. 7, 2010, ECF

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No. 12-1, at 43).

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Formerly known as WSB.

Wachovia appears to have drafted the order before the July 25, 2008 hearing date, but
Judge Tchaikovsky did not sign it until September 2, 2008.
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The NOD recorded on November 7, 2007 is the same one that was signed by the original
trustee on October 26, 2007. (See NOD 1–2).
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On October 19, 2010, Plaintiff sued Defendant Wells Fargo Bank, N.A. (“Wells Fargo”)

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as successor-in-interest to Wachovia in the Second Judicial District of Nevada on seven causes

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of action, including wrongful foreclosure based on the theory that the failure to file another

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notice of default after Judge Tchaikovsky lifted the automatic stay violated NRS section

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107.080(2)(c). (See Compl. ¶ 21). Defendant removed on November 8, 2010. On December 29,

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2010, the Justice Court of Reno Township granted Wells Fargo a Temporary Writ of Restitution,

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giving possession of the Property to Wells Fargo and ordering Plaintiff to vacate by 5:00 p.m. on

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January 28, 2011. (See Writ of Restitution, Dec. 29, 2010, ECF No. 12-1, at 55). Plaintiff asked

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this Court for a TRO against enforcement of the state court order, which the Court granted on

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January 20, 2011 and later extended by stipulation until the preliminary injunction hearing,

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which was itself continued several times by stipulation.

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II.

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LEGAL STANDARDS
The Ninth Circuit in the past set forth two separate sets of criteria for determining

whether to grant preliminary injunctive relief:
Under the traditional test, a plaintiff must show: (1) a strong likelihood of success
on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief
is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement
of the public interest (in certain cases). The alternative test requires that a plaintiff
demonstrate either a combination of probable success on the merits and the
possibility of irreparable injury or that serious questions are raised and the balance
of hardships tips sharply in his favor.

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Taylor v. Westly, 488 F.3d 1197, 1200 (9th Cir. 2007). “These two formulations represent two

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points on a sliding scale in which the required degree of irreparable harm increases as the

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probability of success decreases.” Id.

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The Supreme Court recently reiterated, however, that a plaintiff seeking an injunction

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must demonstrate that irreparable harm is “likely,” not just possible. Winter v. NRDC, 129 S. Ct.

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365, 374–76 (2008) (rejecting the Ninth Circuit’s alternative “sliding scale” test). The Ninth

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Circuit has explicitly recognized that its “possibility” test was “definitively refuted” in Winter,
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and that “[t]he proper legal standard for preliminary injunctive relief requires a party to

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demonstrate ‘that he is likely to succeed on the merits, that he is likely to suffer irreparable harm

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

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injunction is in the public interest.’” Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th Cir.

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2009) (quoting Winter, 129 S. Ct. at 374) (reversing a district court’s use of the Ninth Circuit’s

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pre-Winter, “sliding-scale” standard and remanding for application of the proper standard).

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A recent Ninth Circuit ruling relying largely on the dissenting opinion in Winter parsed

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the language of Winter and subsequent Ninth Circuit rulings and determined that the sliding

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scale test remains viable when there is a lesser showing of likelihood of success on the merits

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amounting to “serious questions,” but not when there is a lesser showing of likelihood of

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irreparable harm. See Alliance for the Wild Rockies v. Cottrell, 622 F.3d 1045, 1052–53 (9th Cir.

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2010). This case presents some difficulty in light of Winter and prior Ninth Circuit cases. To

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the extent Cottrell’s interpretation of Winter is inconsistent with Selecky, Selecky controls. Miller

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v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en banc) (holding that, in the absence of an

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intervening Supreme Court decision, only the en banc court may overrule a decision by a

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three-judge panel). In any case, the Supreme Court stated in Winter that “[a] plaintiff seeking a

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preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to

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suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his

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favor, and that an injunction is in the public interest.” Winter, 129 S. Ct. at 374 (citing Munaf v.

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Geren, 128 S. Ct. 2207, 2218–19 (2008); Amoco Prod. Co. v. Gambell, 480 U.S. 531, 542

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(1987); Weinberger v. Romero-Barcelo, 456 U.S. 305, 311–12 (1982)) (emphases added). The

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test is presented as a four-part conjunctive test, not as a four-factor balancing test, and the word

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“likely” modifies the success-on-the-merits prong in exactly the same way it separately modifies

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the irreparable-harm prong. In rejecting the sliding-scale test, the Winter Court specifically

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emphasized the fact that the word “likely” modifies the irreparable-injury prong, see id. at 375,
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and the word modifies the success-on-the-merits prong the same way, id. at 374. In dissent,

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Justice Ginsburg opined that she did not believe the Court was abandoning the rule that it was

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permissible to “award[ preliminary injunctive] relief based on a lower likelihood of harm when

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the likelihood of success is very high.” Id. at 392 (Ginsburg, J., dissenting). But Justice

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Ginsburg, like the majority, did not address whether she believed relief could be granted when

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the chance of success was less than likely. A “lower likelihood” is still some likelihood. We are

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left with the language of the test, which requires the chance of success on the merits to be at least

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“likely.”

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In summary, to satisfy Winter, a movant must show that he is “likely” to succeed on the

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merits. “Likely” means “having a high probability of occurring or being true.”

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Merriam–Webster Dictionary, http://www.merriam-webster.com/dictionary/likely. Black’s

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defines the “likelihood-of-success-on-the-merits test” more leniently as “[t]he rule that a litigant

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who seeks [preliminary relief] must show a reasonable probability of success . . . .” Black’s Law

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Dictionary 1012 (9th ed. 2009). The Court must reconcile the cases by interpreting the Cottrell

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“serious questions” requirement to be in harmony with the Winter/Selecky “likelihood” standard,

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not as being in competition with it. “Serious questions going to the merits” must mean that there

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is at least a reasonable probability of success on the merits. “Reasonable probability” appears to

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be the most lenient position on the sliding scale that can satisfy the requirement of “likely.”

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III.

ANALYSIS

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The Court will not grant a preliminary injunction. Plaintiff’s argument rests dispositively

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on the adequacy of the original NOD to support the foreclosure. Judge Tchaikovsky’s order was

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clear that because Plaintiff had not complied with her Adequate Protection Order, Wachovia was

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permitted to resume foreclosure based on the original NOD. If Plaintiff believes Judge

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Tchaikovsky’s order was in error, he must ask Judge Tchaikovsky to reconsider, or he must

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appeal the order to the U.S. District Court for the Northern District of California or the Ninth
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Circuit Bankruptcy Appellate Panel, but the order appears final, and the issues it resolves cannot

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be relitigated in this Court. Plaintiff has almost no chance of success on the merits, because the

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issue of whether foreclosure was proper based on the original NOD is precluded from relitigation

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(collaterally estopped) based on Judge Tchaikovsky’s order. It is theoretically possible Plaintiff

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could produce a later order showing that Judge Tchaikovsky’s order had been vacated, but he has

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not done so. Furthermore, Wells Fargo has produced the docket of the bankruptcy proceedings,

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and there is no indication Judge Tchaikovsky’s Order Terminating Automatic Stay has been

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stayed, vacated, amended, or even appealed.

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Also, as Defendant notes, there is no chance of irreparable harm as a result of the Writ of

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Restitution. The effect of that writ is to remove Plaintiff from property to which he no longer

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holds title. Avoidance of the sale is a possible remedy under Nevada law, but Plaintiff seeks to

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change the status quo via his Complaint, not to maintain it, i.e., he seeks to reverse a completed

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trustee’s sale, not to prevent one. In the present motion for preliminary injunction, he seeks only

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to maintain his occupancy. Money damages are adequate to repair such injury, even if such an

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eviction were wrongful, which it does not appear to be.

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CONCLUSION

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IT IS HEREBY ORDERED that the Motion for Preliminary Injunction is DENIED.

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IT IS SO ORDERED.

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DATED: this 6th5th day of July, 2011.
Dated This day of June, 2011.

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_____________________________________
ROBERT C. JONES
United States District Judge

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