JOHN A. MENDEZ, District Judge.
This matter is before the Court on Plaintiff Gordon McMahon's ("Plaintiff") ex parte application for a temporary restraining order ("TRO") and order to show cause regarding preliminary injunction ("Motion") (Doc. #3).
In April 2005, Plaintiff executed a promissory note in the amount of $416,600.00 that was secured by a deed of trust encumbering real property located at 304 Seawind Drive in Vallejo, California ("Subject Property"). Plaintiff defaulted under the terms of his loan on September 1, 2007. A notice of default was recorded on September 8, 2010.
Plaintiff has submitted at least four loan modification applications since default. Plaintiff alleges that his loan servicers failed to review any of these applications in good faith. His current loan servicer, SPS, invited him to submit a fifth loan modification application on April 26, 2016. By letter dated June 20, 2016, SPS acknowledged that Plaintiff had requested mortgage assistance but stated that Plaintiff had no available options. Also on June 20, 2016, Plaintiff mailed his fifth loan modification application to SPS. The application discusses a material change in Plaintiff's circumstances. SPS received Plaintiff's application on June 21, 2016. Plaintiff submitted additional documents, as requested by SPS, on June 22, 2016. Plaintiff is not aware if the June 20, 2016 SPS letter was in response to Plaintiff's fifth loan modification application. The letter fails to provide a reason for the denial or a 30-day period to appeal SPS's decision.
SPS is scheduled to conduct a foreclosure sale on the subject property on June 29, 2016. In light of the pending foreclosure sale, Plaintiff requests a TRO to "allow a good faith review of his loan modification application to prevent an unnecessary foreclosure of his family home." Mot. at 3. Plaintiff's counsel emailed SPS's agent about Plaintiff's ex parte Motion. SPS filed an opposition (Doc. #6).
Federal Rule of Civil Procedure ("Rule") 65 provides authority to issue either preliminary injunctions or TROs. A plaintiff seeking a preliminary injunction must demonstrate that he is "[1] likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest."
Local Rule 231(b) states that court's "will consider whether the applicant could have sought relief by motion for preliminary injunction at an earlier date without the necessity of seeking last-minute relief by motion for temporary restraining order." If the Court finds that the movant unduly delayed in seeking injunctive relief, "the Court may conclude that the delay constitutes laches or contradicts the applicant's allegations of irreparable injury and may deny the motion solely on either ground." Local Rule 231(b).
Defendants argue that the TRO should be denied for failure to comply with Local Rule 231(b). Local Rule 231(b) is discretionary. Without making any findings as to whether Plaintiff unduly delayed the filing, the Court will not deny the TRO at this point solely on the basis of this procedural rule.
On the same day that he filed this Motion, Plaintiff filed a complaint against Defendants for negligence and violations of the Homeowners Bill of Rights ("HBOR"), the Equal Credit Opportunity Act ("ECOA"), the Real Estate Settlement Procedures Act ("RESPA"), and the California Unfair Competition Law ("UCL"). Plaintiff only addressed whether he is likely to succeed on his HBOR claim. Plaintiff argues that HBOR prevents a loan mortgagor such as SPS from conducting a foreclosure sale while a loan modification application is pending. Mot. at 5. California Civil Code section 2923.6(c) states "[i]f a borrower submits a complete application for a first lien loan modification offered by, or through, the borrower's mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not . . . conduct a trustee's sale, while the complete first lien loan modification application is pending." If the application is denied, the borrower has 30 days from the date of denial to appeal the decision. Cal. Civ. Code § 2923.6(d).
On the facts before the Court, Plaintiff submitted a loan modification application on June 20, 2016, that was finalized on June 22, 2016. SPS sent a letter dated June 20, 2016, that acknowledged Plaintiff had requested mortgage assistance but stated that Plaintiff had no available options. It's not clear at this point whether SPS's June 20 letter served as a rejection of Plaintiff's June 20 loan modification application. If SPS's June 20 letter was not a rejection of Plaintiff's latest loan modification application, then HBOR would require SPS to respond to Plaintiff's application. If the letter was a rejection of Plaintiff's latest loan modification application, HBOR would require thirty days from the date of the written denial to appeal SPS's determination. Thus, if SPS conducted the foreclosure sale on June 29, 2016, Plaintiff would likely succeed on his HBOR claim.
As Plaintiff demonstrates, the loss of a plaintiff's residence is considered an irreparable injury.
The Court is required to "balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief."
Issuing a TRO in this case would be in the public interest. Foreclosures reap significant social costs.
Plaintiff has complied with the requirements of Rule 65(b). Plaintiff's attorney emailed Norman Rapp, who had been designated by SPS as the point of contact for Plaintiff, on June 27, 2016 at 9:50 a.m., informing SPS that Plaintiff would be seeking a TRO. Mercer Decl. ¶¶ 2-3, Exh. 1 (Doc. #3-2). Additionally, as described in Section (B)(2) above, immediate and irreparable injury will result to Plaintiff before SPS could be heard in opposition given that the foreclosure sale is scheduled for June 29, 2016.
"The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained." Fed. R. Civ. Pro. 65(c). District courts have discretion to set the amount, if any, of such a security bond.
In this case, the Court has no meaningful way to determine the amount of a bond that would be "proper to pay the costs and damages sustained" by Defendants. In light of this lack of guidance, the Court will require no bond for the duration of this TRO.
Plaintiff has demonstrated that (1) he is likely to succeed on the merits of at least his HBOR claim; (2) he is likely to suffer irreparable harm without a TRO; (3) the balance of equities tips in his favor; (4) a TRO is in the public interest; and (5) his lawyer abided by the technical requirements of Rule 65(b)(1). The TRO will be in place for 14 days or until the Court orders otherwise. Fed. R. Civ. Pro. 65(b)(2). The Court reiterates that this conclusion is based solely on Plaintiff's allegations and in no way presages the Court's future determination regarding a preliminary injunction.
For the reasons set forth above, the Court GRANTS Plaintiff's motion and issues a temporary restraining order that Defendants shall not proceed with a foreclosure sale of the Subject Property for at least 14 days. The Court further orders Plaintiff to file his motion for a preliminary injunction no later than July 5, 2016. A hearing on the motion for preliminary injunction is hereby set for July 12, 2016 at 1:30 p.m. Defendants must submit any briefings in opposition to a preliminary injunction by July 8, 2016. A reply brief may be submitted by Plaintiff by July 11, 2016.
IT IS SO ORDERED.