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Horton v. California Credit Corp. Retirement Plan

March 16, 2009

MICHAEL HORTON; CATHIE L. HORTON, PLAINTIFFS,
v.
CALIFORNIA CREDIT CORP. RETIREMENT PLAN; FORECLOSURE SPECIALISTS, INC.; DOES 1-10, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

Order Granting Preliminary Injunction [Doc. No. 4]

On February 13, 2009, plaintiffs Michael and Cathie Horton filed a complaint alleging defendants violated the Truth in Lending Act ("TILA") and the California Rosenthal Act. On February 25, 2009, this Court issued a TRO and an Order to Show Cause why it should not issue a preliminary injunction against defendants. (Doc. No. 4.) Defendant California Credit Corp. Retirement Plan ("CCCRP") filed an opposition and the Court heard oral argument on March 11, 2009. Plaintiffs filed a supplemental declaration and CCCRP filed objections. After reviewing the parties' submissions, and for the reasons set forth below, the Court GRANTS the preliminary injunction.

BACKGROUND

A. The Parties

Plaintiffs Michael and Cathie Horton are the married owners and occupants of 10272 Rancho Carmel Drive, San Diego, California 92128 (the "Horton residence").

Defendant California Credit Corp. Retirement Plan ("CCCRP") does business in California and holds a note secured by the Horton residence. Defendant Foreclosure Specialists, Inc., dba Zenith Trustee Services ("Zenith") is a California corporation which acts as a "trustee" during foreclosure proceedings.

B. Factual Background

On November 10, 2006, CCCRP loaned plaintiffs $70,000, secured by a second deed of trust on the Horton residence. The purpose of the transaction was primarily personal, in that plaintiffs used it to pay homeowner's dues and satisfy a personal judgment. A finance charge applied to the transaction and the transaction carried an interest rate of 12.7%. The current market value of the home is between $400,000 and $550,000.

During the closing of the transaction, plaintiffs received numerous transaction documents. However, plaintiffs allege the notice of right to cancel did not contain the date the cancellation period expired. Plaintiffs submit a copy of the notice of right to cancel they claim to have received. (Michael Horton Decl., Ex. MH-A.)That notice is a preprinted form that does not include the date the cancellation period expired or any signatures.

In September 2008, plaintiffs allege CCCRP lost plaintiffs' payment and refused to accept plaintiffs' replacement tender, which was made within 28 days. CCCRP caused a notice of default to be recorded in the office of the county recorder and initiated foreclosure proceedings.

On November 28, 2008, pursuant to 15 U.S.C. § 1635, plaintiffs attempted to rescind the transaction by mailing the notice required by TILA. Plaintiffs attached a copy of the notice of rescission as Exhibit DLR-A to the Declaration of Deborah L. Raymond.In December 2008, the parties attempted to mediate plaintiffs' claims.

On February 6, 2009, CCCRP caused a Notice of Trustee's sale to be recorded in the office of the County Recorder. The sale of the Horton Residence was scheduled for March 4, 2009.

On February 27, 2009, First American Title Insurance Company ("First American") filed a notice of trustee sale with the San Diego County Recorder's Office. (Rady Decl., Ex. DRR-C.) First American holds the first mortgage in the Horton Residence, secured by a deed of trust. First American's right to the Horton residence is superior to CCCRP's. The First American foreclosure sale was scheduled to occur on March 19, 2009 at 10:00 a.m.

C. Procedural Background

On February 13, 2009, plaintiffs filed a complaint in the instant action, requesting the Court enjoin defendants from foreclosing during the pendency of the action or otherwise depriving plaintiffs of ownership of the Horton residence.

On February 23, 2009, plaintiffs' attorney contacted Zenith in an attempt to postpone the Trustee's sale. Zenith told plaintiffs' attorney that it would voluntarily postpone the sale if it received a copy of the complaint. Plaintiff emailed Zenith a copy of the complaint, but Zenith declined to postpone the sale. (Raymond Decl., Ex. DLR-C.)

On February 25, 2009, plaintiffs requested a TRO and preliminary injunction. The Court granted the TRO and set the preliminary injunction hearing for March 11, 2009 at 10:30 a.m.

On March 13, 2009 plaintiffs filed a supplemental declaration stating Chase Home Finance LLC ("Chase"), the entity currently servicing the First American mortgage, has stayed the March 19 foreclosure in exchange for a payment plan. Plaintiffs submitted proof that they have already sent the first payment to First American and evidence of the agreement with Chase.

LEGAL STANDARD

When pursuing an injunction, all courts agree a plaintiff must show "irreparable injury" and that legal remedies are "inadequate." Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th Cir. 1987). However, the Ninth Circuit uses two alternative tests to evaluate the propriety of a temporary restraining order or a preliminary injunction. Under the "traditional test," courts implement four factors to evaluate the application:

(1) the likelihood of the moving party's success on the merits; (2) the possibility of irreparable injury to the moving party if relief is not granted; (3) the extent to which the balance of hardships favors the respective parties; and (4) in certain cases, whether the ...


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