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Gerth v. American Mortgage Express Financial

November 5, 2009


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


On November 4, 2009 Plaintiffs filed a complaint and a Motion for Ex parte Request for a Temporary Restraining Order to Stop the Trustee Sale of the Property Scheduled for November 5, 2009 ("TRO"). Pursuant to 28 U.S.C. § 1331, the court has subject matter jurisdiction over the case, because the complaint alleges causes of action under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"), and Real Estate Settlement Procedures Act, 12 U.S.C. § 2605 et . ("RESPA"). For the reasons which follow, Plaintiffs' motion for a TRO is DENIED.

Plaintiffs allege they entered into two loan transactions secured by a residence. They assert RESPA violations, violations of California Civil Code Section 2943, rescission of the loan made by Bank of America, N.A. ("Bank of America"), quiet title under California law, declaratory relief,*fn1 and violation of California Business and Professions Code § 17200 et seq.

They request damages and injunctive relief. In their TRO motion, Plaintiffs allege that Bank of America initiated non-judicial foreclosure proceedings scheduled for November 5, 2009, which Plaintiffs seek to enjoin based on their rescission of the underlying loan.*fn2

A party seeking preliminary injunctive relief, including a TRO, must show either (1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) that serious questions going to the merits are raised and the balance of hardships tips sharply in the moving party's favor. Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115, 1119 (9th Cir. 1999). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Roe v. Anderson, 134 F.3d 1400, 1402 (9th Cir. 1998). Furthermore, the moving party must show that the threatened irreparable harm is imminent. Sardi's Rest. Corp. v. Sardi, 755 F.2d 719, 725 (9th Cir. 1985); Caribbean Marine Servs., Co. v. Baldridge, 844 F.2d 668, 674 (9th Cir. 1988).

Plaintiffs claim that they have rescinded the Bank of America loan pursuant to 15 U.S.C. § 1635 based on the lender's failure to make the requisite disclosures. Under section 1635(a), the borrower has a right to rescind if, among other things, the loan is secured by the "property which is used as the principal dwelling of the person to whom credit is extended." Plaintiffs neither allege nor declare that the property securing the loan is their principal dwelling.

In addition, Plaintiffs do not affirmatively state that they did not receive the requisite disclosures. Instead, the evidence regarding disclosures consists of Robert Gerth's statement that he does "not recall receiving being [sic] meaningfully informed or receiving pertinent written notices of required disclosures." (Plaintiff's Decl.) Moreover, Mr. Gerth is only one of the two Plaintiffs in this case. Plaintiffs did not file a declaration of Judith Gerth to indicate whether she received the disclosures.*fn3

Furthermore, one of requirements for rescission under 15 U.S.C. § 1635 is the borrower's return of money received from the lender, less interest, finance charges and similar items. Unless the lender acquiesces in the rescission, the rescission is not automatic. Yamamoto v. Bank of New York, 329 F.3d1167, 1172 (9th Cir. 2003). If rescission were automatic, "a borrower could get out from under a secured loan simply by claiming TILA violations, whether or not the lender had actually committed any." Id. (emphasis in original). A court "may impose conditions on rescission that assure that the borrower meets [his or] her obligations once the creditor has performed its obligations." Id. at 1173. If the borrower cannot comply with the obligations, i.e., lacks capacity to pay back what he or she received from the lender, the court may decide not to enforce the rescission. Id. Although Plaintiffs assert in a conclusory fashion that their counsel rescinded the Bank of America loan, they do not state that Bank of America acquiesced or specify whether they offered to repay the loan amount or are able to make such an offer.

Last, although Plaintiffs allege that a trustee sale is scheduled for November 5, 2009, they do not include this fact in any declaration or attach any document supporting this allegation. The only declaration addressing the trustee sale states that, "Plaintiff's counsel contacted Trustee in writing on October 29, 2009 regarding Servicer's assertions that no sale date was pending;" and "Plaintiff contacted Trustee by phone on November 1, 2009 regarding Servicer's assertions no sale was pending."*fn4 (Keane Decl. ¶ 13 (emphases added).)

The record before the court does not show that the property allegedly subject to sale is Plaintiffs' principal dwelling, that the requisite TILA disclosures were not made, that Plaintiffs are capable of performing their own rescission obligations, or whether the sale will take place.

Plaintiffs failed to make a sufficient showing of their likelihood of success on the merits and the possibility of imminent irreparable harm. Their motion for a TRO is therefore DENIED.

IT IS SO ...

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