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John K. Cruz v. Washington Mutual Bank

March 14, 2011


The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge



This case comes before the Court on Plaintiff's application for a temporary restraining order ("TRO") and preliminary injunction preventing Defendants from engaging in any act to deprive Plaintiff of ownership or possession of his real property, including proceeding with a non-judicial foreclosure sale. For the reasons set forth below, Plaintiff's application for a TRO is granted.


This case involves the refinance of a loan obtained by Plaintiff from Washington Mutual Bank on or around March 14, 2005, which is secured by a Deed of Trust on his property. A foreclosure sale of the property is currently scheduled for March 18, 2011. On March 8, 2011, Plaintiff filed a Complaint against Defendants Washington Mutual Bank ("WAMU"), Chase Bank, and Mortgage Electronic Registration Services. (Doc. 1.) It does not appear that the Complaint has been served on any Defendants. The Complaint sets forth fourteen claims for relief: (1) violation of the Truth in Lending Act, (2) violation of the Fair Debt Collection Practices Act, (3) violation of the Real Estate Settlement Procedures Act, (4) to set aside and vacate the trustee's sale and cancel the trustee's deed, (5) unjust enrichment, (6) promissory estoppel, (7) accounting, (8) violation of the Consumers Legal Remedies Act, (9) disgorgement under California Business and Professions Code § 17200, (10) violation of California Business and Professions Code § 17200, (11) fraud, (12) negligence, (13) declaratory relief, and (14) application for a TRO. Plaintiff included an application for a TRO and an order to show cause why a preliminary injunction should not be issued as a claim for relief in his Complaint. On March 9, 2011, the Court issued an Order denying Plaintiff's motion for a TRO. (Doc. 3.) On March 11, 2011, Plaintiff filed the instant motion for a TRO and a preliminary injunction, seeking this Court's order enjoining the foreclosure sale.*fn1


The purpose of a TRO is to preserve the status quo before a preliminary injunction hearing may be held; its provisional remedial nature is designed merely to prevent irreparable loss of rights prior to judgment. See Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974)(noting a temporary restraining order is restricted to its "underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer"). Injunctive relief is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 129 S. Ct. 365, 376 (2008). The standard for issuing a temporary restraining order is identical to the standard for issuing a preliminary injunction. Lockheed Missile & Space Co., Inc. v. Hughes Aircraft Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995). A party seeking injunctive relief under Federal Rule of Civil Procedure 65 must show "that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Am. Trucking Ass'ns v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009)(quoting Winter, 129 S. Ct. at 374). With respect to the showing a plaintiff must make regarding his chances of success on the merits, the Ninth Circuit applies a sliding scale approach. See Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045, 1049 (9th Cir. 2010). Under the sliding scale approach, the elements of the preliminary injunction test are balanced and, where a plaintiff can make a stronger showing of one element, it may offset a weaker showing of another. Id. "Therefore, 'serious questions going to the merits' and a hardship balance that tips sharply towards the plaintiff can support issuance of an injunction, so long as the plaintiff also shows a likelihood of irreparable injury and that the injunction is in the public interest." Id. at 1053.


The primary basis for Plaintiff's motion is that he was fraudulently induced to enter into default in order to obtain a modification of his loan. Plaintiff claims "that, around February 15, 2009, a representative of WAMU instructed him to cease making the scheduled payments and to default on his loan, and that if Plaintiff complied, WAMU would restructure his loan." (TRO Memo. at 5, 6.) Plaintiff alleges he immediately stopped making payments and submitted a loan modification application to WAMU after being in default for 90 days, as instructed. (Id. at 2.) Plaintiff alleges he was subsequently informed by a WAMU representative that his application was missing and he submitted a second application. (Id.) Plaintiff contacted WAMU 30 days later and discovered that Defendant Chase Bank had assumed all of WAMU's assets and liabilities. (Id. at 3.) He then contacted Chase and was told by a representative that his application was missing and he needed to submit a third application. (Id.) After submitting his third application, Plaintiff obtained a conditional loan modification and resumed making monthly payments on his loan. (Id.) However, when he subsequently inquired about the status of his property insurance and taxes, he was told he would have to submit a fourth loan modification application. (Id.) He did so and it was quickly denied. (Id.; see also Complaint ¶¶ 21-33.)

In his motion for a TRO, Plaintiff argues he has shown a likelihood of success on the merits of his claims for violation of California Business and Professions Code § 17200 and promissory estoppel. The Court interprets Plaintiff's argument regarding his claim for promissory estoppel as applying to his claim for fraud. The elements of a fraud claim are false representation, knowledge of falsity, intent to defraud, justifiable reliance, and damages. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). Plaintiff alleges in a verified Complaint and in his motion for a TRO that a WAMU representative made a knowingly false statement to him with the intent to defraud, upon which he justifiably relied, causing damages. Accordingly, Plaintiff has at least raised serious questions going to the merits with respect to his fraud claim.

Plaintiff has also shown the balance of hardships tips sharply towards him. If the TRO is not issued, Plaintiff is likely to lose possession of his home through a judicial foreclosure sale. In contrast, if the TRO is issued, Defendants will merely be required to delay the foreclosure sale. Their interest in Plaintiff's property will remain secured and, should this Order be dissolved or judgment be entered in favor of Defendants in this action, they will be able to proceed with the foreclosure sale at such time.

Plaintiff has shown a probability of irreparable harm in the potential loss of his residence through an impending non-judicial foreclosure sale. Finally, as Plaintiff has argued, there is an interest in accurately resolving disputes over ownership of real property and it is in the public interest to permit homeowners the opportunity to pursue what appear to be valid claims before their homes are sold pursuant to a foreclosure sale. Accordingly, Plaintiff's motion for a TRO is granted.

Under Rule 65, "[t]he 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. P. 65(c). In light of the hearing to be held on Plaintiff's motion for a preliminary injunction ...

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