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Yreka Western Railroad Company v. Edward A. Tavares

June 4, 2012



Plaintiff Yreka Western Railroad Company filed this action against defendants Edward A. Tavares, Rosemary T. Tavares, and PLM Lender Services, Inc., seeking to enjoin the foreclosure of plaintiff's property. Plaintiff now moves for a preliminary injunction to enjoin foreclosure pending a determination by the Surface Transportation Board ("STB") regarding abandonment.

I. Procedural and Factual Background Plaintiff is a rail common carrier in Siskiyou County, California. (Hammond Decl. ¶¶ 1-2 (Docket No. 49).) Plaintiff owns real property at 300 East Miner Street in Yreka, California, which includes rail lines, a depot, office space, a loading dock, and a work shop. (Id. ¶ 3.) On April 11, 2007, plaintiff executed a promissory note in the amount of $175,000.00, secured by real and personal property. (Id. ¶ 6.) The property consists of approximately 4.3 acres that is located at the end of plaintiff's approximately nine miles of track running from Montague to Yreka. (Cogan Aff. ¶ 15 (Docket No. 50).) The Deed of Trust securing the note specifically exempts the railroad track easement that lies within the boundaries of plaintiff's real property. (Tavares Decl. Ex. B at 14 (Docket No. 63).) The real property includes the depot, office space, loading dock, and work shop. (Hammond Decl. ¶ 3.) The Deed of Trust also describes an interest in personal property, (Compl. Ex. C ("Notice of Default"), Ex. A (Docket No. 2-1)), which plaintiff contends would include all the accounts, furniture, office equipment, supplies, and materials currently owned and stored by plaintiff at the subject property, (Hammond Decl. ¶ 12).

Edward A. Tavares and Rosemary T. Tavares currently hold the interest in the Note and Deed of Trust. (Id. ¶ 8.) In April of 2011, PLM Lender Services, Inc., recorded a Notice of Default and Election to Sell with respect to plaintiff's real and personal property. (Id. ¶ 10.) On November 17, 2011, the parties entered into a Settlement Agreement under which plaintiff released a $25,000 bond to defendants and made an additional $25,000 payment. (Cogan Aff. ¶ 3.) Defendants extended the deadline for plaintiff to pay an additional $177,500 under the Settlement Agreement, however plaintiff was unable to do so and defendants elected to proceed with the sale of the property. (Id. ¶ 4.)

Plaintiff does not dispute defendants' ability to foreclose but argues that defendants are required to petition the STB for abandonment before foreclosing. No goods have passed over plaintiff's rail lines since August 2008, however plaintiff argues that it has not abandoned or withdrawn services and has been participating in proceedings before the STB to require the Central Oregon & Pacific Railroad, Inc. to restore connecting services to plaintiff's line. (Hammond Decl. ¶ 16.) Plaintiff argues that without the property securing the note, it will be unable to carry on its business and would be forced to abandon rail services in Siskiyou County. (P. & A. in Supp. of Prelim. Inj. at 4:7-10 (Docket No. 59-1).) Plaintiff argues that a shop, engine house, tools, and equipment are needed to inspect and maintain the railroad lines and that a permanent location is needed to store this equipment. (Hammond Decl. ("Hammond Decl. II") ¶¶ 10-11 (Docket No. 64-1).)

Defendants argue that plaintiff has already listed the subject property, including the offices and depot, for sale, suggesting that STB approval is not needed for such a sale and that the buildings are not necessary to plaintiff's operations. (Tavares Decl. ¶ 8, Ex. F.) Plaintiff represents that the property is no longer listed for sale and that any sale would have included terms and conditions that would have ensured the continued existence and operations of the railroad. (Hammond Decl. II ¶ 9.) Plaintiff additionally submits a Letter of Intent for Purchase that represents that plaintiff has a sale pending for the entire railroad and that escrow is anticipated to close on June 15, 2012.*fn1 (Cogan Aff. ¶ 4, Ex. A.)

The BSA has previously authorized abandonment by plaintiff of its entire 8.9 miles of rail line. See Yreka Western Railroad Company--Abandonment Exemption-In Siskiyou County, Cal., STB Finance Docket No. AB-246 (May 4, 1999). Plaintiff did not consummate the abandonment, however, and the authorization expired after one year.

II. Judicial Notice

A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201. The court may take judicial notice of matters of public record or of documents whose contents are alleged in the complaint and whose authenticity is not questioned. Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).

Defendants request that the court judicially notice four documents: (1) a copy of the Subordination Agreement recorded February 27, 2006, in Siskiyou County; (2) a copy of the Order from the STB dated February 23, 2000, in Colorado Central Railroad Company -- Operation Exemption -- Yreka Western Railroad Company; (3) a copy of the Petition for Leave to Withdraw from Proceeding of Yreka Western Railroad filed with the STB, Finance Docket No. 35175 on January 14, 2010; and (4) a copy of the Reply to Petition for Leave to Withdraw from Proceeding of Shipper Petitioners filed with the STB, Finance Docket No. 35175 on February 3, 2010. Plaintiff additionally requests that the court judicially notice three decisions by the STB. (Docket No. 64-3.)

The court will take judicial notice of defendants' first exhibit because it is a matter of public record whose accuracy cannot be questioned. See Lee, 250 F.3d at 689. For the remaining requests, to the extent that the parties request that the court take judicial notice of the existence of the filings before the STB and its decisions, the request is granted. See Burbank-Glendale-Pasadena Airport Auth. v. City of Burbank, 136 F.3d 1360, 1364 (9th Cir. 1998). However, the court will not take judicial notice of any disputed facts contained in the filings or opinions. See Lee, 250 F.3d at 690.

III. Discussion "A plaintiff seeking a preliminary injunction must establish 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." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). As the Supreme Court has repeatedly recognized, injunctive relief is "an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion."

Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (quoting 11A Wright, Miller, & Kane, Federal Practice and Procedure § 2948, at 129-30 (2d ed. 1995)); see Winter, 555 U.S. at 22.

After Winter, the Ninth Circuit has held that a preliminary injunction may be appropriate where a plaintiff demonstrates "that serious questions going to the merits were raised and the balance of hardships tips sharply in the plaintiff's favor," provided that the plaintiff also satisfies the other two Winter factors (public interest and irreparable ...

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