United States District Court, N.D. California, San Jose Division
ORDER DENYING PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION
BETH LABSON FREEMAN, District Judge.
This suit arises out of a dispute over a mortgage transaction between Plaintiff and Defendant Countrywide Bank, N.A. Plaintiff brings suit alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), California's Rosenthal Act and Civil Code § 2943, and claims for wrongful foreclosure and quiet title. Before the Court is Plaintiff's motion for a preliminary injunction, seeking to enjoin Defendants from foreclosing on the real property secured by the challenged mortgage transaction. See ECF 2. This is not the first court action Plaintiff has filed to attempt to stave off foreclosure on this property: Plaintiff has now three times, on the eve of foreclosure, sought redress from a court to prevent Defendants from non-judicially foreclosing on the property. Defendants oppose the motion, contending that Plaintiff cannot show a likelihood of success on the merits. They also contend that Plaintiff is forum shopping, and that the Court should deny her preliminary injunction because this suit is an improper vehicle to seek redress on a case that has already been before a state court. For the reasons provided below, the Court agrees with Defendants, and DENIES Plaintiff's motion for a preliminary injunction.
A. Factual Background
Plaintiff states that in 2006 she engaged in a transaction with Countrywide Bank, N.A., in which she refinanced her debt on real property located in Watsonville, California. Compl. ¶ 21. She claims that Countrywide was "not the source of funds involved in the consumer transaction, " and "denies any loan and or debt being owed to any party." Compl. ¶ 22. On July 18, 2014, Plaintiff sent Defendants Select Portfolio Services ("SPS") and National Default Servicing Corp. ("NDSC") a notice of dispute pursuant to 15 U.S.C. § 1692g, disputing the alleged debt and notifying the Defendants of her belief that their prior communication with her violated the FDCPA and other consumer protection statutes. See Compl. Exh. A. at 1-2. SPS responded by serving Plaintiff with a dunning notice. Compl. ¶ 25, Exh. B. Plaintiff further alleges that the assignment of the deed of trust, filed in the Santa Cruz County Recorder's Office, was false and fraudulent. Compl. ¶ 26.
Plaintiff argues that between July and September 2006, the promissory note that evidenced her indebtedness to Countrywide was sold to a Real Estate Mortgage Investment Conduit ("REMIC") called the CWALT 2006-OA17 REMIC Trust ("CWALT Trust"). TRO App. ¶ 4. She contends, however, that the deed of trust was not transferred to the CWALT Trust along with the note. Id. at ¶ 5. She further argues that Mortgage Electronic Registration Systems, Inc. ("MERS") stated in May 5, 2011 that it was the holder of the deed of trust, id. at ¶ 15, and contends that the note and deed were separated, rendering the deed "of no force and effect." Id. at ¶ 16. She continues: "Once the debt instrument and security instrument were separated... the deed of trust including the power of sale incorporated therein became unenforceable." Id. at ¶ 18. She also contends that any assignment by MERS of the deed of trust and promissory note was invalid, and that any transfer of the rights from MERS to another entity, Bank of New York Mellon, constituted "the transfer of a debt in default." TRO App. ¶¶ 19-22.
Plaintiff's Complaint alleges that the CWALT Trust is subject to the terms of a Pooling and Servicing Agreement ("PSA"), Compl. ¶ 27, and that Bank of New York Mellon, the trustee of the CWALT Trust, "does not have the power or authority under the terms of the PSA to declare any note which is the property of the trust to be in default, to modify said note, or to commence a foreclosure of any promissory note or deed of trust held by the trust." Compl. ¶ 28.
Finally, she argues that Defendants are debt collectors, as defined by the FDCPA and Rosenthal Act, and that under both statutes a debt collector cannot non-judicially foreclose on a property in order to satisfy a debt, thus rendering any attempt by SPS or NDSC to foreclose on her property a violation of both statutes. TRO App. at ¶¶ 24-25.
B. Procedural History
This is not the first legal action Plaintiff has brought with regard to this particular debt, though Plaintiff made no mention of her prior legal actions in her Complaint or TRO Application filed with this Court.
After two Notices of Default and a Notice of Trustee's Sale were recorded against the Property, see ECF 15-1 Exhs. 4-5, 7, Plaintiff filed a Chapter 7 bankruptcy petition on August 6, 2014, see id. Exh. 8 the date for which the Trustee's Sale was noticed. Id. Exh. 7 at 1. That action was dismissed on August 21, 2014 for failure to file required documents. Id. Exh. 9.
On August 4, 2014, Plaintiff filed a state court action against Defendants in Santa Cruz Superior Court. Defendants demurred, and Plaintiff filed an amended complaint on November 17, 2014. That same day, Plaintiff filed an ex parte application for a temporary restraining order to stay the foreclosure sale of the property. ECF 16 Exh. 12. The TRO was granted, but following briefing as to why a preliminary injunction should not issue, the state court dissolved the TRO and denied Plaintiff's motion for a preliminary injunction on December 29, 2014. ECF 16 Exh. 13. Plaintiff dismissed the state court action on February 23, 2015.
This third action followed a mere four days later: Plaintiff filed her Complaint and TRO application on February 27, 2015. ECF 1, 2. In her TRO application, Plaintiff stated that on February 25, 2015, she had contacted NDSC to inquire about a continuation date for the pending foreclosure sale, but was "informed that the sale date of March 2, 2015 would be going forward unless restrained by Court Order." TRO App. ¶ 32. She noted that the foreclosure sale "was on hold while the parties were discussing possible solutions, " and that NDSC had "voluntarily continued the previous set date" of the foreclosure sale. Id. ¶¶ 30, 31. Plaintiff made no mention of the fact that the state court had denied her motion for a preliminary injunction two days prior to her contacting NDSC. Without this information, and knowing only that the foreclosure sale was scheduled for the following Monday morning, the Court granted Plaintiff's TRO application, and prohibited the sale of the property from going forward as scheduled. See ECF 6 at 4.
The Court scheduled an Order to Show Cause hearing for March 12, 2015 to determine whether a preliminary injunction should issue. The parties stipulated to continue the hearing date until April 23, 2015, and to maintain the terms of the Court's TRO until that date. See ECF 10 at 3. At the hearing, ...