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Dougherty v. Bank of America, N.A.

United States District Court, E.D. California

June 1, 2017

PENNY DOUGHERTY, and DENNIS DOUGHERTY, Plaintiffs,
v.
BANK OF AMERICA, N.A., WELLS FARGO BANK, N.A., as trustee on behalf of the Harborview Mortgage Loan Trust Mortgage Pass-Through Certificates, Series 2006-12, SELECT PORTFOLIO SERVICING, INC., DOES 1 TO 50, inclusive, Defendants.

          ORDER

          Troy L. Nurcley United States District Judge.

         This matter is before the Court on Plaintiffs Penny Dougherty and Dennis Dougherty's (“Plaintiffs”) Motion for Preliminary Injunction. (ECF No. 65.) Plaintiffs seek to enjoin Defendants Select Portfolio Services, Inc., and Wells Fargo Bank, N.A., (jointly “Defendants”) from conducting a trustee's sale of real property, located at 5130 Fruitvale Road, Newcastle, California, 95658. Defendants oppose the motion. (ECF No. 66.) Plaintiffs filed a reply. (ECF No. 70.) Having carefully considered the arguments raised by both parties and for the reasons set forth below, the Court hereby GRANTS Plaintiffs' Motion for Preliminary Injunction (ECF No. 65).

         I. FACTUAL AND ROCEDURALACKGROUND[1]

         At all times relevant to this action Plaintiffs have resided at 5130 Fruitvale Road, Newcastle, California 95658. (Sec. Amend. Compl., ECF No. 41.) In November 2006, Plaintiffs refinanced an existing loan on the property through Bank of America. (ECF No. 41 at 3.) Plaintiffs approached Bank of America in 2010 to obtain a loan modification. (ECF No. 41 ¶ 25.) Before receiving a modification and after missing a payment, Plaintiffs began making payments of $1, 700 a month instead of their previous $1, 850 a month for 14 months without incident. (ECF No. 41 ¶¶ 26-30.) Plaintiffs allege that in September of 2011, Bank of America returned Plaintiffs' check for $1, 700 and informed Plaintiffs that it would not accept any more payments that were not in the amount of $1, 952.56. (ECF No. 41 ¶ 32.)

         Plaintiffs allege that on November 15, 2011, they attended a home loan event at which a Bank of America representative helped them apply for the Keep Your Home California (“KYHC”) principal reduction program and a loan modification through the bank. (ECF No. 41 ¶ 34.) At this event, Plaintiffs allege that the representative indicated they qualified for a KYHC principle reduction of $100, 000 and executed loan modification papers. (ECF No. 41 ¶ 33.) Plaintiffs allege the modification papers would ultimately reduce the monthly loan payments to $1, 700. (ECF No. 41 ¶ 37.)

         Bank of America sold Plaintiffs' loan to Select Portfolio Servicing, Inc., (“SPS”) on November 30, 2011. (ECF No. 41 ¶ 42.) Plaintiffs allege that upon opening communication with SPS, their representative Debora Shrowder instructed Plaintiffs to refrain from making mortgage payments and asked for the loan modification papers from the November 15th event. (ECF No. 41 ¶ 43.) Plaintiffs allege that they provided Shrowder with the only copy of those documents. (ECF No. 41 ¶ 43.) Plaintiffs allege that in January 2012, they spoke again with Ms. Shrowder who informed them that Wells Fargo and SPS were not members of the KYHC principal reduction program, but were members of the loan reinstatement program. (ECF No. 41 ¶¶ 46- 47.) Plaintiffs applied for and were later admitted into the KYHC loan reinstatement program through which SPS would receive approximately $16, 000 to make Plaintiffs' loan current. (ECF No. 41 ¶ 52; Decl. of Penny Dougherty, ECF No. 54-2 ¶ 7.) Defendants provided a Deed of Trust from May 8, 2012, recording the KYHC program loan for $16, 089.03 to repay Plaintiff's past-due loan amounts and a Deed of Reconveyance from May 6, 2015, demonstrating the forgiveness of that amount. (ECF No. 57-1, Ex. C, Ex. G.)

         Prior to receiving their KYHC loan reinstatement amount, Plaintiffs allege that Ms. Shrowder informed them she would start on an “in house” modification that would move forward simultaneously with Plaintiffs' Home Affordable Modification Program (“HAMP”) application. (ECF No. 41 ¶ 54.) In March 2012, Plaintiffs allege Ms. Shrowder informed Plaintiffs they needed to be current on their monthly payments of $1, 952.56. (ECF No. 41 ¶ 55.) Plaintiffs allege they made the required payments from April 2012 to November 2012. (ECF No. 41 ¶ 57.) However, Plaintiffs acknowledge they stopped making payments again in December 2012 and January 2013. (ECF No. 41 ¶ 59.) Plaintiffs allege that Ms. Shrowder entered them into a six-month forbearance in February 2013 with monthly payments of $1, 700. (ECF No. 41 ¶ 61.) At that time, Plaintiffs were also advised that Wells Fargo had joined the KYHC principal reduction program. (ECF No. 41 ¶ 63.)

         When SPS and Wells Fargo notified Plaintiffs that it formally became a participant in the KYHC principal reduction program, Plaintiffs allege they immediately applied for the program and were informed that they were approved pending SPS documentation. (ECF No. 41 ¶ 66.) Plaintiffs allege that SPS did not timely or accurately provide KYHC with the required documentation and as a result KYHC denied Plaintiffs' reduction request in May 2014. (ECF No. 41 ¶ 67.) Plaintiffs allege they rejected a HAMP loan in May 2014 because the payment was above the $1, 700 Plaintiffs wanted to pay. (ECF No. 41 ¶ 68.)

         Mrs. Dougherty's declaration states that Plaintiffs reapplied for a loan modification and principal reduction through KYHC in August 2015. (ECF No. 54-2 ¶ 14.) Plaintiffs refused a HAMP loan at that time because they believed payments were too expensive. Plaintiffs were also deemed ineligible for KYHC funding because of the instant litigation.[2] Plaintiffs continued with the instant action, and on January 30, 2017, Defendants recorded a Deed of Trustee's sale. (ECF No. 57-1, Ex. H.) A foreclosure sale was scheduled for February 22, 2017. (ECF No. 57-1, Ex. H.)

         Plaintiffs filed an ex parte application for a Temporary Restraining order on February 1, 2017. (ECF No. 54.) The Court ordered Defendants to file an opposition within seven days of the motion and Plaintiffs to file a reply within three days of the opposition. (ECF No. 55.) Subsequently, Defendants filed their opposition on February 7, 2017, and Plaintiffs filed their reply on February 9, 2017. (ECF Nos. 56 ¶ 58.) On February 17, 2017, the Court issued an order granting Plaintiffs' application until the Court ruled on a preliminary injunction and ordering Plaintiffs to file a motion for preliminary injunction within fourteen days. (Order, ECF No. 59 at 12.) Plaintiffs filed the instant motion on March 3, 2017. (ECF No. 65.)

         II. Standard of Law

         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, 22 (2008) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). “The purpose of a preliminary injunction is merely to preserve the relative positions of the parties until a trial on the merits can be held.” University of Texas v. Camenisch, 451 U.S. 390, 395 (1981) (emphasis added); see also Costa Mesa City Employee's Assn. v. City of Costa Mesa, 209 Cal.App.4th 298, 305 (2012) (“The purpose of such an order is to preserve the status quo until a final determination following a trial.”) (internal quotation marks omitted); GoTo.com, Inc. v. Walt Disney, Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (“The status quo ante litem refers not simply to any situation before the filing of a lawsuit, but instead to the last uncontested status which preceded the pending controversy.”) (internal quotation marks omitted). In cases where the movant seeks to alter the status quo, preliminary injunction is disfavored and a higher level of scrutiny must apply. Schrier v. University of Co., 427 F.3d 1253, 1259 (10th Cir. 2005). Preliminary injunction is not automatically denied simply because the movant seeks to alter the status quo, but instead the movant must meet heightened scrutiny. Tom Doherty Associates, Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 33-34 (2d Cir. 1995).

         “A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Winter, 555 U.S. at 20. A plaintiff must “make a showing on all four prongs” of the Winter test to obtain a preliminary injunction. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). In evaluating a plaintiff's motion for preliminary injunction, a district court may weigh the plaintiff's showings on the Winter elements using a sliding-scale approach. Id. A stronger showing on the balance of the hardships may support issuing a preliminary injunction even where the plaintiff shows that there are “serious questions on the merits . . . so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Id. Simply put, the plaintiff must demonstrate, “that [if] serious questions going to the merits were raised [then] the balance of hardships [must] tip[ ] sharply in the plaintiff's favor, ” in order to succeed in a request for preliminary injunction. Id. at 1134-35 (emphasis added).

         III. ...


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