Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_10-cv-00518/USCOURTS-caed-2_10-cv-00518-6/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

GARY L. FOSTER,

Plaintiff,

 v.

SCME MORTGAGE BANKERS, INC. a

California corporation; CLEVER

KEY FINANCIAL, LLC, a

California limited liability

company; WEST COAST MORTGAGE,

a business entity of unknown

form, HOMECOMING FINANCIAL,

LLC, a Delaware limited

liability company f/k/a

HOMECOMINGS FINANCIAL NETWORK,

INC.; MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC. a

Delaware corporation; DEUTSCHE

BANK TRUST CO. AMERICAS;

AURORA LOAN SERVICERS, LLC a

Delaware limited liability

company; CAL-WESTERN

RECONVEYANCE CORPORATION, a

California corporation;

FREDERICK WINSTON WILLIAMS II,

an individual; and DEBORAH

DIAZ, an individual,

Defendants. /

NO. CIV. 2:10-518 WBS GGH

ORDER RE: MOTION FOR

PRELIMINARY INJUNCTION

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This matter came on for hearing on plaintiff’s motion

for a preliminary injunction (Docket No. 29) at 2:00 p.m. on June

14, 2010. Plaintiff was represented by Robert A. Spanner and

defendants Mortgage Electronic Registration Systems, Inc.

(“MERS”) and Aurora Loan Services (“Aurora”) were represented by

Robert Shaw. MERS and Aurora filed an Opposition along with a

series of documents related to Aurora’s servicing of plaintiff’s

loan. (Docket No. 54.) The court previously denied plaintiff’s

motion for a temporary restraining order on the grounds that

plaintiff failed to show a likelihood of success on the merits of

those claims which requested equitable relief. (See Docket Nos.

3, 22.) Plaintiff subsequently filed a First Amended Complaint

(Docket No. 33), which serves as the basis for plaintiff’s

instant motion.

In order to obtain a preliminary injunction, the moving

party “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. NRDC, —-- U.S. —--, —--, 129 S. Ct. 365, 374 (2008).1 As the

Supreme Court has repeatedly recognized, injunctive relief is “an

1 Plaintiff argues that Winter does not fully supercede

the Ninth Circuit’s alternate sliding scale tests for preliminary

injunctive relief, see The Lands Council v. McNair, 537 F.3d 981,

987 (9th Cir. 2008) (articulating the traditional Ninth Circuit

test as requiring a showing of either (1) likelihood of success

and possibility of irreparable injury; or (2) serious questions

going to the merits and a balance of hardships that tips sharply

in the applicant’s favor). This court finds no need to deviate

from Winter’s clear directive that applicants for preliminary

injunctive relief must satisfy all four elements listed above. 

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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); see

Winter, 129 S. Ct. at 375-76. 

Plaintiff’s First Amended Complaint (“FAC”) is

virtually identical to his original Complaint with three

significant changes. (Compare Docket No. 2 with Docket No. 33.) 

The FAC adds Deutsche Bank Trust Co. Americas as a defendant,

eliminates plaintiff’s cause of action for violation of

California Civil Code section 2943, adds multiple new factual

allegations under his cause of action for violation of the Truth

in Lending Act, 15 U.S.C. §§ 1601-1667f, and bifurcates the

wrongful foreclosure cause of action to plead quiet title

separately. None of these changes correct the defects identified

by the court in its April 7, 2010 Order denying plaintiff’s

motion for a temporary restraining order. 

Plaintiff’s motion for a preliminary injunction is

based solely on his causes of action for violations of TILA,

California Business and Professions Code section 17200

(California unfair competition law (“UCL”)), and for

irregularities in the foreclosure process. Plaintiff concedes

that he seeks only damages under TILA and does not seek

rescission of the loan. (Pl.’s Reply in Supp. of Mot. for

Prelim. Inj. (Docket No. 65) at 3.) As the court explained in

its Order of April 7, 2010, a TILA cause of action seeking only

damages does not entitle plaintiff to preliminary injunctive

relief because his damages claim will not be jeopardized by the

foreclosure of his home. (Docket No. 22.) While plaintiff makes

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much of the settled principle that losing one’s home is an

irreparable injury, he is entitled to preliminary injunctive

relief only to the extent that the injury is related to a cause

of action in his FAC that would, if plaintiff prevailed, somehow

affect the foreclosure of his home. Plaintiff’s state law claims

for wrongful foreclosure and to quiet title, discussed below, for

example, do seek equitable relief that could be jeopardized by

the foreclosure sale. If plaintiff prevails on his TILA damages

claim he would be entitled only to damages and there would be no

effect on the foreclosure of his home. The court does not know

how to more clearly state that a TILA claim for damages does not

entitle plaintiff to stop the foreclosure of his house and

therefore cannot be the basis of a preliminary injunction

enjoining the foreclosure. 

Plaintiff seeks injunctive relief under his fifth cause

of action for violation of section 17200 which incorporates the

alleged TILA violations and violations of the Real Estate

Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-2617. 

Section 17203 of the California Business and Professions Code

provides that injunctive relief is available “to prevent the use

or employment by any person of any practice which constitutes

unfair competition” and “as may be necessary to restore to any

person in interest any money or property, real or personal, which

may have been acquired by means of such unfair competition.” 

Cal. Bus. & Prof. Code § 17203. Plaintiff’s fifth cause of

action seeks injunctive relief to enjoin defendants from engaging

in the unlawful business practices related to TILA and RESPA

disclosures. (FAC ¶ 96.) 

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The alleged TILA violations are that defendants failed

to make required disclosures related to the annual percentage

rate (“APR”) of his loan, interest rate, finance charges, and

negative amortization. (Id. ¶¶ 38-59.) The result of these

alleged disclosure failures was that plaintiff was unaware his

principal loan balance would increase, that he would lose equity

in his home, and that he would be unable to refinance his home. 

(Id. ¶ 54.) In his section 17200 cause of action plaintiff

alleges that he received worse terms in the note than he had been

promised, and that defendants benefitted from their unfair

business practices by receiving more money from plaintiff than

they otherwise would have. (Id. ¶ 94.) 

These allegations do not support an injunction to stop

the foreclosure on plaintiff’s home. An injunction under section

17203 to prevent unfair competition practices would be one that

stopped the misleading disclosure practices of which plaintiff

complains in his first and fifth causes of action. To the extent

the FAC could be interpreted to seek injunctive relief to restore

his money or property which was acquired by unfair competition,

plaintiff’s fifth cause of action alleges only that defendants

received more money from plaintiff than they were entitled to. 

Indeed, plaintiff seeks the imposition of a constructive trust

over the additional sums allegedly collected by defendants. (Id.

¶ 95.) Simply put, the fifth cause of action does not seek

injunctive relief related to the foreclosure of plaintiff’s home. 

Plaintiff cannot seek to stop the foreclosure of his home on a

motion for preliminary injunction if prevailing on his fifth

cause of action would not affect the foreclosure. 

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Plaintiff also argues that irregularities in the

foreclosure process warrant an injunction because it is unclear

if any of the defendants have authority to foreclose on

plaintiff’s home. Plaintiff’s ninth cause of action for wrongful

foreclosure in his FAC is identical in all respects to his

original Complaint except for two additions. First, plaintiff

now alleges that MERS is not authorized to conduct business in

California and therefore could not properly substitute the

trustee under the deed of trust. (FAC ¶¶ 136, 138.) MERS,

however, is statutorily exempted from the requirement to obtain a

certificate of qualification to conduct business in California. 

MERS registered as a Delaware corporation, which is a foreign

corporation under California law. Cal. Corp. Code §§ 167, 171. 

MERS is not required to obtain a certificate of qualification

from the Secretary of State because it does not “transact

intrastate business” within the meaning of the statute. See,

e.g., Castaneda v. Saxon Mortg. Servs., Inc., 687 F. Supp. 2d

1191, 1195 & n.3 (E.D. Cal. 2009). Second, plaintiff alleges

that the note holder has not authorized the foreclosure. (Id. ¶

139.) As explained in the court’s prior Order, multiple parties

other than the holder of the note can initiate a non-judicial

foreclosure. (See Docket No. 22, at 8-11.) Plaintiff has failed

to raise a serious merits issue, therefore, with respect to

claims that the foreclosure process is somehow invalid. 

With respect to the remainder of plaintiff’s causes of

action in his FAC, they are identical to those in his original

Complaint and cannot support a motion for a preliminary

injunction for the same reasons the court articulated in its

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April 7, 2010 Order denying plaintiff’s motion for a temporary

restraining order. Because plaintiff has not shown a likelihood

of success on the merits for any of the claims which are listed

in the motion for preliminary injunction or in his FAC which

request equitable relief, his motion for a preliminary injunction

must be denied. See Winter, 129 S. Ct. at 374.

IT IS THEREFORE ORDERED that plaintiffs’ motion for a

preliminary injunction be, and the same hereby is, DENIED.

DATED: June 25, 2010

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