Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-02301/USCOURTS-azd-2_11-cv-02301-1/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1444 Petition for Removal- Foreclosure

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1

 For purposes of the analysis of the motion for preliminary injunction, the Court has

used Defendants to mean: (1) Bank of America, as successor in interest to BAC Home Loans

Servicing; (2) Bank of America; (3) Countrywide Home Loans, Inc. (4) Countrywide

Financial Corporation; (4) Mortgage Electronic Registration Systems, Inc.; and (5) Deutsche

Bank National Trust Company, as Trustee for the Holders of the Harborview 2006-5 Trust.

Deutsche is not named in the Complaint; however, in the motion for preliminary injunction,

Plaintiff now claims that Deutsche now owns the note on Plaintiff’s house. Defense counsel

filed a response on behalf of all of these Defendants.

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Karoly Quintana, 

Plaintiff, 

vs.

Bank of America, Countrywide Home

Loans Inc., Countrywide Financial Corp.,

Mortgage Electronic Registration Systems,

Defendants. 

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No. CV 11-2301-PHX-JAT

ORDER

Pending before the Court is Plaintiff’s motion for preliminary injunction to stop a

Trustee Sale of her house scheduled for Tuesday, April 2, 2013. Plaintiff basis this motion

is that she was the victim of fraud in her attempted loan modification process. Defendants1

have opposed the motion.

I. Motion for Preliminary Injunction

A plaintiff seeking a preliminary injunction must establish that:

[1] he is likely to succeed on the merits, 

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2

 In her motion for Preliminary Injunction, Plaintiff states, “Plaintiff filed suit in State

court and alleged among other things, that Bank of America committed fraud when they told

her she had to stop paying to get into a modification program.” Doc. 14 at 2. The Court has

reviewed the complaint, and finds no support for this statement; i.e. the Court cannot find any

allegation of fraud in the complaint. See Doc. 1-1 at 8-13. Instead, it appears Plaintiff’s sole

cause of action is based on a theory of a defective assignment of the note and/or deed of trust.

Id. The Court notes that Plaintiff’s memorandum of points and authorities filed in state court

in support of her original application for a temporary restraining order mentioned the Arizona

Consumer Fraud Act. Doc. 1-1 at 57. Procedurally, the Court is unclear that it can base a

preliminary injunction on factual allegations and legal causes of action found only in a

motion for preliminary injunction and not in the complaint. 

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[2] he is likely to suffer irreparable harm in the absence of preliminary relief,

[3] the balance of equities tips in his favor, and 

[4] an injunction is in the public interest. 

American Trucking Associations, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir.

2009) (citing Winter v. Natural Resources Defense Council, 129 S.Ct. 365, 374 (2008)).

If Plaintiff fails to meet the standard to qualify for a preliminary injunction applying

the Winter factors, then the Court must use the following alternative formulation to see if

Plaintiff can meet prongs 1 and 3:

“A preliminary injunction is appropriate when a plaintiff demonstrates ... that

serious questions going to the merits were raised and the balance of hardships

tips sharply in the plaintiff’s favor. .... Of course, plaintiffs must also satisfy

the other Winter factors.”

Alliance for Wild Rockies v. Cottrell, 632 F.3d 1127, 1134-35 (2011) (quoting Lands Council

v. McNair, 537 F.3d 981, 987 (9th Cir. 2008)).

A. Fraud Related to Initial Modification Request

Plaintiff alleges (in her request for a preliminary injunction, not in her complaint), that

Defendant Bank of America misrepresented to her that she needed to be 90 days late on her

mortgage payments to qualify for a loan modification. Doc. 14 at 2.2

 Plaintiff further claims

that in reliance on this representation, she intentionally fell three months behind on her

mortgage payments even though at that time she had the ability to pay. Id. 

In Arizona, a fraud claim requires proof of nine elements: (1) a representation; (2) its

falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity or ignorance of its truth;

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(5) the speaker’s intent that it be acted upon by the recipient in a manner reasonably

contemplated; (6) the hearer’s ignorance of the falsity of the representation; (7) the hearer’s

reliance on the truth of the representation; (8) the right to rely on it; and (9) consequent and

proximate injury. Echols v. Beauty Built Homes, Inc., 647 P.2d 629, 631 (1982).

Here, Plaintiff alleges that she is likely to succeed on the merits because: 

(1) Bank of America represented to Plaintiff ... that she had to stop paying her

mortgage for 90 days in order to enter into a modification program ...; (2) [the]

representation w[as] false because homeowners did not have to stop paying

their mortgages for 90 days to qualify for any government modification

program and Bank of American had no intention of allowing Plaintiff to

modify her existing loan; (3) the[] misrepresentation[] w[as] material because

[it was] the but-for cause of Plaintiff failing behind on her payments ...; (4)

Bank of America knew the statements that a person had to stop paying for 90

days were false because they knew it was not a government policy and they

did not have an internal written policy that supported any request for the

homeowner to stop payment for 90 days to qualify for a loan modification; (5)

Bank of America[’s] statements were made with the intent to induce Plaintiff

to stop paying her mortgage and to have her fall behind in a manner in which

it would be almost impossible to catch up and/or bring her payments current

and Bank of America never intended to allow Plaintiff to enter into a loan

modification program; (6) Plaintiff had no way of knowing that [] there was

no Bank of America policy that guaranteed if one stops paying for 90 days,

they would qualify for a loan modification ...; (7) Plaintiff relied on Bank of

America’s statements to her detriment when she stopped paying for 90 days

...; (8) Plaintiff had a right to rely on Bank of America’s statements because

the house was hers and in her name ...; (9) if it were not for Bank of America’s

fraudulent actions and misstatements, Plaintiff would never have stopped

paying her mortgage and would not have destroyed her credit rating in an

attempt to modify her loan ... .

Doc. 14 at 3-4.

Defendants respond and argue:

Plaintiff (at 2) bases the Motion on a claim for “fraud,” but fraud is a claim

seeking monetary damages for which equitable relief should not be granted.

Even assuming that Plaintiff has a strong likelihood of succeeding on that

claim, recovering monetary damages for fraud would not be cause to prevent

Defendants from enforcing their contractual rights and selling collateral at a

trustee’s sale.

Doc. 16 at 3.

Thus, Defendants’ primary argument is that because fraud is remediable by money

damages it cannot form the basis for equitable relief. The Court agrees that any claim

remediable by money damages cannot be the basis for equitable relief. See Stanley v. Univ.

of Calif., 13 F.3d 1313, 1320-21 (9th Cir.1994) (to obtain a preliminary injunction the moving

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party must demonstrate that her remedy at law was inadequate and to the extent she is

seeking money damages, her remedy at law is adequate). However, the claim in this case is

a hybrid because, while Defendants are correct that generally fraud can by remedied by

money damages, under Arizona law Plaintiff’s fraud claim will be barred if this Court does

not grant an injunction.

Specifically, in Madison v. Groseth, 279 P.3d 633, 638 ¶15 (Ariz. App. 2012), the

Arizona Court of Appeals held that failing to obtain an injunction prior to the Trustee’s sale

“waives all defenses and objections to the sale.” In Madison, the plaintiff was bringing

various tort claims after the Trustee sale of her house. Id. In applying the waiver provision

of A.R.S. § 33-811(c), the Arizona Court of Appeals stated, “In sum, because Madison’s tort

claims depend on her objections to the validity of the trustee’s sale, and she has waived those

objections, her tort claims cannot survive as a matter of law.” Id.

Reading Madison, it appears that while Plaintiff’s fraud claim might be remediable

by money damages, it will be waived and barred if this Court does not grant equitable relief

to preserve the claim. Based on Plaintiff’s arguments, there are serious questions going to

the merits as to whether she states a tort claim for fraud, and the balance of equities tips

sharply in her favor because her claim will be waived if this Court does not grant an

injunction. Thus, Plaintiff meets prongs one and three of Winter using the Alliance for the

Rockies test.

Next, Plaintiff meets prong two of Winter; specifically, she is likely to suffer

irreparable harm. In this case, if an injunction is not granted, Plaintiff will be barred from

litigating her case on the merits because her fraud claim will be waived.

Finally, “[i]n cases where the public interest is involved, the district court must also

examine whether the public interest favors the plaintiff.” Fund for Animals, Inc. v. Lujan,

962 F.2d 1391, 1400 (9th Cir.1992) (citing Caribbean Marine Servs., Co. v. Baldrige, 844

F.2d 668, 674 (9th Cir.1988)). In this case, the Court does not see that the public interest is

clearly implicated by granting or denying the preliminary injunction. However, the Ninth

Circuit Court of Appeals has identified a public policy in litigation that favors resolution of

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cases on their merits. Henderson v. Duncan, 779 F.2d 1421, 1423 (9th Cir.1986). Granting

the preliminary injunction in this case to prevent Plaintiff’s claim(s) from being waived by

a Trustee sale furthers the public policy of allowing this case to be resolved on its merits.

Because Plaintiff has met the relevant three prongs for granting a preliminary

injunction, the Court will grant the motion in this case. However, the Court must also

consider the appropriate bond amount, and the status of the complaint.

B. Fraud in the Settlement Process

Plaintiff also argues that Defendant committed fraud in the settlement process. The

Court has recounted these allegations in a prior order. See Doc. 17 at 1-2. For purposes of

the motion for preliminary injunction, the Court has not considered these allegations.

II. Amended Complaint

As the Court noted in footnote 2, the Court has concerns about whether the Court can

grant injunctive relief based on a theory that is not pleaded in the complaint. Thus, for this

injunction to take effect, Plaintiff will be required to file an amended complaint, by 8:00 a.m.

Tuesday, April 2, 2013, to include the facts and counts on which she premises her motion for

preliminary injunction. If Plaintiff fails to file an amended complaint by this deadline, the

injunction will dissolve without further order of this Court.

III. Bond

Defendants seek a bond of all of Plaintiff’s back payments, plus current monthly

payments. In other words, Defendants argue that the only appropriate bond would be to

make Plaintiff come completely current on her note.

However, Arizona applies a different test. Specifically, in eviction actions, the

Arizona Rules of Procedure for Eviction Actions states that when an appeal is taken from

justice court to superior court:

If the appellant wants to remain in possession of the premises while the appeal

is pending, the appellant must pay to the clerk of the court any rent due apart

from amounts included in the judgment and continue paying to the clerk

additional rent as it becomes due during the appeal. Failure of the appellant

to pay any rent due as it accrues is cause for the appellee to seek an order

allowing it to enforce a writ of restitution, but shall not be cause for the

dismissal of the appeal. In this event, the appeal will proceed despite the

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3

 At the request of the Court, at oral argument both parties proposed a bond amount.

(Defendants requested the monthly mortgage payment of $7.500.00 as a monthly bond

amount; but acknowledged that the Court was seeking a monthly fair market value rent

amount.) First, Plaintiff proposed a nominal bond of $1,000.00 per month. Alternatively,

Plaintiff presented rental comparables (“comps”) for properties in Plaintiff’s area ranging

from $2,600.00 per month to $8,000.00 per month. Defendants orally said they had evidence

of a monthly fair market value rent of $4,200.00. Defendants handed evidence to the Court

of a monthly fair market value rent of $4,696.00. Defendants opined that the $4,200.00

figure might be up to 20% inaccurate in either direction. Both attorneys conceded that given

the time between the Court’s order and the hearing, they did not have as much as they would

have liked to address this issue.

The Court rejects Plaintiff’s request for a nominal bond. The Court has set the bond

at the monthly fair market value rent of the lowest comp presented to the Court. However,

Defendants may move to increase the bond amount if they have evidence to support such a

motion.

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appellant’s loss of possession of the premises while it is pending.

Arizona Rules of Procedure for Eviction Actions, Rule 17b.(2).

Thus, this Court finds that monthly fair market value rent to be a reasonable bond

amount. Accordingly, Plaintiff will be required to post a bond in the amount of $2,600.003

by 8:15 a.m., Tuesday, April 2, 2013. If Plaintiff fails to post the bond, this injunction will

not go into effect. Further, on the 2nd of each month thereafter (or the following Monday, if

the 2nd falls on a weekend or holiday) Plaintiff must again post this amount. If Plaintiff fails

in any subsequent month to post the bond, Defendants may move to dissolve the injunction.

IV. Conclusion

Based on the foregoing,

IT IS ORDERED that Plaintiff’s motion for preliminary injunction (Doc. 14) is

granted conditioned on: 1) Plaintiff filing an amended complaint by 8:00 a.m., Tuesday,

April 2, 2013; and 2) Plaintiff posting a bond with the Clerk of the Court in the amount of

$2,600.00 by 8:15 a.m., Tuesday, April 2, 2013.

/ / /

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/ / /

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IT IS FURTHER ORDERED that Plaintiff shall post another bond in the same

amount on the 2nd of each month thereafter (or the following Monday, if the 2nd falls on a

weekend or holiday); failing which, Defendants may move to dissolve the injunction.

DATED this 1st day of April, 2013.

Case 2:11-cv-02301-JAT Document 22 Filed 04/01/13 Page 7 of 7