Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-02704/USCOURTS-casd-3_09-cv-02704-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1331 Fed. Question

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-1- 09cv2704-WQH-BLM

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

YUEH CHEN and CHEN C. WU,

individuals,

Plaintiffs,

CASE NO. 09cv2704-WQH-BLM

ORDER

vs.

PMC BANCORP, a California

corporation, 01HOMELOAN, ONE

WEST BANK, FIDELITY NATIONAL

TITLE COMPANY, NDEX WEST, LLC,

DEUTSCHE BANK NATIONAL

TRUST COMPANY, and DOES 1

through 20,

Defendants.

HAYES, Judge:

The Matter before the Court is the Ex Parte Application for Temporary Restraining

Order (“Application for TRO”) filed by Plaintiffs Yueh Chen and Chen C. Wu. (Doc. # 18).

I. Background

On December 3, 2009, Plaintiffs initiated this action by filing a Complaint in this Court.

(Doc. # 1). 

A. Allegations of the Complaint

The Complaint, which is verified by Plaintiff Chen C. Wu, alleges that on December

13, 2006, Plaintiffs refinanced their primary residence, located at 1088 Camino Del Sol, San

Marcos, California (“Property”), through a loan in the amount of $500,000. Plaintiffs financed

the Property by signing a note in the principal amount of $500,000, secured by a deed of trust

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 1 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-2- 09cv2704-WQH-BLM

from Defendant PMC Bancorp (“PMC”), the originating lender. During the loan application

process, Plaintiffs accurately provided their yearly income. “Defendants did not show

Plaintiffs what exact amounts were eventually stated with respect to their income in the loan

application.” (Doc. # 1 ¶ 9). Defendants “Homeloan and PMC submitted [an] inflated stated

income amount” in order to secure approval of the loan. (Doc. # 1 ¶ 11).

“[D]uring the course of the loan application process, two copies of the Notice of Right

to Cancel, as required under [the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq.],

that stated a transaction date and the expiration date of the rescission period, were not provided

in the closing packet. In addition, Plaintiffs were not provided with the initial disclosure and

final disclosure documents including those required by [the Real Estate Settlement Procedures

Act (“RESPA”), 12 U.S.C. §§ 2605 et seq.], [and] TILA....” (Doc. # 1 ¶ 12).

“The initial Notice of Default filed by Defendant [NDEX West, LLC (“NDEX”)] on

August 28, 2009, was flawed and failed to comply with California Civil Code § 2924. When

the Notice of Default was prematurely filed by NDEX, it was not the trustee on the Deed of

Trust, as [Defendant] National Fidelity Title Company was still the Trustee on the Deed of

Trust. NDEX was not substituted as trustee on the Deed of Trust until November 3, 2009,

nearly two months after the original Notice of Default was already filed, in clear violation of

§ 2924.” (Doc. # 1 ¶ 13).

The Complaint alleges eight claims: (1) intentional misrepresentation; (2) breach of

fiduciary duty; (3) quiet title; (4) violations of TILA; (5) violation of RESPA; (6) violation of

California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200; (7) violation of

California Civil Code § 1632; and (8) violation of California Civil Code § 2924.

On December 3, 2009, Plaintiffs filed a Notice of Pendency of Action, also known as

a lis pendens, stating that this action “alleges a real property claim affecting title and right of

possession of” the Property at issue. (Doc. # 3 at 2).

B. Application for TRO

On February 12, 2010, Plaintiffs filed the Application for TRO. (Doc. # 18). Plaintiffs

move the Court for “a Temporary Restraining Order restraining, enjoining and preventing

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 2 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-3- 09cv2704-WQH-BLM

Trustee NDEX West, LLC ... and Defendant One West Bank, F.S.B. ... and their agents ... from

selling Plaintiffs’ house at Trustee’s Sale currently set for February 17, 2010 at 10:00 a.m. at

the entrance to the East County Regional Center ..., El Cajon, CA.” (Doc. # 18 at 1).

The Application for TRO contains two exhibits, both of which were referenced in the

Complaint. The first exhibit is a Notice of Default and Election to Sell under Deed of Trust

(“Notice of Default”), which was filed in the San Diego County Recorder’s Office on August

28, 2009. (Doc. # 18-2). The Notice of Default notified Plaintiffs that their account was in

default by an amount of $11,726.68 as of August 27, 2009, and it contains an affidavit which

states: “The mortgagee, beneficiary or authorized agent has contacted the borrower to discuss

the borrower’s financial situation and to explore options for the borrower to avoid foreclosure

in compliance with Cal. Civ. Code Section 2923.5. Thirty days or more have elapsed since the

borrower was contacted.” (Doc. # 18-2 at 3). The Notice of Default was signed by “NDEX

WEST, LLC as Agent for Beneficiary.” (Doc. # 18-2 at 2). 

The second exhibit attached to the Application for TRO is a “Substitution of Trustee,”

which states that, on October 21, 2009, the beneficiary under the Deed of Trust, Defendant

Deutsche Bank National Trust Company, substitutes NDEX as trustee under the Deed of Trust.

(Doc. # 18-3 at 2). The Substitution of Trustee was filed with the San Diego County

Recorder’s Office on November 3, 2009. (Doc. # 1 ¶ 13; see also Doc. # 19-1, Ex. 4).

In the brief accompanying the Application for TRO, Plaintiffs contend that they are

likely to prevail on the merits of their claims for violation of California Civil Code § 2924.

Plaintiffs contend:

[The Notice of Default] was not filed by either the ‘trustee, mortgagee or

beneficiary’ as required by statute.... [T]he Notice of Default was recorded by

NDEX ([on] August 28, 2009) before NDEX had any position of record

concerning the Deed of Trust on this property. NDEX was not acting as a

trustee or beneficiary when it recorded the Notice of Default and had no actual

interest in the property whatsoever until the Substitution of Trustee was recorded

(filed on October 21, 2009 and recorded on November 3, 2009), over two

months after the Notice of Default was originally filed.... Defendants had no

right to file the original Notice of Default on the property and therefore they

currently have no right to sell Plaintiffs’ home at the scheduled Trustees sale.

Therefore, a temporary restraining order should issue preventing Defendants

from proceeding with the trustee’s sale until this case can be heard on its merits.

(Doc. # 18-1 at 4-5). Plaintiffs additionally contend that “[t]he [foreclosure] sale date should

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 3 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-4- 09cv2704-WQH-BLM

have been vacated when Defendants received the Notice of Rescission based on the material

TILA violations in the PMC Loan documents.” (Doc. # 18-1 at 6).

On February 12, 2010, Defendants NDEX, One West Bank, and Deutsche Bank

National Trust Company (collectively, “Opposing Defendants”) filed an opposition to the

Application for TRO. (Doc. # 19). The Opposing Defendants contend that the Application

for TRO should be denied on the following grounds: (1) the Opposing Defendants followed

the proper foreclosure procedure pursuant to California Civil Code § 2924; (2) all of Plaintiffs’

rescission claims “are barred by Plaintiff’s failure to allege tender while requesting injunctive

relief”; each of Plaintiff’s causes of action fail to state a claim upon which relief may be

granted; the equities weigh in favor of Defendants because “[i]t does not serve the interests of

justice to allow Plaintiffs to occupy the Property essentially for free”; and “[t]here is no proof

that Plaintiffs will pay insurance and taxes” or otherwise “protect the property throughout this

litigation which jeopardizes Defendants’ property interest.” (Doc. # 19 at 5, 16-17).

On February 12, 2010, the Opposing Defendants filed a notice which states: “[T]he

foreclosure sale on the property ... set for on or about February 17, 2010 has been continued

by [the Opposing] defendants ... to a date on or after this Court rules on plaintiffs’ ex parte

application for a temporary restraining order/preliminary injunction or further order of this

Court.” (Doc. # 19-2 at 2).

II. Standard of Review

When the nonmovant has received notice, as here, the standard for issuing a temporary

restraining order is the same as that for issuing a preliminary injunction. See Brown Jordan

Int’l, Inc. v. Mind’s Eye Interiors, Inc., 236 F. Supp. 2d 1152, 1154 (D. Haw. 2002); Franklin

v. Scribner, Civil No. 07-0438, 2007 WL 1491100, at *3 (S.D. Cal., May 21, 2007); Bronco

Wine Co. v. U.S. Dep’t of Treasury, 997 F. Supp. 1309, 1313 (E.D. Cal. 1996); Lockheed

Missile & Space Co., Inc. v. Hughes Aircraft Co., 887 F. Supp. 1320, 1323 (N.D. Cal. 1995).

“[A] preliminary injunction 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) (quotation omitted).

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 4 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-5- 09cv2704-WQH-BLM

To obtain preliminary injunctive relief, a movant must show “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); see also Am. Trucking Ass’n, Inc.

v. City of L.A., 559 F.3d 1046, 1052 (9th Cir. 2009).

III. Discussion

1. California Civil Code § 2924

Plaintiff contends that the Notice of Default “was not filed by either the ‘trustee,

mortgagee or beneficiary’ as required by statute,” and this “is fatal to the current Trustee’s Sale

as it taints the entire statutorily required non-judicial foreclosure sale process.” (Doc. # 18-1

at 4, 6).

The non-judicial foreclosure statute provides that “[t]he trustee, mortgagee, or

beneficiary, or any of their authorized agents shall first file for record, in the office of the

recorder of each county wherein the mortgaged or trust property or some part or parcel thereof

is situated, a notice of default.” Cal. Civ. Code § 2924(a)(1) (emphasis added). California

Civil Code § 2924 does not require that the trustee file the Notice of Default, but permits any

of the beneficiary’s authorized agents to do so. See Wood v. Aegis Wholesale Corp., No.

09cv536, 2009 WL 1948844, at *4 (E.D. Cal., July 6, 2009). The Notice of Default at issue

was filed in the San Diego County Recorder’s Office by “NDEX WEST, LLC as Agent for

Beneficiary.” (Doc. # 18-2 at 2). There is no evidence in the record to rebut this evidence that

NDEX was acting as the beneficiary’s agent, as expressly permitted by Cal. Civ. Code § 2924.

In addition, the foreclosure procedure is not tainted by the fact that NDEX recorded the

Notice of Default prior to the Substitution of Trustee. See Cal. Civ. Code § 2934a(c)

(providing the notice procedures for when “the substitution [of trustee] is effected after a notice

of default has been recorded but prior to the recording of the notice of sale”). In Wood, the

court addressed the same argument Plaintiffs make here. The court stated:

The fact that [defendant] recorded the Notice of Default three months before

recording the Substitution of Trustee does not void the foreclosure procedure.

Thus, because [defendant] had the authority as [the beneficiary]’s agent, to file

the Notice of Default, it is immaterial to the validity of the foreclosure process

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 5 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-6- 09cv2704-WQH-BLM

that [defendant] filed the Notice of Default before [defendant] was officially

substituted as trustee. Accordingly, Plaintiff has failed to show any procedural

impropriety with respect to the non-judicial foreclosure proceedings.

Wood, 2009 WL 1948844, at *4 (citing U.S. v. Hertz, Inc. v. Niobrara Farms, 41 Cal. App. 3d

68, 85 (1974)).

This Court concludes that Plaintiffs have failed to demonstrate a likelihood of success

on the merits of their claim that California Civil Code § 2924 was violated by the Defendants.

2. Tender

Under California common law, “to enjoin a foreclosure sale due to non-judicial

foreclosure defects, the trustor must in good faith tender amounts to cure the default.” Lopez

v. Chase Home Fin., LLC, No. CV 09-449, 2009 WL 981676, at *8 (E.D. Cal., Apr. 9, 2009)

(citing Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal. App. 3d 112, 117 (1971) (“A valid and

viable tender of payment of the indebtedness owing is essential to an action to cancel a

voidable sale under a deed of trust.”)). Similarly, in order to prevail on a TILA rescission

claim, the borrower will be obligated to tender the property the borrower received from the

creditor under the loan. See 15 U.S.C. § 1635(b); 12 C.F.R. §226.23(d); see also Yamamoto

v. Bank of N.Y., 329 F.3d 1167, 1171 (9th Cir. 2003) (courts have the discretion to condition

rescission upon the satisfaction of the tender requirement).

“By far, the majority of Courts to address the issue recently have required that

borrowers allege an ability to tender the principal balance of the subject loan in order to state

a claim for rescission under TILA.” Garcia v. Wachovia Mortgage Corp., --- F. Supp. 2d ----,

2009 WL 3837621, at *3 (C.D. Cal., Oct. 14, 2009) (collecting cases). This rule is in

recognition of the principle that “[e]quity will not interpose its remedial power in the

accomplishment of what seemingly would be nothing but an idly and expensively futile act,

nor will it purposely speculate in a field where there has been no proof as to what beneficial

purpose may be subserved through its intervention.” Karlsen, 15 Cal. App. 3d at 117; see also

Garza v. Am. Home Mortgage, No. CV 08-1477, 2009 WL 188604, at *5 (E.D. Cal., Jan. 27,

2009) (“The complaint fails to hint that Ms. Garza is able to fulfill her [tender] obligations

under 15 U.S.C. § 1635(b) and 12 C.F.R. § 226.23(d). Rescission is an empty remedy without

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 6 of 7
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

-7- 09cv2704-WQH-BLM

Ms. Garza’s ability to pay back what she has received.”).

The Court concludes that preliminary injunctive relief is not warranted in this case

without a showing that Plaintiffs have the ability to tender. See Reganit v. Kay-Co. Invs., No.

2:09cv1120, 2009 U.S. Dist. LEXIS 34883, at *3-*4 (E.D. Cal., Apr. 24, 2009) (finding, in

denying an application for a temporary restraining order to enjoin a foreclosure sale, that

success was unlikely because “Plaintiff has not indicated she is able to tender the requisite loan

proceeds”). Neither the Complaint nor the Application for TRO contains any allegation or

evidentiary showing related to Plaintiff’s ability to tender. Accordingly, even if Plaintiffs had

otherwise demonstrated a likelihood of success on their rescission claims, the Court concludes

that Plaintiffs have not demonstrated any chance of success on the merits due to their failure

to show the ability to tender. “When ... a party has not shown any chance of success on the

merits, no further determination of irreparable harm or balancing of hardships is necessary.”

Global Horizons, Inc. v. U.S. Dep’t of Labor, 510 F.3d 1054, 1058 (9th Cir. 2007).

III. Conclusion

IT IS HEREBY ORDERED that the Ex Parte Application for Temporary Restraining

Order is DENIED. (Doc. # 18).

DATED: February 16, 2010

WILLIAM Q. HAYES

United States District Judge

Case 3:09-cv-02704-WQH-CAB Document 21 Filed 02/16/10 Page 7 of 7