Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_10-cv-01016/USCOURTS-caed-1_10-cv-01016-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

LYNETTE GZELL, CASE NO. CV F 10-1016 LJO SMS

Plaintiffs, ORDER TO DENY INJUNCTIVE RELIEF

vs. (Doc. 2.)

NOVASTAR MORTGAGE,

INC., et al.,

Defendants.

 /

INTRODUCTION

On June 7, 2010, plaintiff Lynette Gzell (“Ms. Gzell”) filed papers which this Court construes

to seek a temporary restraining order (“TRO”) to enjoin foreclosure of her Angels Camp home

(“property”). Ms. Gzell’s complaint (“complaint”) alleges no less than 18 claims in connection with her

loan for the property and property foreclosure. Forthe reasons discussed below, this Court DENIES Ms.

Gzell a TRO to enjoin foreclosure. 

DISCUSSION

Injunctive Relief Standards

Ms. Gzell fails to demonstrate that she is entitled to injunctive relief. The purpose of a

preliminary injunction is to preserve the status quo if the balance of equities so heavily favors the

moving party that justice requires the court to intervene to secure the positions until the merits of the

action are ultimately determined. University of Texas v. Camenisch, 451 U.S. 390, 395 (1981). A

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preliminary injunction is available to a plaintiff who “demonstrates either (1) a combination of probable

success and the possibility of irreparable harm, or (2) that serious questions are raised and the balance

of hardship tips in its favor.” Arcamuzi v. Continental Air Lines, Inc., 819 F. 2d 935, 937 (9th Cir.

1987). Under either approach the plaintiff “must demonstrate a significant threat of irreparable injury.” 

Arcamuzi, 819 F.2d at 937. Also, an injunction should not issue if the plaintiff “shows no chance of

success on the merits.” Arcamuzi, 819 F.2d at 937. At a bare minimum, the plaintiff “must demonstrate

a fair chance of success of the merits, or questions serious enough to require litigation.” Arcamuzi, 819

F.2d at 937.

As discussed below, Ms. Gzell fails to demonstrate probable success on her claims or significant

threat of irreparable injury, especially given her default. 

Failure To Tender Indebtedness

Ms. Gzell’s failure to tender, and apparent inability to tender, the amount owing on her loan

dooms her claims and in turn her TRO request. 

“A tender is an offer of performance made with the intent to extinguish the obligation.” Arnolds

Management Corp. v. Eischen, 158 Cal.App.3d 575, 580, 205 Cal.Rptr. 15 (1984) (citing Cal. Civ.

Code, § 1485; Still v. Plaza Marina Commercial Corp., 21 Cal.App.3d 378, 385, 98 Cal.Rptr. 414

(1971)). “A tender must be one of full performance . . . and must be unconditional to be valid.” Arnolds

Management, 158 Cal.App.3d at 580, 205 Cal.Rptr. 15. “Nothing short of the full amount due the

creditor is sufficient to constitute a valid tender, and the debtor must at his peril offer the full amount.” 

Rauer's Law etc. Co. v. S. Proctor Co., 40 Cal.App. 524, 525, 181 P. 71 (1919).

A defaulted borrower is “required to allege tender of the amount of [the lender's] secured

indebtedness in order to maintain any cause of action for irregularity in the sale procedure.” Abdallah

v. United Savings Bank, 43 Cal.App.4th 1101, 1109, 51 Cal.Rptr.2d 286 (1996), cert. denied, 519 U.S.

1081, 117 S.Ct. 746 (1997). “A party may not without payment of the debt, enjoin a sale by a trustee

under a power conferred by a deed of trust, or have his title quieted against the purchaser at such a sale,

even though the statute of limitations has run against the indebtedness.” Sipe v. McKenna, 88

Cal.App.2d 1001, 1006, 200 P.2d 61 (1948).

In FPCI RE-HAB 01 v. E &G Investments, Ltd., 207 Cal.App.3d 1018, 1021, 255 Cal.Rptr. 157

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(1989), the California Court of Appeal explained:

. . . generally “an action to set aside a trustee's sale for irregularities in sale notice or

procedure should be accompanied by an offer to pay the full amount of the debt for

which the property was security.” . . . . This rule . . . is based upon the equitable maxim

that a court of equity will not order a useless act performed. . . . “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.” . . . The rationale behind the rule is that if plaintiffs could not

have redeemed the property had the sale procedures been proper, any irregularities in the

sale did not result in damages to the plaintiffs. (Citations omitted.)

An action to set aside a foreclosure sale, unaccompanied by an offer to redeem, does not state

a cause of action which a court of equity recognizes. Karlsen v. American Sav. & Loan Assn., 15

Cal.App.3d 112, 117, 92 Cal.Rptr. 851 (1971). The basic rule is that an offer of performance is of no

effect if the person making it is not able to perform. Karlsen, 15 Cal.App.3d at118, 92 Cal.Rptr. 851 

(citing Cal. Civ. Code, § 1495.) Simply put, if the offeror “is without the money necessary to make the

offer good and knows it” the tender is without legal force or effect. Karlsen, 15 Cal.App.3d at118, 92

Cal.Rptr. 851 (citing several cases). “It would be futile to set aside a foreclosure sale on the technical

ground that notice was improper, if the party making the challenge did not first make full tender and

thereby establish his ability to purchase the property.” United States Cold Storage v. Great Western

Savings & Loan Assn., 165 Cal.App.3d 1214, 1224, 212 Cal.Rptr. 232 (1985). “A cause of action

‘implicitly integrated’ with the irregular sale fails unless the trustor can allege and establish a valid

tender.” Arnolds Management, 158 Cal.App.3d at 579, 205 Cal.Rptr. 15.

“It is settled in California that a mortgagor cannot quiet his title against the mortgagee without

paying the debt secured.” Shimpones v. Stickney, 219 Cal. 637, 649, 28 P.2d 673 (1934); see Mix v.

Sodd, 126 Cal.App.3d 386, 390, 178 Cal.Rptr. 736 (1981) (“amortgagor in possession may not maintain

an action to quiet title, even though the debt is unenforceable”); Aguilar v. Bocci, 39 Cal.App.3d 475,

477, 114 Cal.Rptr. 91 (1974) (trustor is unable to quiet title “without discharging his debt”).

Moreover, to obtain “rescission or cancellation, the rule is that the complainant is required to do

equity, as a condition to his obtaining relief, by restoring to the defendant everything of value which the

plaintiff has received in the transaction. . . . The rule applies although the plaintiff was induced to enter

into the contract by the fraudulent representations of the defendant.” Fleming v. Kagan, 189 Cal.App.2d

791, 796, 11 Cal.Rptr. 737 (1961). “A valid and viable tender of payment of the indebtedness owing

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is essential to an action to cancel a voidable sale under a deed of trust.” Karlsen, 15 Cal.App.3d at 117, 

92 Cal.Rptr. 851. Analyzing “trust deed nonjudicial foreclosure sales issues in the context of common

law contract principles” is “unhelpful” given “the comprehensive statutory scheme regulating

nonjudicial foreclosure sales.” Residential Capital v. Cal-Western Reconveyance Corp., 108

Cal.App.4th 807, 820, 821, 134 Cal.Rptr.2d 162 (2003). 

“The rules which govern tenders are strict and are strictly applied.” Nguyen v. Calhoun, 105

Cal.App.4th 428, 439, 129 Cal.Rptr.2d 436 (2003). “The tenderer must do and offer everything that is

necessary on his part to complete the transaction, and must fairly make known his purpose without

ambiguity, and the act of tender must be such that it needs only acceptance by the one to whom it is

made to complete the transaction.” Gaffney v. Downey Savings & Loan Assn., 200 Cal.App.3d 1154,

1165, 246 Cal.Rptr. 421 (1988). The debtor bears “responsibility to make an unambiguous tender of

the entire amount due or else suffer the consequence that the tender is of no effect.” Gaffney, 200

Cal.App.3d at 1165, 246 Cal.Rptr. 421.

Neither the complaint nor record references Ms. Gzell’s tender of indebtedness or ability to do

so. The complaint’s silence on Ms. Gzell’s tender of or ability to tender loan proceeds is construed as

her concession of inability to do so. Without Ms. Gzell’s meaningful tender, Ms. Gzell seeks empty

remedies, not capable of being granted. Without a tender, there is no possibility of irreparable harm to

Ms. Gzell. The claims against defendants are subject to dismissal in the absence of a sufficiently alleged

tender of loan proceeds.

Absence Of Actionable Duties

Nothing in the record reflects Ms. Gzell’s fair chance of success on the merits or the existence

of serious questions to require litigation. In essence, she claims that she was unqualified for her property

loan and that defendants breached fiduciary and related duties by making the loan to her.

There is no actionable duty between a lender and borrower in that loan transactions are armslength. A lender “owes no duty of care to the [borrowers] in approving their loan. Liability to a

borrower for negligence arises only when the lender ‘actively participates’ in the financed enterprise

‘beyond the domain of the usual money lender.’” Wagner v. Benson, 101 Cal.App.3d 27, 35, 161

Cal.Rptr. 516 (1980) (citing several cases). “[A]s a general rule, a financial institution owes no duty of

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care to a borrower when the institution's involvement in the loan transaction does not exceed the scope

of its conventional role as a mere lender of money.” Nymark v. Heart Fed. Savings & Loan Assn., 231

Cal.App.3d 1089, 1096, 283 Cal.Rptr. 53 (1991); see Myers v. Guarantee Sav. & Loan Assn., 79

Cal.App.3d 307, 312, 144 Cal. Rptr. 616 (1978) (no lender liability when lender did not engage “in any

activity outside the scope of the normal activities of a lender of construction monies”). 

“Public policy does not impose upon the Bank absolute liability for the hardships which may

befall the [borrower] it finances.” Wagner, 101 Cal.App.3d at 34, 161 Cal.Rptr. 516. The success of

a borrower’s investment “is not a benefit of the loan agreement which the Bank is under a duty to

protect.” Wagner, 101 Cal.App.3d at 34, 161 Cal.Rptr. 516 (lender lacked duty to disclose “any

information it may have had”).

The complaint lacks facts to support an actionable duty to impose on defendants. “No such duty

exists” for a lender “to determine the borrower's ability to repay the loan. . . . The lender's efforts to

determine the creditworthiness and ability to repay by a borrower are for the lender's protection, not the

borrower's.” Renteria v. United States, 452 F.Supp.2d 910, 922-923 (D. Ariz. 2006) (borrowers “had

to rely on their own judgment and risk assessment to determine whether or not to accept the loan”). The

complaint lacks facts of special circumstances to impose duties on defendants in that the complaint

depicts an arms-length loan transaction, nothing more. The complaint fails to substantiate a special

lending relationship or an actionable breach of duty to substantiate a negligence claim. 

“The relationship between a lending institution and its borrower-client is not fiduciaryin nature.” 

Nymark, 231 Cal.App.3d at 1093, n. 1, 283 Cal.Rptr. 53 (1991) (citing Price v. Wells Fargo Bank, 213

Cal.App.3d 465, 476-478, 261 Cal.Rptr. 735 (1989)). A commercial lenderis entitled to pursue its own

economic interests in a loan transaction. Nymark, 231 Cal.App.3d at 1093, n. 1, 283 Cal.Rptr. 53(citing

Kruse v. Bank of America, 202 Cal.App.3d 38, 67, 248 Cal.Rptr. 217 (1988)). Absent “special

circumstances” a loan transaction is “at arms-length and there is no fiduciary relationship between the

borrower and lender.” Oaks Management, 145 Cal.App.4th at 466, 51 Cal.Rptr.3d 561 (“the bank is in

no sense a true fiduciary”); see Downey v. Humphreys, 102 Cal.App.2d 323, 332, 227 Cal.Rptr. 484

(1951) (“A debt is not a trust and there is not a fiduciary relation between debtor and creditor as such.”). 

This Court is familiar with Ms. Gzell’s claims which many prior defaulted borrowers have

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pursued unsuccessfully. Neither Ms. Gzell nor the record offers anything to suggest a fair chance of

success on the merits or irreparable harm given Ms. Gzell’s default and inability to tender. This Court

considers Ms. Gzell’s TRO request as a further tactic to attempt to delay foreclosure proceedings. This

Court intends to dismiss this action in short order, especially given the high likelihood of defendants’

upcoming successful motions to dismiss to remove doubt as to probable success of Ms. Gzell’s claims

or irreparable harm to her. 

CONCLUSION

For the reasons discussed above, this Court DENIES Ms. Gzell a TRO or other relief to enjoin

foreclosure proceedings.

IT IS SO ORDERED.

Dated: June 9, 2010 /s/ Lawrence J. O'Neill 

66h44d UNITED STATES DISTRICT JUDGE

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