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26 ORDER - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT TACOMA

DEANNE M. KROULIK, an unmarried person,

Plaintiff,

v.

UNITED STATES OF AMERICA acting

through the State Director, USDA Rural

Development, Rural Housing Service for the

State of Washington; and T.D. ESCROW

SERVICES, INC., d.b.a. T.D. SERVICE

COMPANY, a Washington corporation,

Defendants.

Case No. C06-5388FDB

ORDER DENYING PLAINTIFF’S

MOTION FOR ORDER

RESTRAINING SALE

INTRODUCTION

This cause of action arises out of Plaintiff Kroulik’s obtaining in 2003 a loan of about

$80,000 from the Single Family Housing Program of the U.S. Department of Agriculture’s Rural

Housing Service (RHS). Kroulik claims that she has overpaid on her loan and that RHS has failed to

properly credit her payments. The United States contends that Kroulik is in arrears over $10,000.

Kroulik moves for an order restraining the sale of certain property (described in her motion),

commonly known as 127 First Street, Port Hadlock, Jefferson County, Washington. She originally

filed her case in Jefferson County Superior Court, and the United States removed the matter to this

Case 3:06-cv-05388-FDB Document 19 Filed 08/01/06 Page 1 of 7
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26 ORDER - 2

court. In support of her motion, Kroulik submits her “Certified Statement.” Plaintiff contends that

her monthly payments were $453.41 and that it was to be subsidized for twenty-four months, thus,

lowering her monthly payment to $301.24. For the eleven-month period of April 10, 2004 through

February 10, 2005, Kroulik contends that Exhibit # 4 shows that she paid $7,566.93 during that

eleven-month period, resulting in an overpayment of $4,253.29. Kroulik admits that she has been

unable to make payments since February 17, 2005, but that applying the overpayment to that period,

she is in arrearage only $566.55, which sum she states that she has deposited into the Court Registry

in this cause number. Thus, she contends that the house should not be sold at the Trustee’s Sale. 

The United States responds to Kroulik’s motion contending that she is in arrears over

$10,000, that she has made sporadic and often insufficient payments on her loan, that she has made

no payments at all since April 2005, that she failed to file an adequate application for a payment

moratorium from the Agency, despite multiple attempts of the RHS to help her to do so. Moreover,

the United States argues that Kroulik has never properly served the USDA and/or RHS or the

Department of Justice with notice of this action. Finally, the United States argues that there is no

reasonable likelihood that Kroulik will prevail on the merits of this cause of action. 

The Court reviewed the briefs initially filed by the parties as well as the briefs subsequently

filed pursuant to this Court’s Order Requiring Additional Briefing. 

INJUNCTIVE RELIEF STANDARD

To obtain a preliminary injunction, the moving party must show either (1) a

combination of probable success on the merits and the possibility of irreparable injury

or (2) that serious questions are raised and the balance of hardships tips in its favor. 

Benda v. Grand Lodge of the Int’l Ass’n of Machinists & Aerospace Workers, 584

F.2d 308, 314-15 (9th Cir. 1978), cert. dismissed, 441 U.S. 937, 99 S.Ct. 2065, 60

L.Ed.2d 667 (1979). These two formulations represent two points on a sliding scale

in which the required degree of irreparable harm increases as the probability of

success decreases. Oakland Tribune, Inc. v. Chronicle Publishing Co., 762 F.2d

1374, 1376 (9th Cir. 1985).

U.S. v. Odessa Union Warehouse Co-op, 833 F.2d 172, 174 (9th Cir. 1987). See also, Earth Island

Inst. v. U.S. Forest Service, 351 F.3d 1291, 1297-98 (9th Cir. 2003). 

Case 3:06-cv-05388-FDB Document 19 Filed 08/01/06 Page 2 of 7
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26 ORDER - 3

DISCUSSION

A. Service of Process

It does not appear that Kroulik has properly served the United States and the Agency

pursuant to Fed. R. Civ. P. 4(i)(2)(A), which requires a summons and complaint against an agency of

the United States to be sent via registered or certified mail to the agency, as well as to the United

States Attorney and the Attorney General of the United States under Fed. R. Civ. P. 4(i)(1). It also 

appears, however, that there is still time to effect service. 

B. Temporary Restraining Order

Defendants are seeking a non-judicial foreclosure of Kroulik’s property under the

Washington Deed of Trust Act, RCW 61.24. There is no dispute that the Defendants have the

authority to proceed with foreclosure under this statute absent a court order. 

1. Likelihood of success on merits

The Defendants argue that Kroulik cannot show a likelihood of success on the merits or even

that there are “serious questions going to the merits” because she cannot demonstrate that she is not

in arrears. Rebecca Cronquist, Single-Family Housing Technician with the Rural Housing Service,

United States Department of Agriculture submits her declaration, which sets forth the particulars

regarding Kroulik’s loan, including the amount of her monthly payment. Kroulik’s payment history,

and Kroulik’s attempts to obtain a payment moratorium. Kroulik’s payment under the note is

$453.41 per month plus escrow for real property taxes and property insurance of approximately

$152.17 per month, subject to a reduction under a payment assistance agreement of $152.17 per

month, leaving her with a monthly payment of $453.41. (Cronquist Decl., ¶ 5.) Plaintiff Kroulik has

a history of making payments by check with insufficient funds in her bank account. ( Id. ¶ 7.) 

Kroulik requested a payment moratorium pursuant to the appropriate regulations prior to October

19, 2004, she was mailed a moratorium application on November 3, 2004, RHS received an

incomplete moratorium application from Borrower on December 2, 2004, between December 22,

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26 ORDER - 4

2004 and February 2, 2005 RHS made numerous attempts to have Kroulik complete her moratorium

application, which was finally rejected as incomplete on February 3, 2005. Meanwhile, during the

application process, Kroulik’s loan was placed on moratorium, in accordance with the applicable

regulations. (Cronquist Decl. ¶¶10 – 17.) 

Gene Elkin, Legal Liaison and Compliance Specialist of the Centralized Servicing Center for

Rural Housing Service (RHS) has control and access to all RHS records for borrowers in the State

of Washington, including the records of Deanne M. Kroulik, identified by Loan No. 82079252. 

Mr. Elkin states in his Declaration that on July 18, 2006 he conducted a comprehensive

review of the system notes, correspondence, documents, and payment records, which together

comprise the history of the Kroulik loan on the USDA Rural Housing Service Loan Servicing and

Accounting system. Mr. Elkin reviewed the document on which Kroulik relies and states that

although it is titled “Payment History,” it is more accurately a transaction activity report for the 12-

month history (Elkin Decl. ¶ 5.). It is inaccurate as a payment history because it contains credit

transactions that were not payments, such as loan closing costs and refunds of excess loan funds that

are credit transactions rather than payments, and it fails to account for payment transactions that

were reversed because the payment instrument was returned for reason of insufficient funds. ( Id. ¶

7.) Mr. Elkin then summarizes payments actually paid, a credit that Kroulik received, and $568.00

of undetermined origin that was posted as a payment. ( Id. ¶¶ 10 & 11.) Mr. Elkin attaches a copy

of the payment history that he directed to be prepared, and this is attached as Attachment # 3 to his

Declaration as a true and accurate statement of all payments credited to Kroulik’s loan for the period

April 1, 2004 through July 21, 2006 and identifies the amount of arrearage as $10,849.41. ( Id. ¶¶

12 and 13.) 

To be entitled to injunctive relief, Kroulik must overcome this showing made by Defendants.

Kroulik relies, among other things, on a document titled “Payment History” that she received from a

teller working for the USDA Rural Housing Service Loan Servicing and Accounting System. 

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26 ORDER - 5

(Exhibit 4 to “Certified Statement of Deanne M. Kroulik.”) Kroulik also draws the Court’s attention

to exhibits attached to the Cronquist Declaration in support of the Defendants’ Opposition. Therein,

at Paragraph 5, there is a statement that “Subject to the provisions of this agreement, the borrower

will pay 301.24 dollars per month for 24 months beginning 04/10/04.” Earlier in the document

(Cronquist Decl. Exhibit C, p. 2.) setting forth the monthly payment plan, there is an indication that

the monthly installment at note rate is $453.41, the monthly payment is $301.24, and monthly

payment assistance is $152.17. 

Additional briefing has been filed by the parties, and the Court has reviewed these briefs and

accompanying documents. The Second Declaration of Gene Elkin, submitted with the Defendants’

Additional Briefing Regarding Plaintiff’s Payments clarifies how the monthly payment is calculated

and how the amounts to be paid each year for taxes and insurance are subject to change (Elkin

Second Decl. ¶ 10) and how a change in the payment assistance may also affect the monthly

payment. ( Id. ¶ 25) Paragraphs 18 and 19 are of particular note, following the explanation of the

determination of the Equivalent Interest Rate (EIR) that is used to determine the payment amount of

a borrower (such as Plaintiff Kroulik) eligible for subsidy or payment assistance. Thus, the difference

between the monthly payment of $453.41 under the full note rate of 6% and the monthly payment of

$301.24 at the EIR of 3% is $152..17, and this amount is the payment assistance Kroulik was

entitled to receive when the loan was originated. Kroulik’s monthly payment obligation was $301.24

principal and interest at the subsidy adjusted Equivalent Interest Rate of 3% plus the amount

required to be escrowed for taxes and insurance in the amount of $153.50 for a total monthly

payment of $454.74. A borrower’s payment amount may change from time to time owing to a

change in the escrow payment for taxes and insurance. Monthly billing statements informing the

borrower of the amount due as well as any delinquent payment amounts that have been billed are

sent to the borrower fifteen days before their payment is due. ( Id. ¶ 26) 

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26 ORDER - 6

In a letter dated October 20, 2004, in response to an inquiry made by Kroulik (Elkin Second

Decl., Ex. A.), she was informed of the Principal and Interest payment amount of $453.41 less the

subsidy payment of $152.17, leaving $301.24. Kroulik was further informed that her account was

set up on escrow to pay her Real Estate Taxes and Homeowner Insurance Premium and that the

amount of her April 10, 2004 escrow payment was $153.50 making her payment amount due

$454.74 (301.24 + $153.50 = $454.74). Kroulik was also informed that beginning with May the 10,

2004 payment, the monthly payment was $451.68 (301.24 + 150.44 = $451.68.) Kroulik was also

informed in this October 20, 2004 letter of her payment history, including the amount received in

payments on the account, that certain checks received were reversed for non-sufficient funds and an

NSF fees were applied to the account. ( Id. ) The letter also explained the late charges imposed. (Id.

)

It therefore appears that the Defendants’ arguments are well taken and that Plaintiff cannot

demonstrate a likelihood of success on the merits of this cause of action. Consequently, Plaintiff is

not entitled to injunctive relief. 

2. Irreparable Harm

There is no showing that the foreclosure will cause irreparable harm; there is only a statement

of this conclusion in Plaintiff’s proposed order. Plaintiff Kroulik devotes her argument to the alleged

miscalculation of her monthly payment. Because Plaintiff has failed to make a substantial showing on

the merits of her claim, she is obligated to make a stronger showing of irreparable harm in order to

be granted injunctive relief. Plaintiff has failed to make any showing of irreparable harm. There is

no reason to grant the extraordinary relief of an injunction against the foreclosure on the showing

made by Kroulik. 

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26 ORDER - 7

CONCLUSION

Given that there is no dispute that Defendants have the authority to proceed with foreclosure

pursuant to the Washington Deed of Trust Act, RCW 61.24; that Kroulik’s payment history on her

Loan No. 82079252 in the amount of $80,827.16, reflects that for the period of April 1, 2004

through July 21, 2006 the total amount of arrearage is $10,849.41; that Plaintiff Kroulik has made no

showing of irreparable harm and that she has not demonstrated a likelihood of success on the merits,

Plaintiff Kroulik is not entitled to injunctive relief preventing the Trustee’s sale of the property in

dispute. 

NOW, THEREFORE, IT IS ORDERED: Plaintiff’s Motion for An Order Restraining

Trustee’s Sale [Dkt. # 7] is DENIED. 

DATED this 1st day of August, 2006.

AFRANKLIN D. BURGESS

UNITED STATES DISTRICT JUDGE

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