Court Opinion

ID: 2807913
Source: CourtListenerOpinion
Date Created: 2015-06-12 19:03:08.615262+00
Date Added: 2024-06-11T11:30:06.365442
License: Public Domain

Filed 6/12/15
                               CERTIFIED FOR PUBLICATION

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                               THIRD APPELLATE DISTRICT

                                            (Sacramento)
                                                ----

MICHAEL MONTEROSSA et al.,                                        C077683

                Petitioners,                               (Super. Ct. No. 34-2014-
                                                           00162063-CU-OR-GDS)
        v.

THE SUPERIOR COURT OF SACRAMENTO
COUNTY,

                Respondent;

PNC BANK, etc., et al.,

                Real Parties in Interest.

        ORIGINAL PROCEEDING in mandate. Steven H. Rodda, Judge. Writ petition
        granted with directions.

        United Law Center, Stephen J. Foondos and Danny A. Barak for Petitioners.

         No appearance for Respondent.

                                                 1
       LeClairRyan, Peter J. VanZandt and Lindsey S. Libed for Real Party in Interest
       PNC Bank, a division of PNC Bank, N.A.

       No appearance for Real Party in Interest Quality Loan Service Corporation.

       In 2012, new legislation imposed specific limitations regarding the nonjudicial
foreclosure of owner-occupied residential real property.1 Among other things, the
statutory scheme provides that a court may award reasonable attorney fees and costs to
the “prevailing borrower,” indicating: “A borrower shall be deemed to have prevailed for
purposes of this subdivision if the borrower obtained injunctive relief or was awarded
damages pursuant to this section.” (Civ. Code, § 2924.12, subd. (i).)2 In this case, the
respondent superior court concluded the petitioners were not prevailing borrowers
because they obtained only a preliminary, rather than permanent, injunction. The court
erred. We hold that a borrower who obtains a preliminary injunction enjoining, pursuant
to section 2924.12, the trustee’s sale of his or her home is a “prevailing borrower” within
the meaning of the statute.

                 FACTUAL AND PROCEDURAL BACKGROUND

       On April 16, 2014, petitioners Michael Monterossa and Cheranne Nobis filed an
ex parte application for a temporary restraining order (TRO) and request for issuance of
an order to show cause regarding a preliminary injunction, seeking to prevent the
trustee’s sale of their Folsom residence, then scheduled for April 21, 2014.

1 Statutes 2012, chapter 86; Statutes 2012, chapter 87. Although the Legislature did not
give the legislation a title, the Governor in his signing statement, and courts and
commentators, have referred to the legislation as the “California Homeowner Bill of
Rights.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 86 & fn.
14; Koo, Saving the California Homeowner Bill of Rights from Federal Banking
Preemption (2013) 48 U.S.F. L.Rev. 189; Jacobs & Stern, Rights in Foreclosure
(Jan. 2013) 35 L.A. Lawyer 24, 25-26 & fn. 32.)
2 Undesignated statutory references are to the Civil Code.

                                             2
Simultaneously, petitioners filed a civil complaint against real parties. On April 17, the
respondent superior court issued an order granting the TRO, enjoining real parties in
interest from conducting the trustee’s sale pending a May 8, 2014 hearing on petitioners’
motion for a preliminary injunction.

       In support of the motion for a TRO and preliminary injunction, petitioners
declared, as relevant: Petitioners obtained a loan of $359,650 from PNC Mortgage, a
division of PNC Bank, N.A. (PNC), and purchased their home in 2005. In June 2013,
petitioners were unable to make their mortgage payments. PNC twice wrote to
petitioners in August, asking them to call PNC for help with foreclosure prevention
alternatives, and telling them that PNC wanted to help them retain their home.
Petitioners repeatedly called PNC to request a “hardship assistance package,” but PNC
failed to send them one. Despite PNC’s failure to send petitioners a hardship assistance
package, PNC notified petitioners that their request for hardship was denied because PNC
did not receive a completed hardship assistance package from petitioners. Thereafter,
PNC recorded a notice of default with Quality Loan Service Corporation. In November
2013, petitioners submitted a loan modification agreement to PNC, and PNC “appointed
a single point of contact” named Hazel, who informed petitioners they needed to submit
missing documents. On December 5, 2013, petitioners submitted the missing documents,
and Hazel confirmed PNC had received a complete package. On January 24, 2014, PNC
recorded a notice of trustee’s sale on the property. Petitioners immediately called PNC,
and were told that their loan modification was denied due to missing documents.

       After a hearing, the respondent superior court issued an order on May 8, 2014,
granting petitioners’ motion for a preliminary injunction enjoining the trustee’s sale of
petitioners’ home, conditioned on petitioners either posting a $20,000 bond or paying real
party PNC $2,135.54 monthly pending trial of the action. The court reasoned that real
parties offered no evidence in opposition to petitioners’ evidence that real parties engaged

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in “dual tracking” by recording a notice of trustee’s sale while simultaneously engaging
in the loan modification process, in violation of section 2923.6. The court concluded:
“[Petitioners] would suffer irreparable harm if they were to lose their residence before the
merits of their claims were adjudicated. Any harm to [real parties] in granting the
injunction is far outweighed by the damage to [petitioners] if the injunction were to be
denied.”

       Thereafter, petitioners filed a motion for attorney fees and costs pursuant to
section 2924.12, subdivision (i). After a hearing, the respondent superior court denied
the motion, reasoning the language of the statute is consistent with the award of attorney
fees at the conclusion of the action; statutory attorney fees are awardable only at the end
of the case; and the statute does not specifically provide for an interim award of attorney
fees upon the granting of provisional relief such as a preliminary injunction.

       Petitioners filed a petition for writ of mandate seeking an order directing the
respondent superior court to grant the motion for attorney fees and costs. We issued an
order to show cause. Real party PNC has filed a return. We shall issue a peremptory writ
of mandate.

                                      DISCUSSION

       Petitioners contend the respondent superior court erred in interpreting subdivision
(i) of section 2924.12 as precluding an award of attorney fees and costs if a borrower
obtains only a preliminary rather than a permanent injunction. We agree.3

3 We expressly decline to determine whether an order denying attorney fees and costs
under section 2924.12 is immediately appealable or is reviewable upon appeal from a
final judgment in the case. “To obtain writ review, a petitioner generally must show his
or her remedy in the ordinary course of law is inadequate or that petitioner would suffer
irreparable injury were the writ not granted. [Citations.] However, discretionary writ
review may nevertheless be appropriate ‘where it is necessary to resolve an issue of first
impression promptly and to set guidelines for bench and bar.’ ” (Interinsurance

                                             4
       “Generally, we review an award of fees and costs by the trial court for abuse of
discretion. ‘However, de novo review of such a trial court order is warranted where the
determination of whether the criteria for an award of attorney fees and costs in this
context have been satisfied amounts to statutory construction and a question of law.’ ”
(Crews v. Willows Unified School Dist. (2013) 217 Cal.App.4th 1368, 1379, citing &
quoting Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142.)

       “ ‘The rules governing statutory construction are well settled. We begin with the
fundamental premise that the objective of statutory interpretation is to ascertain and
effectuate legislative intent. [Citations.] To determine legislative intent, we turn first to
the words of the statute, giving them their usual and ordinary meaning. [Citations.]
When the language of a statute is clear, we need go no further. However, when the
language is susceptible of more than one reasonable interpretation, we look to a variety of
extrinsic aids, including the ostensible objects to be achieved, the evils to be remedied,
the legislative history, public policy, contemporaneous administrative construction, and
the statutory scheme of which the statute is a part. [Citations.]’ (Nolan v. City of
Anaheim (2004) 33 Cal.4th 335, 340.) In addition, ‘every statute should be construed
with reference to the whole system of law of which it is a part, so that all may be
harmonized and have effect. [Citation.] Legislative intent will be determined so far as
possible from the language of the statutes, read as a whole.’ (County of Fresno v. Clovis
Unified School Dist. (1988) 204 Cal.App.3d 417, 426.)” (Doe v. Albany Unified School
Dist. (2010) 190 Cal.App.4th 668, 675-676.)

       “[O]n July 2, 2012, the California Legislature passed Assembly Bill No. 278 and
Senate Bill No. 900 (2011-2012 Reg. Sess.), which have since been signed into law by

Exchange of the Automobile Club v. Superior Court (2007) 148 Cal.App.4th 1218, 1225.)
We exercise our discretion to resolve the important question of first impression raised by
this writ petition, for the benefit of the bench and bar.

                                              5
the Governor. These provisions address more pointedly the foreclosure crisis in our state
through even greater encouragement to lenders and loan servicers to engage in good faith
loan modification efforts. [¶] One of the targets of the legislation is a practice that has
come to be known as ‘dual tracking.’ ‘Dual tracking refers to a common bank tactic.
When a borrower in default seeks a loan modification, the institution often continues to
pursue foreclosure at the same time.’ (Lazo, Banks are foreclosing while homeowners
pursue loan modifications, L.A. Times (Apr. 14, 2011); see Sen. Floor Analyses, Conf.
Rep. on Assem. Bill No. 278, as amended June 27, 2012, p. 3.) The result is that the
borrower does not know where he or she stands, and by the time foreclosure becomes the
lender’s clear choice, it is too late for the borrower to find options to avoid it. ‘Mortgage
lenders call it “dual tracking,” but for homeowners struggling to avoid foreclosure, it
might go by another name: the double-cross.’ (Lazo, Banks are foreclosing.)” (Jolley v.
Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 904, fn. omitted.)4

       The prohibition against dual tracking is found in section 2923.6, subdivision (c),
which provides in pertinent part: “If a borrower submits a complete application for a first
lien loan modification offered by, or through, the borrower’s mortgage servicer, a
mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a

4 Assembly Bill No. 278 (Stats. 2012, ch. 86) and Senate Bill No. 900 (Stats. 2012, ch.
87) (2011-2012 Reg. Sess.) enacted identical provisions. Because Senate Bill No. 900
was chaptered with a higher number, its provisions apply. (See Gov. Code, § 9605 [“In
the absence of any express provision to the contrary in the statute which is enacted last, it
shall be conclusively presumed that the statute which is enacted last is intended to prevail
over statutes which are enacted earlier at the same session and, in the absence of any
express provision to the contrary in the statute which has a higher chapter number, it shall
be presumed that a statute which has a higher chapter number was intended by the
Legislature to prevail over a statute which is enacted at the same session but has a lower
chapter number”]; In re Thierry S. (1977) 19 Cal.3d 727, 745, fn. 17 [“in this state the
highest chapter number rule and related analyses, when applicable, constitute the
exclusive method designated by the Legislature for interpreting legislative intent and
resolving conflicts between statutes enacted at the same session”].)

                                              6
notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien
loan modification application is pending.”

       And the prohibition against dual tracking is given teeth by section 2924.12, which
provides remedies for a violation of section 2923.6 or other specified provisions of the
statutory scheme. The remedies are different, depending on whether a trustee’s deed
upon sale has been recorded. “If a trustee’s deed upon sale has not been recorded, a
borrower may bring an action for injunctive relief to enjoin a material violation of
Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17.” (§ 2924.12,
subd. (a)(1).) “Any injunction shall remain in place and any trustee’s sale shall be
enjoined until the court determines that the mortgage servicer, mortgagee, trustee,
beneficiary, or authorized agent has corrected and remedied the violation or violations
giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an
injunction based on a showing that the material violation has been corrected and
remedied.” (§ 2924.12, subd. (a)(2).)

       “After a trustee’s deed upon sale has been recorded, a mortgage servicer,
mortgagee, trustee, beneficiary, or authorized agent shall be liable to a borrower for
actual economic damages pursuant to Section 3281, resulting from a material violation of
Section 2923.55, 2923.6, 2923.7, 2924.9, 2924.10, 2924.11, or 2924.17 by that mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent where the violation was not
corrected and remedied prior to the recordation of the trustee’s deed upon sale. If the
court finds that the material violation was intentional or reckless, or resulted from willful
misconduct by a mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent,
the court may award the borrower the greater of treble actual damages or statutory
damages of fifty thousand dollars ($50,000).” (§ 2924.12, subd. (b).)

       Here, because a notice of trustee’s deed upon sale had not been recorded,
petitioners sought and obtained a preliminary injunction enjoining the trustee’s sale. As

                                               7
we have indicated, petitioners then sought an award of attorney fees and costs, pursuant
to subdivision (i) of section 2924.12, which provides: “A court may award a prevailing
borrower reasonable attorney’s fees and costs in an action brought pursuant to this
section. A borrower shall be deemed to have prevailed for purposes of this subdivision if
the borrower obtained injunctive relief or was awarded damages pursuant to this
section.”5

       The statute at issue refers to “injunctive relief,” which plainly incorporates both
preliminary and permanent injunctive relief. Nevertheless, the respondent superior court
concluded that the phrase “prevailing borrower . . . in an action” suggests the Legislature
intended for an award of attorney fees and costs solely at the conclusion of the action,
i.e., after a judgment issuing a permanent injunction. However, a preliminary injunction
is obtained “in an action.” And a borrower who obtains a preliminary injunction has
prevailed in obtaining “injunctive relief.” Thus, the plain language of subdivision (i) of
section 2924.12 provides for attorney fees and costs to a borrower who obtains a
preliminary injunction.

       But even if we assume the phrase “prevailing borrower . . . in an action” creates an
ambiguity as to whether the Legislature intended to authorize attorney fees and costs
when a preliminary injunction is issued, nevertheless the language and purpose of the
statutory scheme, and its legislative history, demonstrate the Legislature intended to
authorize an award of attorney fees and costs when a preliminary injunction issues.

       Under this unique statutory scheme, in many cases the best a plaintiff can hope to
achieve is a preliminary injunction. “In deciding whether to issue a preliminary

5 Section 2924.12 applies only to certain entities that foreclosed on more than 175 real
properties during their immediately preceding annual reporting period. (§§ 2924.12,
subd. (j), 2924.18, subd. (b).) Real party PNC does not contend that section 2924.12 does
not apply to it.

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injunction, a trial court weighs two interrelated factors: the likelihood the moving party
ultimately will prevail on the merits, and the relative interim harm to the parties from the
issuance or nonissuance of the injunction.” (Hunt v. Superior Court (1999) 21 Cal.4th
984, 999.) Where the trial court has found the plaintiff is likely to prevail on the claim of
a “material violation” of one of the provisions enumerated in subdivision (a)(1) of
section 2924.12, and accordingly has issued a preliminary injunction, the “mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent” can expeditiously correct
and remedy the violation giving rise to the action for injunctive relief and then move to
dissolve the preliminary injunction pursuant to subdivision (a)(2) of section 2924.12.
This compliance with the statutory scheme would consequently moot the borrower’s
request for a permanent injunction. But, given that the borrower has effectively prevailed
in the action by obtaining a preliminary injunction forcing compliance with the statute,
the Legislature must have intended to authorize an award of attorney fees and costs when
a trial court issues a preliminary injunction pursuant to subdivision (i) of section 2924.12.

       As an example, in this case the respondent court found petitioners’ showing to be
undisputed that real parties “dual tracked” petitioners in violation of section 2923.6 by
recording a notice of trustee’s sale while petitioners’ first lien loan modification
application was pending. Rather than wait for trial on petitioners’ claim for a permanent
injunction, real parties could simply comply with the statutory scheme and then, if
necessary, move to dissolve the preliminary injunction in order to record a new notice of
trustee’s sale. That is, real parties could provide petitioners with a written determination
regarding the loan modification application (§ 2923.6, subd. (c)), and if a loan
modification is granted, wait 14 days for petitioners to decide whether to accept it
(§ 2923.6, subd. (c)(2)). If loan modification is denied, real parties would wait 31 days to
determine if petitioners appealed, and if they did, wait another 15 days if the appeal was
denied. (§ 2923.6, subds. (d) & (e).) The short time periods set out in the statutory

                                              9
scheme suggest the Legislature’s understanding that a prevailing borrower’s preliminary
injunctive victory may often be short-lived and subject to dissolution upon compliance
with the statutory scheme’s procedural requirements.6

       Our interpretation of the statute as authorizing attorney fees and costs when a
borrower obtains a preliminary injunction is further supported by the purpose of the
statutory scheme, set out in section 2923.4, subdivision (a): “The purpose of the act that
added this section is to ensure that, as part of the nonjudicial foreclosure process,
borrowers are considered for, and have a meaningful opportunity to obtain, available loss
mitigation options, if any, offered by or through the borrower’s mortgage servicer, such
as loan modifications or other alternatives to foreclosure. Nothing in the act that added
this section, however, shall be interpreted to require a particular result of that process.”
In enacting the statutory scheme, the Legislature mandated a process for fair
consideration of options other than foreclosure. As we have explained, when a lender
fails to comply with that process, the borrower prevails by obtaining a preliminary
injunction requiring the lender to comply with the process. After correcting the error, the
lender may move to dissolve the preliminary injunction, and in such cases, there will be
no need for a trial regarding a permanent injunction. The Legislature’s purpose is
fulfilled by providing attorney fees and costs to a borrower who successfully forces the
lender to comply with the statutory process by obtaining a preliminary injunction.

       Finally, the legislative history demonstrates unequivocally that the Legislature
intended to authorize an award of attorney fees and costs when a trial court grants a
preliminary injunction as a result of a lender’s violation of sections 2923.55, 2923.6,

6 The same short time limits would apply to correct most of the other statutory violations
set out in section 2924.12, i.e., sections 2923.7 (single point of contact), 2924.9
(notification of foreclosure prevention alternatives), 2924.10 (notice regarding loan
modification process), and 2924.17 (requirements for declarations in support of trustee’s
sale documents).

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2923.7, 2924.9, 2924.10, 2924.11, or 2924.17. As explained in the July 2, 2012 Senate
Rules Committee’s “Conference Report No. 1” regarding Senate Bill No. 900, as
amended June 27, 2012, page 29: “Importantly, no action for money damages would be
allowed until the date the trustee’s deed is recorded after a foreclosure sale. At all times
until then, the only legal remedy a homeowner may seek is an action to enjoin a
substantial violation of the specified sections, along with any trustee’s sale. When a court
considers a request for injunctive relief it must determine whether there is convincing
evidence of harm if the injunction is not granted. The court will also consider if the
borrower has a likelihood of prevailing on the merits. As part of that consideration, no
legal action would be permissible if brought in bad faith or intended merely for the
purpose of unnecessary delay, and no injunctive relief could be awarded unless the
homeowner could show a likelihood of prevailing on the merits in relation to the balance
of harms. Any such injunction is to be dissolved if the moving party shows that the
violation has been redressed. No special pre-litigation procedures or particular
allegations are required by the amendments, whether or not the sale is pending.
Conversely, the servicer or other covered entity may avoid legal action by curing the
violation any time prior to recordation of a trustee’s deed. This right to cure is not
unprecedented in comparable circumstances where the parties are known to each other
and have an established relationship of ongoing communication. Equivalent provisions
may be found in Civil Code Section 910 et seq. and Labor Code Section 2698 et seq. If it
is necessary to order injunctive relief, a party who obtains an injunction is among those
who is recognized as a prevailing party for the purposes of attorney’s fees and costs. As
with the vindication of other important statutory rights, an award of attorney’s fees and
costs is to be decided by the court. (See, e.g., Code of Civil Procedure Section 1021.5;
Government Code Section 12965; Civil Code Section 52.1.)” (Italics added.) Thus, the
Legislature understood that the intent of the statutory scheme was to permit a trial court

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to award attorney fees and costs to a borrower who prevails in obtaining a preliminary
injunction.

       We reject the position of the superior court and real party PNC that “interim”
attorney fee awards may never be made in conjunction with provisional relief such as the
issuance of a preliminary injunction. Indeed, the conference report to Senate Bill
No. 900, quoted above, expressly refers to one statute as to which attorney fees have been
awarded to a plaintiff who obtained a preliminary injunction, i.e., Code of Civil
Procedure section 1021.5. (See, e.g., Bouvia v. County of Los Angeles (1987)
195 Cal.App.3d 1075, 1080, 1086.) The respondent superior court and real party
mistakenly rely on a practice guide, which notes only the general rule that attorney fees
are ordinarily awarded at the end of the case rather than when interim relief is granted.
(Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2014)
¶ 17:152.5, pp. 17-115 to 17-116.) Indeed, the case cited by the practice guide simply
recognizes that attorney fees may be awarded only when specifically provided for by
statute, and asserts that interim attorney fee awards in California have been limited to
cases under Code of Civil Procedure section 1021.5. (Bell v. Farmers Ins. Exchange
(2001) 87 Cal.App.4th 805, 830-832.) But, here, the Legislature has specifically
provided that trial courts may award attorney fees upon issuance of “injunctive relief,”
which includes the issuance of a preliminary injunction.

       We reject also real party PNC’s contention that it is improper to award attorney
fees because a preliminary injunction may issue solely to preserve the status quo.
Although the case authority relied on by real party PNC recognizes that the purpose of a
preliminary injunction is to maintain the status quo, the cases also state the rule that a
trial court must consider both the plaintiff’s likelihood of prevailing on the merits and the
balance of harms to the parties; and, further, that the trial court must deny a preliminary
injunction if the plaintiff has no reasonable probability of prevailing on the merits.

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(Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528; SB Liberty, LLC v. Isla
Verde Assn., Inc. (2013) 217 Cal.App.4th 272, 280; see, e.g., Weingand v. Atlantic Sav. &
Loan Assn. (1970) 1 Cal.3d 806, 820; Pro-Family Advocates v. Gomez (1996)
46 Cal.App.4th 1674, 1681.) In order to issue a preliminary injunction, the respondent
superior court was required to, and did in fact, determine that petitioners were likely to
prevail on the merits. An award of attorney fees at the preliminary injunction stage
furthers the legislative purpose of ensuring borrowers have a meaningful opportunity to
participate in available loss mitigation options.

       We reject real party PNC’s contention that an absurd consequence may result if
attorney fees are awarded to a borrower at the preliminary injunction stage only to have
the lender correct the violation or to have the borrower lose in a subsequent effort to
obtain a permanent injunction. There is nothing absurd about such an outcome. A
borrower who obtains a preliminary injunction that prevents the foreclosure of his or her
home because of the lender’s violation of section 2923.55, 2923.6, 2923.7, 2924.9,
2924.10, 2924.11, or 2924.17, may recover attorney fees expended to obtain the
preliminary injunction. The borrower has prevailed in the action by obtaining injunctive
relief. The lender’s correction of the violation and successful motion to dissolve the
preliminary injunction will not entitle the lender to recover the attorney fees. If the
lender fails to correct the violation and to move to dissolve the preliminary injunction, as
a practical matter, the borrower may have little incentive to set the matter for trial of a
permanent injunction. But, in the scenario where the borrower has obtained a
preliminary injunction and then pursues but fails to obtain a permanent injunction, the
borrower will still have been entitled to seek the attorney fees he or she incurred in order
to obtain the preliminary injunction.

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                                      DISPOSITION

       Let a peremptory writ of mandate issue directing the respondent superior court to
vacate its September 3, 2014 order denying petitioners’ motion for attorney fees and
costs, and to consider that motion on its merits. Petitioners are awarded their costs of this
proceeding. (Cal. Rules of Court, rule 8.493(a).) (CERTIFIED FOR PUBLICATION)

                                                           BUTZ               , Acting P.J.

We concur:

      MURRAY                , J.

      DUARTE                , J.

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