Veniamin Rozhko vs New Penn Financial et al
Case No: 18CV01047
Hearing Date: Wed Mar 28, 2018 9:30

Nature of Proceedings: Preliminary Injunction

Tentative Ruling: The court grants the application of plaintiffs Vera Rozhko and Veniamin Rozhko for a preliminary injunction and orders that defendants New Penn Financial, d/b/a Shellpoint Mortgage Servicing; the Bank of New York Mellon, fka the Bank of New York, as Trustee for the Certficateholders of the CWMBS, Inc. CHL Mortgage Pass-Through Trust 2005-07, Mortgage Pass Through Certificates, Series 2005-07; and Peak Foreclosure Services, Inc., and their agents, servants, employees, and representatives, and all persons acting in concert with them, are hereby be enjoined and restrained, during the pendency of this action, from engaging in, committing, or performing, directly or indirectly, any and all of the following acts: proceeding with a foreclosure, sale, or in any way transferring, further encumbering, or affecting the real property identified as 3721 Brent Street, Santa Barbara, CA 93105. Plaintiffs Vera Rozhko and Veniamin Rozhko shall provide an undertaking in the sum of $49,600 on or before April 10, 2018, or the temporary restraining order entered on March 5, 2018, and the preliminary injunction ordered herein shall be dissolved.

Background: On March 1, 2018, plaintiffs Veniamin and Vera Rozhko filed their complaint against defendants New Penn Financial, d/b/a Shellpoint Mortgage Servicing (“Shellpoint”); the Bank of New York Mellon, fka the Bank of New York, as Trustee for the Certficateholders of the CWMBS, Inc. CHL Mortgage Pass-Through Trust 2005-07, Mortgage Pass Through Certificates, Series 2005-07 (“BONYM”); and Peak Foreclosure Services, Inc. (“Peak”). Plaintiffs allege:

Plaintiff Vera Rozhko is a signatory to a deed of trust, dated January 6, 2005, and recorded on January 12, 2005 (“DOT”), pursuant to which the single family residential real property at 3721 Brent Street in Santa Barbara (the “Subject Property”) was pledged as security for a $884,000 purchase money loan. [Complaint ¶13] The DOT is a first lien deed of trust secured by owner occupied residential real property containing no more than four dwelling units within the meaning of Civil Code §2924.15. [¶17]

BONYM is the successor beneficiary under the DOT. [¶18] Shellpoint is the mortgage servicer for BONYM. [¶19] Peak is the successor trustee under the DOT. [¶20]

On September 25, 2017, Shellpoint caused Peak to issue and record a Notice of Default (“NOD”). [¶21] On February 7, 2018, Shellpoint, BONYM, and Peak caused a Notice of Trustee’s Sale (“NOTS”) to be issued and recorded, indicating a trustee’s sale date of March 7, 2018 for the Subject Property. [¶22]

On February 28, 2018, Vera Rozhko submitted to Shellpoint a completed loan modification application for a foreclosure prevention alternative. [¶23, Exh. D]

In violation of Civil Code § 2924.11(a), defendants have wrongfully engaged in dual tracking by unlawfully continuing with the foreclosure sale, in failing and/or refusing to record a notice of rescission of the notice of default, and have continued the foreclosure process by not only recording the notice of trustee sale but in refusing to cancel or suspend the trustee sale and continue to list and advertise the Subject Property for a trustee sale on March 7, 2018. [¶¶24, 25]

Without first contacting Plaintiff Vera Rozhko to discuss her financial situation and explore options to avoid foreclosure, Shellpoint caused Peak to record a notice of default in violation of Civil Code § 2923.5. [¶¶30-33] Plaintiff is entitled to injunctive relief, pursuant to Civil Code §2924.12, prohibiting Shellpoint and Peak from conducting a trustee’s sale until Shellpoint complies with Civil Code §2923.5. [¶38]

The causes of action in the complaint are: 1) violation of Civil Code § 2924.11; 2) violation of Civil Code § 2923.5; 3) negligent servicing; and 4) violation of Unfair Competition Law.

Application for Injunction, TRO/OSC, and Service: Plaintiffs filed their application for a temporary restraining order enjoining any foreclosure sale (“TRO”) and an order to show cause regarding a preliminary injunction (“OSC”). On March 5, the court issued its TRO and OSC. The order directed plaintiffs to serve the complaint, declarations, and application, TRO, and OSC on defendants by personal service no later than March 9. The TRO/OSC provided that any opposition must be filed no later than March 16.

On March 8, plaintiffs filed proofs of personal service demonstrating service of the summons and complaint on Shellpoint and BONYM on March 2; and on Peak on March 5. On March 16, plaintiffs filed proofs of service of the application, TRO, and OSC on Shellpoint and BONYM on March 7, and on Peak on March 8.

Defendants have not filed an opposition.

Preliminary Injunction: The court may grant a preliminary injunction when it appears by the complaint that the plaintiff is entitled to the relief demanded or the commission or continuance of some act during the litigation would produce great or irreparable injury to a party to the action. CCP § 526(a). “In deciding whether to issue a preliminary injunction, a court must weigh two ‘interrelated’” factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction. … The trial court’s determination must be guided by a ‘mix’ of the potential-merit and interim-harm factors; the greater the plaintiff’s showing on one, the less must be shown on the other to support an injunction.” Butt v. State of California, 4 Cal.4th 668, 677-78 (1992).

To grant an injunction, the court need not find the party seeking the preliminary injunction will necessarily prevail on the merits, but only that there is a reasonable probability that the plaintiff will prevail on the merits. Baypoint Mortgage Corp. v. Crest Premium Real Estate etc. Trust, 168 Cal.App.3d 818, 824 (1985). The plaintiff bears the burden of presenting facts establishing the requisite likelihood of success on the merits “‘by someone having knowledge thereof, made under oath or by declaration under penalty of perjury.’” Fleishman v. Superior Court, 102 Cal.App.4th 350, 356 (2002) [citation omitted].

“[I]f the party seeking the injunction can make a sufficiently strong showing of likelihood of success on the merits, the trial court has discretion to issue the injunction notwithstanding that party’s inability to show that the balance of harms tips in his favor.” White v. Davis, 30 Cal.4th 528, 561 (2003).

1. Plaintiffs’ Case and Relative Harms: Civil Code § 2924.12(a)(1) provides: “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 2923.5, 2923.7, 2924.11, or 2924.17.” Plaintiffs allege violations of Civil Code §§ 2923.5 and 2924.11. The court issued the TRO before March 7, 2018—the scheduled date for the trustee’s sale.

Civil Code § 2923.5(a)(1) provides that a mortgage servicer, trustee, or beneficiary may not record a notice of default until 30 days after the initial contact pursuant to subdivision (a)(2) or after satisfying due diligence. (The declaration attached to the NOD in this case states there was contact.) Civil Code § 2923.5(a)(2) provides: “A mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.”

Plaintiff Vera Rozhko states in her declaration that Shellpoint did not contact her prior to recording the NOD to discuss her financial situation and explore options to avoid foreclosure. [Rozhko Dec. ¶12]

Civil Code § 2924.11(a) provides: “If a borrower submits a complete application for a foreclosure prevention alternative offered by, or through, the borrower’s mortgage servicer, a mortgage servicer, trustee, mortgagee, beneficiary, or authorized agent shall not record a notice of sale or conduct a trustee’s sale while the complete foreclosure prevention alternative application is pending, and until the borrower has been provided with a written determination by the mortgage servicer regarding that borrower’s eligibility for the requested foreclosure prevention alternative.”

In her declaration, Vera Rozhko states that, on February 28, 2018, she submitted a completed loan modification application as a foreclosure prevention alternative to Shellpoint and that application is still pending. [Rozhko Dec. ¶11] She does not attach a copy of the application to her declaration but a copy is attached to the complaint as Exhibit D. The NOTS was recorded prior to February 28, 2018. However, the sale had not taken place before she submitted the application.

Plaintiffs have sustained their burden of presenting facts establishing the requisite likelihood of success on the merits. Defendants have presented no evidence.

There is no evidence regarding the relative interim harm to plaintiffs and defendants. The court takes notice that the sale of plaintiffs’ property without affording them the opportunity to pursue statutorily mandated foreclosure options would create a substantial hardship on plaintiffs. Any delay in the foreclosure process while defendants comply with the statutes would not cause defendants significant harm.

2. Undertaking: “On granting an injunction, the court or judge must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined any damages, not exceeding an amount to be specified, the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.” CCP § 529(a). “A bond is an indispensable prerequisite to the issuance of a preliminary injunction and the duty to order a bond is mandatory, not discretionary.” Mangini v. J.G. Durand Int’l, 31 Cal.App.4th 214, 217 (1994) [internal quotation and citation omitted]. Undertakings are required when preliminary injunctions are ordered under Civil Code § 2924.12. E.g., Monterossa v. Superior Court of Sacramento Cty., 237 Cal.App.4th 747, 750 (2015).

“The sole limit imposed by the [injunction undertaking] statute is that the harm must have been proximately caused by the wrongfully issued injunction.” ABBA Rubber Co. v. Seaquist, 235 Cal.App.3d 1, 14 (1991). The statute “requires that the potential damages be estimated on the assumption that the preliminary injunction was wrongfully issued.” Id. at 15. Recoverable damages include the profits lost by reason of the injunction and reasonable counsel fees and expenses incurred in successfully procuring a final decision dissolving the injunction. Id.

“The amount of bond is fixed by the judge, exercising sound discretion, based on the probable damage the enjoined party may sustain because of the injunction. Hummell v. Republic Fed. Sav. & Loan Assn., 133 Cal.App.3d 49, 51 (1982).

Plaintiffs only briefly address the bond requirement, stating that “to require a bond in any substantial amount is effectively to deny Plaintiffs the requested relief. Defendants are already protected by the lien security interest in Plaintiffs’ home, so additional security in the form of a bond should be unnecessary.” Plaintiffs provide no evidence of the equity in the Subject Property.

In the application, plaintiffs suggest that a bond would effectively deny relief. Presumably, counsel is suggesting plaintiffs cannot afford a bond. A bond can be waived for indigent litigants under certain circumstances. CCP § 995.240. But the court has no evidence on which to make that determination.

As of September 27, 2017, amount of the debt was $992,526.21. The harm caused by a wrongfully issued injunction would be the cost of delay in collecting this amount through foreclosure. Assuming litigation for a year and interest at the rate of 5% per annum, the court will require an undertaking in the amount of $49,600.

3. Order: The court grants the application of plaintiffs Vera Rozhko and Veniamin Rozhko for a preliminary injunction and orders that defendants New Penn Financial, d/b/a Shellpoint Mortgage Servicing; the Bank of New York Mellon, fka the Bank of New York, as Trustee for the Certficateholders of the CWMBS, Inc. CHL Mortgage Pass-Through Trust 2005-07, Mortgage Pass Through Certificates, Series 2005-07; and Peak Foreclosure Services, Inc., and their agents, servants, employees, and representatives, and all persons acting in concert with them, are hereby be enjoined and restrained, during the pendency of this action, from engaging in, committing, or performing, directly or indirectly, any and all of the following acts: proceeding with a foreclosure, sale, or in any way transferring, further encumbering, or affecting the real property identified as 3721 Brent Street, Santa Barbara, CA 93105. Plaintiffs Vera Rozhko and Veniamin Rozhko shall provide an undertaking in the sum of $49,600 on or before April 10, 2018, or the temporary restraining order entered on March 5, 2018, and the preliminary injunction ordered herein shall be dissolved.