Case Number: EC062647    Hearing Date: July 18, 2014    Dept: NCB

23. EC062647
GREGORY J. WITHERS et al v. THE ALLIANCE PORTFORLIO
Order to Show Cause Re: Preliminary Injunction

This case arises from the Plaintiffs’ claim that the Defendants are unlawfully foreclosing on their property. No trial has been set. The case management conference is set for November 10, 2014.

The Plaintiffs filed their complaint on June 10, 2014 and appeared on June 23, 2014 with an ex parte application for a temporary restraining order to halt the sale or transfer of their property. The Court granted the application and set the OSC regarding a preliminary injunction for July 18, 2014.

CCP section 527(a) requires a motion for a preliminary injunction to establish with facts in affidavits or in a verified complaint that there are grounds to issue a preliminary injunction. Declarations may be used under CCP section 2015.5 because they are equivalent to an affidavit.
Under CCP section 526(a), a preliminary injunction may be issued in the following cases:

1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually.
2) When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.
3) When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual.
4) When pecuniary compensation would not afford adequate relief.
5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief.
6) Where the restraint is necessary to prevent a multiplicity of judicial proceedings.
7) Where the obligation arises from a trust.

The Plaintiffs have the burden of establishing grounds exist for the injunction with evidence offered under oath. Ancora-Citronelle Corp. v. Green (1974) 41 Cal. App. 3d 146, 148. The granting or denial of a preliminary injunction rests in the sound discretion of the Court and is based upon a consideration of all the particular circumstances of each individual case. Froomer v. Drollinger (1960) 183 Cal. App. 2d 787, 788-789. If granted, the preliminary injunction does nothing more than to preserve the status quo until the merits of plaintiffs’ claim can be adjudicated. Id.

First, the Plaintiffs argue that the Defendants no longer have a security interest in the Plaintiffs’ home. The Plaintiffs argue that there are multiple beneficiaries with fractional interests in the deed of trust. The Plaintiffs offer no legal authority holding that the security interest of a deed of trust becomes unenforceable or vanishes merely because there are multiple beneficiaries.
Further, under Civil Code section 2924(a)(1), the trustee, mortgagee, beneficiary, or any of their authorized agents may record a notice of default. The use of the conjunction “or” indicates that any of the identified persons may record the notice of default and commence the foreclosure proceedings.
Exhibit 20 contains the substitution of trustee recorded on November 18, 2013 that made SBS Trust Deed Network the trustee. Exhibit 21 contains the notice of default recorded on November 18, 2013 by the trustee, SBS Trust Deed Network. Since SBS Trust Deed Network is the trustee, it is authorized to commence the non-judicial foreclosure proceedings by recording the notice of default. This indicates that the foreclosure proceedings were commenced by a party authorized under Civil Code section 2924(a)(1).
As noted above, the Plaintiffs have the burden of establishing grounds exist for the injunction with evidence offered under oath. Ancora-Citronelle Corp. v. Green (1974) 41 Cal. App. 3d 146, 148. The Plaintiffs do not meet this burden because they offer no evidence that the Defendants no longer held a security interest in the property or that the right to sell the property could not be enforced.
Accordingly, this is not grounds to issue the requested preliminary injunction.

Second, the Plaintiffs argue that the Defendants did not comply with Civil Code section 2923.5. Civil Code section 2923.5 prohibits the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent from recording a notice of default pursuant to Section 2924 until 30 days after initial contact is made or 30 days after satisfying the due diligence requirements. Section 2923.5 requires the mortgage servicer to 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.
Section 2923.5 may be enforced by a private right of action that is limited to obtaining a postponement of an impending foreclosure sale to permit the lender to comply with section 2923.5. Mabry v. Superior Court (2010) 185 Cal. App. 4th 208, 213-214. The plaintiff need not tender the full amount of the mortgage indebtedness as a prerequisite to bringing the action. Id.
The Plaintiff, Gregory Withers, states in paragraphs 35 and 36 that the declaration of James Perry attached to the notice of default in exhibit 21 to his declaration is false. The declaration of James Perry is attached to the notice of default recorded on November 18, 2013 and it has a checkmark next to the statement that the mortgage servicer has contacted the borrower to assess their financial situation and explore options to avoid foreclosure. Mr. Perry did not check the box next to the statement that the mortgage servicer had exercised due diligence in attempting to contact the borrower. This indicates that the mortgage servicer claimed that it had been in communication with the borrower.
Mr. Withers states that neither he nor his wife were contacted by any servicer to assess their financial situation and to explore options to avoid foreclosure. These facts indicate that the mortgage servicer had not been in communication with the Plaintiffs, as required under Civil Code section 2923.5.
This indicates that there are grounds to enjoin the foreclosure proceedings under Civil Code section 2923.5 because the Plaintiffs have provided facts to demonstrate that the Defendants did not comply with Civil Code section 2923.5 before recording the notice of default.

In their opposition, the Defendants provide facts in the declaration of James Perry, who is the President and CEO of Alliance Portfolio. Mr. Perry states in paragraph 3 that Alliance communicated with the Plaintiffs through telephone, text, email, direct mail, and certified mail. Mr. Perry does not state that he participated in these contacts with the Plaintiffs or that he has personal knowledge of the Defendants’ contact with the Plaintiffs. Further, Mr. Perry did not attach any documents or records to support his conclusion, e.g., servicing notes regarding the Plaintiffs’ account or copies of the letters sent to the Plaintiffs through direct or certified mail.
Further, the facts in the declaration of Mr. Perry that accompanies the opposition appears to contradict the declaration of Mr. Perry that accompanies the notice of default. As noted above, in the notice of default, Mr. Perry checked the box that indicated that the borrower had been contacted. However, in paragraph 4 of his declaration, Mr. Perry states that Mr. Withers would not respond to Alliance’s inquiries. In the opposition papers, on page 2, at lines 20 to 22, the Defendant argues that the Defendant made an effort to contact the Plaintiff by call, text, email, direct mail, and certified mail, and that the Plaintiff would not respond. This appears to indicate that the Defendant was not in contact with the Plaintiff and that the Defendant did not engage in communications to assess the Plaintiffs’ financial condition and to explore options to avoid foreclosure.
Accordingly, the facts in the notice of the default and in the declaration of James Perry appear to be in conflict regarding the manner in which the Defendant complied with Civil Code section 2923.5, i.e., did the Defendant engage in a communication with the Plaintiffs or did the Defendant exercise due diligence in attempting to contact the Plaintiffs. Further, the facts in Mr. Perry’s declaration are insufficient to demonstrate that the Defendant was in communication with the Plaintiffs to assess their financial situation and to discuss alternatives to foreclosure or that the Defendant exercised due diligence in attempting to contact the Plaintiffs. The Defendants have failed to demonstrate that they complied with Civil Code section 2923.5.

The Defendants also provide evidence that the Plaintiffs filed for a petition for bankruptcy and that the petition was dismissed. These facts are irrelevant to the determination of whether the Defendants engaged in the contacts required under Civil Code section 2923.5

Therefore, the Court grants the Plaintiffs’ application for a preliminary injunction because the Plaintiffs have offered facts to demonstrate that they can establish their claim that the Defendants did not comply with Civil Code section 2923.5. The preliminary injunction will preserve the status quo until the merits of the Plaintiffs’ claim can be adjudicated.

Finally, in order to obtain the preliminary injunction, CCP section 529 requires the Plaintiffs to provide an undertaking to the effect that the Plaintiffs will pay to the Defendant any damages, not exceeding an amount to be specified, the Defendant may sustain by reason of the injunction, if the Court finally decides that the Plaintiffs were not entitled to the injunction. Here, the Defendants’ damages would be the loss of the use of the money they would have obtained from the sale of the property or the rental value they could obtain from renting the property during the pendency of this case.
The notice of trustee’s sale in exhibit 22 to the Plaintiffs’ motion indicates on page 2 that the amount of the unpaid balance is $1,165,850.27. The Defendants’ damages would be the loss of the use of this amount because they would have obtained this amount in the sale of the property. A method for calculating the loss of use of money is the interest rate that the Defendants could charge if they loaned out the money during the pendency of this case.
This case should proceed to trial within one year. If the Court decides that the Plaintiffs were not entitled to the injunction, then the Defendants’ damages would be the loss of the use of $1,165,850.27 for one year. Under CCP section 685.010, Courts use an interest rate at 10% per annum on unsatisfied amounts of monetary judgments. Since the Legislature has identified 10% per annum as reasonable rate of interest, the Court uses this rate.
The interest that would accrue on $1,165,850.27 at 10% interest for one year is $116,585. Since this is the interest that the Defendants would have obtained on the amount due and owing from the Plaintiffs under the Legislature’s 10% per annum rate, the amount of $116,585 is the damages that the Defendants will suffer from the loss of the use of their money, if the Court finds that the Plaintiffs were not entitled to their injunction.
Therefore, the Court orders the Plaintiffs to file an undertaking for $116,585 to obtain the requested preliminary injunction.