Case Number: EC063152 Hearing Date: February 13, 2015 Dept: NCD
PRELIMINARY INJUNCTION
[CCP §526]

TENTATIVE RULING (2/13/15)
#8
EC 063152
KESHISHIAN v. PNC MORTGAGE

OSC Re Preliminary Injunction
TENTATIVE:
Application for preliminary injunction is GRANTED. Plaintiffs have established a probability of prevailing on their claim that defendants have violated Civil Code section 2923.6, and the remedy provided for such violation is to enjoin the conduct of the trustee’s sale until compliance can be established. Civil Code 2924.12. Preliminary injunction to issue upon the posting of a bond in the sum of $20,000.

BACKGROUND:
Moving Party: Plaintiffs Robin Keshishian and Manoush Keshishian
Responding Party: Defendant PNC Bank, N.A. dba PNC Mortgage

RELIEF REQUESTED:
Preliminary injunction in connection with the trustee’s sale of plaintiffs’ home

SUMMARY OF FACTS:
Plaintiffs Robin Keshishian and Manoush Keshishian, and Julianne Morris allege that defendants PNC Mortgage and Clear Recon Corp. recorded a Notice of Default and Notice of Trustee’s Sale with respect to their residence in Glendale without first complying with Civil Code section 2923.5 and 2923.6 concerning plaintiffs’ loan modification, and failed to review plaintiffs’ application appropriately given a recent material change in their financial circumstances. It is also alleged that the declaration upon which the Notice of Default is based is inaccurate and insufficient, and in violation of Civil Code § 2924.17, as the declaration states that due diligence was made to contact the borrower, when defendants were in actual contact with the borrowers. Plaintiffs also allege that defendants have charged marked up and unnecessary fees in connection with default related services. The complaint alleges causes of action for Violation of California Civil Code §§2923.55, 2923.6, 2924.17, Negligence, Violation of California Business & Professions Code § 17200, and Accounting.

On November 26, 2014, plaintiffs brought an ex parte application for a temporary restraining order/90 day stay and order to show case re preliminary injunction to enjoin a Trustee’s Sale scheduled for December 1, 2014. The application was granted, a TRO issued and on OSC re preliminary injunction set for January 2, 2015.

The summons, complaint and moving papers were personally served on defendants on November 26, 2014.

Prior to the January 2, 2015 hearing, defendant PNC Bank requested a continuance of the matter to permit it to fully respond to the application, which the court granted, setting the hearing for this date and extending the November 26, 2014 TRO.

ANALYSIS:
Under CCP § 526, an injunction may be granted in cases (a)(1) in which “it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief …consists in restraining… the act complained of;” (2) “when it appears by the complaint or affidavits that the commission… of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action;” or (4) “when pecuniary compensation would not afford adequate relief. ”

An application for a preliminary injunction is considered a motion procedure, and must be supported by affidavits or declarations which provide evidentiary facts under CCP § 2009. See Weil & Brown 9:574 et seq. The burden is on the party seeking the preliminary injunction. Weil & Brown at 9:632.1.

Granting or denying a preliminary injunction is within the sound discretion of the trial court and will be upheld on appeal absent an abuse of discretion. Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 458. Such a remedy is intended to preserve the status quo until a full trial on a permanent injunction may be conducted. Id.

The moving papers include a declaration from plaintiff Roben Keshishian that the subject property is his “home,” and that both he and his wife live in the home. [Roben Keshishian Decl., para. 1]. This gives rise to an inference that the loss of the property would be irreparable, as real property is considered to be unique. Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454.

This leaves the question of whether plaintiffs are entitled to the relief demanded here.

In Butt v. State of California, (1992) 4 Cal.4th 668, 677, the California Supreme Court set the following criteria in connection with preliminary injunction applications under subdivision (a) (1):
“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.”

Plaintiff brings this action pursuant to The Homeowners’ Bill of Rights, which became effective January 1, 2013.

Under Civil Code section 2924.12, plaintiff may bring an action as follows:
“(a)

(1) 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.

(2) 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.”

Plaintiffs argue that they are likely to prevail on their claims in this matter in that defendant PNC failed to evaluate the home for loan modification, even after receipt of notice of a material change in their financial circumstances, in violation of the HBOR, under which plaintiffs may seek injunctive relief.

Plaintiffs argue that defendants have violated Civil Code sections 2923.6 and 2923.11.

Civil Code section 2923.6 provides for procedures to be followed in loan modification application processes, and provides, in pertinent part:
“(c) 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 notice of default or notice of sale, or conduct a trustee’s sale, while the complete first lien loan modification application is pending. A mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or notice of sale or conduct a trustee’s sale until any of the following occurs:

(1) The mortgage servicer makes a written determination that the borrower is not eligible for a first lien loan modification, and any appeal period pursuant to subdivision (d) has expired…

(d) If the borrower’s application for a first lien loan modification is denied, the borrower shall have at least 30 days from the date of the written denial to appeal the denial and to provide evidence that the mortgage servicer’s determination was in error.

(e) If the borrower’s application for a first lien loan modification is denied, the mortgage servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice of default or, if a notice of default has already been recorded, record a notice of sale or conduct a trustee’s sale until the later of:

(1) Thirty-one days after the borrower is notified in writing of the denial.

(2) If the borrower appeals the denial pursuant to subdivision (d), the later of 15 days after the denial of the appeal or 14 days after a first lien loan modification is offered after appeal but declined by the borrower, or, if a first lien loan modification is offered and accepted after appeal, the date on which the borrower fails to timely submit the first payment or otherwise breaches the terms of the offer.”

Plaintiffs rely on Civil Code section 2923.6(g), which provides:
“(g) In order to minimize the risk of borrowers submitting multiple applications for first lien loan modifications for the purpose of delay, the mortgage servicer shall not be obligated to evaluate applications from borrowers who have already been evaluated or afforded a fair opportunity to be evaluated for a first lien loan modification prior to January 1, 2013, or who have been evaluated or afforded a fair opportunity to be evaluated consistent with the requirements of this section, unless there has been a material change in the borrower’s financial circumstances since the date of the borrower’s previous application and that change is documented by the borrower and submitted to the mortgage servicer.”

Plaintiff’s declaration indicates that there has been a material change in plaintiffs’ financial circumstances, as now one plaintiff is making $500 more per month, and that the change has been memorialized and submitted to defendants. [Roben Keshishian Decl., paras. 4, 6]. The notification to defendants is attached as Exhibit D, and was sent November 21, 2014.
Accordingly, the court finds that the probability of prevailing requirement has been established. The claim is that defendants by pursuing foreclosure are in violation of the statute and may properly be enjoined from continuing with the sale until they comply.

The opposition focuses on the other violations alleged, and indicates that with respect to this alleged violation, “despite it being unclear whether there has been a material change in Plaintiffs’ financial circumstances, PNC has nevertheless agreed to review Plaintiffs for a loan modification once again,” that it agreed to review on December 18, an updated loan modification application was submitted on January 8, 2015, and that PNC is currently reviewing these documents, but it is not clear that plaintiffs have submitted a “complete” loan modification application. [McGrew Decl., para. 15].

This is not a showing that plaintiffs are not likely to prevail, but a concession that any further foreclosure activity should be postponed pending this agreed-to review. This seems particularly appropriate in light of the fact that under section 2924.12, if it turns out a second review is not warranted, or it is appropriately concluded, PNC , as the enjoined entity “may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.” The injunction shall issue.

Under CCP § 529, if the court grants the injunction it “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 the 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.”

The “damages” to be covered by the statute include both lost profits and the expenses incurred in having the injunction dissolved; “It is now well settled that reasonable counsel fees and expenses incurred in successfully procuring a final decision dissolving the injunction are recoverable as ‘damages’ within the meaning of the language of the undertaking, to the extent that those fees are for services that relate to such dissolution. Russell v. United Pacific Ins. Co. (1963) 214 Cal.App.2d 78, 88-89.

In determining the appropriate amount of an undertaking:
“the trial court’s function is to estimate the harmful effect which the injunction is likely to have on the restrained party, and to set the undertaking at that sum.”
Abba Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 10.

The standard of review is clear abuse of discretion:
“That estimation is an exercise of the trial court’s sound discretion, and will not be disturbed on appeal unless it clearly appears that the trial court abused its discretion by arriving at an estimate that is arbitrary or capricious, or is beyond the bounds of reason.”
Id.

The court in Abba concluded:
“Thus, in calculating the amount of the undertaking to be required in this case, the trial court should have considered at least (1) the profits to be lost by the defendants from the elimination of the vast majority of their existing customers, and (2) the attorney’s fees and expenses to be incurred in either prosecuting an appeal of the preliminary injunction, or defendant at trial against those causes of action upon which the preliminary injunctive relief had been granted.”
Abba, at 16.

Here, the opposition argues that the NOD recorded indicates that as of February 3, 2014, plaintiffs were $15,670.90 in arrears, which should serve as the lower limit for the bond. Under the previous statute, however, it has been held that full tender of arrearages should not be a requisite to enforcing the lender’s statutory obligations. See Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 225,

However, it appears that the lender would be foregoing the monthly payments due while the injunction is in place. It is not clear what the monthly payments due are, but they appear to be between $2,000 and $5,000 per month. [See Exs. 1, 2]. It appears that any alleged violation could be corrected in just a matter of months. Attorney’s fees to fix the problem and dissolve the injunction should be fairly minimal, perhaps 40 hours at $250 per hour, for another $10,000.