Chu v. Fay Servicing, LLC

Background

Stephanie Chu moved for a temporary restraining order to stop a trustee’s sale involving the property identified in the order as 23 Dory Lane, Foster City. Fay Servicing, LLC, and Wilmington Trust, N.A., as trustee for MFRA Trust 2015-1, opposed the motion.

The court had previously granted defendants’ motion to dismiss Chu’s First Amended Complaint, allowing her to amend. In that earlier order, the court found that she had not adequately alleged wrongful foreclosure or improper recordation under California Civil Code section 2924(a)(6), denied her request for a preliminary injunction, and rejected claims under California Civil Code sections 2923.5 and 2923.55 and other claims. Chu then filed a Second Amended Complaint alleging a violation of the federal Truth in Lending Act, 15 U.S.C. § 1641(g), and a related claim under California Business and Professions Code section 17200.

Analysis

The court concluded that Chu had not shown a likelihood of success on the claims in her Second Amended Complaint. Her Truth in Lending Act theory was that Wilmington failed to notify her that it had become the new owner of the loan. But the complaint alleged that Wilmington had been assigned the deed of trust and note in November 2015 and that the assignment had been recorded. Chu provided no evidence on the motion showing that she lacked actual or constructive notice of the assignment.

Defendants argued that the record also showed notice through Chu’s 2018 bankruptcy proceedings, in which Wilmington Trust was identified as the new creditor on the note. They therefore argued that the one-year limitations period for the alleged Truth in Lending Act violation had expired before Chu filed the Second Amended Complaint. The court stated that the Truth in Lending Act claim and the related section 17200 claim appeared likely to fail.

The court also considered evidence that Chu had previously sued and settled litigation concerning the loan. According to defendants’ evidence, those settlements affirmed the enforceability of the loan and released claims that were or could have been raised in, or related to, the earlier action, the note, or the deed of trust. The most recent settlement had been entered in 2016.

Defendants also submitted evidence that Chu had requested and been offered loan modifications several times from 2018 through the present. The court stated that, even if Chu had alleged a violation involving “dual tracking” while a loan-modification application was pending—which she had not—she still had not shown likely success because California law does not require evaluation of multiple successive applications absent a documented material change in the borrower’s financial circumstances.

The court further explained that, even assuming Chu could plead a viable Truth in Lending Act claim, the only remedy available at that stage would be damages. The court cited authority stating that the right to rescind under the Act expires three years after the transaction is completed, even if required information or forms were not delivered.

Disposition

Because Chu had not shown a likelihood of success on the claims in the Second Amended Complaint or on the new claim she attempted to raise in her motion, the court did not reach the other factors required for temporary injunctive relief. The court noted that defendants had postponed the trustee’s sale until August 24, 2020, based on Chu’s submission of additional documents supporting her latest loan-modification application.

The court denied the motion for a temporary restraining order and terminated Docket No. 39.