Ozkay v. Equity Wave Lending, Inc.

Background

The plaintiffs asked the court to continue an earlier temporary order stopping the sale of their property while the lawsuit proceeded. Their remaining claims rested on two theories: that the defendants improperly conditioned reinstatement of the loan on curing a default on a senior lien, and that the defendants failed to follow a prior loan-modification agreement. The court addressed only the first theory because it found that the plaintiffs were likely to prevail on it.

Legal standard

A preliminary injunction is temporary relief issued before trial. The plaintiff must make a threshold showing that success on the merits is likely, irreparable harm is likely without the injunction, the balance of hardships favors the plaintiff, and the injunction serves the public interest. The court may also require security, commonly called a bond, to compensate a party for losses caused by an injunction that was wrongfully issued.

Section 2924c and the senior lien

California Civil Code section 2924c allows a borrower to reinstate an accelerated mortgage loan by paying the defaults identified in the notice of default, certain recurring obligations, and reasonable enforcement costs. Recurring obligations can include amounts advanced on senior liens that became due after the notice of default was recorded.

The defendants argued that section 2924c allowed them to proceed with foreclosure because the plaintiffs had not cured a senior U.S. Bank lien. They relied on a provision allowing a beneficiary or mortgagee to require reliable written evidence that senior liens, property taxes, and hazard-insurance premiums had been paid. The defendants asserted that they had requested this evidence and that Eser Ozkay had promised to provide it.

The court held that the notice of default had to clearly identify the particular senior-lien obligation and state that payment of it was required for reinstatement. A statement that the beneficiary “may” require payment was not enough. Because the 2019 notice of default did not identify the U.S. Bank lien, the defendants could not condition reinstatement on payment of that lien under the existing notice. The court stated that the defendants could do so only after issuing a new notice of default listing the lien as a particular default.

Preliminary-injunction findings

The court found that the plaintiffs were likely to succeed on at least their section 2924c claim. It also found likely irreparable harm, reasoning that the potential loss of the property could not be adequately remedied with money. The court concluded that the balance of equities and the public interest favored delaying the sale while the merits were assessed.

Order

The court granted the preliminary injunction and enjoined the defendants, their agents, and employees from selling the plaintiffs’ property, identified as 2275 Country Club Drive, Novato, California 94949, based on the notice of default recorded May 20, 2019, or on any trustee’s-sale notice based on or arising from that notice.

The court did not require the plaintiffs to provide security under Federal Rule of Civil Procedure 65(c). The defendants had not addressed security in their opposition, and the court found that a bond amount could not be based on speculation.