Tashjian v. Invictus Residential Pooler - 2A

Background

Before removal to federal court, the Santa Clara County Superior Court issued a preliminary injunction, meaning an order providing temporary relief before a final trial decision, that barred certain defendants from foreclosing on Vahe Tashjian’s home. The defendants seeking relief in this order were Planet Home Lending, LLC and Sprout Mortgage Asset Trust.

Tashjian’s underlying dispute concerned a mortgage loan from Recovco Mortgage Management, LLC. He alleged that a loan modification required interest-only payments for 84 months, while payment notices included principal. He made payments through May 2019 and then defaulted, according to the order. He later filed state-court actions alleging improper credit reporting, improper charging of principal during the interest-only period, and that these issues prevented foreclosure. The actions were removed to federal court and consolidated.

The state court granted the preliminary injunction on December 10, 2020, conditioned on Tashjian posting a $304,000 undertaking. An undertaking is security intended to pay defendants’ costs or damages if the injunction is later determined to have been improper. Tashjian submitted a $304,000 cashier’s check to the state court.

A separate state-court case brought by Bell Investment Partners, LLC resulted in orders concerning money allegedly transferred from entities associated with Tashjian. The defendants presented bank records that, according to the order, showed the $304,000 used for the undertaking came from those entities’ assets. The Bell court froze the relevant funds.

Legal standard

Under federal law, a party seeking to dissolve or modify an injunction must show a significant change in facts or law that warrants doing so. Federal Rule of Civil Procedure 65(c) also permits a preliminary injunction only when the person seeking it provides security in an amount the court considers proper to cover losses caused by wrongful restraint. The order further relied on California law, which requires an injunction applicant to provide an undertaking and states that the injunction must be dissolved if the required undertaking is insufficient and a sufficient one is not filed as required.

Court’s analysis

The court concluded that the preliminary injunction had to be dissolved because the $304,000 undertaking did not provide the required protection. It reasoned that the Bell court’s injunction indicated that Bell was likely to succeed on allegations that the money used for the undertaking was stolen, and that the funds appeared to belong to parties other than Tashjian. Because the Bell injunction froze the money, the defendants in the foreclosure case could not obtain the undertaking if the foreclosure injunction were later found improper.

Tashjian argued that the injunction should remain because the Bell order did not require the undertaking funds to be released. The court rejected that argument, explaining that the purpose of the undertaking was to protect the defendants and that the frozen funds could not serve that purpose. The court treated this as a changed circumstance warranting dissolution.

The court also granted the parties’ separate requests for judicial notice of court records.

Disposition

The court GRANTED defendants’ motion to dissolve the preliminary injunction. It gave Tashjian ten days from February 10, 2022, to obtain and post a new undertaking.