Granados v. City National Bank

Background

Elizabeth Granados filed an ex parte application, meaning an application made without a prior hearing involving both sides, for a temporary restraining order. She sought to stop Wharton Note Company from conducting a foreclosure sale of property at 90 Madera Court, Danville, California, scheduled for July 26, 2023.

The amended complaint asserted claims under the federal Truth in Lending Act, the implied covenant of good faith and fair dealing, the Fair Debt Collection Practices Act, a federal regulation requiring periodic mortgage statements, and several California statutes.

The court criticized Granados and her counsel for waiting until shortly before the foreclosure sale to file the application, despite Granados’s alleged earlier knowledge of the foreclosure. The court nevertheless granted temporary relief to preserve the status quo while it conducted a fuller review.

Legal standard

A temporary restraining order is short-term emergency relief that may prevent conduct until a court can hold a hearing on a preliminary injunction. The court applied the familiar four-factor standard: likelihood of success on the merits, likely irreparable harm without relief, the balance of hardships, and the public interest. Under the Ninth Circuit’s sliding-scale approach, relief may also issue when there are serious questions about the merits, the hardship balance sharply favors the applicant, and the applicant shows likely irreparable harm and a public interest in relief.

Court’s analysis

The court found that Granados had shown serious questions about at least one claim. It focused as an example on the Truth in Lending Act, which requires a mortgage loan servicer to send the borrower a statement for each billing cycle containing specified information. Wharton argued that it did not become the servicer until November 2022. Granados argued that Wharton acquired City National Bank’s obligations when it became the servicer. The court also noted that the briefing did not show that Wharton had corrected any earlier deficiencies involving interest charged without the required statements.

Wharton primarily argued that the Truth in Lending Act claim was barred by the one-year limitations period. The court explained that there was disagreement about when that period begins and that equitable tolling—an extension of the filing period when a claimant could not obtain vital information despite diligence—might apply. The court found that Granados’s account raised serious questions that would be better addressed on a fuller record. The court did not finally decide whether her claims would succeed.

For irreparable harm, the court found that the likely loss of Granados’s home before a hearing could occur was sufficient. It found that the balance of equities favored Granados because the foreclosure could cause her to lose the property, while the temporary restraint would not change Wharton’s claimed right to recover the loan balance, interest, or fees. The court also found a public interest in allowing homeowners to pursue apparently valid claims before being displaced from their homes.

Order

The court granted Granados’s temporary restraining order application solely to maintain the status quo until the earliest possible hearing on the merits of the preliminary-injunction request. Wharton Note Company was enjoined from any sale, disposition, or transfer of the property, including a foreclosure sale, until that hearing could be held. The order took effect immediately and remained in effect until further order of the court.

The court found that no bond was necessary because there was no realistic likelihood of harm to Wharton during the short period before the hearing. Granados was directed to file a reply brief by 5:00 p.m. on July 28, 2023, and the court set a show-cause hearing on the preliminary-injunction application for August 4, 2023, at 10:00 a.m. The opinion does not decide the ultimate merits of Granados’s claims.