Lansdown v. Bayview Loan Servicing, LLC

Background

Melissa Lansdown moved for a preliminary injunction to prevent the sale or attempted sale of her home during the case. The court had consolidated two related actions. In the first action, the claims still pending included breach-of-contract claims against Bayview Loan Servicing, LLC and Newrez, LLC doing business as Shellpoint Loan Servicing, LLC, based on the deed of trust and a 2018 Memorandum of Understanding. The second action included claims seeking to prevent the sale, breach-of-contract claims, and claims under the federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act.

Lansdown argued that she was not in default, or that the amount claimed was overstated, for several reasons. She asserted that the original lender inflated her income when making the loan; that Bank of America advised her to stop making mortgage payments while evaluating her for a loan modification; that Bayview failed to credit certain 2019 payments; and that these events prevented the servicers from requiring further payments or charging late fees and interest.

Preliminary-Injunction Standard

To obtain a preliminary injunction, a plaintiff generally must show a likely success on the merits, likely irreparable harm without an injunction, a favorable balance of hardships, and that an injunction serves the public interest. The Ninth Circuit also allows relief when serious questions on the merits are raised and the balance of hardships sharply favors the plaintiff.

Court’s Analysis

The court rejected Lansdown’s predatory-lending theory for purposes of the motion. It concluded that she had not shown a likelihood of success or raised serious questions under the federal and California statutes she cited.

The court did find serious questions concerning Lansdown’s assertion that Bank of America advised her to fall behind on her mortgage payments. The court reasoned that the deed of trust’s provision allowing fees for services connected with default included an implied promise of good faith and fair dealing, which could prevent a lender from inducing or encouraging a default and then charging related fees. The court noted possible problems concerning causation and how long Lansdown could reasonably rely on the advice. It concluded that reliance likely ceased being reasonable after March 2, 2012, when Lansdown said Bank of America informed her that she was not eligible for a loan modification because it lacked contractual authority to provide one.

The court rejected Lansdown’s theory concerning the 2019 payments. The Memorandum of Understanding required the executed loan modification by January 31, 2019, but Lansdown said she returned it on May 13, 2019. The court accepted the evidence that the payments were connected to the untimely modification and concluded that Bayview was not at fault for returning them.

The court also rejected the argument that Lansdown’s earlier offer to bring the loan current, or her 2019 payments, permanently relieved her of the duty to make mortgage payments or barred future charges. The court noted that she had not made a mortgage payment in more than four years and concluded that she was in default.

The court found that the complete, recorded version of the December 2022 notice of default included the declaration of compliance required by California Civil Code section 2923.55(c). It therefore rejected Lansdown’s argument that the notice failed to comply with California law.

The court explained that the earlier action’s Fair Debt Collection Practices Act and Rosenthal Act claims had been dismissed as untimely. However, it concluded that the later action alleged timely claims against Shellpoint based on the December 22, 2022 notice of default. Those claims raised serious questions only to the extent they depended on whether Bank of America improperly charged default-related fees after encouraging Lansdown to default.

Irreparable Harm, Equities, and Public Interest

The court found irreparable harm because the property was Lansdown’s home. But it concluded that the balance of equities favored neither side. Lansdown faced the loss of her home, while the defendants would face delay in foreclosing. The court also noted that the claim involving potentially improper fees was limited and could result in damages for overcollection rather than a right to keep the home. The public-interest factor was neutral.

Disposition

Judge Thomas S. Hixson denied Lansdown’s motion for a preliminary injunction. The court concluded that an injunction was not needed to protect the monetary remedy available if Lansdown ultimately prevailed and that she had not shown sufficient grounds to stop the sale.