Lansdown v. Bayview Loan Servicing, LLC

Background

Melissa Lansdown sought a preliminary injunction, meaning a temporary court order during the lawsuit, to stop the sale or attempted sale of her home. The court had consolidated this action with a related case involving the same foreclosure dispute. For purposes of deciding the injunction motion, the court assumed that the claims surviving dismissal in the first action and the claims alleged in the related action were pending.

The surviving claims in the first action included breach-of-contract claims against Bayview Loan Servicing, LLC and Newrez, LLC doing business as Shellpoint Loan Servicing, LLC, under a deed of trust and a 2018 memorandum of understanding. The related action also alleged that the defendants violated the federal Fair Debt Collection Practices Act and the California Rosenthal Fair Debt Collection Practices Act, among other claims.

Legal Standard

To obtain a preliminary injunction, Lansdown had to show a likely or seriously arguable chance of success on the merits, likely irreparable harm without an injunction, a favorable balance of hardships, and that an injunction would serve the public interest. The court applied the Ninth Circuit’s version of a sliding-scale approach, under which serious questions on the merits can sometimes support an injunction when the balance of hardships strongly favors the plaintiff.

Analysis

Lansdown advanced several reasons why the injunction should issue. First, she argued that the amount listed in the notice of default was wrong or that she was not in default. She said that an original lender had overstated her income when making the loan and that Bank of America later advised her to stop making mortgage payments while it evaluated her for a loan modification.

The court found no probability of success or serious merits question on the predatory-lending theory. It noted that the evidence did not establish whether Lansdown’s then-husband had income that affected the borrowers’ ability to make the mortgage payment. The court also found that the federal statute she cited appeared to require a pattern or practice and that the California statute she cited did not appear relevant to her allegations.

The court did find serious questions about Lansdown’s argument that Bank of America improperly charged some default-related fees after allegedly telling her to fall behind on her payments. The court reasoned that the deed of trust arguably included an implied promise of good faith and fair dealing concerning fees for services connected with default. It also identified questions about causation and about how long it was reasonable for Lansdown to rely on the alleged advice. The court stated that reliance likely ceased being reasonable after March 2, 2012, when Lansdown said Bank of America informed her that it lacked contractual authority to give her a loan modification.

Lansdown also argued that Bayview failed to credit payments she sent in 2019 under settlement documents. The court rejected this theory for purposes of the injunction. The memorandum of understanding required the executed loan modification to be returned by January 31, 2019, but Lansdown said she returned it on May 13, 2019. The defendants submitted evidence that the payments were held pending compliance with the settlement terms and later returned. Because the modification was submitted late and the payments were labeled as modification payments, the court found that this theory was not likely to succeed and did not present serious questions.

Lansdown further appeared to argue that her earlier willingness to become current, together with the 2019 payments, permanently relieved her of the obligation to make mortgage payments or barred future late fees and interest. The court rejected that argument. It noted that Lansdown had not made a mortgage payment in more than four years and concluded that she was in default. The court also said that any dispute over some fees did not eliminate her obligation to make ongoing mortgage payments.

Second, Lansdown argued that the defendants failed to follow California Civil Code requirements for recording a notice of default. Her copy of the notice appeared to be missing a required compliance declaration. But the defendants’ complete copy showed five pages, including the required declaration on the final two pages. The court therefore rejected this argument.

Third, Lansdown argued that the defendants violated the federal and California debt-collection laws by trying to collect more than she owed. The court said the claims in the first action had previously been dismissed as untimely, but the related action’s claims against Shellpoint based on the December 22, 2022 notice of default were timely. The court concluded that these claims raised serious questions only to the extent they depended on whether default-related fees had been improperly charged after Bank of America allegedly encouraged Lansdown to default.

Other Injunction Factors

The court found that Lansdown would suffer irreparable harm if the injunction were denied because the property was her home and was unique. It found that the balance of hardships favored neither side. Losing the home would harm Lansdown, but an injunction would prevent the defendants from foreclosing while the case continued. The court also considered that Lansdown had not made mortgage payments for more than four years and that the debt was secured by property the court said was worth substantially more than the debt, reducing the prospect that the defendants would be unable to recover what they were owed.

The public-interest factor was neutral because the requested injunction would affect only the parties. The court emphasized that the only claim presenting serious questions appeared to concern a limited period of allegedly improper default-related fees and could lead to monetary damages. In the court’s view, stopping the sale would provide more preliminary relief than the final relief available if Lansdown prevailed at trial.

Disposition

The court denied Lansdown’s motion for a preliminary injunction. The order did not decide the ultimate merits of the underlying claims; it ruled that the requested temporary relief was not justified.