Schroeder v. M & I Bank, FSB et al, No. 2:2008cv02190 - Document 23 (D. Ariz. 2009)
Court Description: OPINION re 13 MOTION for Temporary Restraining Order by Bradley Schroeder. Plaintiff's showing on the merits is clearly not strong enough to justify granting a Temporary Restraining Order - an extraordinary remedy - in spite of the harm suffered by the Plaintiff. Plaintiff has not shown a strong likelihood of success on the merits and accordingly, the Motion for a Temporary Restraining Order is denied. Signed by Judge Roslyn O Silver on 3/13/09. (LSP)
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Bradley Schroeder, Plaintiff, 10 11 vs. 12 M & I Bank, FSB, et al., 13 Defendant. 14 ) ) ) ) ) ) ) ) ) ) ) ) No. CV-08-2190-PHX-ROS OPINION 15 16 17 18 On March 13, 2009 this Court denied Plaintiff s Motion for a Temporary Restraining Order. The reasons for the decision follow. BACKGROUND 19 Plaintiff Bradley Schroeder brought suit to enjoin foreclosure on his home in Cave 20 Creek, alleging a violation of his right to rescind the mortgage contract. He refinanced his 21 home in August, 2007, ostensibly for the purpose of making improvements on it. At that 22 time, the residence was apparently appraised at $1,330,000. Plaintiff claims Defendants 23 failed to make disclosures required under the Truth in Lending Act ( TILA ) and federal 24 regulations. Defendants scheduled foreclosure to take place on December 9, 2008; Schroeder 25 filed suit on December 1, 2008. Defendants temporarily delayed foreclosure, which is now 26 scheduled for March 17, 2009, causing Plaintiff to file a Motion for a Temporary Restraining 27 Order. A Motion to Dismiss has been filed but not yet ruled on. 28 1 STANDARD OF REVIEW 2 The standard for issuing a Temporary Restraining Order ( TRO ) is the same as that 3 for issuing a preliminary injunction. Gonzalez v. State, 435 F. Supp. 2d 997, 999 (D. Ariz. 4 2006). In the Ninth Circuit, there are two sets of criteria for a court to use when evaluating 5 a request for a TRO. First, a plaintiff must show: 6 (1) a strong likelihood of success on the merits, 7 (2) the possibility of irreparable injury to plaintiff if preliminary relief 8 is not granted, 9 (3) a balance of hardships favoring the plaintiff, and 10 (4) advancement of the public interest (in certain cases). 11 Earth Island Inst. v. U.S. Forest Serv., 351 F.3d 1291 (9th Cir. 2003) (quoting Johnson v. 12 Cal. State Bd. Of Accountancy, 72 F.3d 1427, 1430 (9th Cir. 1995). Alternately, a plaintiff 13 may demonstrate[] either a combination of probable success on the merits and the 14 possibility of irreparable injury or that serious questions are raised and the balance of 15 hardships tips sharply in his favor Id. These two tests represent a continuum; [t]hus, the 16 greater the relative hardship to [Plaintiffs] the less probability of success must be shown. 17 Earth Island, 351 F.3d at 1298. 18 ANALYSIS 19 A. Likelihood of Success on the Merits 20 i. Standing 21 Defendants argue Plaintiff lacks standing because TILA applies only to consumer 22 credit transactions, defined as transactions in which the money, property, or services which 23 are the subject of the transaction are primarily for personal, family, or household purposes. 24 15 U.S.C. § 1602(h). TILA does not apply to [c]redit transactions involving extensions of 25 credit primarily for business . . . purposes. 15 U.S.C. § 1603(1). Schroeder has stated and 26 apparently stated in his loan application that he intended to use the money to make exterior 27 improvements to his house, and to perform landscaping. This would put his use of the money 28 squarely within the ambit of the statute. -2- 1 However, a property evaluation that M&I obtained to estimate its losses did not 2 reflect substantial improvements to the property. Def. Ex. 1, Roberts Decl. The appraiser 3 recommended a significant write-down of the property value. Id. While only a drive-by 4 assessment, and while that write-down might have occurred due to plummeting home prices 5 even in the face of capital improvements, Plaintiff has failed to provide any evidence that the 6 loan was used for its intended purpose. Contrary to Plaintiff s counsel s assertion at hearing, 7 even the complaint itself fails to allege facts regarding the use of the loan moneys such that 8 standing is proper under TILA; it states only that Plaintiff is a consumer, see ¶ 5, rather than 9 what purpose the loan monies were put to. 10 11 Accordingly, Defendants have raised serious questions regarding Plaintiff s ability to demonstrate standing under TILA. 12 ii. Tender 13 Defendants also argue that Plaintiff s TILA suit is futile if he cannot refund the money 14 at the time of rescission. Courts have, indeed, made this a condition of rescission. 15 Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1171 (9th Cir. 2003). However, the law does 16 not necessarily require a showing that Plaintiff is able to do this, or even state that repayment 17 is an absolute requirement. See, e.g., Palmer v. Wilson, 502 F.2d 860, 863 (9th Cir. 1974) 18 ( [W]hen an obligor seeks to enforce his right of recission, as well as to recover the statutory 19 penalty and attorney fees, it is within the district court s equitable power to grant both forms 20 of relief, but to condition enforcement of the rescission order on the debtor s tender of the 21 principal of the loan received from the creditor. ). 22 Here, Plaintiff has not made a showing that he is able to repay all or part of the loan, 23 which is not necessarily fatal to his claim. However, given the power of the court to 24 condition rescission on repayment, it does bear against the likelihood that this Court would 25 eventually allow rescission. 26 Plaintiff implies that rescission is a right under TILA totally independent of 27 repayment. However, this is not supported by the case law. As noted above, Ninth Circuit 28 courts have repeatedly reaffirmed the court s ability to condition rescission on repayment. -3- 1 Other courts have decided similarly. See, e.g., Johnson v. Chase Manhattan Bank, 2007 U.S. 2 Dist. Lexis 50569 at * 14. 3 iii. Merits1 4 Schroeder alleges that Defendants failed to make required disclosures under TILA. 5 The only specific disclosure he alleges Defedants failed to make is that the appraisal fee was 6 inappropriately excluded from the finance charge, thus fraudulently overstating it. This 7 charge was $695.00. 8 TILA includes appraisal fees on a list of items that shall not be included in the 9 computation of the finance charge with respect to that transaction. 15 U.S.C. § 1605(e). 10 FIDC regulations specify that in order to be excluded, the appraisal fee must be bona fide 11 and reasonable. 12 CFR Part 226.4(c)(7)(iv). Further, TILA allows recission if the 12 amount disclosed as the finance charge does not vary from the actual finance charge by more 13 than $35. 15 U.S.C. 1635(i)(2). 14 Plaintiff states that the $695.00 appraisal fee is unreasonable and not bona fide and 15 argues that his personal inquiries set a reasonable appraisal fee at around $350. Defendants, 16 on the other hand, note that it was prepared by an Arizona certified residential real estate 17 appraiser and provide evidence that it was consistent with market prices for appraisal services 18 at the time. Def. Ex. A; Def. Ex. 2, Norris Dec. 19 Plaintiff s conclusory statement that $695.00 is an unreasonable appraisal fee is not 20 sufficient to raise a strong likelihood of success or even serious questions in light of 21 Defendants evidence to the contrary. B. Irreparable Harm, Balance of the Harms, and the Public Interest 22 23 Plaintiff has shown irreparable harm in that he faces losing his residence, a harm to 24 which this Court is not insensible. Nor is it persuaded that the harm faced by Defendants in 25 26 1 27 28 It is worth noting that Plaintiff s Complaint contains three counts. However, only Count One (Rescission under TILA) acts to stop foreclosure itself and thus is dealt with in this Opinion. -4- 1 delaying foreclosure, namely potential financial risk resulting from a delayed foreclosure 2 sale, outweighs it. 3 However, Plaintiff s showing on the merits is clearly not strong enough to justify 4 granting a Temporary Restraining Order an extraordinary remedy in spite of the harm 5 suffered by the Plaintiff.2 Plaintiff has not shown a strong likelihood of success on the 6 merits and accordingly, the Motion for a Temporary Restraining Order is denied. 7 8 DATED this 13th day of March, 2009. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 The eleventh hour nature of this Motion also bears against Plaintiff in the balance of the harms. Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir. 1985). Despite knowing the risk of foreclosure since December, Plaintiff chose to wait until mid-March, immediately prior to foreclosure, to seek the intervention of this Court. -5-
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