Acevedo v. The Loan Company of San Diego et al, No. 3:2020cv01263 - Document 25 (S.D. Cal. 2020)
Court Description: ORDER denying 3 Motion for Temporary Restraining Order. Signed by Judge Cynthia Bashant on 8/10/2020. (jpp)
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Acevedo v. The Loan Company of San Diego et al Doc. 25 Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.558 Page 1 of 15 1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 SOUTHERN DISTRICT OF CALIFORNIA 11 12 DIMAS ACEVEDO, Plaintiff, 13 14 15 16 Case No. 20-cv-1263-BAS-MSB v. ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER [ECF No. 3] THE LOAN COMPANY OF SAN DIEGO, et al., Defendants. 17 18 19 On July 7, 2020, Plaintiff Dimas Acevedo filed an Ex Parte Motion for 20 Temporary Restraining Order, requesting the Court enjoin a scheduled foreclosure. 21 (ECF No. 3.) Defendant The Loan Company of San Diego filed an opposition to the 22 Motion (“Opp’n,” ECF No. 9) to which Plaintiff replied (“Reply,” ECF No. 13). The 23 Court held a telephonic oral argument on July 29, 2020. The Court then ordered 24 supplemental briefing on one issue and temporarily postponed the foreclosure until 25 further order. (ECF No. 18.) Both parties filed briefs. For the foregoing reasons, 26 the Court DENIES the Motion and lifts the temporary postponement of the 27 foreclosure. 28 –1– Dockets.Justia.com Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.559 Page 2 of 15 1 I. FACTUAL ALLEGATIONS 2 Plaintiff is the owner of two parcels of land located at 1351–1355 Imperial 3 Beach Boulevard and 1361–1363 Imperial Beach Boulevard in Imperial Beach, 4 California. (“Compl.,” ECF No. 1, at ¶ 1, (hereinafter “parcel 1” and “parcel 2” 5 respectively).) Plaintiff states he has lived in one of the units on parcel 2 since April 6 2015. (“Acevedo Supp. Decl.,” ECF No. 22, ¶ 5.) In July 2017, Defendant The Loan 7 Company of San Diego loaned Plaintiff $1,200,000 for him to buy both parcels. 8 (Compl. ¶ 3.)1 Both parcels secure the loan. (Id. ¶ 10.) Plaintiff alleges the loan 9 “was fashioned in such a way that it was secured by both [parcels] in order to 10 circumvent the requirements of” federal regulations. (Id. ¶ 12.) The loan covers all 11 five homes on the properties. (Id. ¶ 36.)2 Defendant Action Foreclosure Services, 12 Inc. is the foreclosing trustee (id. ¶ 4) and set a foreclosure date for both properties 13 for July 31, 2020. (Mot. at 2.) Plaintiff seeks an order: 14 To restrain and enjoin Defendants, its agents, assigns, employees, officers, attorneys, and representatives, and those in active concert or participation with them, pending trial of this action, from engaging in or performing any act to deprive or foreclose on Plaintiff of his residence in and possession of the real properties located at 1351-1355 Imperial Beach Boulevard, Imperial [Beach], California and 1361-1363 Imperial Beach Boulevard, Imperial Beach, California, including but not limited to instituting or maintaining eviction, or eviction enforcement proceedings on the property or from otherwise taking any steps whatsoever to deprive Plaintiff of their residence in and possession of the property or to impair or degrade the value of the Property. 15 16 17 18 19 20 21 22 23 (Id. at 7–8.) Defendant the Loan Company opposes the Motion, and Defendant 24 Action Foreclosure Services, Inc. did not file a response. Although all of Plaintiff’s 25 26 27 28 1 The Complaint specifically states that the loan was “to buy” the parcels, but at oral argument Plaintiff’s counsel informed the Court that the loan was actually a refinance. Plaintiff received another loan from another company to buy the properties, but that lender was going to rescind the loan so Plaintiff refinanced six weeks with Defendant six weeks after purchase. 2 Although the Complaint states there are five homes on both properties, at oral argument, Plaintiff’s counsel stated that there are actually seven units on the properties. –2– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.560 Page 3 of 15 1 causes of action are technically made against “all Defendants,” Plaintiff does not 2 once mention Action Foreclosure Services in the substance of his Complaint and 3 makes it clear that the claims are centered around The Loan Company’s actions. 4 Thus, when the Court references “Defendant” throughout this Order, it is referencing 5 The Loan Company. 6 II. LEGAL STANDARD 7 The standard for a temporary restraining order (“TRO”) and preliminary 8 injunction are “substantially identical.” Stuhlbarg Int’l Sales Co. v. John D. Brush & 9 Co., 240 F.3d 832, 839 n.7 (9th Cir. 2001). “A plaintiff seeking a preliminary 10 injunction must establish that he is likely to succeed on the merits, that he is likely to 11 suffer irreparable harm in the absence of preliminary relief, that the balance of 12 equities tips in his favor, and that an injunction is in the public interest.” Am. Trucking 13 Ass’ns Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting 14 Winter v. Nat. Res. Defense Council, Inc., 555 U.S. 7, 21 (2008)). A TRO’s 15 “underlying purpose [is to] preserv[e] the status quo and prevent[ ] irreparable harm” 16 until a preliminary injunction can be held. Granny Goose Foods, Inc. v. Bhd. Of 17 Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974). 18 III. ANALYSIS 19 A. 20 Plaintiff moves ex parte for a TRO, titling his motion an “emergency ex parte 21 application.” While the Court agrees that Plaintiff seeks an injunction before the 22 scheduled foreclosure of July 31, 2020, it is less clear why Plaintiff did not request 23 relief earlier and thus effectively made the situation an emergency. Timing of the Ex Parte Motion 24 Notices of default were recorded in August 2019 for both parcels. (Exhibits 4 25 and 5 to Lavinsky Decl., ECF No. 16.) Notices of Trustee’s sale were recorded in 26 January 2020 for both parcels. (Exhibits 6 and 7 to Lavinsky Decl.) The Trustee’s 27 sale was scheduled for February 19, 2020. (Lavinsky Decl. ¶ 16.) Plaintiff filed a 28 bankruptcy petition, to which Defendant objected, and the Bankruptcy Court set a –3– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.561 Page 4 of 15 1 hearing for July 8, 2020. (Exhibit 12 to Coughlin Decl., ECF No. 9-2.) Plaintiff filed 2 the present lawsuit on July 6, 2020. On July 17, 2020, the Bankruptcy Court 3 dismissed the bankruptcy case. (Exhibit 11 to Coughlin Decl.) 4 Thus, Plaintiff has been on notice of the foreclosure for almost a year. Despite 5 notice of the impending foreclosure sale, however, Plaintiff waited to file this suit 6 challenging the sale until July 6, 2020, filed the TRO motion on July 7, 2020, and 7 did not file the proof of service of said motion on Defendants until July 15, 2020. 8 A proper ex parte motion must “address . . . why the regular noticed motion 9 procedures must be bypassed,” i.e., “it must show why the moving party should be 10 allowed to go to the head of the line in front of all other litigants and receive special 11 treatment.” Mission Power Eng’g Co. v. Cont’l Cas. Co., 883 F. Supp. 488, 492 12 (C.D. Cal. 1995). This requires the moving party to “show that the moving party’s 13 cause will be irreparably prejudiced if the underlying motion is heard according to 14 regular noticed motion procedures” and “that the moving party is without fault in 15 creating the crisis that requires ex parte relief, or that the crisis occurred as a result 16 of excusable neglect.” Id.; see also Hammett v. Sherman, No. 19-CV-605 JLS (LL), 17 2019 WL 8013763, at *1 (S.D. Cal. Sept. 23, 2019). Plaintiff does not explain the 18 lengthy delay in filing the Motion after he learned of the foreclosure. Plaintiff’s lack 19 of diligence has forced his “emergency” onto the Court, compelling it to come to a 20 decision in the few days before the scheduled foreclosure. The Court could deny the 21 ex parte motion simply because Plaintiff has created the crisis; nevertheless, given 22 the scheduled foreclosure and the parties’ need for a decision, the Court will evaluate 23 the present Motion. 24 B. 25 Plaintiff argues he is likely to succeed on the merits of his claim that the loan 26 violates various federal statutes and other state laws.3 The parties agree that the loan Likelihood of Success on the Merits 27 28 3 Plaintiff lists the Equal Credit Opportunity Act (“ECOA”) in his Motion as a statute that Defendants violated. Although Plaintiff lists ECOA as his eighth cause of action in the caption of –4– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.562 Page 5 of 15 1 is secured by all properties on both parcels. (Lavinsky Decl. ¶ 4; Mot at 2.) The 2 issue is the legality of the way Defendant structured the loan. 3 1. The Truth in Lending Act (“TILA”) and Regulation Z 4 Plaintiff claims Defendant “never made any of the TILA-RESPA disclosure 5 forms [sic] to Plaintiff.” (Compl. ¶ 38.) He states he was never given a loan estimate 6 or a closing disclosure. (Id. ¶¶ 40, 41.) 7 a. Plaintiff’s Residence 8 The parties fiercely debate whether Plaintiff lives at one of the properties. In 9 his Motion, Plaintiff states he has lived on parcel 2 since April 6, 2015, prior to 10 purchasing it, and he continued to live there after buying it. (Mot. at 3.) Plaintiff 11 and his attorney submit various documents that list parcel 2 as Plaintiff’s address, for 12 example: w-2 wage statements from 2016 to 2019 from Plaintiff’s employer (Exhibit 13 D to Aldana Decl., ECF No. 3-2)4 and driver’s licenses for Plaintiff and his wife 14 (Exhibits 1–4, 7 to Acevedo Decl., ECF No. 13-1). In his supplemental briefing, 15 Plaintiff (for the first time) submitted a declaration under penalty of perjury declaring 16 that he lives on parcel 2. (Acevedo Supp. Decl. ¶¶ 5, 20.) 17 18 19 20 21 22 23 24 25 26 27 his Complaint, he does not provide any information about it in the body of his Complaint (which changes the eighth cause of action to fraud). The Court cannot evaluate the ECOA claim as it relates to the present Motion. For a federal court to issue an injunction, there must be a “sufficient nexus between the claims raised in a motion for injunctive relief and the claims set forth in the underlying complaint itself. The relationship between the preliminary injunction and the underlying complaint is sufficiently strong where the preliminary injunction would grant relief of the same character as that which may be granted finally. Absent that relationship or nexus, the district court lacks authority to grant the relief requested.” Pac. Radiation Oncology, LLC v. Queen’s Med. Ctr., 810 F.3d 631, 636 (9th Cir. 2015). 4 Counsel does not establish how he has personal knowledge of the truth of the exhibits. The statements are likely hearsay; it is logical to assume that the only reason counsel can state that the documents are accurate is because Plaintiff told him so. (See ECF No. 9-3 (Defendant’s objections to the declaration).) However, courts “may give even inadmissible evidence some weight, when to do so serves the purpose of preventing irreparable harm before trial.” Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir. 1984). Accordingly, the Court does not strike the documents and will give them some weight if doing so will prevent irreparable harm. 28 –5– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.563 Page 6 of 15 1 In response, Defendant points to the loan documents where Plaintiff listed his 2 residence as a condo in Chula Vista. (Exhibits 2 and 3 to Lavinsky Decl. (deeds of 3 trust listing Plaintiff’s address as “[redacted] #13, Chula Vista, CA 91913-2408”).) 4 Plaintiff’s Chula Vista address is also listed on other loan-related documents. (See 5 Exhibit 13 and 14 to Lavinsky Decl. (disclosure statement of real estate loan and 6 borrower contact information sheet).) The disclosure statement also provides that 7 the loan of $1,200,000 is to be secured by deeds of trust on property located at 1351– 8 1355 and 1361–1363 Imperial Beach Boulevard, “which is not expected to be used 9 as Borrower’s principal residence.” (Exhibit 13 to Lavinsky Decl. at 1.) On that 10 same document, Plaintiff initialed next to the statement: “I hereby warrant and 11 represent the property securing the loan is held or will be held for investment 12 purposes only; and is not now or intended to be my personal dwelling or on 13 residential real property that includes or is intended to include my personal 14 dwelling.” (Id. at 2.) Plaintiff’s tax returns also list the Chula Vista condo as his 15 residence. (Exhibit 16 to Lavinsky Decl.) Plaintiff states he rented the Chula Vista 16 condo so that his children could attend a nearby school. (Acevedo Supp. Decl. ¶ 28.) 17 But the Court need not make a determination as to whether Plaintiff lives at 18 19 the property; the below analysis does not require a decision either way. b. TILA and Regulation Z Analysis 20 TILA, 15 U.S.C. §§ 1601 et seq., and its implementing regulations, 12 C.F.R. 21 §§ 226 et seq. (“Regulation Z”), require lenders to disclose certain information to 22 borrowers as part of a loan transaction, including a “separate written itemization of 23 the amount financed,” the “finance charge,” and the APR. See 12 C.F.R. 24 §§ 226.18(c)–(d), 226.22. 25 disclosure of credit terms so that the consumer will be able to compare more readily 26 the various credit terms available to him and avoid the uninformed use of credit, and 27 to protect the consumer against inaccurate and unfair credit billing and credit card 28 practices.’” Hauk v. JP Morgan Chase Bank USA, 552 F.3d 1114, 1118 (9th Cir. “Congress enacted TILA ‘to assure a meaningful –6– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.564 Page 7 of 15 1 2009) (quoting 15 U.S.C. § 1601). “To effectuate TILA’s purpose, a court must 2 construe ‘the Act’s provisions liberally in favor of the consumer’ and require 3 absolute compliance by creditors.” Id. (quoting In re Ferrell, 539 F.3d 1186, 1189 4 (9th Cir. 2008)). If a lender fails to make the required disclosures, a borrower may 5 (subject to certain statutes of limitations) bring a claim for damages or may “rescind 6 any credit transaction in which a security interest is created in the obliger’s home.” 7 King v. California, 784 F.2d 910, 913 (9th Cir. 1986) (citing 15 U.S.C. § 1635). 8 TILA’s rescission and damage remedies are available only in “consumer credit 9 transactions.” 15 U.S.C. § 1635(i)(4); 12 U.S.C. § 2606(a). For a loan to qualify as 10 a consumer credit transaction under the statute, a borrower must demonstrate that the 11 loan was extended to (1) a natural person and was obtained (2) “primarily for 12 personal, family, or household purposes.” 15 U.S.C. § 1602(i). TILA specifically 13 exempts from its scope extensions of credit for business or commercial purposes. 12 14 U.S.C. § 2606(a). In determining whether a transaction is primarily for personal or 15 business purposes, the Court must look to the transaction as a whole. The Ninth 16 Circuit has identified five factors to consider in determining whether the loan was 17 for personal or business purposes: (1) the relationship of the borrower’s primary 18 occupation to the acquisition; (2) the degree to which the borrower will personally 19 manage the acquisition; (3) the ratio of income from the acquisition to the total 20 income of the borrower; (4) the size of the transaction; and (5) the borrower’s 21 statement of purpose for the loan. Thorns v. Sundance Props., 726 F.2d 1417, 1419 22 (9th Cir. 1984). 23 As to the first factor, Plaintiff listed his occupation as an estimator for Pacific 24 Pipe. 25 statements, and/or Chapter 13 plan filed in the bankruptcy court).) Plaintiff provides 26 the Court with no information about his work. Without further information as to 27 what an estimator for a pipe company does, the Court cannot determine whether this 28 occupation is related to the property acquisition. As to the second factor, Defendant (Exhibit 24 to Coughlin Decl., at 1 (Plaintiff’s balance of schedules, –7– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.565 Page 8 of 15 1 points to the leases for the properties and notes that there is no reference to any 2 property management company in the leases. (Exhibit 22 to Lavinsky Decl.) Thus, 3 Defendant contends that Plaintiff personally manages the properties. 4 debates the veracity of Exhibit 22, stating he “did not provide the leases” that 5 Defendant attached, and they were not “made, written, or signed by Plaintiff.” 6 (Reply at 3.) Plaintiff does not provide the Court with the “correct” leases, and 7 Defendant contends the attachment contains the leases that Plaintiff himself gave 8 Defendant when he applied for the loan. The Court is not at this time evaluating the 9 legitimacy of the leases; but, Plaintiff does not submit any leases or any evidence 10 that he does use a property management company or that he does not personally 11 manage the properties. Therefore, it appears that Plaintiff personally manages the 12 properties. “The more personal involvement there is, the more likely it is to be 13 business purpose.” Thorns, 726 F.2d at 1419. As to the third factor, Defendant points 14 to Plaintiff’s bankruptcy filing where he listed his income as $6,900 per month. 15 (Exhibit 24 to Coughlin Decl., at 1.) The income from the acquisition is the rent 16 received on the properties, which Defendant calculates to be $14,945 per month. 17 (Opp’n at 12; Lavinsky Decl. ¶ 30.) Defendant bases this calculation on “information 18 submitted by Plaintiff in connection with his loan request (including the leases).” 19 (Lavinsky Decl. ¶ 30.) Plaintiff responds that parcel 2 “generates $4,700” but he and 20 his wife pay $2,000 of that and parcel 1 “generates $5,000.” (Reply at 2.) Plaintiff 21 provides no evidence or documentation to support this calculation. The higher the 22 ratio of the income from the property to Plaintiff’s income, the more likely the loan 23 was made for a business purpose. Thorns, 726 F.2d at 1419. By Defendant’s 24 calculations, the income from the rent is more than two times Plaintiff’s income, and 25 by Plaintiff’s, the income from the rent is slightly more than Plaintiff’s income. As 26 to the fourth factor, the size of the loan is $1,200,000, which is large. “The larger 27 the transaction, the more likely it is to be business purpose.” Thorns, 726 F.2d at 28 1419. As to the fifth factor, as noted above, Plaintiff repeatedly attested in loan –8– Plaintiff Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.566 Page 9 of 15 1 documents that the loan was made for business purposes. (See Exhibit 13 to 2 Lavinsky Decl.) Now he says he lives at parcel 2, but this is contradicted by the 3 statement of purpose stated in loan documents, which Plaintiff signed and initialed. 4 After weighing these factors, the Court finds that Plaintiff is not likely to 5 succeed in establishing that the loan was for personal purposes. See Cox v. LB 6 Lending, LLC, No. EDCV171580JGBSPX, 2017 WL 6820171, at *8 (C.D. Cal. Nov. 7 16, 2017), aff’d, 713 F. App’x 623 (9th Cir. 2018) (denying preliminary injunction 8 on TILA claim after finding the plaintiff “cannot overcome Defendants’ 9 documentary evidence and meet her burden of proof” that the loan falls under TILA). 10 Plaintiff has submitted little evidence that would show that the loan was made for 11 personal reasons, and “evidence of the personal nature of [the] loan, if any exists, 12 should be uniquely available to [Plaintiff], especially at this early stage of litigation.” 13 Bergman v. Fid. Nat. Fin., Inc., No. 2:12-CV-05994-ODW, 2012 WL 6013040, at 14 *5 (C.D. Cal. Dec. 3, 2012). 15 In fact, a weighing of the factors suggests that the loan was for business 16 purposes whether or not Plaintiff lives at the property—a factor the Court considers 17 along with the five factors the Ninth Circuit has recognized. There are seven units 18 on the property and Plaintiff lives in one unit and receives rent from the six other 19 properties and (according to Defendant) from renting out four garages. 20 Lavinsky Decl. ¶ 30.)5 This shows the loan primarily is secured by property that 21 Plaintiff rents out and the purpose of the loan was so that he could do so. Indeed, it 22 is not logical that one would take out a $1,200,000 loan for two parcels (covering 23 seven units and multiple garages) solely or primarily for personal purposes. See 24 Schulken v. Wash. Mut. Bank, Henderson, NV, No. C 09-02708 JW, 2010 WL 25 8971766, at *3 (N.D. Cal. Mar. 3, 2010) (“In evaluating whether a certain loan was 26 made for commercial purposes, the emphasis should be on the purpose of the (See 27 28 5 At oral argument, Plaintiff’s counsel stated that Plaintiff had once rented out the garages, but he no longer does so. –9– Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.567 Page 10 of 15 1 transaction and not the categorization of the properties used to secure the loan.”). 2 Further, commentary on Regulation Z provides that even for owner-occupied rental 3 property, “[c]redit extended to acquire the rental property is deemed to be for 4 business purposes if it contains more than 2 housing units.” Supplement I to Part 5 226, Effective January 1, 2020, 12 C.F.R. § Pt. 226, Supp. I, Subpt. A. The loan 6 covers all seven housing units on the parcels, accordingly, the commentary still 7 deems the loan to be one made for business purposes even if one of the units is owner- 8 occupied. 9 10 11 After considering the evidence in front of the Court at this time, the Court finds that Plaintiff is not likely to succeed on the merits of his TILA claim. 2. The Real Estate Settlement Procedures Act (“RESPA”) 12 Plaintiff states he was never provided RESPA disclosures. (Compl. ¶¶ 47, 53.) 13 He states even if the loan “was a high-priced mortgage,” Defendant violated 14 Regulation X “because Plaintiff was not given the required list of counseling 15 resource providers, and Plaintiffs [sic] did not take a counselling session.” (Id. ¶ 52.) 16 RESPA does not apply to “credit transactions involving extensions of credit 17 primarily for business, commercial, or agricultural purposes.” 12 U.S.C. § 2606(a)(1). 18 Regulation X is RESPA’s implementing regulation. 12 C.F.R. §§ 1024 et seq. It 19 similarly exempts business purpose loans from RESPA’s coverage. 20 § 1024.5(b)(2). For the reasons stated above, Plaintiff is not likely to succeed in 21 establishing that the loan was for personal purposes, and thus has not met his burden 22 in showing that RESPA applies. 23 24 3. The Home Ownership and Equity 12 C.F.R. Protection Act (“HOEPA”) 25 Plaintiff states he was not provided with certain disclosures or information in 26 violation of HOEPA. (Compl. ¶¶ 67–70.) Following oral argument, the Court 27 requested the parties provide supplemental briefing on HOEPA. 28 – 10 – Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.568 Page 11 of 15 1 Plaintiff claims he has a “high-cost” mortgage that is covered by HOEPA. 2 HOEPA “is an amendment of TILA, and therefore is governed by the same remedial 3 scheme and statutes of limitations as TILA.” Beriones v. IMH Assets Corp., No. 4 19CV301-CAB-NLS, 2019 WL 1714467, at *3 (S.D. Cal. Apr. 16, 2019) (citation 5 omitted). A mortgage is “high-cost” and triggers HOEPA protections if it is a 6 consumer credit transaction that is secured by the consumer’s principal dwelling and 7 satisfies one of the following conditions: (1) the mortgage has an annual percentage 8 rate that exceeds the average prime rate by more than 6.5 points on a first mortgage, 9 or more than 8.5 points on a subordinate mortgage; (2) the total points and fees 10 exceed five percent of the transaction for $20,000 or more or the lesser of eight 11 percent; or $1,000 on a transaction less than $20,000; or (3) the transaction 12 documents allow for prepayment fees more than three years after the closing, or such 13 fees amount to more than two percent of the prepaid sum. 15 U.S.C. § 1602(b)(b). 14 Plaintiff argues Defendant did not provide him with certain HOEPA disclosures and 15 that Defendant violated section 1639(r), which provides that a creditor may not take 16 any action “in connection with a high cost mortgage . . . to structure a loan transaction 17 as an open-end credit plan or another form of loan for the purpose and with the intent 18 of evading the provisions of this subchapter.” 15 U.S.C. § 1639(r). 19 Defendant points to 15 U.S.C. § 1603, which states, “[t]his subchapter does 20 not apply to . . . credit transactions involving extensions of credit primarily for 21 business [or] commercial purposes . . . .” 15 U.S.C. § 1603(1). Defendant contends, 22 “if the transaction is exempt under 15 U.S.C.A. § 1603(1), then a lender is expressly 23 not subject to any of the requirements or operation of any other provision of 24 Subchapter 1 [namely section 1602 or 1639(r)].” (ECF No. 20, at 3.) This is because 25 the subchapter referred to in 1603 covers 15 U.S.C. § 1601 to § 1667f, and therefore 26 the Court should not look beyond 1603, which provides “this subchapter” shall not 27 apply to loans primarily for business purposes. Thus, it does not matter whether 28 Plaintiff lives on one of the parcels, or even if the unit there is his “principal – 11 – Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.569 Page 12 of 15 1 dwelling” under section 1602, because the primary purpose of the loan was business. 2 (Id. at 5.) Plaintiff does not mention section 1603 in his supplemental brief, only 3 arguing that the parcel does constitute his principal dwelling and he is still within the 4 statute of limitations to rescind the loan. (ECF No. 23.) The Court agrees with 5 Defendant, and a reading of section 1603 informs the Court that it need not look any 6 further into the HOEPA subchapter if the loan is primarily for business purposes, like 7 the loan here. 8 Further, in analyzing TILA, the Ninth Circuit noted that the rescission and 9 damage remedies are available only in “consumer credit transactions” which TILA 10 defines “carefully.” Gilliam, Tr. of Lou Easter Ross Revocable Tr. v. Levine, Tr. of 11 Joel Sherman Revocable Tr., 955 F.3d 1117, 1120 (9th Cir. 2020). Namely, “[f]or a 12 loan to qualify as a consumer credit transaction under the statute, a borrower must 13 demonstrate that the loan was extended to (1) a natural person, and was obtained (2) 14 ‘primarily for personal, family, or household purposes.’ Extensions of credit to 15 organizations are excluded, as are credit transactions performed for non-consumer 16 purposes, such as loans for a business purpose, even when that loan is obtained by a 17 natural person.” Id. (citations omitted) (citing 15 U.S.C. § 1602(i) and § 1603). The 18 definition of “high cost mortgage” under HOEPA is a “consumer credit transaction 19 that is secured by the consumer’s principal dwelling” if certain conditions are met. 20 15 U.S.C. § 1602(b)(b)(1)(A). For the Court to even turn to the questions of whether 21 the loan is secured by Plaintiff’s “primary dwelling” and whether the conditions are 22 met, the loan must in the first place be a consumer credit transaction. The Court has 23 found above that the loan was extended primarily for business purposes, accordingly, 24 it is not a consumer credit transaction. 25 Plaintiff’s next argument is that Defendant improperly structured the loan in a 26 way to avoid HOEPA, which is not allowed under 15 U.S.C. § 1639(r). But section 27 1639 also falls within the “subchapter” referred to in 1603 (i.e. “[t]his subchapter 28 does not apply to . . . credit transactions involving extensions of credit primarily for – 12 – Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.570 Page 13 of 15 1 business [or] commercial purposes”), so, section 1639 does not apply if the loan was 2 extended primarily for business purposes. And further, section 1639 itself provides: 3 “A creditor may not take any connection with a high-cost mortgage 4 . . . to structure a loan transaction as an open-end credit plan or another form of loan 5 for the purpose and with the intent of evading the provisions of this subchapter.” 15 6 U.S.C. § 1639(r) (emphasis added). Thus, section 1639 does not apply unless the 7 loan in question is a “high-cost mortgage” which itself is defined as a “consumer 8 credit transaction.” The loan here is not a consumer credit transaction because it was 9 not extended primarily for personal reasons. Section 1639 does not apply. 10 For these reasons, Plaintiff has not met his burden in demonstrating that 11 HOEPA applies to his loan. 12 4. Negligence 13 Plaintiff’s Complaint broadly alleges Defendants had “a duty to exercise 14 reasonable care and skill in performing their duties for the benefit of Plaintiff, in 15 representing Plaintiff in originating” the loan, but Defendants breached this duty and 16 their fiduciary duty. (Compl. ¶¶ 79, 80.) There is no further information by Plaintiff 17 as to what action specifically led to a breach of duty, and the Court found above that 18 Plaintiff is not likely to succeed on his claim regarding violation of the federal 19 statutes, so this cannot form the basis of the breach. Plaintiff has not established he 20 is likely to succeed on the merits of his negligence claim. 21 5. Unfair Competition Law 22 California Business and Professions Code § 17200 et seq., also known as the 23 California Unfair Competition Law (“UCL”), prohibits acts of “unfair competition,” 24 including any “unlawful, unfair or fraudulent business act or practice.” Specifically, 25 Plaintiff alleges “Defendants [sic] conduct was unfair in that Defendant violated 26 Civil Code § 1572 (Fraud).” (Compl. ¶ 101.) Because the Court finds below that 27 Plaintiff has not adequately alleged fraud, the same result goes for the UCL claim 28 based on fraud. – 13 – Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.571 Page 14 of 15 1 6. Fraud 2 Plaintiff alleges fraud occurred because Defendant “knew that Plaintiff had 3 [sic] could not pay the LOAN they were [sic] receiving. Defendant was told by Alan 4 Paranada that in six months, he would be able to refinance into a conventional loan 5 with an interest of 4.5%.” (Compl. ¶ 117.) The Court assumes Plaintiff meant to say 6 that he (not Defendant) “was told by Alan Paranada” about the refinance. However, 7 the Complaint does not say who Alan Paranada is, nor does it state Parnada’s 8 connection to either Defendant or his role in the transaction. In his supplemental 9 declaration, Plaintiff attests that Paranada is a loan officer for Defendant. (Acevedo 10 Supp. Decl. ¶ 15.) 11 Federal Rule of Civil Procedure 9(b) demands that allegations of fraud “be 12 ‘specific enough to give defendants notice of the particular misconduct . . . so that 13 they can defend against the charge and not just deny that they have done anything 14 wrong.’” Bly–Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001) (citation 15 omitted). “Averments of fraud must be accompanied by ‘the who, what, when, 16 where, and how’ of the misconduct charged. Vess v. Ciba-Geigy Corp. USA, 317 17 F.3d 1097, 1106 (9th Cir. 2003). Without any more detail about Paranada, the 18 statement he allegedly made, and why it was false, Plaintiff has not met Rule 9(b) 19 and therefore does not establish that he is likely to succeed on the merits of his claim. 20 “Likelihood of success on the merits ‘is the most important’ Winter factor; if 21 a movant fails to meet this ‘threshold inquiry,’ the court need not consider the other 22 factors, in the absence of ‘serious questions going to the merits.” Disney Enters, Inc. 23 v. VidAngel, Inc., 869 F.3d 848, 856 (9th Cir. 2017). Plaintiff has not established 24 any serious questions on the merits of his claims, so the Court does not consider the 25 other factors. 26 27 28 /// – 14 – Case 3:20-cv-01263-BAS-MSB Document 25 Filed 08/10/20 PageID.572 Page 15 of 15 1 IV. CONCLUSION 2 Plaintiff has not established he is likely to succeed on the merits of any of his 3 claims, therefore, he has not established that a temporary restraining order is 4 warranted. For the foregoing reasons, the Court DENIES Plaintiff’s Motion. The 5 Court also LIFTS the temporary postponement of the foreclosure it previously 6 issued. (See ECF No. 18.) 7 IT IS SO ORDERED. 8 9 DATED: August 10, 2020 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 – 15 –
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