United States District Court, E.D. Virginia, Newport News Division
G. DONMAR, SENIOR UNITED STATES DISTRICT JUDGE
August 4, 2017, the parties in the instant case appeared
before the Court for a hearing on Plaintiffs' Motion for
Preliminary Injunction and/or Temporary Restraining Order
("Motion" or "Motion for Injunction").
ECF No. 4. Plaintiffs' Motion sought to enjoin the
foreclosure sale of property located at 13 Howe Road in
Hampton, Virginia, which was scheduled to occur on August 4,
2017, at 4:15 p.m. After hearing testimony and argument, the
Court denied Plaintiffs' Motion. See ECF No. 8.
This Opinion elaborates on the reasons for the Court's
PROCEDURAL AND FACTUAL BACKGROUND
31, 2017, the Estate of Martha Dawson, Martina Dawson Ellis,
and Howard Ellis (collectively, "Plaintiffs") filed
a complaint against Ditech Financial, LLC and Commonwealth
Trustees, LLC (collectively, "Defendants") in the
Circuit Court for the City of Hampton seeking injunctive
relief and compensatory damages (hereinafter
"Complaint" or "Compl."). ECF No. 1 at
Ex. A. Plaintiffs' claims arise out of a mortgage loan
secured by property located at 13 Howe Road in Hampton,
Virginia (the "Property") and serviced by Defendant
Ditech Financial, LLC ("Ditech"). Id.
¶ 6. According to the Complaint, the mortgagor on the
loan, Martha E. Dawson, died in July of 2015, after which her
daughter, Plaintiff Martina Dawson Ellis, and Ms. Ellis'
husband, Plaintiff Howard Ellis, moved into the Property and
tried to assume the monthly mortgage payments. Compl.
¶¶ 8, 12-13. Plaintiffs allege that between
October, 2015, and July, 2017, Mr. and Ms. Ellis made
numerous payments to Ditech but were unable to keep the loan
current. Id. ¶¶ 14-15. Plaintiffs further
allege that on July 7, 2017, Mr. and Ms. Ellis received
notice that a foreclosure sale of the Property would be
conducted on August 4, 2017. Id. ¶ 20. On July
31, 2017, Plaintiffs filed the instant lawsuit to enjoin the
foreclosure sale and to recover compensatory damages for
Ditech's alleged breach of "the Promissory Note and
the Deed of Trust." Id. ¶ 45.
August 3, 2017, Defendant Ditech removed Plaintiffs'
action to this Court, citing 28 U.S.C. §§ 1331 and
1332. Id. at 1. On that same day,
Plaintiffs filed the instant Motion to enjoin the foreclosure
sale of the Property that was scheduled to occur the next day
at 4:15 p.m. See Motion for Injunction, ECF No. 4;
PI. Mem. in Support, ECF No. 5. Hours later, Defendants filed
a memorandum in opposition to Plaintiffs' Motion
("Def. Resp."). ECF No. 7. On August 4, 2017, prior
to the scheduled foreclosure sale, the Court conducted a
hearing and ultimately denied Plaintiffs' Motion.
See ECF No. 8.
of the Federal Rules of Civil Procedure governs issuance of
preliminary injunctions and temporary restraining orders.
Fed.R.Civ.P. 65. Where, like here, the adverse party is on
notice, the Court may enter a preliminary injunction when the
movant demonstrates that: (1) it is likely to succeed on the
merits; (2) it is likely to suffer irreparable harm in the
absence of preliminary relief; (3) the balance of the
equities tips in its favor; and (4) an injunction is in the
public interest. Winter v. Natural Res. Defense Council.
Inc., 555 U.S. 7, 20 (2008); Perry v. Judd. 471
Fed.App'x. 219, 223 (4th Cir. 2012). The Fourth Circuit
has found that a plaintiff must "clearly show" that
it is likely to succeed on the merits. Dewhurst v.
Century Aluminum Co.. 649 F.3d 287, 290 (4th Cir. 2011)
(quoting Winter. 555 U.S. at 22). "The grant of
preliminary injunctions [is] ... an extraordinary remedy
involving the exercise of a very far-reaching power, which is
to be applied 'only in the limited circumstances'
which clearly demand it." Direx Israel. Ltd. v.
Breakthrough Med. Corp.. 952 F.2d 802, 811 (4th Cir.
1992) (quoting Instant Air Freight Co. v. C.F. Air
Freight. Inc.. 882 F.2d 797, 800 (3d Cir. 1989)).
case, Ditech argues that Plaintiffs have not "clearly
shown" that they are likely to succeed on the merits
because they do not have standing to bring their claims. Def.
Resp., ECF No. 7, at 3. Standing is a threshold issue in
federal litigation because it determines "the propriety
of judicial intervention." Warm v. Seldin. 422
U.S. 490, 518 (1975). The existence of federal jurisdiction,
including standing, "ordinarily depends on the facts as
they exist when the complaint is filed." Luian v.
Defs. of Wildlife. 504 U.S. 555, 571 (1992) (quoting
Newman-Green. Inc. v. Alfonzo-Larrain. 490 U.S. 826,
830 (1989) (emphasis added)).
standing doctrine is comprised of two distinct components:
constitutional standing and prudential standing. Bishop
v. Bartlett. 575 F.3d 419, 423 (4th Cir. 2009) (citing
Allen v. Wright, 468 U.S. 737, 751 (1984)).
Constitutional standing is derived from Article III of the
United States Constitution. Id. In order to meet the
Article III requirements for standing, a plaintiff must
prove: (1) that he or she suffered an
"injury-in-fact;" (2) a causal relationship between
the injury and the challenged conduct; and (3) that the
injury will likely be redressed by a favorable decision.
Friends of the Earth. Inc. v. Laidlaw Envtl.
Services. 528 U.S. 167, 180-81 (2000); Luian.
504 U.S. at 560-61. Prudential standing, on the other hand,
is the product of self-imposed nonconstitutional limitations
on the federal courts' adjudicative authority.
Bishop, 575 F.3d at 423. One such limitation is that
"the plaintiff generally must assert his own legal
rights and interests, and cannot rest his claim to relief on
the legal rights or interests of third parties."
Warth. 422 U.S. at 499.
Complaint asserts two primary claims against Defendants.
First, it alleges that Ditech violated "Regulation
X" of the Real Estate Settlement Procedures Act
("RESPA"), specifically, the regulatory provisions
found in 12 C.F.R. §§ 1024.39(a) and 1024.41(c),
(g). Compl. ¶¶ 36-42. Second, the Complaint alleges
that the Defendants breached the "Promissory Note"
and/or "Deed of Trust" securing the Property.
Id. ¶¶ 32, 46. While Plaintiffs'
Complaint does not attach any documents purporting to be the
contract(s) at issue, Defendant Ditech attached to its
opposition brief the Note between Martha E. Dawson, Borrower,
and SunTrust Mortgage, Inc., Lender, for a loan on the
subject Property, dated June 15, 2007, (Exhibit A), as well
as the Deed of Trust given by Martha E. Dawson, as
Borrower/Trustor, securing the Note (Exhibit B). ECF Nos.
7-1, 7-2. Plaintiffs do not contest the authenticity of these
instant Motion for Injunction is based solely on
Plaintiffs' RESPA claim. ECF No. 4. In their supporting
memorandum, Plaintiffs argue that they are likely to succeed
on the merits of this claim because (1) Ditech failed to
"cease foreclosure activity on [the Property]"
after receiving Plaintiffs' "full and complete loss
mitigation package" as required under 12 C.F.R. §
1024.41(g); (2) Ditech failed to provide notice to Plaintiffs
of the loss mitigation options available as required under 12
C.F.R. § 1024.41(c); and (3) Ditech failed to
"initiate live contact with the borrower once the loan
bec[ame] thirty-six days delinquent" as required under
12 C.F.R. § 1024.39(a). ECF No. 5 at 2-3. In addition,
Plaintiffs argue that the three other requirements for
injunctive relief are satisfied because (1) Mr. and Ms. Ellis
currently reside in the Property and thus will be irreparably
harmed by foreclosure; (2) the equities weight in favor of
the Plaintiffs in this case who stand to lose their family
home while Defendants stand "to lose nothing"; and
(3) the public interest weighs in favor of enjoining
foreclosures by loan servicers, like Ditech, "who run
roughshod over borrowers." Id. at 3-4.
key argument in opposition to Plaintiffs' Motion is
jurisdictional: It argues that Plaintiffs cannot succeed on
the merits of their RESPA claim because Plaintiffs lack
standing. ECF No. 7 at 3-4. In support, Ditech argues that
only the borrower can sue under RESPA, and here, Martha E.
Dawson is the sole borrower identified in the Note and the
Deed of Trust. Id. at 4 (citing Ex. A, ECF No. 7-1,
at 4; Ex. B, ECF No. 7-2, at 1). Ditech adds that Mr. and Ms.
Ellis are not parties to or the intended beneficiaries of
either the Note or the Deed of Trust for the subject
Property. Id. And despite Ms. Ellis' claim that
she inherited the subject Property upon her mother's
death, neither she nor Mr. Ellis is the executor or qualified
administrator of Ms. Dawson's estate, nor did they assume
Ms. Dawson's rights and obligations under the Note or
Deed of Trust. Id. at 3-4. Without such privity of
contract, Ditech argues that Plaintiffs lack standing to sue
Ditech with respect to Ms. Dawson's mortgage or her
rights thereunder. Id.
hearing on the instant Motion, Plaintiffs did not dispute the
factual bases for Ditech's argument. Instead, Plaintiffs
argued that, at all relevant times, Ditech treated Ms. Ellis
as if she assumed Ms. Dawson's rights and obligations
under the mortgage loan and therefore cannot now contest her
standing to sue as a non-party to the Note or Deed of Trust.
In support, Ms. Ellis testified to the following facts: (1)
that in October of 2015, she notified Ditech of her
mother's death, after which Ditech requested a copy of
Ms. Dawson's death certificate and accepted same; (2)
that between October, 2015, and July, 2017, Mr. and Ms. Ellis
made multiple loan payments to Ditech totaling at least $9,
900; and (3) that Ditech accepted and cashed all of these
payments. In addition, Plaintiffs produced to the Court a
copy of Ms. Dawson's will ...