Psarakis v. World Business Lenders Inc
3:20-cv-08868
| N.D. Cal. | Dec 17, 2020Background
- Plaintiffs Nikolaos and Panagiota Psarakis, limited English‑proficient Greek immigrants, used a mortgage broker (Pete Boudouvas) and transferred title to a business to obtain financing for their family home.
- Broker arranged a short‑term, extremely high‑interest loan (~69% APR, $645,000); plaintiffs paid ~$240,000 in periodic payments. Broker later obtained a second loan ($615,000 at 12%) that purportedly paid off the first loan but left a large undisclosed balance.
- Plaintiffs stopped payments after being told the first loan was settled and later learned the first loan still had a large remaining principal; the second‑loan lender (Fricke trust) initiated foreclosure and scheduled a trustee sale for December 17, 2020.
- Plaintiffs sued and sought a TRO on December 14; a hearing was held December 17. Plaintiffs asserted fraud and breach of fiduciary duty against the broker and raised statutory irregularities in the foreclosure process.
- The court found imminent, irreparable harm (loss of family home), determined the equities and public interest favored injunctive relief during a pandemic winter, and enjoined the sale pending further proceedings.
- Relief was conditioned on plaintiffs’ posting a $25,000 bond and tendering one usual payment to the lender by December 22; the court set a briefing schedule and limited discovery for a preliminary injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Irreparable harm / balance of equities for TRO | Home sale imminent; loss of family residence is irreparable | Sale should proceed; no adequate stay shown | Court: irreparable harm shown; equities and public interest tip sharply to plaintiffs; TRO granted |
| Fraud / breach of fiduciary duty by broker | Boudouvas misled them into predatory loans and concealed balances | Trustee/lender (Fricke) disclaims any relationship or knowledge of broker misconduct | Court: prima facie claims against broker plausible but plaintiffs failed to show direct tie between broker and trust; still significant questions exist |
| Applicability / compliance with Cal. Civ. Code § 2923.5 | Property is owner‑occupied; servicer had to contact borrowers and assess alternatives before filing default | Servicer’s notice asserted §2923.5 did not apply because loan not a first lien or not owner‑occupied | Court: defendants’ documents conceded noncompliance; §2923.5 appears to apply; remedy is postponement of sale; supports TRO |
| Scope and conditions of interim relief | Requested stop to trustee sale pending merits | Lender/Trustee opposed interruption of sale absent security | Court enjoined sale but conditioned continued relief on $25,000 bond, one payment by a set date, service on defendants, limited discovery, and a briefing/hearing schedule |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008) (standard for preliminary injunction requires likelihood of success, irreparable harm, balance of equities, public interest)
- Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) (where equities tip sharply in plaintiff's favor, a serious question on the merits may suffice)
- Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832 (9th Cir. 2001) (discussion of standards for injunction and requisite showing)
- Lueras v. BAC Home Loan Servicing, 221 Cal. App. 4th 49 (2013) (Cal. Civ. Code § 2923.5 requires lender contact to assess borrower finances and explore alternatives before filing a notice of default)
- Skov v. U.S. Bank Nat’l Ass’n, 207 Cal. App. 4th 690 (2012) (remedy for § 2923.5 noncompliance is postponement of the foreclosure sale)
- In re Turner, 859 F.3d 1145 (9th Cir. 2017) (discusses § 2923.5 and remedies in federal bankruptcy context)
- Wyatt v. Union Mortgage Co., 24 Cal. 3d 773 (1979) (broker/loan officer liability for wrongdoing; fiduciary duties in mortgage transactions)
- Robinson Helicopter Co. v. Dana Corp., 34 Cal. 4th 979 (2004) (standards for fraud and related tort claims under California law)
- Real Estate Analytics, LLC v. Vallas, 160 Cal. App. 4th 463 (2008) (real property loss is presumptively irreparable under California law)