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Smith v. PNC Bank, National Association

United States District Court, D. Colorado

November 29, 2017

PNC BANK NATIONAL ASSOCIATION, and THOMAS S. MOWLE, El Paso County Public Trustee, Defendants.



         THIS MATTER comes before the Court on Plaintiff Michael Smith's Emergency Motion for a Temporary Restraining Order and Preliminary Injunction, and Brief in Support Thereof (#4).


         According to Mr. Smith's pro se[1] Verified Complaint (# 1), Mr. Smith is the owner of a parcel or real property in Peyton, Colorado, which is located within El Paso County, Colorado. The property is encumbered by a promissory note, [2] which Defendant PNC Bank National Association (“PNC”) claims to hold, along with a Deed of Trust in favor of Mr. Mowle, the El Paso County Public Trustee. Mr. Smith concedes that no payments have been made on the note since January 2007.

         For purposes of the instant matter, it is necessary to note only that PNC commenced foreclosure proceedings on the property in May 2017, invoking the procedures of Colo. R. Civ. P. 120. The state court conducted several hearings in the matter, including hearing certain defenses Mr. Smith sought to raise, but on November 9, 2017, the court authorized the Public Trustee to conduct a foreclosure sale. That sale is set for November 29, 2017. Mr. Smith commenced this action on November 17, 2017, and the matter was assigned to the undersigned late in the afternoon of November 21, 2017.

         In summary, Mr. Smith's Complaint asserts that certain provisions of Colorado's non-judicial foreclosure process, C.R.S. § 38-38-101(1)(b)(II), (1)(c)(II), and (6)(b), violate the Due Process clause of the Fourteenth Amendment to the U.S. Constitution.[3] Those provisions provide that although a party seeking to initiate a foreclosure proceeding generally must produce “the original evidence of the debt, ” (along with the necessary indorsements) and “the original recorded deed of trust.” C.R.S. § 38-38-101(1)(b), (c). However, the statute also provides that, as an alternative to producing the original note and deed, the party initiating the foreclosure may instead provide only a copy of those documents, plus a certification or statement by the party's attorney attesting to the accuracy of the copy. C.R.S. § 38-38-101(1)(b)(II), (c)(II). Separately, C.R.S. § 38-38-101(6) requires the party to produce the original indorsements that may be necessary to demonstrate that the party is the proper holder of a promissory note, but C.R.S. § 38-38-101(6)(b) provides that if the original note is not so indorsed, the party may satisfy the statute's requirements by producing a copy of the note plus a statement from its attorney “that the party . . . is the holder of the evidence of debt.” Mr. Smith contends that these provisions allow a party seeking foreclosure to “make an unsworn claim . . . that [it] was the ‘current holder of evidence of debt' without ever having to provide evidence thereof.” He further asserts that these statutes “lower the standard of proof that a creditor must meet in order to proceed to foreclosure from original documentary evidence to an unsworn statement” and “create an additional burden upon a debtor to establish evidence of the creditor's identity which the creditor, itself, is not required to locate.” Relying in Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974), among other cases, Mr. Smith argues that these statutory provisions fail to provide the requisite Due Process protections he is entitled to before being deprived of his property.[4]

         Mr. Smith has filed an Emergency Motion for Temporary Restraining Order and Preliminary Injunction (# 4), requesting that the Court enjoin the Public Trustee from proceeding with the foreclosure sale.


         A. Standard of review

         Because Mr. Smith seeks an ex parte temporary restraining order, he must first comply with Fed.R.Civ.P. 65(b)(1). That rule requires him to: (i) demonstrate, via affidavit or verified complaint, facts that show that he will suffer irreparable harm before PNC can be heard in opposition, Rule 65(b)(1)(A); and (ii) certify in writing any efforts that he made to give PNC notice of the motion and the reasons why such notice should not be required, Rule 65(b)(1)(B).

         In addition, Mr. Smith must also make a sufficient showing as to the traditional elements for provisional injunctive relief: (i) irreparable harm to Mr. Smith if the injunction is not granted; (ii) a substantial likelihood that the movant will prevail on the merits; (iii) threatened injury to the movant outweighs possible harm to the opposing party if the injunction is granted; and (iv) that the injunction would not be contrary to the public interest. RoDa Drilling Co. v. Siegal, 552 F.3d 1203, 1208 (10th Cir. 2009).

         However, it is worth noting that the preliminary injunction Mr. Smith requests - one prohibiting foreclosure upon his home - is one that essentially grants him all of the relief requested in his Complaint. The Complaint requests “a permanent injunction prohibiting [the Public Trustee] from undertaking any steps which would lead to a foreclosure sale of Smith's property, ” along with declarations that the cited provisions of Colorado law are unconstitutional, “a declaration that PNC must provide the original Note, Deed of Trust, and assignments before proceeding with any future attempts to foreclose on the property, ” and a declaration that PNC's rights to foreclose have been extinguished by the statute of limitation. But for the last item, all of the other items of relief Mr. Smith seeks would effectively be granted were this Court to conclude that Mr. Smith is entitled to a preliminary injunction (and to some extent, his request for an injunction incorporates the last item as well). Mr. Smith must show a likelihood of success on his claims of unconstitutionality in order to obtain his requested injunctive relief and because his claims of unconstitutionality are issues of law, not fact, a finding that he is likely to succeed on those claims is effectively identical to a finding that the statutes are indeed unconstitutional.[5] Similarly, a finding that the statutes are unconstitutional effectively requires PNC to support any further requests to foreclose with original documentation, as the Court will have nullified the statutory alternatives to original evidence. Where the requested preliminary injunction grants essentially all of the relief requested, the Court requires that Mr. Smith demonstrate that the four factors listed above “weight heavily and compellingly in his favor.” O Centro Espirita Beneficienty Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 977 (10th Cir. 2004).

         B. Merits

         The Court finds that Mr. Smith has adequately complied with Rule 65(b)(1)(A), insofar as his Complaint is verified. The Complaint alleges that, if the foreclosure sale scheduled for November 29, 2017 is allowed to proceed, he is subject to being evicted from his home by the successful buyer. The Court has some doubt as to whether that is a foregone conclusion, but it will indulge the assumption that the property in question is unique and thus, its unwarranted loss to Mr. Smith could not be remedied through monetary compensation. See e.g. Sportsmen's Wildlife Defense Fund v. U.S. Dept. of the Interior, 949 F.Supp. 1510, ...

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