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Degamo v. Bank of America, N.A.

United States District Court, D. Hawaii

March 14, 2019

MILAGROS JUAN DEGAMO, et al., Plaintiffs,
v.
BANK OF AMERICA, N.A., et al. Defendants.

         ORDER DENYING PLAINTIFFS' (1) MOTION TO ACCEPT RATIFICATION BY BANKRUPTCY TRUSTEES OR, IN THE ALTERNATIVE, PERMIT SUBSTITUTION OF BANKRUPTCY TRUSTEES FOR PLAINTIFFS PROPRIOS AND PADUA AND (2) RENEWED MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

          JILL A. OTAKE UNITED STATES DISTRICT JUDGE

         INTRODUCTION

         The present litigation, a putative class action, arises from Defendant Bank of America's (“Defendant”) non-judicial foreclosures of over a thousand Hawai‘i homeowners' mortgages. Plaintiffs Mac and Helen Padua (collectively “Paduas”), and Susan Propios (“Ms. Propios”) (collectively “Plaintiffs”) request an order (1) accepting ratification of this action by Elizabeth Kane (“Trustee Kane”), in her capacity as Chapter 7 Trustee for the bankruptcy estate of the Paduas, and Dane Field (“Trustee Field”), in his capacity as Chapter 7 Trustee of the bankruptcy estate of Ms. Propios, or, alternatively, permitting the Trustees to substitute in for the Paduas and Ms. Propios; and (2) granting leave to amend the First Amended Complaint (“FAC”).

         For the reasons articulated below, the Court DENIES Plaintiffs' (1) Motion to Accept Ratification by Bankruptcy Trustees or, in the Alternative, Permit Substitution of Bankruptcy Trustees for Plaintiffs Propios and Padua and (2) Renewed Motion for Leave to File Second Amended Complaint, Doc. No. 127, and DISMISSES the action with prejudice.

         BACKGROUND

         A. Factual History

         1. The Paduas

         On September 24, 2009, the Paduas obtained a mortgage from Defendant, which was secured by real property located on Kekuanoni Street in Honolulu. FAC, Doc. No. 14 at ¶¶ 59-60. Thereafter, Defendant assigned the mortgage to BAC Home Loans.[1] Id. at ¶ 64. The Paduas defaulted on the mortgage and BAC Home Loans instituted foreclosure proceedings against them. Id. at ¶¶ 65-72. BAC Home Loans was the highest bidder at the September 16, 2010 public auction. Id. at ¶¶ 73, 77.

         On November 30, 2011, the Paduas filed for Chapter 7 Bankruptcy. Opp'n at 3 (citing In re Padua, No. 11-03105 (Bankr. D. Haw.)). In their Chapter 7 Schedules, the Paduas responded “None” as to whether they possessed any “contingent and unliquidated claims of every nature.” Doc. No. 80-3, Schedule B - Personal Property at ¶ 21. The Bankruptcy Court discharged the Paduas' debt on March 6, 2012. Doc. No. 80-5.

         2. Ms. Propios

         Ms. Propios obtained a $484, 000 loan from Community Lending Incorporated on June 28, 2007, and executed a promissory note (“Note”) for $484, 000 payable to Community Lending. FAC, Doc. No. 14 at ¶ 82. The loan funds were used to purchase real property located on Lehopulu Street in Waipahu. Id. at ¶ 83. Ms. Propios granted Mortgage Electronic Registration Systems, Inc. (“MERS”) a mortgage on the property to secure repayment of the Note. Id. MERS thereafter assigned the mortgage to BAC Home Loans. Id. at ¶ 87.

         Following Ms. Propios' default on the mortgage, BAC Home Loans commenced foreclosure proceedings. Id. at ¶¶ 88-95. BAC Home Loans was the highest bidder at the March 9, 2010 auction. Id. at ¶ 101.

         On July 19, 2011, Ms. Propios filed for Chapter 7 bankruptcy. Opp'n at 3 (citing In re Propios, No. 11-02005 (Bank. D. Haw.)). In her Chapter 7 Schedules, Ms. Propios responded “None” as to whether she possessed any “contingent and unliquidated claims of every nature.” Doc. No. 80-6, Schedule B - Personal Property at ¶ 21. The Bankruptcy Court discharged Ms. Propios' debt on October 24, 2011. Doc. No. 80-8.

         B. Procedural History

         Milagros Juan Degamo[2] commenced this action on September 7, 2012, in the Circuit Court of the First Circuit, State of Hawai‘i. On March 25, 2013, Defendant removed the action to this court.

         On April 23, 2013, Plaintiffs filed the FAC. Doc. No. 14. The FAC added the Paduas and Ms. Propios as Plaintiffs.

         On October 17, 2013, the Court stayed the case pending Ninth Circuit appeals in Lima v. Deutsche Bank National Trust Co., Civil No. 12-00509 SOM-RLP; Gibo v. U.S. Bank N.A., Civil No. 12-00514 SOM-RLP; and Bald v. Wells Fargo Bank, Civil No. 13-00135 SOM-KSC. Doc. No. 50.

         On May 23, 2017, Defendant filed a notice informing the Court that the Ninth Circuit issued a decision regarding the Lima and Gibo cases. Doc. No. 52. The Court lifted the stay on June 22, 2017. Doc. No. 61.

         On December 8, 2017, Plaintiffs filed a Motion for Leave to File Second Amended Complaint. Doc. No. 77. Defendant filed a Motion for Judgment on the Pleadings; to Strike Class Allegations; and to Modify First Amended Rule 16 Scheduling Order on December 26, 2017. Doc. No. 80.

         The case was again stayed on February 13, 2018, to allow Plaintiffs to reopen their bankruptcy cases “in order to amend their respective schedules, disclose the instant claims, and determine what the respective trustees intend to do.” Doc. No. 113. Due to the stay, the Motion for Leave to File Second Amended Complaint and the Motion for Judgment on the Pleadings; to Strike Class Allegations; and to Modify First Amended Rule 16 Scheduling Order were not ruled upon.

         In April 2018, Plaintiffs amended their bankruptcy schedules. Opp'n at 5.

         On May 31, 2018, Plaintiffs filed a Submission of Documents Under Fed. R. Civ. Proc. Rule 17(a)(3), Relating to Ratification and Notice of Ratification. Doc. No. 117.

         At an August 15, 2018 status conference, the Court directed Plaintiffs to file a Motion for Ratification and/or to Amend Complaint by September 14, 2018. Doc. No. 124. In anticipation of the deadline to file this Motion, the Court lifted the stay on September 13, ...


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