United States District Court, D. Hawaii
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
A. OTAKE UNITED STATES DISTRICT JUDGE
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”).
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.
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. 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.
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.
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.
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.
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.
Juan Degamo 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.
April 23, 2013, Plaintiffs filed the FAC. Doc. No. 14. The
FAC added the Paduas and Ms. Propios as Plaintiffs.
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.
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.
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.
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
April 2018, Plaintiffs amended their bankruptcy schedules.
Opp'n at 5.
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.
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, ...