Irigoyen v. First Guarantee Financial Corporation et al

Filing 26

ORDER vacating hearing date of October 24, 2011 and order on Plaintiff's Motion for Preliminary Injunction. signed by Chief Judge Anthony W. Ishii on 10/20/2011. (Nazaroff, H)

1
2
3
4
5
6
7
8

IN THE UNITED STATES DISTRICT COURT FOR THE

9

EASTERN DISTRICT OF CALIFORNIA

10
11
12
13
14
15
16

BERNADETTE IRIGOYEN, personally )
and on behalf of all similarly situated,
)
)
Plaintiff,
)
v.
)
)
FIRST GUARANTY FINANCIAL
)
CORPORATION, et al.,
)
)
Defendants.
)
____________________________________)

1:11-CV-1096 AWI MJS
ORDER VACATING
HEARING AND ORDER ON
PLAINTIFF’S MOTION FOR
PRELIMINARY INJUNCTION
(Doc. No. 8)

17
18
This case involves the attempted foreclosure by Defendants against real property owned
19
by Plaintiff. On July 6, 2011, the Court granted Plaintiff’s motion for temporary restraining
20
order (“TRO”). The order prevented Defendants from foreclosing on Plaintiff’s real property,
21
and set a briefing schedule and hearing date for Plaintiff’s motion for preliminary injunction.
22
Following the issuance of the TRO, the parties on several occasions stipulated to continue the
23
deadlines and effectiveness of the TRO. Currently, hearing on Plaintiff’s motion for preliminary
24
injunction is set for October 24, 2011.
25
On October 11, 2011, Plaintiff filed a notice of Chapter 7 bankruptcy.
26
On October 14, 2011, the Court ordered the parties to address the issue of Plaintiff’s
27
standing in light of her filing for bankruptcy.
28

1

On October 17, 2011, Plaintiff filed a memorandum in which she conceded that she no

2

longer has standing to prosecute this suit. Plaintiff stated that she reserves the right to continue

3

to prosecute this action if the trustee ratifies, joins or substitutes itself or abandons the causes of

4

action in the suit. Plaintiff also states that her motion for preliminary injunction is temporarily

5

moot because of the automatic bankruptcy stay. Plaintiff then requests that the hearing on her

6

preliminary injunction be stayed pending the bankruptcy proceedings.

7

On October 19, 2011, Defendants responded. Defendants contend that the Court should

8

dismiss the case instead of staying the matter, since there is no identifiable time line for the

9

bankruptcy proceedings. However, Defendants state that they will defer to the Court’s judgment.

10

Discussion

11

Once a person files for bankruptcy, a bankruptcy estate is created and that estate includes

12

causes of action that accrued prior to the filing of bankruptcy. See De Pomar v. Equifirst Corp.,

13

2010 U.S. Dist. LEXIS 143216 (C.D. Cal. Feb. 2, 2010); Runaj v. Wells Fargo Bank, 667

14

F.Supp.2d 1199, 1206 (S.D. Cal. 2009); Cobb v. Aurora Loan Servs., 408 B.R. 351, 354 (E.D.

15

Cal. 2009); Hernandez v. Downey Sav. & Loan Ass’n, 2009 U.S. Dist. LEXIS 21495 (S.D. Cal.

16

Mar. 17, 2009). The bankruptcy trustee becomes the real party in interest with respect to the

17

bankruptcy estate assets. See id. A Chapter 7 bankruptcy debtor may not prosecute a cause of

18

action that belongs to the bankruptcy estate absent a showing that the claims are exempt from the

19

bankruptcy estate or the claims have been abandoned by the bankruptcy trustee. See Runaj, 667

20

F.Supp.2d at 1206; Cobb, 408 B.R. at 354; Rowland v. Novus Fin. Corp., 949 F.Supp. 1447,

21

1453-54 (D. Haw. 1996).

22

Here, as Plaintiff concedes, because this lawsuit was filed prior to Plaintiff filing

23

bankruptcy, each of the causes of action alleged in this lawsuit are now the property of the

24

bankruptcy estate, and Plaintiff cannot prosecute them. See id. That is, Plaintiff does not have

25

prudential standing to pursue this lawsuit.1 See Dunmore v. United States, 358 F.3d 1107, 1112

26

(9th Cir. 2004); Hernandez, 2009 U.S. Dist. LEXIS 21495 at *8-*13.

27
1

28

Prudential standing is a judicially self-imposed limit on federal jurisdiction, and is separate from Article III
constitutional standing. City of L.A. v. County of Kern, 581 F.3d 841, 845 (9th Cir. 2009).

2

1

However, it is possible to cure a lack of prudential standing through Rule 17(a). See

2

Dunmore, 358 F.3d at 1112. Federal Rule of Civil Procedure 17(a)(3) reads: “The court may not

3

dismiss an action for failure to prosecute in the name of the real party in interest until, after an

4

objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be

5

substituted into the action.” As discussed, the bankruptcy trustee is now the real party in interest.

6

See Cobb, 408 B.R. at 354. Before dismissal of this lawsuit, the Court will give the trustee the

7

opportunity to ratify, join, or be substituted in this lawsuit. See De Pomar, 2010 U.S. Dist.

8

LEXIS 143216 at *14; Runaj, 667 F.Supp.2d at 1210; Rowland, 949 F.Supp. at 1461.

9

Alternatively, the Court will give Plaintiff the opportunity to file an amended complaint that

10
11

alleges either exemption or abandonment by the bankruptcy trustee. See id.
With respect to the currently pending motion for preliminary injunction, first, Plaintiff no

12

longer has standing to pursue the motion. Second, the TRO prohibits the Defendants from

13

foreclosing on Plaintiff’s property. Both parties acknowledge that the bankruptcy proceedings

14

will prevent foreclosure. See Court’s Docket Doc. Nos. 24, 25. In light of the on-going

15

bankruptcy protection, the Court no longer sees a risk of irreparable harm to Plaintiff, nor does

16

the Court currently see how an injunction would be in the public interest, nor does the Court

17

currently see how the balance of equities tip in favor of an injunction. That is, irrespective of

18

Plaintiff’s likelihood of success on the merits,2 each additional consideration regarding

19

preliminary injunctions weighs against issuing an injunction. See Winter v. Natural Res. Def.

20

Council, Inc., 129 S.Ct. 365, 374 (2008); Park Vill. Apt. Tenants Ass'n v. Mortimer Howard

21

Trust, 636 F.3d 1150, 1160 (9th Cir. 2011). Plaintiff’s request to stay the hearing on the

22

preliminary injunction is not well taken. The Court will not keep a motion that is “temporarily

23

moot” on its docket for an uncertain period of time while bankruptcy proceedings are underway.

24

Instead, in light of the bankruptcy filing, the Court will deny Plaintiff’s motion for preliminary

25

injunction without prejudice.

26
27
2

28

Again, Plaintiff’s lack of prudential standing means that she will not succeed on the merits. See Hernandez
2009 U.S. Dist. LEXIS 21495 at *8-*13, *29.

3

1
2

Accordingly, IT IS HEREBY ORDERED that:
1.

3

The October 24, 2011, hearing on Plaintiff’ s motion for preliminary injunction is
VACATED;

4

2.

Plaintiff’s motion for preliminary injunction is DENIED without prejudice;

5

3.

No later than 1:00 p.m. on November 18, 2011, either:

6

a.

7

A notice shall be filed with the Court of the bankruptcy trustee’s ratification,
joinder, or substitution pursuant to Rule 17(a)(3); or

8

b.

Plaintiff shall file an amended complaint that alleges, consistent with Rule 11, that

9

the causes of action alleged in this lawsuit are exempt from the bankruptcy estate

10

or that the bankruptcy trustee has abandoned the causes of action alleged in this

11

lawsuit;3 and

12
13
14

4.

The failure to abide by the time limitations in this order will result in the dismissal of the
entire action without further notice.

IT IS SO ORDERED.

15
16

Dated:
0m8i78

October 20, 2011
CHIEF UNITED STATES DISTRICT JUDGE

17
18
19
20
21
22
23
24
25
26
27
3

28

Any amended complaint shall comply with the federal pleading requirements as set forth in Ashcroft v.
Iqbal, 129 S.Ct. 1937 (2009).

4