Tejada et al v. Deutsche Bank National Trust Company et al
Filing
37
ORDER GRANTING PARTIAL SUMMARY JUDGMENT AGAINST THE TEJADAS; ORDER STAYING REMAINDER OF ACTION PENDING THE STATE APPELLATE COURT DECISION CONCERNING THE STATE-COURT JUDICIAL FORECLOSURE PROCEEDINGS 24 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 7/ 27/11. ("For the foregoing reasons, the court grants summary judgment in favor of all Defendants on Counts 2, 3, 4, and 6, and in favor of Deutsche Bank on Counts 9, 10, and the portion of Count 8 seeking relief under the Declarat ory Judgment Act based on fraud (but not the Declaratory Judgment Act claim in Count 8 based on chapter 480 of the Hawaii Revised Statutes). Effective August 15, 2011, the remainder of this case is stayed until the state appeal is decided. The partie s are ordered to provide the court with status reports concerning the pending state appeal. These reports may be submitted via letters and should be submitted on a quarterly basis beginning September 15, 2011. Supplemental status reports should be su bmitted via letters within seven (7) days of any change in the status of the appellate proceedings, including (a) any decision issued by the Intermediate Court of Appeals, (b) any filing seeking review by the Hawaii Supreme Court of the decision by t he Intermediate Court of Appeals, (c) the granting or denying of certiorari by the Hawaii Supreme Court, and (d) any decision by the Hawaii Supreme Court. Given the stay, the court terminates the remainder of Deutsche Bank's motion for summary j udgment." ) (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
DEBRA LYNN TEJADA; and
ALEJANDRO MICHAEL TEJADA,
Plaintiffs,
vs.
DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE FOR HASCO
2007-NC1; MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC, as
nominee for Amber Financial
Group, LLC; and AMBER
FINANCIAL GROUP, LLC,
Defendants.
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CIVIL NO. 10-00136 SOM/KSC
ORDER GRANTING PARTIAL
SUMMARY JUDGMENT AGAINST THE
TEJADAS; ORDER STAYING
REMAINDER OF ACTION PENDING
THE STATE APPELLATE COURT
DECISION CONCERNING THE
STATE-COURT JUDICIAL
FORECLOSURE PROCEEDINGS
ORDER GRANTING PARTIAL SUMMARY JUDGMENT AGAINST THE TEJADAS;
ORDER STAYING REMAINDER OF ACTION PENDING
THE STATE APPELLATE COURT DECISION CONCERNING
THE STATE-COURT JUDICIAL FORECLOSURE PROCEEDINGS
I.
INTRODUCTION AND FACTUAL BACKGROUND.
This case arises out of a December 2006 loan by Amber
Financial Group, LLC, to Debra Lynn and Alejandro Michael Tejada.
In the mortgage instrument filed in the State of Hawaii Bureau of
Conveyances as Document Number 2006-237093, Amber Financial
designated Mortgage Electronic Registration Systems, Inc.
(“MERS”), as its nominee.
See ECF No. 25-2.
In April 2008,
MERS, in its capacity as Amber Financial’s nominee, assigned the
mortgage to Deutsche Bank National Trust Company, as Trustee for
HASCO 2007-NC1.
See ECF No. 25-3.
Deutsche Bank says that the Tejadas defaulted on their
loan.
The court takes judicial notice of Deutsche Bank’s filing
of a judicial foreclosure action in state court on February 20,
2009.
See Civil No. 09-1-0055, filed in the Circuit Court of the
Third Circuit, State of Hawaii.
The court takes judicial notice
of the state court’s entry of default against the Tejadas on May
13, 2009.
Id.
The court also takes judicial notice of Deutsche
Bank’s filing of a motion for summary judgment and decree of
foreclosure on October 12, 2009.
Id.
Finally, the court takes
judicial notice of the Tejadas’ filing of their opposition to the
motion for summary judgment and a motion to set aside entry of
default on February 8 and 17, 2010, respectively.
Id.
On March 10, 2010, rather than attempting to file a
counterclaim in the state-court proceeding, the Tejadas filed the
present action with this court.
In this action, the Tejadas
challenge Deutsche Bank’s right to enforce the mortgage
instrument at issue in the state-court proceeding and seek
damages for alleged violations of state and federal law
concerning the closing of their loan.
The Tejadas also ask this
court to enjoin Deutsche Bank from foreclosing on their property
in state court.
See Complaint, Civ. No. 10-00136 SOM/ KSC, March
10, 2010.
The court takes judicial notice of the state court’s
denial of the motion to set aside entry of default on April 13,
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2010.
See Civil No. 09-1-0055.
On July 6, 2010, the state court
filed its Findings of Fact, Conclusions of Law and Order Granting
Plaintiff’s Motion for Summary Judgment and Decree of
Foreclosure.
See ECF No. 25-4.
The court takes judicial notice
of the Tejadas’ appeal filed on August 4 and September 15, 2010.
See Civil No. 09-1-0055.
decided that appeal.
The state appellate courts have not
See id.
The Tejadas concede that summary judgment against them
is appropriate on many of their claims, and summary judgment is
granted against them on those claims.
With respect to the
remaining claims, Deutsche Bank argues that the claims are barred
by the res judicata and Rooker-Feldman doctrines.
Because the
Tejadas have appealed the state-court order granting Deutsche
Bank summary judgment and a decree of foreclosure, rather than
applying either of those doctrines, the court terminates the
remainder of the motion and exercises its inherent power to stay
the remainder of this case until the state-court appellate
proceedings are decided.
The court determines this matter
without a hearing pursuant to Local Rule 7.2(d).
II.
ANALYSIS.
A.
The Tejadas Concede That Summary Judgment Should
Be Granted on Many of Their Claims.
In their Opposition, the Tejadas concede that summary
judgment should be granted in favor of Defendants on many of
their claims.
They concede that summary judgment should be
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granted in favor of all Defendants on Counts 2, 3, 4, and 6.
The
Tejadas also concede that summary judgment should be granted in
favor of Deutsche Bank on Counts 9, 10, and the portion of Count
8 that seeks a declaratory judgment based on fraud (but not the
declaratory judgment request in Count 8 based on chapter 480 of
the Hawaii Revised Statutes).
Because those claims are not
viable, summary judgment is granted against the Tejadas on them.
This leaves for further adjudication:
Count 1: Truth in Lending Act claim against Deutsche
Bank, MERS, and Amber Financial Group;
Count 5: state law Unfair and Deceptive Acts and
Practices claim against Deutsche Bank, MERS, and Amber Financial
Group;
Count 7: state law breach of implied covenant of good
faith and fair dealing claim against Deutsche Bank, MERS, and
Amber Financial Group;
Count 8: Declaratory Judgment Act claim based on
violation of chapter 480 of the Hawaii Revised Statutes against
Deutsche Bank, MERS, and Amber Financial Group;
Count 9: equitable estoppel claim against MERS and
Amber Financial Group, but not Deutsche Bank;
Count 10: intentional infliction of emotional distress
claim against MERS and Amber Financial Group, but not Deutsche
Bank; and
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Count 11: punitive damage claim against Deutsche Bank,
MERS, and Amber Financial Group.
B.
The Remainder of this Action is Stayed.
Because summary judgment has been granted in Deutsche
Bank’s favor in the state-court judicial foreclosure proceeding,
Deutsche Bank argues that the res judicata and Rooker-Feldman
doctrines bar the remaining claims in this case.
Generally speaking, res judicata prohibits a party from
relitigating a previously adjudicated cause of action.
v. Lee, 90 Haw. 143, 148, 976 P.2d 904, 909 (1999).
Dorrance
The
preclusive effect in this court of a Hawaii state-court decision
is determined by Hawaii law.
Pedrina v. Chun, 97 F.3d 1296, 1301
(9th Cir. 1996) (“In determining whether a prior state court
action bars a subsequent federal action, the federal court must
look to the res judicata principles of the state court in which
the judgment was rendered.”); In re Russell, 76 F.3d 242, 244
(9th Cir. 1995) (“Because the underlying judgment was rendered in
state court, we must apply California’s res judicata and
collateral estoppel principles.”).
Under Hawaii law, the doctrine of res judicata applies
when: 1) the claim or cause of action asserted in the present
action was or could have been asserted in the prior action,
2) the parties in the present action are identical to, or in
privity with, the parties in the prior action, and 3) a final
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judgment on the merits was rendered in the prior action.
See
Smallwood v. City & County of Honolulu, 118 Haw. 139, 146, 185
P.3d 887, 895 (2008); Morneau v. Stark Enters., Ltd., 56 Haw.
420, 422-23, 539 P.2d 472, 474-75 (1975) (the “judgment of a
court of competent jurisdiction is a bar to a new action in any
court between the same parties or their privies concerning the
same subject matter, and precludes the relitigation, not only of
the issues which were actually litigated in the first action, but
also of all grounds of claim and defense which might have been
properly litigated in the first action but were not litigated or
decided.”); accord Pedrina, 97 F.3d at 1301 (citing Santos v.
State of Hawaii, 64 Haw. 648, 646 P.2d 962, 966 (1982)).
Res judicata prevents a multiplicity of suits, averts
inconsistent results, and provides a limit to litigation by
promoting finality and judicial economy.
Bremer v. Weeks, 104
Haw. 43, 53, 85 P.3d 150, 160 (2004); Dorrance, 90 Haw. at 14849, 976 P.2d at 909-10.
Res judicata serves to relieve parties
of the cost and vexation of multiple lawsuits, conserves judicial
resources, and, by preventing inconsistent decisions, encourages
reliance on adjudications.
It therefore furthers the interests
of litigants, the judicial system, and society by bringing an end
to litigation when matters have already been decided on the
merits.
See Kauhane v. Acutron Co., 71 Haw. 458, 463, 795 P.2d
276, 278-79 (1990).
The doctrine permits every litigant to have
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an opportunity to try its case on the merits, but it limits the
litigant to one such opportunity.
Id..
As the party asserting res judicata, Deutsche Bank
bears the burden of proving its applicability.
118 Haw. at 147, 185 P.3d at 896.
See Smallwood,
With respect to the first
prong of the res judicata test, there is no question that the
claims asserted in this action were or could have been asserted
in the prior state-court action.
The remaining claims against
Deutsche Bank are premised on Deutsche Bank’s alleged lack of a
right to enforce the mortgage that was foreclosed on in state
court, or Deutsche Bank’s allegedly improper actions taken in
connection with the closing of the underlying loan to the
Tejadas.
On page 16 of the Opposition, the Tejadas go so far as
to note that, if allowed to file an answer in the underlying
case, they may be allowed to file a counterclaim that makes it
appropriate to dismiss this case.
See ECF No. 28.
This
indicates that the remaining claims in this case could have been
raised in the state-court judicial foreclosure proceeding.
With respect to the second prong of the res judicata
test, there is no question that Deutsche Bank and the Tejadas are
parties in both the state-court judicial foreclosure proceeding
and in this case.
That leaves the res judicata requirement that Deutsche
Bank demonstrate that a final judgment on the merits has been
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rendered in the state-court action.
See Dorrance, 90 Haw. at
149, 976 P.2d at 910; Morneau, 56 Haw. at 422-23, 539 P.2d at
474-75.
The Hawaii Supreme Court has noted that a default
judgment satisfies this “final judgment” requirement so long as
it is not void.
See Matsushima v. Rego, 67 Haw. 556, 559 696
P.2d 843, 845 (1985); see also Napala v. Valley Isle Loan LLC,
2010 WL 4642025, *8 (D. Haw. Nov. 1, 2010) (noting that Hawaii
courts have given preclusive effect to a default judgment).
Summary judgments also satisfy the “final judgment on the merits”
requirement for res judicata purposes.
See Brown v. Progressive
Direct Ins. Co., 2010 WL 1806031, *6 (Haw. App. May 5, 2010)
(citing a Nebraska case for the proposition that “[s]ummary
judgments, judgments on directed verdict, judgments after trial,
default judgments, and consent judgments are all generally
considered to be on the merits for purposes of res judicata.”
(unpublished disposition1)).
However, the entry of summary judgment against the
Tejadas in the state court proceeding, by itself, is insufficient
to satisfy the “final judgment” requirement.
Under Hawaii law, a
“judgment is final where the time to appeal has expired without
appeal being taken.”
Glover, Ltd. v. Fong, 42 Haw. 560, 574
1
Pursuant to Rule 35(c)(2) of the Hawaii Rules of
Appellate Procedure, unpublished dispositions after July 1, 2008,
“may be cited in any proceeding,” but have only “persuasive
value” and are not precedent.
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(1958).2
“It follows from Glover that where an appeal has been
taken, a judgment of the trial court is not final, at least for
purposes of res judicata.”
Littleton v. State, 6 Haw. App. 70,
75, 708 P.2d 829, 833, aff’d 68 Haw. 220, 708 P.2d 824 (1985).
Instead, when an appeal is taken, judgment becomes final under
Hawaii law when the appeal is decided.
See Kauhane, 71 Haw. at
465, 795 P.2d at 279 (“Plaintiff, however, withdrew his appeal
and thereby foreclosed review by this court.
Once that appeal
was withdrawn, the circuit court’s judgment became final for res
judicata purposes”); Glover, 42 Haw. at 574 (“A judgment is final
where the time to appeal has expired without appeal being
taken.”).
Because an appeal has been taken from the state-trial
court’s determination that Deutsche Bank is entitled to foreclose
on the loan to the Tejadas, that decision is not yet a final
judgment on the merits for purposes of res judicata.
When an appeal has been taken, the Hawaii Supreme Court
has noted that it is proper to stay a subsequent suit regarding
the subject matter of the first suit pending that appeal.
See
generally Solarana v. Indus. Elecs., Inc., 50 Haw. 22, 30, 428
P.2d 411, 417 (1967).
The court exercises its inherent power to
2
The court is unpersuaded by Deutsche Bank’s citation
of Wong v. Cayetano, 111 Haw. 462, 478, 143 P.3d 1, 44 (2006),
for the proposition that an appeal has no bearing on the finality
of a state-court judgment. Wong involved a state court’s
interpretation of when a judgment becomes final under federal
law, not Hawaii law. It is therefore inapposite.
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stay this action pending the disposition of the state-court
appellate proceedings.
See Leyva v. Certified Grocers of Cal.,
Ltd., 593 F.2d 857, 863-64 (9th Cir. 1979) (“A trial court may,
with propriety, find it is efficient for its own docket and the
fairest course for the parties to enter a stay of an action
before it, pending resolution of independent proceedings which
bear upon the case. . . . In such cases the court may order a
stay of the action pursuant to its power to control its docket
and calendar and to provide for a just determination of the cases
pending before it.”).
Staying this action is appropriate under the
circumstances presented here.
This court has no reason to think
that the Hawaii appellate courts will take an unreasonable amount
of time to decide the Tejadas’ appeal.
To the contrary, the
court expects that the stay in this case will be of a fairly
short duration.
See Dependable Highway Express, Inc. v.
Nagigators Ins. Co., 489 F.3d 1059, 1067 (9th Cir. 2007) (noting
that stays should not be indefinite and that they should not be
granted unless is appears that the other proceedings will be
concluded within a reasonable time).
Staying the present action
is appropriate because the final Hawaii appellate court decision
will likely end the litigation in this case.
If, for example,
Hawaii’s appellate courts affirm the summary judgment in favor of
Deutsche Bank, the Tejadas will not be allowed to relitigate any
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claim relating to Deutsche Bank’s alleged lack of a right to
foreclose on the loan or any claim that could have been brought
in the state-court action.
On the other hand, if Hawaii’s
appellate courts reverse the state-trial court, vacate the entry
of default, and allow the Tejadas to answer the state-court
complaint and file a counterclaim in the state-court action, the
Tejadas may well dismiss this case as duplicative.
Opposition at 15-16, ECF No. 28, July 5, 2011.
See
The Tejadas
themselves have asked this court to stay the present motion
pending the appellate ruling.
Id.
It flows from that request
that the Tejadas will likely have no objection to staying this
action pending the appellate ruling in the state-court case.
Because the court is staying this action sua sponte,
the court delays the effective date of the stay until August 15,
2011, to allow the parties time to ask the court to reconsider
the stay.
If any party can identify any damage (other than the
delay itself) arising from the stay of this action, or any other
reason not to stay this case, the party may file a motion for
reconsideration of the stay, which will be decided on an
expedited basis.
Any motion seeking reconsideration of the stay
shall be filed no later than August 4, 2011.
Staying this action is also consistent with the RookerFeldman doctrine, which generally prevents this court from
exercising appellate jurisdiction over state-court decisions.
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D.C. Court of Appeals v. Feldman, 460 U.S. 462, 482-86 (1983);
Rooker v. Fid. Trust Co., 263 U.S. 413, 415-16 (1923).
The
Rooker-Feldman doctrine states that:
a losing party in state court is barred from
seeking what in substance would be appellate
review of the state judgment in a United
States District Court, based on the losing
party’s claim that the state judgment itself
violates the loser’s federal rights.
Bennett v. Yoshina, 140 F.3d 1218, 1223 (9th Cir. 1998) (quoting
Johnson v. DeGrandy, 512 U.S. 997, 1005-06 (1994)).
If the court
stays this action, allowing Hawaii’s appellate courts to decide
any appeal of the state-trial court’s decision, this court cannot
be said to be acting as an appellate court over the state-court
decision.
III.
CONCLUSION.
For the foregoing reasons, the court grants summary
judgment in favor of all Defendants on Counts 2, 3, 4, and 6, and
in favor of Deutsche Bank on Counts 9, 10, and the portion of
Count 8 seeking relief under the Declaratory Judgment Act based
on fraud (but not the Declaratory Judgment Act claim in Count 8
based on chapter 480 of the Hawaii Revised Statutes).
Effective
August 15, 2011, the remainder of this case is stayed until the
state appeal is decided.
The parties are ordered to provide the court with
status reports concerning the pending state appeal.
These
reports may be submitted via letters and should be submitted on a
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quarterly basis beginning September 15, 2011.
Supplemental
status reports should be submitted via letters within seven (7)
days of any change in the status of the appellate proceedings,
including (a) any decision issued by the Intermediate Court of
Appeals, (b) any filing seeking review by the Hawaii Supreme
Court of the decision by the Intermediate Court of Appeals,
(c) the granting or denying of certiorari by the Hawaii Supreme
Court, and (d) any decision by the Hawaii Supreme Court.
Given the stay, the court terminates the remainder of
Deutsche Bank’s motion for summary judgment.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, July 27, 2011.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
Tejada v. Deutsche Bank, et al., Civil No. 10-00136 SOM/KSC; ORDER GRANTING PARTIAL
SUMMARY JUDGMENT AGAINST THE TEJADAS; ORDER STAYING REMAINDER OF ACTION PENDING THE
STATE APPELLATE COURT DECISION CONCERNING THE STATE-COURT JUDICIAL FORECLOSURE
PROCEEDINGS
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