Guzman et al v. Central Pacific Home Loans, Inc. et al

Filing 36

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS 21 , 26 . Signed by JUDGE LESLIE E. KOBAYASHI on 7/29/2011. (afc)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). All Participants are registered to receive electronic notifications.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
ROGELIO GUZMAN and MARIA G.
GUTIERREZ,

)
)
)
Plaintiffs,
)
)
vs.
)
)
CENTRAL PACIFIC HOME LOANS,
)
INC., BAC HOME LOANS
)
SERVICING, LP, BANK OF
)
AMERICA, N.A., MORTGAGE
)
ELECTRONIC REGISTRATION
)
SYSTEM, INC. and FEDERAL
)
NATIONAL MORTGAGE
)
ASSOCIATION,
)
)
Defendants.
)
_____________________________ )

CIVIL NO. 11-00126 LEK-BMK

ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS
Before the Court are: Defendants BAC Home Loans
Servicing, LP (“BAC”), Bank of America, N.A. (“BOA”), Mortgage
Electronic Registration Systems, Inc. (“MERS”), and Federal
National Mortgage Association’s (“FNMA”) (collectively, “Moving
Defendants”) Motion to Dismiss Plaintiffs’ First Amended
Complaint (“Motion”), filed on May 25, 2011, and Defendant
Central Pacific Homeloans, Inc.’s (“CPH”) joinder in the Motion
(“Joinder”), filed on June 9, 2011.1

Plaintiffs Rogelio Guzman

and Maria G. Gutierrez (collectively, “Plaintiffs”) did not
respond to the Motion.
1

On June 8, 2011, the Court found that

Unless otherwise noted, BAC, BOA, MERS, FNMA, and CPH are
collectively referred to as “Defendants”.

this matter was suitable for disposition without a hearing
pursuant to Rule LR7.2 of the Local Rules of Practice of the
United States District Court for the District of Hawai`i (“Local
Rules”).
On June 16, 2011, the Court issued its Order to Show
Cause (“OSC”) ordering Plaintiffs’ counsel to show cause, if any,
why Plaintiffs’ First Amended Complaint should not be dismissed
with prejudice for failure to prosecute.
response on June 17, 2011.

The Moving Defendants and CPH filed

their replies on July 6, 2011.
on July 13, 2011.

Plaintiffs filed their

This matter came on for hearing

Appearing on behalf of Plaintiffs was

James Fossbinder, Esq.

Shyla Cockett, Esq., appeared on behalf

of the Moving Defendants, and William Harstad, Esq., appeared on
behalf of CPH.

After careful consideration of the parties’

submissions and the relevant legal authority, the Moving
Defendants’ Motion and CPH’s Joinder are HEREBY GRANTED for the
reasons set forth below.
BACKGROUND
I.

Factual History
On February 26, 2008, Plaintiffs obtained a mortgage

loan for $229,500.00 from CPH (“Mortgage”)2 secured by property
located at 3676 Lower Honoapiilani Road, C103, Lahaina, Hawai`i

2

The Mortgage is attached to Plaintiffs’ First Amended
Complaint as Exhibit 1. [Dkt. no. 13-1.]
2

96761 (“the Property”).
Mortgage at 3.]

[First Amended Complaint at ¶¶ 5, 48;

On March 4, 2008, CPH recorded the Mortgage in

the Bureau of Conveyances, State of Hawai`i, as document number
2008-032561.

[First Amended Complaint at ¶ 5; Mortgage at 1.]

In mid-2009, Plaintiffs began experiencing financial
hardship and sought a loan modification from “[BOA] and/or
BAC[.]”

[First Amended Complaint at ¶ 79.]

Plaintiffs allege

that, due to BAC’s failure to “negotiate the loan modification in
good faith,” they were unable to obtain a timely modification
prior to foreclosure.

[Id. at ¶¶ 82-83.]

In October 2009,

Plaintiffs stopped making payments on their Mortgage.

[Id. at ¶

79.]
Sometime during June 2010, Plaintiffs allege that
either BOA or BAC informed them by letter that the Property would
be sold at a foreclosure auction on June 15, 2010.3

Plaintiffs

claim that they were subsequently advised that the auction had
been rescheduled but that they were never informed of the new

3

According to the Mortgagee’s Affidavit of Foreclosure Sale
Under Power of Sale (“Foreclosure Affidavit”), recorded on June
30, 2010 as document number 2010-091757 in the Bureau of
Conveyances and attached to the First Amended Complaint as
Exhibit 3, [dkt. no. 13-3,] BAC posted a copy of its Notice of
Mortgagee’s Intention to Foreclose Under Power of Sale on the
Property not less than twenty-one days before the public auction
sale on June 15, 2010. [Id. at 2-3.] BAC also claims to have
notified “[b]y certified mail or personal service . . . all
parties who have recorded encumbrances, liens and/or other claims
which have attached against the [Property]” of its intention to
foreclose. [Id. at 2.]
3

auction date.4

[Id. at ¶ 87.]

According to the Foreclosure

Affidavit, BAC purchased the Property for $187,718.15 at a public
foreclosure auction held on June 15, 2010.
Affidavit at 1, 3.]

[Foreclosure

Plaintiffs allege that, in “approximately

July or August of 2010”, an unknown person gave them notice that
FNMA owned the Property.

[First Amended Complaint at ¶ 89.]

On August 17, 2010, BAC, acting as a subsidiary of BOA,
approved a loan modification on the Mortgage.
Modification Agreement at 1.5]

[Id. at ¶ 90; Loan

Plaintiffs contend that BAC

“purposefully drew out the modification process so that
Plaintiffs inevitably ended up in foreclosure.”

[First Amended

Complaint at ¶ 93.]
In a letter dated September 8, 2010, BOA Customer
Advocate Karen R. Hill informed Plaintiffs that, inter alia,
according to their records, Plaintiffs declined BAC’s August 2010
loan modification offer and “the foreclosure [on the Property]
was rescinded through August 23, 2010.”

[Letter dated 9/8/10 to

Plaintiffs from Karen R. Hill (“BOA Letter”) at 2;6 First Amended

4

Plaintiffs claim that, although BAC’s counsel “swears
under oath [that notice] was sent by certified mail or personal
service to the Plaintiffs[,]” there is no record of said notice.
[First Amended Complaint at ¶ 88.]
5

The Loan Modification Agreement is attached to the First
Amended Complaint as Exhibit 4. [Dkt. no. 13-4.]
6

The BOA Letter is attached to the First Amended Complaint
as Exhibit 5. [Dkt. no. 13-5.]
4

Complaint at ¶ 91.]

Ms. Hill advised Plaintiffs to contact BOA’s

Home Retention Division to discuss the options available to save
their Property.

[BOA Letter at 2.]

On January 21, 2011, Plaintiffs allegedly received a
letter from “the law office RCO, informing them that they had ten
days to vacate the Subject Property because it had been sold in a
non-judicial foreclosure to FMNA.”

[First Amended Complaint at ¶

92.]
II.

Procedural History
On March 1, 2011, Plaintiffs filed their Complaint

against Defendants.7

On April 20, 2011, the Moving Defendants

filed their Motion to Dismiss Plaintiffs’ Complaint.
9.]

[Dkt. no.

The Court set the Motion to Dismiss for hearing on June 27,

2011.

CPH filed an answer to the Complaint on May 3, 2011.

[Dkt. no. 11.]
On May 11, 2011, Plaintiffs filed their First Amended
Complaint against Defendants.

[Dkt. no. 13.]

The First Amended

Complaint asserts the following counts: (1) Declaratory Relief
(Against MERS, BAC, and FNMA) (Count I); (2) Unfair and Deceptive
Acts and Practices (Against BAC and BOA) (Count II); (3) Slander
of Title (Against BAC and MERS) (Count III); (4) Violation of

7

Plaintiffs mistakenly identified CPH as “Central Pacific
Home Loans, Inc.” and MERS as “Mortgage Electronic Registration
System, Inc.” in the captions of their Complaint and First
Amended Complaint.
5

Federal and Hawai`i Antitrust Statutes (Against All Defendants)
(Count IV); and (5) Intentional Infliction of Emotional Distress
(Against BAC) (Count V).
On May 25, 2011, the Moving Defendants filed the
instant Motion, [dkt. no. 21,] which seeks the dismissal with
prejudice of Plaintiffs’ First Amended Complaint for failure to
state a claim upon which relief can be granted.

[Motion at 1.]

The Court set the Motion for hearing on June 27, 2011.

CPH filed

an answer to the First Amended Complaint on May 31, 2011.

[Dkt.

no. 23.]
On June 1, 2011, the Court issued its Order Regarding
Defendants’ Motion to Dismiss Plaintiffs’ Complaint, [dkt. no.
24,] finding that Plaintiffs’ Complaint, filed on March 1, 2011,
had been superceded by their First Amended Complaint, filed on
May 11, 2011.

The Court denied as moot the Moving Defendants’

Motion to Dismiss Plaintiffs’ Complaint, filed on April 20, 2011,
and vacated the hearing on said motion.

The Court informed the

parties that the hearing on the instant Motion would proceed as
scheduled on June 27, 2011.

[Id. at 1-2.]

On June 8, 2011, the Court issued its Inclination and
Order Regarding Plaintiffs’ Response to Defendants’ Motion to
Dismiss Plaintiffs’ Complaint, [dkt. no. 25,] finding that
Plaintiffs failed to file a response to the Motion by June 6,
2011 pursuant to Local Rule 7.4 and vacating the hearing on the

6

Motion pursuant to Local Rule 7.2(d).
On June 9, 2011, CPH filed its Joinder, [dkt. no. 26,]
joining the Moving Defendants in simple agreement with the relief
sought in the Motion.

[Id. at 2.]

On June 16, 2011, the Court issued its OSC ordering
Plaintiffs’ counsel to appear before the Court on July 13, 2011
to show good cause, if any, why Plaintiffs’ First Amended
Complaint should not be dismissed with prejudice for failure to
prosecute.

[Dkt. no. 28.]

The Court informed Plaintiffs that

they had until June 29, 2011 to file a written response to the
OSC.

The Court informed Defendants that they had until July 6,

2011 to file an optional reply.

[Id. at 3.]

Also on June 16, 2011, Plaintiffs filed their “Notice
of Dismissal (Without Prejudice)” (“Notice of Dismissal”).
no. 29.]

[Dkt.

Plaintiffs informed the Court that they were

voluntarily dismissing the case without prejudice pursuant to
Rule 41(a)(1) of the Federal Rules of Civil Procedure.

[Id. at

1.]
On June 17, 2011, the Court issued an order regarding
the Notice of Dismissal (“Order Regarding Notice of Dismissal”).
[Dkt. no. 31.]

The Court informed Plaintiffs that, since CPH had

already filed an answer to Plaintiffs’ First Amended Complaint
and the parties did not stipulate to the First Amended
Complaint’s dismissal, the Notice of Dismissal was invalid and

7

without effect pursuant to Rule 41(a)(1)(A).

[Id. at 2.]

III. Plaintiffs’ Response to the OSC
Also on June 17, 2011, Plaintiffs filed their “Written
Statement to Judge Susan O. Mollway’s Order to Show Cause”
(“Written Statement”).

[Dkt. no. 30.]

The majority of the

Written Statement, paragraphs one through five, recites the
procedural history of the case.

[Id. at 1-2.]

The remainder of

the Written Statement, paragraphs six through eight, states:
6. The first opportunity for Plaintiffs and
counsel, James H. Fosbinder to meet regarding
voluntarily dismissing this action was on June 6,
2011, the date Plaintiffs’ opposition was due.
7. After consent by Plaintiffs, a voluntary
dismissal was filed on June 16, 2011, the same
date Judge Mollway’s Order to Show Cause was
filed.
8. Plaintiffs respectfully request this
Court’s permission to enter their Notice of
Dismissal, without prejudice, in the above-cause
of action.
[Id. at 2-3.]

Plaintiffs failed to address the issue of whether

their First Amended Complaint should be dismissed with prejudice
for failure to prosecute.
IV.

CPH’s Reply
On July 6, 2011, CPH filed an optional reply to the

OSC.

[Dkt. no. 33.]

CPH claims that the history of this case

indicates that Plaintiffs have no interest in taking it to
judgment.

[Id. at 3 (citation omitted).]

Further, CPH contends

that “Plaintiffs’ Written Statement provides nothing against
dismissing Plaintiffs’ First Amended Complaint for failure to
8

prosecute[,]” and thus “confirms that Plaintiffs and their
counsel have no intent to prosecute this lawsuit.”

[Id. at 3-4

(citation omitted).]
CPH contends that, over the past four months, CPH and
its attorneys
have expended significant time and resources
defending Plaintiffs’ claims, including without
limitation: investigating Plaintiffs’ claims in
the initial Complaint; preparing and filing the
Answer to the Complaint; reviewing the Moving
Defendants’ moving papers and other submissions;
preparing [CPH’s] Rule 16 Scheduling Conference
Statement and attending the Scheduling Conference;
reviewing the claims in the First Amended
Complaint; preparing and filing the Answer to the
First Amended Complaint; and addressing the
various issues raised by Plaintiffs’ failure to
prosecute and the Order to Show Cause.
[Id. at 4 (footnote omitted).]

CPH argues that, at this stage in

the litigation, “Plaintiffs and/or their counsel should not be
afforded the opportunity to simply re-start the litigation
process all over again, as might be the case if their claims are
dismissed without prejudice.”
V.

[Id.]

The Moving Defendants’ Reply
Also on July 6, 2011, the Moving Defendants filed an

optional reply to the OSC.

[Dkt. no. 34.]

The Moving Defendants

request that the Court involuntarily dismiss this case with
prejudice pursuant to Rule 41(b) of the Federal Rules of Civil
Procedure because Plaintiffs have failed to prosecute it.
at 2.]

[Id.

They contend that all of the applicable factors - “‘(1)

9

the public’s interest in expeditious resolution of litigation;
(2) the court’s need to manage its docket; (3) the risk of
prejudice to the defendants; (4) the public policy favoring
disposition of cases on their merits; and (5) the availability of
less drastic sanctions’” - weigh in favor of dismissal.

[Id. at

4 (quoting Malone v. U.S. Postal Serv., 833 F.2d 128, 130 (9th
Cir. 1987)).]
STANDARD
Rule 41(b) of the Federal Rules of Civil Procedure
permits a district court to sua sponte involuntarily dismiss an
action for failure to prosecute.

See, e.g., Chambers v. NASCO,

Inc., 501 U.S. 32, 44 (1991) (recognizing that a court “may act
sua sponte to dismiss a suit for failure to prosecute” (citation
omitted)); Hells Canyon Pres. Council v. U.S. Forest Serv., 403
F.3d 683, 689 (9th Cir. 2005) (citation omitted) (recognizing the
inherent power of courts to sua sponte dismiss a case under Rule
41(b) for lack of prosecution).

Rule 41(b) provides, in

pertinent part:
If the plaintiff fails to prosecute or to comply
with these rules or a court order, a defendant may
move to dismiss the action or any claim against
it. Unless the dismissal order states otherwise,
a dismissal under this subdivision (b) and any
dismissal not under this rule . . . operates as an
adjudication on the merits.
A court must weigh five factors in determining whether
to dismiss a case for failure to prosecute: “(1) the public’s

10

interest in expeditious resolution of litigation; (2) the court’s
need to manage its docket; (3) the risk of prejudice to
defendants/respondents; (4) the availability of less drastic
alternatives; and (5) the public policy favoring disposition of
cases on their merits.”

Pagtalunan v. Galaza, 291 F.3d 639, 642

(9th Cir. 2002) (citing Ferdik v. Bonzelet, 963 F.2d 1258,
1260-61 (9th Cir. 1992)).

The five-factor test is a disjunctive

balancing test, so not all five factors must support dismissal.
See Valley Eng’rs Inc. v. Elec. Eng’g Co., 158 F.3d 1051, 1057
(9th Cir. 1998) (noting that the five-factor test “amounts to a
way for a district judge to think about what to do, not a series
of conditions precedent” to dismissal).

Dismissal is proper

“where at least four factors support dismissal, or where at least
three factors strongly support dismissal[.]”

Hernandez v. City

of El Monte, 138 F.3d 393, 399 (9th Cir. 1998) (citations and
internal quotation marks omitted).
DISCUSSION
I.

Expeditious Resolution and Need to Manage Docket
With respect to the first two factors, the Court

observes that Plaintiffs have already filed two complaints
against Defendants, both of which were opposed by timely motions
to dismiss.
motions.

Plaintiffs failed to respond to either of these

A dismissal without prejudice at this point in the

litigation would undermine Defendants’ and the public’s interest
11

in the expeditious resolution of this action.

See Yourish v.

Cal. Amplifier, 191 F.3d 983, 990 (9th Cir. 1999) (“[T]he
public’s interest in expeditious resolution of litigation always
favors dismissal.”).

The Court also has a strong interest in

allocating its scarce judicial resources to cases in which all
parties are actively litigating their cases and following the
applicable rules.

See Pagtalunan, 291 F.3d at 642 (“It is

incumbent upon the Court to manage its docket without being
subject to routine noncompliance of litigants[.]” (citation
omitted)); Ferdik, 963 F.2d at 1261 (stating the same principle).
As a result, the Court FINDS that the first and second factors
weigh strongly in favor of dismissal.
II.

Prejudice to Defendants
With respect to the third factor, the Court observes

that Defendants have expended significant time, money, and
resources responding to two different complaints and filing two
different motions, both of which went unopposed.

Plaintiffs

failed to account for their inaction in their Written Statement.
They offered no explanation, moreover, as to why their case
should not be dismissed with prejudice.

The Court finds that

Plaintiffs’ dilatory conduct has caused an unreasonable delay,
which, under Ninth Circuit precedent, is presumed to be
prejudicial.

See, e.g., In re Phenylpropanolamine (PPA) Prods.

Liab. Litig., 460 F.3d 1217, 1227 (9th Cir. 2006) (“The law . . .

12

presumes prejudice from unreasonable delay.” (citations
omitted)); see also Pagtalunan, 291 F.3d at 643 (finding that the
plaintiff’s failure to account for his inaction supported a
finding of unreasonable delay).

As a result, the Court FINDS

that the third factor also weighs strongly in favor of dismissal.
III. Availability of Less Drastic Alternatives
The fourth factor requires courts to consider less
drastic alternatives to dismissal with prejudice.

See In re

Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d at 1229
(describing the fourth factor as “the ‘consideration of
alternatives’ requirement” (citations omitted)).

Less drastic

sanctions include
a warning, a formal reprimand, placing the case at
the bottom of the calendar, a fine, the imposition
of costs or attorney fees, the temporary
suspension of the culpable counsel from practice
before the courts, . . . dismissal of the suit
unless new counsel is secured . . . preclusion of
claims or defenses, or the imposition of fees and
costs upon plaintiff’s counsel . . . .
Id. at 1228 n.5 (alterations in original) (citations and internal
quotation marks omitted).

Providing a party with another chance

following a failure to comply with a court order is also
considered a less drastic sanction, “albeit a lenient one.”
(citation omitted).

Id.

“[F]or the prior implementation of a lesser

sanction to be a persuasive factor, it must have occurred after
the plaintiff’s violation of a court order.”
(citations omitted).
13

Id. at 1229

After Plaintiffs failed to respond to the Motion, the
Court ordered them “to show good cause, if any, why their First
Amended Complaint should not be dismissed with prejudice for
failure to prosecute.”

[OSC at 3.]

The OSC warned Plaintiffs in

clear terms that, pursuant to Rule 41(b), a failure to prosecute
or comply with the Federal Rules of Civil Procedure or the
Court’s orders could result in an involuntary dismissal.

[Id.]

Plaintiffs then filed their request for voluntary dismissal
without prejudice – an option that was no longer available.
[Order Regarding Notice of Dismissal at 2.]

Then, rather than

show good cause why their First Amended Complaint should not be
dismissed with prejudice, Plaintiffs filed a document that merely
recited the procedural history of this action.
Statement at 1-3.]

[Written

The Court notes, moreover, that at no time

did Plaintiffs request an extension of time to respond to the
Motion or ask Defendants to stipulate to an extension or to
dismissal without prejudice.
Less drastic alternatives certainly exist and this
Court has considered such alternatives.

However, in light of

Plaintiffs’ dilatory conduct, their disregard for Rule 41(a)(1),
and their failure to raise any argument in the Written Statement
why the case should not be dismissed with prejudice, which
essentially wasted the opportunity afforded to Plaintiffs by way
of the OSC, the Court finds that alternative sanctions are not

14

likely to advance the case’s prosecution fairly nor would these
alternatives be suitable.

Accordingly, the Court FINDS that the

fourth factor weighs in favor of dismissal.
IV.

Public Policy
The Court recognizes the importance of giving due

weight to the fifth factor - the public policy favoring
disposition of cases on the merits.

See Dreith v. Nu Image,

Inc., --- F.3d ----, No. 10–55172, 2011 WL 2811226, at *8 (9th
Cir. July 19, 2011) (observing that the public policy favoring
“resolution of cases on their merits . . . always weighs against
dismissal” (citation omitted)).

The Court nonetheless FINDS that

this factor is outweighed by the other four factors, which all
support dismissal.

Accordingly, the Court DISMISSES Plaintiffs’

First Amended Complaint WITH PREJUDICE.
CONCLUSION
On the basis of the foregoing, the Moving Defendants’
Motion, filed on May 25, 2011, and CPH’s Joinder, filed on June
9, 2011, are HEREBY GRANTED.

Plaintiffs’ First Amended Complaint

is HEREBY DISMISSED WITH PREJUDICE.
directed to close this case.
IT IS SO ORDERED.

15

The Clerk of Court is

DATED AT HONOLULU, HAWAII, July 29, 2011.

/S/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge

ROGELIO GUZMAN, ET AL. V. CENTRAL PACIFIC HOME LOAN INC., ET AL;
CIVIL NO. 11-00126 LEK-BMK; ORDER GRANTING DEFENDANT’S MOTION TO
DISMISS

16