OneWest Bank, FSB v. Farrar et al
Filing
288
ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, DEFAULT JUDGMENT, AND AN ORDER FOR INTERLOCUTORY DECREE OF FORECLOSURE re: 232 . Signed by JUDGE ALAN C. KAY on 10/8/2014.Excerpt of Conclusion: "[T] he Court GRANTS OneWest's Motion for Summary Judgment Against Defendants J. Randall Farrar, Christopher Salem, Wayne Wagner, Mary Wagner, and Lot 48A LLC, and for Summary Judgment and Default Against Defendant Credit Associates of Maui, Ltd., an d for an Order for Interlocutory Decree of Foreclosure and for Entry of Final Judgment Pursuant to Fed. R. Civ. P. 54(b)." "Within seven days of this Order, OneWest shall provide for the Court's approval and signature a proposed Foreclosure Decree...." "Within seven days of this Order, OneWest shall also submit to the Court and to all defendants the name and qualifications of a proposed foreclosure commissioner...." "Default judgement is hereby entere d against Credit Associates of Maui, Ltd., and all right, title, and interest of Credit Associates of Maui, Ltd., in the Lower Road and Hui Properties, based on or arising out of the default judgment, are hereby forfeited." [W ritten Order follows hearing held October 6, 2014 on Motion 232 . Minutes of hearing: doc. no. 287 ] (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). 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
ONEWEST BANK, FSB,
) Civ. No. 12-00108 ACK-KSC
)
Plaintiff,
)
)
v.
)
)
J. RANDALL FARRAR; CHRISTOPHER
)
SALEM; WAYNE WAGNER; MARY
)
WAGNER; LOT 48A LLC; POOL PRO,
)
INC.; CREDIT ASSOCIATES OF MAUI, )
LTD; JOHN and MARY DOES 1-20;
)
DOE PARTNERSHIPS, CORPORATIONS, )
OR OTHER ENTITIES 1-20,
)
)
Defendants.
)
)
)
ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, DEFAULT
JUDGMENT, AND AN ORDER FOR INTERLOCUTORY DECREE OF FORECLOSURE
For the following reasons, the Court hereby GRANTS
OneWest’s Motion for Summary Judgment Against Defendants J.
Randall Farrar, Christopher Salem, Wayne Wagner, Mary Wagner, and
Lot 48A LLC, and for Summary Judgment and Default Against
Defendant Credit Associates of Maui, Ltd., and for an Order for
Interlocutory Decree of Foreclosure and for Entry of Final
Judgment Pursuant to Fed. R. Civ. P. 54(b).
FACTUAL BACKGROUND
This case arises out of two loans that Defendants J.
Randall Farrar and Christopher Salem (together, “Borrowers”)
obtained from La Jolla Bank, FSB, which were secured by two
mortgages for each loan on two pieces of residential property in
Hawaii.
I.
The Loan Documents
A.
The Promissory Notes
The first loan (the “Lower Road Loan”) was in the
amount of $990,000.00 and was made for the purpose of acquiring a
984 square foot single family home located at 5106 Lower
Honoapiilani Road, Lahaina, Hawaii (the “Lower Road Property”).
Both Salem and Farrar executed and delivered a promissory note,
dated August 14, 2008, payable to La Jolla in connection with the
Lower Road Loan (the “Lower Road Note”). (Pl.’s Concise Statement
of Facts (“CSF”), Ex. A.)
The second loan (the “Hui Loan”) was in the amount of
$1,560,000.00 and was a refinance of an existing loan for a home
located at 8 Hui Road, E. Lahaina, Hawaii (the “Hui Property”).
On or about August 14, 2008, Salem and Farrar executed and
delivered a second promissory note in the amount of
$1,560,000.00, payable to La Jolla in connection with the Hui
Loan (the “Hui Note”). (Pl.’s CSF, Ex. B.)
Under the terms of both Notes, interest accrued at a
rate of 6.500% per annum for the first six months. Every six
months thereafter, the interest rate adjusted based on the
Federal Home Loan Bank 11th District Monthly Weighted Average
Cost of Funds Index, plus a margin of 2.850%. (Pl.’s CSF, Exs. A
2
& B at 1.) Both Notes provide for an interest rate increase of
3.000% on the margin in the event of the Borrowers’ default.
(Id.) The Notes define default to include the failure to make
timely payments, and provide for the assessment of a late charge
for any delinquent payments. Specifically, under the terms of the
Notes, the Borrowers will be charged 5.000% of the principal and
interest overdue or $5.00, whichever is greater, if a payment is
16 days or more late. (Id.) Further, the Notes provide for the
assessment of attorneys’ fees and costs against the Borrowers if
they default on the Notes. (Id.)
B.
The Mortgages
The Lower Road Loan and the Hui Loan are cross-
collateralized, meaning both properties serve as collateral for
both loans. Specifically, the Lower Road Loan is secured by a
first-lien mortgage dated August 14, 2008, signed by Borrowers in
favor of La Jolla, on the Lower Road Property. (Pl.’s CSF, Ex.
C.) The Lower Road Loan is further secured by a second-lien
mortgage dated August 14, 2008, signed by Borrowers and in favor
of La Jolla, on the Hui Property. (Pl.’s CSF, Ex. D.) The Hui
Loan is similarly secured by two separate mortgages: a first-lien
mortgage on the Hui Property executed by the Borrowers in favor
of La Jolla on August 14, 2008, (Pl.’s CSF, Ex. E), and a secondlien mortgage on the Lower Road Property, executed by the
Borrowers in favor of La Jolla on August 14, 2008. (Pl.’s CSF,
3
Ex. F.) (Collectively, the four mortgages are referred to as the
“Mortgages”). All four Mortgages were duly recorded in the Bureau
of Conveyances for the State of Hawaii. (See Pl.’s CSF, Exs. C,
D, E, F.)
C.
Transfer of the Notes and Mortgages to OneWest
On February 19, 2010, the Office of Thrift Supervision
of the U.S. Department of the Treasury closed La Jolla and
appointed the Federal Deposit Insurance Corporation (“FDIC”) as
Receiver for La Jolla. On the same day, OneWest entered into a
Purchase and Assumption Agreement (“FDIC Agreement”) with the
FDIC, as Receiver for La Jolla, to purchase certain assets and
limited liabilities formerly belonging to La Jolla. See OneWest
Bank, FSB, Pasadena, California, Assumes All of the Deposits of
La Jolla Bank, FSB, La Jolla, California, FDIC Press Release
(Feb. 19, 2010), available at
http://www.fdic.gov/news/news/press/2010/pr10034.html.
Pursuant to the FDIC Agreement, OneWest acquired all of
La Jolla’s rights and interests in connection with the Loans,
including the security interests and the Notes. (Pl.’s CSF, Decl.
of Indebtedness at ¶ 9.) The FDIC transferred both original Notes
to OneWest,1/ (see Pl.’s CSF, Exs. G & H), and executed and
1/
Deutsche Bank, as custodial agent for OneWest, has been
in possession of the original Notes since before the Complaint
was filed in this action. (Pl.’s CSF, Decl. of Indebtedness at
¶ 10.)
4
delivered to OneWest assignments of mortgage transferring to
OneWest all right, title, and interest in the four Mortgages and
to all money due or to become due on the corresponding Notes.
(Pl.’s CSF, Exs. I, J, K, L.) All four assignments of mortgage
were duly recorded in the Bureau of Conveyances for the State of
Hawaii. (See id.)
II.
The Status of the Loans
Borrowers have not made any payments on the Lower Road
Loan, as required by the Lower Road Note, since the payment that
was due for May 1, 2010. (Pl.’s CSF, Decl. of Indebtedness at
¶ 13.) Similarly, Borrowers have not made any payments on the Hui
Loan, as required by the Hui Note, since the payment that was due
for February 1, 2010. (Id.) Under the terms of both Notes, the
Borrowers’ failure to remit payments due constitutes a default.
(Pl.’s CSF, Exs. A & B at 1.)
On July 22, 2010, OneWest gave Borrowers written notice
regarding the default of both Notes, acceleration of the debt,
and OneWest’s intention to foreclose if the defaults were not
cured. (Pl.’s CSF, Ex. M, N.) Borrowers have nevertheless failed
to cure the defaults. (Pl.’s CSF, Decl. of Indebtedness at ¶¶ 1416.)
PROCEDURAL BACKGROUND
OneWest filed its Complaint and Notice of Pendency of
Action in the Circuit Court of the Second Circuit for the State
5
of Hawaii on January 24, 2012. In addition to the Borrowers, the
Complaint names as defendants other parties that may claim an
interest in the Mortgaged Properties.2/ The Notice of Pendency of
Action was recorded in the Bureau of Conveyances for the State of
2/
All liens held by the other defendants are junior to
OneWest’s liens. Defendants Wayne and Mary Wagner may claim an
interest in the Mortgaged Properties by virtue of a mortgage
dated August 27, 2009, and recorded in the Bureau of Conveyances
for the State of Hawaii (“the Bureau”) as Document No.
2009-136690, and a mortgage dated August 31, 2009, and recorded
in the Bureau as Document No. 2009-136691. Defendant and junior
lienholder Lot 48A LLC may claim an interest in the Mortgaged
Properties by virtue of a Final Judgment Regarding Arbitration
Award dated December 23, 2009, filed in the Circuit Court of the
Second Circuit, State of Hawaii, S.P. No. 09-1-0040(3) and
recorded in the Bureau as Document Nos. 2009-197979 and
2010-029579, and a Final Judgment Regarding Fees and Costs in
Special Proceeding to Confirm Arbitration Award dated March 24,
2010, filed in the Circuit Court of the Second Circuit, State of
Hawaii, S.P. No. 09-1-0040(3) and recorded in the Bureau as
Document No 2010-045679 and 2010-045680, and a Writ of Execution
dated February 23, 2010, filed in the Circuit Court of the Second
Circuit, State of Hawaii, S.P. No. 09-1-0040(3) and recorded in
the Bureau as Document No. 2010-052604. Defendant and junior
lienholder Credit Associates of Maui, Ltd. may claim an interest
in the Mortgaged Properties by virtue of a Default Judgment
entered in the District Court of the Second Circuit, Lahaina
Division, State of Hawaii, Civil No. DC Civil 10-1-0177, on
October 15, 2010 and recorded in the Bureau as Document No.
2011-145162. (See Pl.’s CSF, Title Aff., Exs. A & B.) In addition
to the liens held by the other defendants, OneWest’s updated
title search referenced an additional junior lien on both
properties in the form of a “Deed to Trust” dated June 12, 2013
between Thomas and Jennie Lindsey as Grantors and Thomas and
Jennie Lindsey as Trustees of the Kamaki Lindsey Trust as
Grantees. (Amended Title Aff., Exs. A & B (Doc. No. 267).) Title
Guaranty of Hawaii states that it “does not believe that the
foregoing document has any valid or enforceable effect on the
title to the land described herein. If a policy of title
insurance is issued, Schedule B will not contain a reference to
said document.” (Id.) Thus, it appears Title Guaranty of Hawaii
is willing to insure over the lien. Nevertheless, this lien must
be noted in the published notice of foreclosure sale.
6
Hawaii on January 27, 2012. (Pl.’s CSF, Ex. O.) Defendant Salem
removed the action to this district court on February 23, 2012.3/
(Doc. No. 1.)
On December 19, 2012, OneWest filed a motion for
summary judgment seeking a decree of foreclosure in connection
with the Complaint. (Doc. No. 65.) Defendant Salem subsequently
filed a voluntary Chapter 11 bankruptcy petition in the United
State Bankruptcy Court, District of Hawaii, resulting in an
automatic stay of the instant lawsuit. See In re Salem, Case No.
13-00392 (Bnkr. Haw. Dec. 19, 2012). OneWest obtained relief from
the automatic stay in the bankruptcy proceeding on June 17, 2013.
See Order Granting Pl.’s Mot. for Relief from the Automatic Stay
Under 11 § 362 (Real Property) or, in the Alternative, Adequate
Protection (June 17, 2013) (Bankruptcy Dkt. No. 72).
On August 26, 2013, OneWest, Salem, and Farrar4/
3/
All named defendants were served with the Complaint;
Defendants Salem, Farrar, Lot 48A LLC, and the Wagners all filed
answers. (Doc. Nos. 6, 25, 29.) On April 20, 2012, the Clerk of
this district court entered default against Credit Associates of
Maui, Ltd. (Doc. No. 27.) Pool Pro was dismissed without
prejudice pursuant to the Notice of Partial Dismissal without
Prejudice of Plaintiff's Complaint as to Defendant Pool Pro,
filed on May 23, 2012. (Doc. No. 32.)
4/
The Wagners were given notice of the settlement
conference but did not attend; however, they participated in the
drafting of the Settlement Agreement and consented to the terms
set forth therein. Specifically, the Wagners stated that they
would agree to a global settlement that included payment of
$50,000 in return for their release of lien on the Hui Property
and Farrar’s release of his interest in the Mortgaged Properties.
(continued...)
7
participated in a settlement conference and placed a settlement
on the record before Magistrate Judge Kevin S. C. Chang.5/ (Doc.
Nos. 140, 142.) In light of the settlement, OneWest’s summary
judgment motion was vacated. (Doc. No. 141.) Defendant Salem
failed, however, to sign the Settlement Agreement and to
4/
(...continued)
(See Ex. 2 to Settlement on the Record (Doc. No. 142).)
5/
The settlement on the record contained the following
terms: (1) the parties agreed to execute a written settlement
agreement (the “Settlement Agreement”) within 14 days from August
26, 2013; (2) there would be a global settlement among the
parties; (3) Salem would execute a deed in lieu of foreclosure
for the Hui Property free and clear of all liens, including the
Wagner Mortgage, the Lot 48A liens and any other liens on the
property, except for the OneWest mortgages; (4) The Wagners
release any and all claims against OneWest in connection with the
foreclosure; (5) The Wagners release Farrar personally and
release their lien on the Hui Property in exchange for (i)
payment of $50,000.00 from Salem and (ii) Farrar’s release of all
interest in the Hui and Lower Road Properties; (6) Salem would
pay $575,000 to OneWest on the loan for the Lower Road Property;
(7) Salem would deliver a release of Lot 48A liens by the hearing
date on OneWest’s motion in Bankruptcy Court to approve the
Settlement Agreement; (8) Salem would provide proof of funds for
payment to OneWest for the Lower Road Property, and a
representation that the funds were not from his bankruptcy
estate; (9) OneWest would issue 1099s to Salem and Farrar for the
Hui and Lower Road Properties; (10) Salem would file a withdrawal
of his opposition to OneWest’s summary judgment motion; (11) the
parties would execute a stipulated decree of foreclosure order
and judgment for the Hui Property, which OneWest could then file
if Salem failed to fulfill the terms of the Settlement Agreement;
(12) Salem, Farrar, and the Wagners release all claims against
OneWest relating to the subject loans or properties; (13) Salem
would have the right to pursue an administrative claim with the
FDIC as receiver pursuant to 12 U.S.C. § 1821(d) for monies the
FDIC may recover from third parties for acts or omissions by La
Jolla Bank; (14) OneWest will waive its deficiency rights against
Salem and Farrar; (15) the settlement is subject to Bankruptcy
Court approval; and (16) OneWest will file its motion to approve
settlement in Bankruptcy Court. (See Doc. No. 171 at 7-8.)
8
otherwise comply with the settlement on the record. Finding the
settlement to be valid and enforceable, on October 31, 2013,
Magistrate Judge Chang issued his Findings and Recommendations
Granting Plaintiff’s Motion to Enforce Settlement Agreement.
(Doc. No. 171.) There being no objections to the Findings and
Recommendation, this Court issued its order adopting them on
November 19, 2013. (Doc. No. 173 (“Order to Enforce
Settlement”).) Defendant Salem, now proceeding pro se, is
currently appealing this order to the Ninth Circuit. (Doc. No.
174.) Pursuant to the Order to Enforce Settlement, this Court
retained jurisdiction to ensure Salem’s compliance with the
Order.6/
On April 9, 2014, OneWest filed the instant Motion for
Summary Judgment Against Defendants J. Randall Farrar,
Christopher Salem, Wayne Wagner, Mary Wagner and Lot 48A LLC, and
Default Judgment Against Defendant Credit Associates of Maui,
Ltd, and for an Order for Interlocutory Decree of Foreclosure and
6/
On January 9, 2014, the Ninth Circuit denied Salem’s
Motion to Stay the District Court’s Proceedings Pending Appeal,
confirming that the pending appeal in the Ninth Circuit does not
divest this Court of jurisdiction to supervise compliance with
the order being appealed. (See Doc. No. 207.) Pursuant to the
Order to Enforce Settlement, Salem was required, inter alia, to
execute the written Settlement Agreement incorporating the terms
from the settlement on the record. Defendant Salem failed to
comply with the Order to Enforce Settlement, and on February 18,
2014, this Court issued its Order Adopting Magistrate Judge’s
Finding and Recommendation to Grant Plaintiff’s Motion for an
Order for Defendant Christopher Salem to Show Cause Why He Should
Not Be Held in Civil Contempt. (Doc. No. 223.)
9
for Entry of Final Judgment pursuant to Fed. R. Civ P. 54(b).7/
(Doc. No. 232.) The motion was supported by a concise statement
of facts, as well as numerous exhibits. (Doc. No. 233.) On May
29, 2014, Defendant Farrar filed his Limited Opposition to
OneWest’s motion, opposing the motion only to the extent that
OneWest seeks a deficiency judgment. (Doc. No. 246 (“Farrar
Opp’n”.) Defendant Salem also filed an opposition to the motion,
supported by a concise statement of facts and numerous exhibits,
on May 30, 2014.8/ (Doc. Nos. 248, 249 (“Salem Opp’n”).) The
remaining defendants, the Wagners, Lot 48A LLC, and Credit
Associations of Maui, Ltd., did not file responses to the motion.
OneWest filed its reply on June 5, 2014. (Doc. No. 253.)
A hearing on the motion was originally set for June 19,
2014. During that hearing, Defendant Salem requested a one week
continuance to give his new attorney time to prepare. The Court
therefore continued the hearing to June 30, 2014. (Doc. No. 266.)
Twenty minutes before the June 30, 2014 hearing commenced,
however, Defendant Salem filed a Chapter 11 Petition in the
Bankruptcy Court for the District of Hawaii, thereby triggering
7/
On April 30, 2014, the Court granted OneWest’s Ex Parte
Motion to Advance Time for Hearing. (Doc. No. 240.)
8/
Salem’s opposition was untimely and violated Local Rule
10.2 (dealing with the form of submissions) in a number of ways.
Because Salem is proceeding pro se, the Court will nevertheless
consider it. The Court cautions Salem, however, that further
filings in violation of the Local Rules and the Court’s deadlines
will not be permitted.
10
an automatic bankruptcy stay. The Court therefore stayed the
hearing and the case until the lifting of the bankruptcy stay.
(Doc. No. 270.) On September 9, 2014, OneWest notified the Court
that the bankruptcy stay had been terminated as a result of the
Bankruptcy Court granting OneWest’s Motion to Dismiss Bankruptcy
Case. (Doc. No. 274.) The Court therefore held a hearing on the
instant Motion on October 6, 2014.9/
STANDARD
I.
Summary Judgment
Summary judgment is proper where there is no genuine
issue of material fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a). Rule 56(a)
mandates summary judgment “against a party who fails to make a
showing sufficient to establish the existence of an element
essential to the party’s case, and on which that party will bear
the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986); see also Broussard v. Univ. of Cal. at Berkeley,
192 F.3d 1252, 1258 (9th Cir. 1999).
9/
The Court notes that on June 12, 2014, Defendant Salem
filed a Motion for Continuance of One West Bank’s Motion for
Summary Judgment, in which Salem asked the Court to delay ruling
on the summary judgment motion, apparently for the purpose of
allowing the Magistrate Judge time to rule on Salem’s Motion to
Compel Production of Documents. (Doc. No. 254.) On September 25,
2014, however, the Magistrate Judge issued his Order Denying
Defendant Christopher Salem’s Motion to Compel Production of
Documents. (Doc. No. 284.) Counsel for Salem therefore withdrew
the Motion for Continuance during the hearing held on the instant
Motion on October 6, 2014.
11
“A party seeking summary judgment bears the initial
burden of informing the court of the basis for its motion and of
identifying those portions of the pleadings and discovery
responses that demonstrate the absence of a genuine issue of
material fact.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978,
984 (9th Cir. 2007) (citing Celotex, 477 U.S. at 323); see also
Jespersen v. Harrah’s Operating Co., 392 F.3d 1076, 1079 (9th
Cir. 2004). “When the moving party has carried its burden under
Rule 56 [(a)] its opponent must do more than simply show that
there is some metaphysical doubt as to the material facts [and]
come forward with specific facts showing that there is a genuine
issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio,
475 U.S. 574, 586–87 (1986) (citation and internal quotation
signals omitted); see also Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247–48 (1986) (stating that a party cannot “rest upon
the mere allegations or denials of his pleading” in opposing
summary judgment).
“An issue is ‘genuine’ only if there is a sufficient
evidentiary basis on which a reasonable fact finder could find
for the nonmoving party, and a dispute is ‘material’ only if it
could affect the outcome of the suit under the governing law.” In
re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (citing Anderson,
477 U.S. at 248). When considering the evidence on a motion for
summary judgment, the court must draw all reasonable inferences
12
on behalf of the nonmoving party. Matsushita Elec. Indus. Co.,
475 U.S. at 587; see also Posey v. Lake Pend Oreille Sch. Dist.
No. 84, 546 F.3d 1121, 1126 (9th Cir. 2008) (stating that “the
evidence of [the nonmovant] is to be believed, and all
justifiable inferences are to be drawn in his favor” (citations
omitted)).
II.
Special Considerations for Pro Se Litigants
Defendant Salem is proceeding pro se. The Ninth Circuit
has repeatedly cautioned that pro se litigants must be treated
with liberality. See, e.g., Waters v. Young, 100 F.3d 1437, 1441
(9th Cir. 1996) (“As a general matter, this court has long sought
to ensure that pro se litigants do not unwittingly fall victim to
procedural requirements that they may, with some assistance from
the court, be able to satisfy.”) Thus, when considering a motion
for summary judgment against a pro se plaintiff, the Court must
consider as evidence the pro se party’s contentions offered in
motions and pleadings, where such contentions are based on
personal knowledge and set forth facts that would be admissible
in evidence, and where the pro se party attested under penalty of
perjury that the contents of the motions or pleadings are true
and correct. Jones v. Blanas, 393 F.3d 918, 923 (9th Cir. 2004).
Nonetheless, pro se litigants must follow the same
rules of procedure that govern other litigants. King v. Atiyeh,
814 F.2d 565, 567 (9th Cir. 1987). “Ignorance of court rules does
13
not constitute excusable neglect, even if the litigant appears
pro se.” Swimmer v. IRS, 811 F.2d 1343, 1345 (9th Cir. 1987). The
court is not required to provide a non-prisoner pro se litigant
with notice of the summary judgment rules. Bias v. Moynihan, 508
F.3d 1212, 1223 (9th Cir. 2007).10/
10/
Here, OneWest asks the Court to strike a number of
exhibits Defendant Salem attached to his concise statement of
facts. Specifically, OneWest argues that Exhibits 1 through 5, as
well as Exhibits D, E, G, H, J, Q, R, and S are all improperly
before the Court. (Reply at 8.) Generally, in cases involving a
party proceeding pro se, the Court must consider as evidence the
pro se party’s contentions offered in motions and pleadings where
such contentions are based on personal knowledge and set forth
facts that would be admissible in evidence, and where the pro se
party attested under penalty of perjury that the contents of the
motions or pleadings are true and correct. Jones v. Blanas, 393
F.3d 918, 923 (9th Cir. 2004). With respect to Exhibits 1 through
5 (the Declarations of Wayne Wagner and Bond Rowe, Salem’s March
8, 2014 letter to Indy Mac Mortgage Services, and Salem’s thenattorney’s correspondence regarding the settlement agreement),
OneWest argues that they should be stricken as improperly
authenticated. As OneWest points out, they are referenced in
Salem’s memorandum in opposition, but not in his declaration and,
as such, it appears that he has failed to attest under penalty of
perjury that they are true and correct. As such, these exhibits
are not properly before the Court and are stricken. See Jones,
393 F.3d at 923. OneWest also asks the Court to strike the
following exhibits: Exhibit D (the La Jolla Bank Underwriting
Analysis), Exhibit E (the Hui Loan Application), Exhibit G (a
copy of the first page of the Hui Road Mortgage), Exhibit H (a
November 5, 2008 Interoffice Memo and December 2, 2008 Memorandum
both regarding workout options), Exhibit J (a September 17, 2010
Notice of Foreclosure from RCO Hawaii, LLLC), Exhibit Q (March
2011 email correspondence between Salem and a OneWest employee),
Exhibit R (April 2011 email correspondence between Salem and
OneWest regarding a possible purchase offer), and Exhibit S (a
Purchase Contract purportedly offering to purchase the Hui
Property, as well as more email correspondence regarding workout
options). OneWest correctly notes that Exhibits E, G, Q, R, and S
all appear to be incomplete. Local Rule 56.1(c) states that, for
documents the parties reference in their concise statements of
(continued...)
14
DISCUSSION
In the instant motion, OneWest seeks to foreclose on
the Mortgages. Specifically, OneWest seeks judgment pursuant to
Federal Rule of Civil Procedure 56 in OneWest’s favor against
Defendants Farrar, Salem, the Wagners, and Lot 48A LLC, as well
as default judgment in favor of OneWest against Credit Associates
of Maui, Ltd. OneWest further seeks an interlocutory decree of
foreclosure in favor of OneWest as to all claims and all parties.
I.
Foreclosure
In general, there is no federal foreclosure law;
rather, state law serves as the law of decision in foreclosure
actions. See Whitehead v. Derwinski, 904 F.2d 1362, 1371 (9th
Cir. 1990), overruled on other grounds by Carter v. Derwinski,
987 F.2d 611 (9th Cir. 1993). Under Hawaii law, a court may issue
10/
(...continued)
facts, “[t]he parties may extract and highlight the relevant
portions of each referenced document, but shall ensure that
enough of a document is attached to put the matter in context.”
Here, it does not appear that Salem has made any attempt to alert
the Court to the fact that the documents are incomplete, or to
provide a full context in which to view the portions of the
documents he does provide. The Court therefore strikes these
exhibits. Based on Salem’s somewhat confusing Declaration, it
appears that he was himself served with the Notice of Foreclosure
(Exhibit J), thus, the Court will not strike this exhibit. As for
Exhibits D and H, which both appear to be documents created by La
Jolla Bank and OneWest employees, respectively, the Court
likewise strikes these exhibits, as Salem has not properly
authenticated these documents or attested to their truth and
accuracy. In sum, the Court strikes Exhibits D, E, G, H, Q, R,
and S. The Court notes, however, that even were it to consider
these exhibits, it would nevertheless still conclude that OneWest
has established its entitlement to foreclose.
15
a foreclosure decree when the moving party establishes all four
of the following: (1) the existence of a promissory note,
mortgage, or other debt agreement; (2) the terms of the
promissory note, mortgage, or other debt agreement; (3) default
by the borrower under the terms of the promissory note, mortgage,
or other debt agreement; and (4) the giving of the cancellation
notice and recordation of an affidavit to such effect. See
IndyMac Bank v. Miguel, 184 P.3d 821, 835 (Haw. Ct. App. 2008)
(citing Bank of Honolulu, N.A. v. Anderson, 654 P.2d 1370, 1375
(Haw. Ct. App. 1982)); see also Haw. Rev. Stats. §§ 667-1 et seq.
(providing for foreclosure by court action). The party seeking to
foreclose must provide evidence of default, but need not
determine a sum certain before obtaining a decree of foreclosure.
Miguel, 184 P.2d at 835 (citing Anderson, 654 P.2d at 1374).
Here, OneWest has made a prima facie case that it is
entitled to foreclose on the four Mortgages. First, OneWest has
demonstrated the existence and terms of the promissory notes and
mortgages: the Court has before it the Notes executed by the
Borrowers evidencing their indebtedness to La Jolla (as well as
evidence that the loans were later sold to OneWest pursuant to
the FDIC Agreement), as well as the four Mortgages constituting
OneWest’s interest in the Mortgaged Properties as security for
the Notes. (See Pl.’s CSF, Exs. A & B (the two Notes); C, D, E &
F (the four Mortgages).) Thus, there is no factual dispute as to
16
the existence of the parties’ agreements, or the terms of the
Notes and Mortgages.
Further, OneWest has proffered evidence that the
Borrowers are currently in default under the loan documents for
failure to make required payments. (See Pl.’s CSF, Decl. of
Indebtedness at ¶ 13.) Pursuant to the terms of the Mortgages, in
the event of the Borrowers’ failure to make timely payments, the
lender had the right to declare the indebtedness immediately due
and payable and to proceed to foreclose judicially or
nonjudicially. (Pl.’s CSF, Exs. C, D, E & F at 4-5.) The
Borrowers do not appear to dispute that they have not made any
payments on the Hui Loan since the payment due for February 1,
2010, and on the Lower Road Loan since the payment due for May 1,
2010. (See Pl.’s CSF, Decl. of Indebtedness at ¶ 13.) Under the
terms of the Mortgages, a failure to make any payment when due
constitutes an event of default. (Pl.’s CSF, Exs. C, D, E & F at
4.) Thus, OneWest has shown that the Borrowers are in default.
Finally, OneWest has demonstrated that it gave
Borrowers notice of its intention to foreclose. Specifically, on
July 22, 2010, OneWest sent Borrowers written notices concerning
the default of both the Hui Note and the Lower Road Note, and
informed the Borrowers of OneWest’s election to accelerate the
debt pursuant to the terms of the Notes, and to foreclose under
loan documents if the default was not cured. (Pl.’s CSF, Exs. M &
17
N.) Notwithstanding the default notices, Borrowers have
apparently not cured their default. (See Pl.’s CSF, Decl. of
Indebtedness at ¶ 16.)
Based on these facts, the Court finds that OneWest has
demonstrated that it is entitled to foreclose as a matter of law.
Borrowers have offered no evidence that the loan documents are
not valid, that they are not indebted to OneWest, or that they
are not in default. Indeed, Defendant Farrar does not dispute
OneWest’s entitlement to foreclose, and opposes the instant
motion only insofar as he seeks to clarify that OneWest is not
seeking a deficiency judgment against him or Defendant Salem.11/
(See Farrar Opp’n at 3-4.) All other defendants, with the
exception of Defendant Salem, have not opposed the instant
motion.
Defendant Salem argues, however, that issues of fact
exist as to the terms and validity of the loan documents in light
11/
Defendant Farrar notes in his memorandum in opposition
that the Settlement Agreement expressly provided that OneWest
waived its deficiency rights against Defendants Farrar and Salem.
(Farrar Opp’n at 3; see also Settlement Agreement at 4-5.) Farrar
has also produced a May 22, 2014 e-mail exchange between counsel
for OneWest and counsel for Farrar in which OneWest’s counsel
states that “OWB is not seeking a deficiency in its [summary
judgment motion].” (Farrar Opp’n, Ex. A.) Nevertheless, OneWest
does request in the instant Motion that the Court “reserve
jurisdiction” to, inter alia, “[e]nter a judgment for such
deficiency as may be found in favor of OneWest and against
Borrowers.” (Mot. at 405.) During the hearing on the instant
Motion, however, counsel for OneWest confirmed that it is not
seeking a deficiency judgment against either Farrar or Salem.
18
of alleged violations of federal lending laws by La Jolla Bank.
(See generally Salem Opp’n.) Further, Salem appears to argue that
he engaged in discussions with La Jolla regarding possible loan
workout options, including the sale of one of the mortgaged
properties, and that OneWest’s refusal to accept such a sale as
part of a loan resolution constituted a breach of the agreement
Salem had discussed with La Jolla. (Salem Opp’n at 13-15.) These
arguments appear to simply reiterate those made in opposition to
OneWest’s first summary judgment motion that was filed shortly
prior to the parties’ August 26, 2013 settlement on the record
and terminated after the settlement was reached. (See Doc. Nos.
132, 136, 138.)
Salem’s arguments must fail for several reasons. As an
initial matter, pursuant to the Settlement Agreement, which this
Court has found is valid and enforceable, (see Order to Enforce
Settlement (Doc. No. 173),) OneWest has a right to foreclose as a
remedy in the event of Salem’s breach.12/ (See Doc. No. 156, Ex. R
(Settlement Agreement) at 12, § E.2.) As discussed above, Salem
has failed to sign the Settlement Agreement or otherwise comply
with its terms, and has therefore defaulted under the terms of
12/
While under the terms of the Settlement Agreement OneWest
had agreed to foreclose only on the Hui Property, and to cancel
the Lower Road Note in exchange for, inter alia, a partial
payment of $575,000, (see Doc. No. 156, Ex. R at 9-10,) because
Salem has entirely failed to comply with that agreement, OneWest
is now exercising its entitlement to foreclose on both
properties.
19
the agreement. OneWest is therefore entitled to foreclose. (Id.
(stating that OneWest’s remedies upon default include its
entitlement to “proceed with the Lawsuit to foreclose the
Mortgages [and] pursue any other remedy available to OneWest
under the Loan Documents or at law or in equity.”).)
Further, leaving aside OneWest’s remedies under the
Settlement Agreement, Salem has altogether failed to raise any
issue of fact as to OneWest’s entitlement to foreclose as a
matter of law under the terms of the Notes and Mortgages. Salem
does not appear to dispute the existence and terms of the Notes
and Mortgages, the fact that the Borrowers are in default, or the
fact that OneWest provided notice of its intention to foreclose.
(See generally Salem Opp’n.) Rather, Salem appears to acknowledge
his default, but argue that OneWest is somehow responsible for
the default because it allegedly rejected offers by Salem to sell
one of the properties to pay off the loans, and would not
cooperate with Salem’s proposed refinancing of the properties.
(Salem Opp’n at 11-15.) This argument must fail, however, because
OneWest was under no obligation to modify the terms of Salem’s
loans.
While Salem and OneWest may have been attempting to
negotiate some sort of loan modification, Salem has produced no
evidence suggesting that the parties ever came to any such
agreement. Any discussions the parties may have had about workout
20
options did not affect OneWest’s ability to foreclose or Salem’s
existing obligations under the Notes and Mortgages. See Doran v.
Wells Fargo Bank, Civ. No. 11-00132 LEK-KSC, 2011 WL 5239738 at
*9 (D. Haw. Oct. 31, 2011). Pursuant to the express terms of the
Notes and Mortgages, and in light of the cross-collateralization
of the two Loans, OneWest was entitled to demand payment in full
for both Loans in order for Salem to obtain a full release of
either Property. (See Pl.’s CSF, Exs. A, B, C, D, E & F (the
Notes and Mortgages).) Salem has thus failed raise any genuine
issue of material fact to suggest that he is not in default.
In sum, because OneWest has met all four requirements
in making a prima facie showing that it is entitled to foreclose,
and Borrowers have failed to “set forth specific facts showing
that there is a genuine issue” of material fact, the Court finds
that summary judgment in favor of OneWest as to foreclosure is
appropriate. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
256 (1986). As such, the Court GRANTS the motion insofar as it
finds that OneWest is entitled to foreclose on the Mortgages
pursuant to the two Notes.
II.
Amount of Judgment
OneWest asserts that it is entitled to judgment as a
matter of law in the amount of the Borrowers’ total indebtedness
under the Notes, or $3,330,271.53. (Mot. at 17.) In his
Declaration of Indebtedness, Jon Dickerson, Vice President of
21
OneWest Bank sets forth the following amounts due under the two
Notes:
Lower Road Note:
Unpaid Principal
Interest (4/1/2010 to 4/1/2014)
Late Charges
Escrow Advance
Recoverable Corporate Advance
Sub-Total (Lower Road Note)
$
$
$
$
$
$
981,348.97
255,150.72
869.40
30,654.08
2,130.00
1,270,153.17
Hui Note:
Unpaid Principal
Interest (1/1/2010 to 4/1/2014)
Late Charges
Escrow Advance
Recoverable Corporate Advance
Sub-Total (Hui Note)
$
$
$
$
$
$
1,548,614.53
427,804.83
2,739.96
78,314.04
2,645.00
2,060,118.36
Total:
$ 3,330,271.53
An examination of the business records upon which this
declaration relies, however, reveals some discrepancies between
the figures in Dickerson’s declaration and the figures set forth
in OneWest’s records. Specifically, OneWest’s business records,
while hardly models of clarity, appear to state that, as of April
1, 2014, the total amount due on the Lower Road Note is
$1,274,472.33, and the total amount due on the Hui Note is
$2,370,441.97. (See Pl.’s CSF, Ex. P (Lower Road Note records) at
11, Ex. Q (Hui Note records) at 16.) Together, this totals
$3,644,914.30.
During the hearing on the instant Motion, however,
counsel for OneWest explained that it is only seeking
$3,330,271.53, an amount that does not include attorneys’ fees
22
and certain fees and costs (including late fees that accrued
after acceleration of the debt) that were automatically included
in the calculations set forth in OneWest’s business records.
Counsel for OneWest confirmed that it is waiving its right to any
late fees accrued after the time of acceleration of the loan, and
that it will seek attorneys’ fees and costs at the time it files
a motion to confirm the sale of the Properties. Thus, OneWest
asserts that the amount set forth in Dickerson’s declaration is
the correct amount of total indebtedness for which OneWest seeks
judgment in the instant Motion. Omitting those amounts OneWest is
not claiming in the instant Motion, it appears OneWest has
demonstrated that the total amount due on both Notes is
$3,330,271.53. Moreover, none of the defendants dispute this
amount.
The Court therefore concludes that OneWest is entitled
as a matter of law to judgment in the amount of $3,330,271.53.
III. Default Judgment Against Credit Associates of Maui
Finally, OneWest seeks a default judgment against
Defendant Credit Associates of Maui (“Maui Credit”). (Mot. at
18.) Maui Credit may claim an interest in the Lower Road and Hui
Properties by virtue of a default judgment entered in the
District Court of the Second Circuit, Lahaina Division, State of
Hawaii, Civ. No. DC Civil 10-1-0177, on October 15, 2010, and
recorded in the Bureau of Conveyances of the State of Hawaii as
23
Document Number 2011-145162. (See Pl.’s CSF, Title Aff., Exs. A &
B.)
OneWest served the Complaint upon Maui Credit on
February 8, 2012. (See Pl.’s CSF, Schiel Decl. ¶ 4; Doc. No. 27,
Ex. A (Return and Acknowledgment of Service).) Maui Credit failed
to timely respond to the Complaint and, as such, the clerk of
this district court entered default against Maui Credit on April
20, 2012. (Doc. No. 27.)
Federal Rule of Civil Procedure 55 governs the entry of
default by the clerk and the subsequent entry of default judgment
by either the clerk or the district court. Rule 55 requires a
“two-step process,” consisting of: (1) seeking the clerk’s entry
of default, and (2) filing a motion for entry of default
judgment. Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986);
Symantec Corp. v. Global Impact, Inc., 559 F.3d 922, 923 (9th
Cir. 2009). The entry of default against a defendant does not,
however, entitle plaintiff to default judgment against that
defendant as a matter of right. Valley Oak Credit Union v.
Villages, 132 B.R. 742, 746 (9th Cir.1991); see also Fed. R. Civ.
P. 55(b)(1), (2).
The Court considers the following factors in deciding a
motion for default judgment: (1) the possibility of prejudice;
(2) the merits of plaintiff’s substantive claims; (3) the
sufficiency of the complaint; (4) the sum of money at stake in
24
the action; (5) the possibility of a dispute concerning material
facts; (6) whether the default was due to excusable neglect; and
(7) the strong policy favoring decisions on the merits. Eitel,
782 F.2d at 1471–72.
On default, “the factual allegations of the complaint,
except those relating to the amount of damages, will be taken as
true.” TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917–18
(9th Cir. 1987) (quoting Geddes v. United Fin. Group, 559 F.2d
557, 560 (9th Cir. 1977)). The allegations in the complaint
regarding liability are deemed true, but the plaintiff must
establish the relief to which it is entitled. Fair Hous. of Marin
v. Combs, 285 F.3d 899, 906 (9th Cir. 2002).
Here, the Court finds that OneWest has demonstrated the
appropriateness of an entry of a default judgment against Maui
Credit. As discussed above, there is no question of fact as to
OneWest’s entitlement to foreclose: the Borrowers have been in
default under the Notes and Mortgages since 2010, and OneWest
will be prejudiced if Maui Credit’s interest in the Properties is
not extinguished and Maui Credit is not precluded from objecting
to OneWest foreclosing against the Properties. The Complaint
sufficiently alleges OneWest’s claims regarding its right to
foreclose, and the amount of money at stake for OneWest is
substantial (several million dollars). Conversely, it appears
Maui Credit’s potential interest in the Properties (by virtue of
25
the default judgment recorded with the Bureau of Conveyances) is
$5,063.75. (See Pl.’s CSF, Title Aff., Ex. A at Endorsement No.
2.) Further, because Maui Credit has never appeared in this
action, there appears to be little possibility of a dispute over
the materal facts, and there is no indication that its default
was due to excusable neglect.
Finally, Maui Credit’s failure to answer the Complaint
makes a decision on the merits impractical, if not impossible.
Under Rule 55, “termination of a case before hearing the merits
is allowed whenever a defendant fails to defend an action.”
PepsiCo., Inc. v. Cal. Security Cans, 238 F. Supp. 2d 1172, 1177
(C.D. Cal. 2002). Here, Maui Credit has failed to defend this
action and has consequently rendered adjudication on the merits
before this Court impracticable.
In sum, the Court finds that the Eitel factors weigh in
favor of entry of default judgment against Maui Credit. OneWest’s
motion is GRANTED insofar as it seeks default judgment against
Maui Credit.
CONCLUSION
For the foregoing reasons, the Court GRANTS OneWest’s
Motion for Summary Judgment Against Defendants J. Randall Farrar,
Christopher Salem, Wayne Wagner, Mary Wagner, and Lot 48A LLC,
and for Summary Judgment and Default Against Defendant Credit
Associates of Maui, Ltd., and for an Order for Interlocutory
26
Decree of Foreclosure and for Entry of Final Judgment Pursuant to
Fed. R. Civ. P. 54(b).
Within seven days of this Order, OneWest shall provide
for the Court’s approval and signature a proposed Foreclosure
Decree setting forth the necessary terms and conditions to
effectuate the foreclosure process. Within seven days of this
Order, OneWest shall also submit to the Court and to all
defendants the name and qualifications of a proposed foreclosure
commissioner with experience in Maui County. If any defendant
objects to OneWest’s proposed commissioner, they may, within
fourteen days of this Order, submit to the Court and to OneWest
the name and qualifications of an alternative proposed
commissioner.13/
Default judgment is hereby entered against Credit
Associates of Maui, Ltd., and all right, title, and interest of
Credit Associates of Maui, Ltd., in the Lower Road and Hui
Properties, based on or arising out of the default judgment, are
hereby forfeited.
13/
In a separate order, the Court will make the final
selection of an appropriate commissioner and provide the
necessary directions regarding the foreclosure of the Notes and
Mortgages.
27
IT IS SO ORDERED.
DATED:
Honolulu, Hawaii, October 8, 2014
________________________________
Alan C. Kay
Senior United States District Judge
OneWest Bank, FSB v. J. Randall Farrar et al., Civ. No. 12-00108 ACK KSC,
Order Granting Plaintiff’s Motion for Summary Judgment, Default Judgment, and
an Order for Interlocutory Decree of Foreclosure
28
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