HSBC Bank v. Llave Enterprises ( 2016 )

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1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 FNBN-RESCON I LLC,
3 Plaintiff,
4 v. NO. 33,292
5 LLAVE ENTERPRISES, INC., LLAVE
6 CONSTRUCTION, INC., LLAVE DEVELOPMENT,
7 INC., ROBERT B. KEERAN, CYNTHIA J. KEERAN,
8 JEFFREY A. ZUMWALT, LORRI M. ZUMWALT,
9 STOCK BUILDING SUPPLY, INC., SCOTT’S
10 FENCING COMPANY, INC., HIGH MESA
11 CONSULTING GROUP, RESOURCE TECHNOLOGY,
12 INC., ALBUQUERQUE PUBLIC SCHOOL DISTRICT,
13 CITY OF ALBUQUERQUE, ED WHITEHOUSE,
14 CHARLENE WHITEHOUSE, CAROLIN M. CHAVEZ,
15 KEVIN P. CHAVEZ, MORTGAGE ELECTRONIC
16 REGISTRATION SYSTEMS, INC., as nominee for
17 Mortgage Capital Associates, Inc., and its successors and
18 assigns, DANIEL L. GRACE, ELISE L. GRACE, BANK OF
19 AMERICA, N.A., ATLAS PUMPING COMPANY, INC.,
20 D.D.T. ROCK HARD CONCRETE CO., and BOARD OF
21 COUNTY COMMISSIONS OF BERNALILLO COUNTY,
22 Defendants.
23 and
24 HSBC BANK USA, N.A.,
25 Counter/Cross Plaintiff-Appellant,
1 v.
2 LLAVE ENTERPRISES, INC., a New Mexico
3 corporation,
4 Cross/Counter Defendant-Appellee,
5 and
6 KEVIN P. CHAVEZ, a/k/a KEVIN PATRICK CHAVEZ,
7 CAROLIN M. CHAVEZ, a/k/a CAROLIN M. DELKER,
8 a/k/a CAROLIN M. DOERR, FNBN-RESCON I LLC,
9 ATLAS PUMPING CO, INC., AND D.D.T. ROCK
10 HARD CONCRETE CO.,
11 Cross/Counter Defendants.
12 Consolidated with
13 HSBC BANK USA, N.A.,
14 Plaintiff-Appellant,
15 v. NO. 33,518
16 LLAVE ENTERPRISES, INC., a New Mexico
17 corporation,
18 Defendant-Appellee,
19 and
20 KEVIN P. CHAVEZ, a/k/a KEVIN PATRICK
21 CHAVEZ, CAROLIN M. CHAVEZ, a/k/a
22 CAROLIN M. DELKER, a/k/a CAROLIN M. DOERR,
23 and UNKNOWN TENANT (REAL NAME UNKNOWN),
24 Defendants.
2
1 APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
2 C. Shannon Bacon and Alan M. Malott, District Judges
3 Rose L. Brand & Associates, P.C.
4 Eraina M. Edwards
5 Albuquerque, NM
6 for Appellant HSBC Bank USA, N.A.
7 Foster, Rieder & Jackson, P.C.
8 J. Douglas Foster
9 Albuquerque, NM
10 for Appellee Llave Enterprises, Inc.
11 MEMORANDUM OPINION
12 KENNEDY, Judge.
13 {1} HSBC Bank USA, N.A., (HSBC) appeals the dismissals of its successive
14 identical suits for mortgage foreclosure against the same defendant by two district
15 judges in two separate cases. The problems of which it complains are of HSBC’s own
16 making, and the decisions the courts made are well within their discretion. HSBC,
17 prior to a dismissal of fatally defective claims filed in the first action, filed a second
18 amended case concerning the same subject matter and parties. Having run afoul of
19 Rule 1-041(E)(1) NMRA by allowing the first suit to languish without having taken
20 significant action to conclude it, HSBC’s first suit was involuntarily dismissed with
21 prejudice. The second suit was then dismissed with prejudice on grounds of res
22 judicata based on the dismissal of the first suit. For the reasons that follow, we affirm.
3
1 {2} Because this is a memorandum opinion, and the parties are familiar with the
2 facts and procedural history of the case, they will be mentioned only in so far as
3 necessary to support the decision herein.
4 DISCUSSION
5 {3} In October 2009, FNBN-RESCON I LLC (FNBN) filed a foreclosure action
6 (CV-11772) against four properties. This case involves one of the four claims, which
7 was based on FNBN’s mistaken belief that it had a first priority mortgage on property
8 owned by Llave Enterprises, LLC (Defendant). In fact, HSBC held the first lien
9 position, and on May 6, 2010, counterclaimed against FNBN, who dismissed its
10 claims as to the property concerned in this case.
11 {4} HSBC also filed with that counterclaim a cross-claim for foreclosure against the
12 original purchasers1 and their successors by deed, Defendants. In December 2010,
13 HSBC filed a notice of intent to take a default judgment in the case that it did not
14 pursue further.
15 {5} By February 2011, as a result of information received by HSBC from federal
16 agencies that indicated that documents supporting HSBC’s foreclosures in many cases
17 were deficient to a degree that rendered them unable to be pursued, HSBC suspended
18 pursuing foreclosure suits in New Mexico, including CV-11772. With regard to this
1
19 It appears that by virtue of disclaiming their interests and a discharge in
20 bankruptcy, the Chavezes are no longer parties to the case.
4
1 case, it determined that “required information may have been missing from its demand
2 letter sent to the borrowers from the initiation of the cross-claim, and that a re-demand
3 and new suit would be necessary in order to ensure compliance with federal demand
4 notice requirements.” Although HSBC concluded it could not proceed with the case
5 owing to those defects, it did not notify either the parties or the district court that the
6 suit was fatally untenable until June 2013 at the hearing on Defendants’ motion to
7 dismiss.
8 {6} Despite discovering in February 2011 that this defect was fatal to its claim,
9 HSBC waited until September 2012 to “inadvertently” file a motion pursuant to Rule
10 1-041(E)(2) for dismissal without prejudice of its cross-claim against Defendants in
11 CV-11772 that it “mistakenly” entitled “stipulated.”2 The motion, on which HSBC
12 never requested a hearing, stated that HSBC had “elected not to pursue this
13 foreclosure action at this time.” However, on November 1, 2012, believing that it had
14 fixed its demand problem against Llave, the HSBC filed a new foreclosure action
15 against Llave (CV-10147). This is the second case, the dismissal of which HSBC also
16 appeals here.
17 {7} The day after being served with this new lawsuit, Llave filed a motion to
18 dismiss CV-11772 with prejudice for failure to prosecute under Rule 1-041(E)(1).
2
19 Though titled as a “stipulated” motion to dismiss, HSBC later stated that the
20 motion was “mistakenly captioned.”
5
1 HSBC responded on January 4, 2013, that it only objected to a dismissal with
2 prejudice. Notably, HSBC did not mention in this pleading that it had filed the other
3 lawsuit against Llave two months previously that was pending in another division of
4 the district court. After a hearing on Llave’s motion in June 2013, the district court
5 granted a dismissal of case CV-11772 with prejudice on June 24, 2013. Following a
6 denied motion to reconsider this ruling, HSBC appealed the case on October 25, 2013.
7 {8} Llave had also filed a motion to dismiss the second case (CV-10147) in January
8 2013, alleging that CV-11772 was at that time subject to a motion to dismiss with
9 prejudice. By the time HSBC responded to this motion, CV-11772 had been dismissed
10 with prejudice for failure to prosecute. The motion to dismiss CV-10147 was heard
11 on December 3, 2013, and granted by the district court, which dismissed the case with
12 prejudice. The district court found that there were no claims that were or could have
13 been raised in CV-10147 that could not have been raised in the context of CV-11772
14 and that the dismissal with prejudice of CV-11772 operated to bar CV-10147 by the
15 doctrine of res judicata. HSBC appealed from the second dismissal, and both appeals
16 have now been consolidated by this Court.
17 A. Case CV-10147 Can Be Barred by Res Judicata
18 {9} We review the legal question of claim preclusion de novo. Kirby v. Guardian
19 Life Ins. Co. of Am., 2010-NMSC-014, ¶ 61, 148 N.M. 106, 231 P.3d 87. A dismissal
20 with prejudice constitutes an adjudication on the merits and is res judicata of the
6
1 issues between the parties and their privies as to subsequent cases. Campos v. Brown
2 Constr. Co., 1973-NMCA-140, ¶ 14, 85 N.M. 684, 515 P.2d 1288; Reed v. Furr’s
3 Supermarkets, Inc., 2000-NMCA-091, ¶ 35, 129 N.M. 639, 11 P.3d 603. As such, the
4 dismissal with prejudice of CV-11772 that preceded the dismissal in CV-10147 would
5 operate as res judicata so as to bar a subsequent case in the latter action that concerned
6 itself with the same parties, the same subject matter, the same relationships between
7 the parties, and the same cause of action. See Myers v. Olson, 1984-NMSC-015, ¶ 9,
8 100 N.M. 745, 676 P.2d 822 (stating the requisite elements for res judicata to apply).
9 Res judicata would also bar raising claims for the first time in a second action where
10 they could have been raised in the first action. City of Sunland Park v. Macias, 2003-
11 NMCA-098, ¶ 18, 134 N.M. 216, 75 P.3d 816. “One of the primary purposes of the
12 claim preclusion doctrine is to protect a defendant from being harassed by repetitive
13 actions based on the same claim.” Concerned Residents of Santa Fe N., Inc. v. Santa
14 Fe Estates, Inc., 2008-NMCA-042, ¶ 40, 143 N.M. 811, 182 P.3d 794 (quoting 18
15 James Wm. Moore, Moore’s Federal Practice § 131.24[1], at 74 (3d ed. 2007)). Res
16 judicata also protects the courts’ interest in conserving judicial resources. Kirby, 2010-
17 NMSC-014, ¶ 65.
18 {10} As noted below, HSBC never cavilled that the second suit it filed, while the first
19 was pending, was identical in all claims and parties to the first. The district court in
20 CV-10147 found that there was nothing in the case before it that could not have been
7
1 raised in the case before it that departed from the previous case CV-11772, and that
2 HSBC had failed to show why CV-10147 should not be dismissed owing to res
3 judicata. On the record before us, we entirely agree. HSBC fails to demonstrate any
4 error on the part of the district court in dismissing CV-10147 for res judicata. Thus,
5 the propriety of the second dismissal rests entirely on the propriety of the first, which
6 we now address.
7 B. Dismissing CV-11772 Was Within the District Court’s Discretion
8 {11} That CV-11772 was a case in need of dismissal was never in dispute when
9 Llave’s motion to dismiss CV-11772 with prejudice was heard by the district court on
10 June 13, 2013. Although its motion stated that it had “elected not to pursue this
11 foreclosure action at this time,” at the hearing HSBC stated that it was “fine with a
12 dismissal [without prejudice] because we can’t proceed with [the case].” (Emphasis
13 added.) Rule 1-041(E)(1) permits a district court to dismiss with prejudice any cross-
14 claim “if the party asserting the claim has failed to take any significant action to bring
15 such claim to trial or other final disposition within two (2) years from the filing of
16 such action or claim.” Id.
17 {12} We review a dismissal for inactivity under Rule 1-041(E)(1) for an abuse of
18 discretion, Summit Elec. Supply Co. v. Rhodes & Salmon, P.C., 2010-NMCA-086, ¶ 6,
19 148 N.M. 590, 241 P.3d 188, and will reverse the district court only for an abuse of
20 discretion. N.M. Water Quality Control Comm’n v. Emerald Corp., 1991-NMCA-136,
8
1 ¶ 5, 113 N.M. 144, 823 P.2d 944 (emphasis added). We consider all of the
2 circumstances in the record in evaluating whether the district court has exceeded “the
3 bounds of reason”; reasonableness is not gauged by a fixed standard but only by the
4 circumstances of the case. Summit Electric, 2010-NMCA-086, ¶ 6. The two-part test
5 we apply was enunciated in State ex rel. Reynolds v. Molybdenum Corp. of Am., 1972-
6 NMSC-027, ¶ 23, 83 N.M. 690, 496 P.2d 1086. First, the plaintiff must have diligently
7 and timely taken the case to its final determination within the time period specified by
8 the rule. Id. Second, the plaintiff must not have been excusably prevented from taking
9 such action. Id. ¶ 24. Summit Electric requires that a plaintiff’s action to make the case
10 to proceed to its end be taken in good faith. 2010-NMCA-086, ¶¶ 13-14.
11 {13} A district court might abuse its discretion where dismissal results in an
12 injustice. If special circumstances impeded the plaintiff’s prosecution of its claim, or
13 the plaintiff actively pursued its claim after a prior lapse, an abuse of discretion in
14 dismissing with prejudice might be found by a reviewing court. Id. ¶ 14; see Sewell
15 v. Wilson, 1982-NMCA-017, ¶ 37, 97 N.M. 523, 641 P.2d 1070 (upholding the
16 plaintiff’s appeal against dismissal when it demonstrated “continual activity in pursuit
17 of [its] claim and sufficient excuse for failure to attempt to conclude it with any
18 greater dispatch”). In Molybdenum Corp., taking depositions, active discovery
19 practice, and requests for trial all sufficed to demonstrate sufficient activity, while
20 stipulated delays and delays caused by the court itself excusably prevented the
9
1 plaintiff from proceeding. 1972-NMSC-027, ¶¶ 2-6. In Sewell, pursuing adequate and
2 available expert testimony was sufficient. 1982-NMCA-017, ¶¶ 24-28. None of those
3 excuses exist in this case. In this case, HSBC might have filed its second case within
4 the statute of limitations after having secured a voluntary dismissal, but did not pursue
5 its own motion to dismiss, and allowed the case to languish.
6 1. A Greater Than Two-Year Delay in This Case Is Not Disputed
7 {14} HSBC filed its cross-claim against Llave on May 6, 2010, and its motion to
8 dismiss on September 6, 2012. HSBC correctly concedes on appeal that “[t]he delay
9 in this case was exactly two years and four months” after HSBC filed its cross-claim
10 against Llave, despite HSBC’s representing to the district court during the hearing that
11 it was “within the two-year period” permitted by the rule. Thus at the hearing on
12 Llave’s motion to dismiss with prejudice on June 13, 2013, the only dispute was
13 whether the dismissal would be with or without prejudice. HSBC asked the district
14 court to construe Rule 1-041 liberally to allow the case to be “tried on the merits
15 [without] trivial technicalities.” Under Rule 1-041(E)(1), which sets a firm two-year
16 deadline, the passage of time is a lynchpin, not a triviality. HSBC’s argument referred,
17 no doubt, to Sewell, 1982-NMCA-017, ¶ 35 (holding that Rule 1-041 should not be
18 applied in “complete disregard” for the rights of litigants to have cases decided on the
19 merits and not “trivial technicalities” (internal quotation marks and citation omitted)).
20 HSBC may assert that “there was no discovery, scheduling order entered, nor a trial
10
1 setting” in the case as hallmarks of a lack of prejudice to Llave by its failing to
2 prosecute the case. However, these are the very actions required by Rule 1-041(E)(1)
3 to avoid dismissal with prejudice for lack of significant action to conclude the case.
4 The time period does not have to be “excessive,” as they plead; it just has to have
5 extended more than two years without significant action by a plaintiff to justify a
6 dismissal with prejudice.
7 2. HSBC Was Unable to Prosecute Its Cross-Claim, and Shows No Excuse
8 For Its Inaction
9 {15} Unfortunately for HSBC, it is not a plaintiff that is “blamelessly ignorant” of
10 its obligations to pursue its case, as we saw in Sewell, nor had it, like Sewell’s
11 plaintiff, been diligent throughout the case and moved to set a trial before the
12 defendants’ motion to dismiss had been heard. 1982-NMCA-017, ¶ 36. Early in the
13 intervening period, HSBC discovered its systemic problems with notices of default,
14 extending at some point to the claim it had filed against Llave. HSBC presented no
15 evidence, documentary or otherwise, to justify its actions to the district court
16 concerning the decision not to proceed to trial or actively pursue another conclusion
17 during the pendency of the case. HSBC disingenuously attempted to color its
18 “moratorium hold” on foreclosure cases as something required or imposed upon it
19 from without, rendering it incapable of taking action on the case. This was a position
20 the district court did not accept, particularly since no notice of HSBC’s ceasing action
11
1 on the case had been given. Under Summit Electric, we assess whether the plaintiff has
2 taken a good-faith action to prosecute before the defendant files a motion to dismiss.
3 2010-NMCA-086, ¶¶ 12-14. HSBC had moved for dismissal under Rule 1-041(A)(2),
4 but had not pursued a hearing on the motion prior to Llave filing its motion under
5 Rule 1-041(E)(1) and being granted a hearing.
6 {16} HSBC states that it legitimately wished “to restart the foreclosure to ensure its
7 compliance with applicable federal laws.” HSBC’s (specious) argument that its only
8 options were to proceed to judgment within two years or comply with federal
9 requirements and risk losing the case under Rule 1-401(E)(1) is belied by its other
10 (correct) argument that a timely voluntary dismissal and refiling a valid case within
11 the statute of limitations would have cured the problem. When questioned about
12 prosecuting two cases based on the same subject matter against the same party at the
13 same time, HSBC responded “we’re not trying to prosecute this [CV-11772] case. We
14 don’t want to prosecute this case at all.” This confirms HSBC’s representation in its
15 motion that it had “elected not to pursue this foreclosure action at this time.”
16 However, neither the motion, nor HSBC’s response to Llave’s motion to dismiss with
17 prejudice on January 4, 2013, mentioned that HSBC considered itself unable to
18 proceed owing to the notice problem that it believed barred the action under the Fair
19 Credit Reporting Act. See Rivera v. Brazos Lodge Corp., 1991-NMSC-030, ¶ 21, 111
20 N.M. 670, 808 P.2d 955 (noting that an appellate court’s review of Rule 1-011 NMRA
12
1 sanctions for filing an action not supported by facts is made easier when the record
2 removes “speculation about the subjective knowledge of the relevant facts and
3 applicable law held by appellant and his attorney at the time of filing”).
4 {17} HSBC is correct that it is permissible to voluntarily dismiss one case and then
5 refile another. City of Roswell v. Holmes, 1939-NMSC-062, ¶ 8, 44 N.M. 1, 96 P.2d
6 701 (“We see no reason why a litigant may not ordinarily dismiss an action prior to
7 the running of the time limitation of the statute and preserve his right to bring a
8 subsequent action.”). However, no case supporting this proposition involves the
9 plaintiff jumping the gun by having filed its second case based on an identical claim
10 before the first case had been dismissed. HSBC misses the point that a voluntary
11 dismissal of a defective case is what preserves the ability to act on the intention to
12 adequately prosecute the action at a later date. We remind HSBC that it forfeited the
13 opportunity for a voluntary dismissal by failing to pursue its motion in CV-11772.
14 The dismissal entered was therefore pursuant to the rule for involuntary dismissal
15 based on failure to prosecute, following a hearing on Llave’s motion that was granted
16 by the district court at Llave’s request, not HSBC’s.
17 {18} Comments by the district court on HSBC’s litigation conduct clearly show that
18 it regarded HSBC’s failure to prosecute an untenable case while filing another before
19 it was dismissed to be a willful waste of judicial resources. This reflects on our
20 evaluation of HSBC’s good faith in attempting to resolve CV-11772, as does its
13
1 statement that HSBC felt comfortable to re-demand and file the new case once its
2 motion to dismiss in CV-11772 had been filed. According to the district court, this
3 wreaked “havoc” in the case because HSBC, while taking no action, assumed it could
4 stay active while it pieced its case together after the fact, having filed its cross-claim
5 and the notice of intent to take default. To the district court, filing the new case
6 smacked of an “end run” around the problems that were fatal to the first case while
7 keeping Llave on the hook. We agree.
8 The Dismissal With Prejudice of CV-11772 Was Within the Court’s Discretion
9 {19} The policy behind Rule 1-041(E) is to give teeth to the inherent authority a
10 court has to control its docket. See Summit Elec., 2010-NMCA-086, ¶ 15; Rule 1-
11 041(E)(2). The rule is designed to allow district courts “to clear deadwood from the
12 docket, not to penalize plaintiffs who are attempting to bring a case to final
13 determination and have demonstrated the viability of the action.” Summit Elec., 2010-
14 NMCA-086, ¶ 9 (internal quotation marks and citation omitted). The district court
15 stated that through its actions, HSBC created problems with two judges’ dockets by
16 not attempting to fix the problems in its first case while filing a parallel proceeding
17 in a new court for the same purpose, where “nothing meaningful” had been done to
18 date in either case. As mentioned above, HSBC concedes that no discovery was
19 conducted, no scheduling orders sought, and no timely motion to dismiss was filed.
20 The district court stated that filing its intent to take a default, which required no action
14
1 from the opposing party, and not acting upon it, did not move the case forward to
2 disposition.
3 {20} HSBC took the position that any attempt to “conclude a case,” prior to the filing
4 of the defendants’ motion will satisfy the rule, and “prevent dismissal with prejudice.”
5 HSBC insists that its notice of intent to take default, and its motion to dismiss satisfy
6 this requirement. A notice to take default is neither an application to enter a default
7 in the case, nor a request for a hearing on the issue. See Rule 1-055(B) NMRA
8 (requiring not less than three days notice prior to a hearing on any application for
9 default). HSBC’s notice is of no effect in the Rule 1-041 calculus especially in light
10 of HSBC’s subsequent decision to abandon its claim in CV-11772 for deficient notice
11 to Defendants of their default on the debt.
12 {21} The district court stated that something more significant than filing an intent to
13 take default and a motion to dismiss nearly two years later is required to stop the clock
14 for Rule 1-041, and granted the dismissal with prejudice. We observe no abuse of
15 discretion in the district court’s action. Under Rule 1-041(E)(1), a party defending a
16 claim can move for a dismissal with prejudice “if the party asserting the claim has
17 failed to take any significant action to bring such claim to trial or other final
18 disposition within two (2) years” from filing the claim. HSBC did not take any of the
19 actions our courts have recognized to bring the case to trial in the two years and four
20 months HSBC recognizes it took to file their motion to dismiss. See Jones v.
15
1 Montgomery Ward & Co., 1985-NMSC-062, ¶ 10, 103 N.M. 45, 702 P.2d 990 (setting
2 out various factors such as pursuing discovery, communications between the court and
3 counsel, motions hearings actually conducted as bearing on whether sufficient action
4 has been taken); see also Summit Elec., 2010-NMCA-086, ¶ 12 (discussing that the
5 filing of a motion for a trial setting on the merits amounted to action by the plaintiff
6 to bring the case to its final determination).
7 CONCLUSION
8 {22} Based on the facts in the record, and inference from the scant pleadings filed
9 by HSBC, and because no other evidence was presented, we can find no abuse of
10 discretion by the district court in concluding that HSBC had not taken any action to
11 prosecute the case it filed within two years. “Prosecute” connotes no more than a
12 party’s acting “to maintain rather than commence or begin an action.” Ballentine’s
13 Law Dictionary, 1013 (3d ed. 1969). HSBC took no actions within two years
14 calculated to further the suit to a conclusion, and HSBC’s admissions show that it
15 regarded the suit as one that was untenable and in need of dismissal for much of that
16 time. Without securing an orderly exit—prosecuting a dismissal—from one case, it
17 perfected its case and filed a second. In light of HSBC’s having already filed a second
18 identical action that was then pending, clarified by its statement to the district court
19 that “we’re not trying to prosecute this case[,]” the district court’s discretion to
20 dismiss the first case with prejudice was properly exercised. In light of the purposes
16
1 of Rule 1-041, particularly the interest in enforcing both a plaintiff’s meaningful
2 prosecution of a case and judicial economy, HSBC’s arguments do not seem reflective
3 of its conduct. HSBC’s allegation of bias on the part of the district court is
4 unpreserved and unsupported by citations to the record. The district court’s comments
5 about HSBC’s keeping its case going while filing another were fair comments on its
6 litigation conduct. For the foregoing reasons, we affirm the district courts’ judgments.
7 {23} IT IS SO ORDERED.
8 _______________________________
9 RODERICK T. KENNEDY, Judge
10 WE CONCUR:
11 _________________________________
12 JAMES J. WECHSLER, Judge
13 _________________________________
14 J. MILES HANISEE, Judge
17