Milagros Juan Degamo v. BANK OF AMERICA, NA, a national banking association

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MILAGROS JUAN DEGAMO,
Plaintiff,
and
MAC PADUA, in his individual capacity
and as the personal representative of Helen
Padua; SUSAN M. PROPIOS, individually
and on behalf of all others similarly situated,
Plaintiffs-Appellants,
v.
BANK OF AMERICA, NA, a national
banking association,
Defendant-Appellee,
and
DEREK WONG; et al.,
Defendants,
v.
GRACE AKANA; et al.,
No. 19-15736
D.C. No.
1:13-cv-00141-JAO-KJM
MEMORANDUM*
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
FILED
FEB 22 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Movants-Appellants.
MILAGROS JUAN DEGAMO; et al.,
Plaintiffs,
v.
BANK OF AMERICA, N.A., a national
banking association,
Defendant-Appellee,
v.
DANE S. FIELD, Trustee; ELIZABETH A.
KANE, Trustee,
Real-party-in-interest-
Appellants,
and
DEREK WONG; et al.,
Defendants,
v.
GRACE AKANA; et al.,
Movants.
No. 19-15826
D.C. No.
1:13-cv-00141-JAO-KJM
Appeal from the United States District Court
for the District of Hawaii
Jill Otake, District Judge, Presiding

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Argued and Submitted October 14, 2020
San Francisco, California
Before: McKEOWN and NGUYEN, Circuit Judges, and WHALEY,** District
Judge.
This is a putative class action arising out of Defendant Bank of America’s
(“the Bank”) non-judicial foreclosures of roughly 1,000 Hawaii homeowners’
mortgages in the aftermath of the 2007-2008 global financial crisis. Putative class
representatives Susan Propios and Mac Padua (“Plaintiffs”)1 alleged that the Bank
engaged in unlawful practices to reduce competition at the foreclosure sales so that
it could buy the homes at depressed prices and resell them for a larger profit.
Plaintiffs each filed for Chapter 7 bankruptcy prior to joining this case.
Because their foreclosure-related claims remained the property of their bankruptcy
estates, the district court dismissed this case because Plaintiffs were not the real
parties in interest and lacked prudential standing. It also denied their motion to
accept ratification by or substitution of the bankruptcy trustees, denied their motion
to amend the complaint, and denied as moot five additional putative class
** The Honorable Robert H. Whaley, United States District Judge for the
Eastern District of Washington, sitting by designation.
1 The original named plaintiff and putative class representative, Milagros
Degamo, dismissed her claims by stipulation while this case was pending in district
court. Another named plaintiff and putative class representative, Helen Padua,
passed away during the pendency of this appeal and this court substituted Mr.
Padua in his capacity as personal representative.

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members’ motion to intervene. We have jurisdiction under 28 U.S.C. § 1291 and
affirm in part, vacate in part, and remand.
1. The district court did not abuse its discretion when it denied Plaintiffs’
motion to accept the bankruptcy trustees’ ratification of this action or to substitute
the trustees as named plaintiffs.
a. Plaintiffs first argue that the relevant inquiry under Federal Rule of
Civil Procedure 17(a)(3) is whether the initial choice in naming the plaintiff was
understandable. They contend that the district court improperly focused on what
counsel knew and did years after they joined as plaintiffs. Even under that
standard, the district court did not abuse its discretion in denying substitution or
ratification. The record is clear that Plaintiffs knew they had filed for bankruptcy
and had viable claims against the Bank when they joined this suit. They therefore
knew they were not the real parties in interest at the outset. See Jones v. Las Vegas
Metro. Police Dep’t, 873 F.3d 1123, 1128 (9th Cir. 2017).
b. Plaintiffs next argue that the district court imposed an affirmative
burden to correct the real-party-in-interest problem as soon as they discovered it.
The burden to establish standing is on Plaintiffs. Elk Grove Unified Sch. Dist. v.
Newdow, 542 U.S. 1, 11 (2004), abrogated in part on other grounds by Lexmark
Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). This includes
ensuring that the action is prosecuted in the name of the real party in interest. See

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Fed. R. Civ. P. 17(a). Though a real-party-in-interest problem is an affirmative
defense, the Bank properly raised this defense when it moved for judgment on the
pleadings. Plaintiffs’ argument that the district court improperly shifted the burden
therefore lacks merit.
c. Plaintiffs also argue that the district court erred when it reasoned that
the bankruptcy trustees needed to formally abandon their interest in the claims to
ratify Plaintiffs’ suit. But any misunderstanding of the legal requirements for a
valid ratification had no effect on the court’s ruling. Regardless of the propriety of
the trustees’ ratification, Plaintiffs nevertheless failed to meet the standard under
Rule 17 because, as described above, Plaintiffs knew they were not the real parties
in interest at the outset of litigation.
2. The district court did not abuse its discretion when it denied Plaintiffs’
motion for leave to file a second amended complaint. The district court found
prejudice because the case had been pending since 2013 and had been active for
nearly two years, yet Plaintiffs were still attempting to add new subclasses and
factual allegations.2 The district court also found that Plaintiffs’ delays caused the
Bank to incur additional expense, impaired its ability to proceed to trial, and
threatened to interfere with the rightful decision of the case. See Jackson v. Bank
2 We understand the district court’s discussion of prejudice as also applying
to its denial of Plaintiffs’ motion for leave to amend the complaint.

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of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990) (“Prejudice to the opposing party is
the most important factor” when considering whether to permit amendment.).
Plaintiffs fail to explain why the district court’s prejudice analysis was an abuse of
discretion.
3. The district court erred when it failed to consider the merits of the five
putative class members’ motion to intervene. In the class action context, courts
retain jurisdiction to grant intervention even when the named plaintiffs have been
dismissed.3 See Kennerly v. United States, 721 F.2d 1252, 1260 (9th Cir. 1983).
This rule applies even when a class has not yet been certified. See id. The district
court in this case therefore had jurisdiction and the obligation to consider
intervention.
Plaintiffs ask us to decide the issue of intervention as a matter of right in the
first instance. See Fed. R. Civ. P. 24(a)(2). But this determination is most
appropriately addressed by the district court. Resolving these issues will involve
making factual findings and could potentially involve taking evidence, which the
district court is in the best position to do. Moreover, the proposed intervenors also
seek permissive intervention, which is “committed to the broad discretion of the
district court.” County of Orange v. Air Cal., 799 F.2d 535, 539 (9th Cir. 1986).
3 Article III standing must also exist, which is not at issue here.

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We therefore remand for consideration of the putative class members’ motion to
intervene.
Each party shall bear its own costs.
AFFIRMED in part, VACATED in part, and REMANDED.

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