HSC Sorts out Difference Between Res Judicata and Law-of-the-Case Doctrine

 PennyMac Corp. v. Godinez (HSC October 8, 2020)

Background. Lewanna Godinez had a mortgage and accompanying promissory note on real property on Maui. In 2010, Godinez defaulted. The mortgagee was first assigned to J. P. Morgan Chase Bank. The bank brought a foreclosure action against Godinez. The bank then assigned its interest to PennyMac. PennyMac filed a motion for summary judgment asking for a finding that Godinez defaulted and a decree of foreclosure. PennyMac asserted that it was the holder of the promissory note and had standing to prosecute the foreclosure action. Godinez opposed the motion and argued PennyMac lacked standing at the time of the filing of the complaint. The circuit court—the Hon. Judge Rhonda I. L. Loo presiding—orally granted the motion at the hearing. 

Before the circuit court issued its order, the HSC ruled in Bank of America, N.A. v. Reyes-Toledo, 139 Hawai'i 361, 390 P.3d 1248 (2017), that “a foreclosing plaintiff must establish entitlement to enforce the note” by showing physical possession of the note at the time the action commenced. Id. at 368, 390 P.3d at 1255. Godinez filed a motion to dismiss based on the case. PennyMac argued that Godinez was barred from making the argument under the law of the case doctrine. The circuit court applied the law of the case doctrine, denied the motion, and granted PennyMac leave to supplement the record to show standing. PennyMac supplemented the record and the circuit court entered findings of fact, conclusions of law, and an order granting summary judgment and a foreclosure decree and judgment.


Godinez did not appeal. She filed pro se a motion to reconsider pursuant to Hawai'i Rules of Civil Procedure (HRCP) Rule 60(b). The circuit court denied the motion. Godinez appealed and the ICA affirmed on the grounds that Godinez was barred from challenging standing based on the doctrine of res judicata. The HSC granted her application for writ of certiorari.


Res Judicata Requires More than one Lawsuit. Res judicata or claim preclusion prevents a new case from proceeding when there is a complete judgment in another case “between the same parties or their priviies concerning the same subject matter[.]” Kauhane v. Acutron Co., 71 Haw. 458, 463, 795 P.2d 276, 278 (1990). The party asserting res judicata must show “(1) there was a final judgment on the merits, (2) both parties are the same or in privity with the parties in the original suit, and (3) the claim decided in the original suit is identical with the one presented in the action in question.” Bremer v. Weeks, 104 Hawai'i 43, 54, 85 P.3d 150, 161 (2004). Once shown, the new claim is barred—“even if the first suit may appear to have been decided wrongly[.]” Kauhane, 71 Haw. at 463, 795 P.2d at 278-279.


The HSC noted that res judicata can only apply to new suits and “is inapplicable in a continuation of the same suit.” That meant that the question here was whether res judicata should have applied to Godinez’s Rule 60(b) motion in the first place. The HSC held it does not.


A Rule 60(b) Motion is not a New Suit; it is part of the Original. HRCP Rule 60(b) motions allow the court to reconsider a judgment:


On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial . . .; (3) fraud . . ., misrepresentation, or other misconduct of an adverse party; (4) the judgment is void; (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which hit is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.


The rule is identical to Federal Rules of Civil Procedure (FRCP) Rule 60(b). “Therefore, authorities interpreting the Federal Rules are ‘highly persuasive.’” Thomas-Yukimura v. Yukimura, 130 Hawai'i 1, 7 n. 16, 304 P.3d 1182, 1188 n. 16 (2013). The HSC accordingly turned to federal authorities and held that a motion filed pursuant to HRCP Rule 60(b) is a continuation of the original proceeding. See Smith v. Widman Trucking & Excavating, Inc., 627 F.2d 792, 799 (7th Cir. 1980); Charter Twp. Of Muskegon v. City of Muskegon, 303 F.3d 755, 762-763 (6th Cir. 2002).

Rule 60(b) Motions are not Barred by Res Judicata. The HSC held that res judicata does not apply to Rule 60(b) motions and in concurrence with courts of other jurisdictions. Arizona v. California, 460 U.S. 605, 619 (1983) (“res judicata and collateral estoppel do not apply if a party moves the rendered court in the same proceeding to correct or modify its judgment.”); Jones v. Murphy, 772 A.2d 502, 505 (Vt. 2001); New Main Nat. Bank v. Nemon, 588 A.2d 1191, 1194 (Me. 1991); Pepper v. Zions First Nat. Bank, N.A., 801 P.2d 144, 150-151 (Utah 1990). The HSC also noted that its holding was not inconsistent with Mortgage Electronic Registration Systems v. Wise, 130 Hawai'i 11, 304 P.3d 1192 (2013).


There, the HSC held that mortgage foreclosures are analogous to two separate proceedings: the foreclosure of the property for default and the separate order confirming sale of the foreclosed property. Id. at 17, 304 P.3d at 1198. In Wise the HSC held that res judicata precludes challenges based on standing in an order confirming sale of the foreclosed property. Id. According to the HSC, Wise does not address Rule 60(b) motions. Here, Godinez’s motion challenged the foreclosure decree and judgment—not the subsequent sale.


The Law-of-the-Case Doctrine Applies to One Case. Unlike res judicata, which requires separate actions, the law of the case doctrine controls rulings in a single case. “[W]hen a court decides upon a rule of law, that a decision should continue to govern the same issues in subsequent stages in the same case.” Arizona v. California, 460 U.S. at 618. The law of the case doctrine governs lower courts on remand after the appellate court makes a ruling as well as the trial court's own rulings throughout the course of the case. According to the HSC, the doctrine is really a “presumption against reconsideration” and the lower court has the discretion to revisit its earlier rulings. Here, the HSC held that the circuit court need not revisit the earlier ruling and found no abuse of discretion in denying Godinez’s Rule 60(b) motion.


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