Professional Documents
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2017-02-28 Bank of AM. V Reyes-Toledo HI
2017-02-28 Bank of AM. V Reyes-Toledo HI
Electronically Filed
Supreme Court
SCWC-15-0000005
28-FEB-2017
08:06 AM
---o0o---
vs.
GRISEL REYES-TOLEDO,
Petitioner/Defendant-Appellant,
and
SCWC-15-0000005
NAKAYAMA, ACTING C.J., McKENNA, POLLACK, AND WILSON, JJ., AND CIRCUIT
COURT JUDGE GARIBALDI, IN PLACE OF RECKTENWALD, C.J., RECUSED
consider whether a foreclosing plaintiff seeking summary
I. BACKGROUND
stated that BAC Home Loans Servicing, LP, services the loan on
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An assignment of the Mortgage from Mortgage Electronic
Homeowner’s property.
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foreclosure.1 Homeowner attacked the validity of the Assignment2
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Bank of America moved for summary judgment and an
Homeowner.
and that the Note “has been duly endorsed to blank.” Also
follows:
WITHOUT RECOURSE
COUNTRYWIDE HOME LOANS, INC.
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BY: [signature Michele Sjolander]
MICHELE SJOLANDER
EXECUTIVE VICE PRESIDENT
******
that she did “not have to prove who owns the note and mortgage”
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The circuit court granted Bank of America’s motion for
Decree”). The court found that Bank of America was the “current
holder” of the Note and Mortgage.5 The court concluded that Bank
5
The court found, “Plaintiff is the current holder of the Note and
Mortgage by an Assignment of Mortgage (‘Assignment’) recorded on October 19,
2011 in the Office of the Assistant Registrar of the Land Court of the State
of Hawaii as Document No. 4105159 and noted on Transfer Certificate of Title
No. 878,760.”
6
Prior to filing her notice of appeal, Homeowner moved for a stay
of the Foreclosure Decree and cancellation of the sale of the property. In
her supporting memorandum, Homeowner requested that the circuit court “stay
the summary judgment order and the judgment, cancel any proposed sale, and
(continued . . .)
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Homeowner asserted that the circuit court erred in holding that
Homeowner also moved for a stay in the ICA requesting that the
ICA stay the Foreclosure Decree, cancel the sale of the property, and allow
the property to act as a supersedeas bond. The ICA granted the motion in
part on the condition that, within twenty days, Homeowner submit to the
circuit court for approval a supersedeas bond issued by a licensed surety in
the amount of $300,000.
7
The ICA also concluded that Homeowner’s arguments with respect to
the validity of the Assignment were without merit. With respect to
Homeowner’s assertion that any transfers of the Note and Mortgage were void
and in violation of the rules of the trust, the ICA noted that Homeowner
failed “to cite to the record or any evidence to support her assertion that
the Note and Mortgage were in a trust that dissolved, or that the transfers
were based on forged documents,” and the ICA concluded that Homeowner thus
“failed to demonstrate that the assignment of the Note and Mortgage was
void.” Finally, the ICA determined that Homeowner failed to establish that
she was entitled to a continuance to complete discovery pursuant to HRCP Rule
56(f).
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established that [Bank of America] was the ‘holder’ of the Note,
and the Egan Declaration stated that the Note was a true and
did not have jurisdiction over these orders as they were not
II. DISCUSSION
8
Homeowner presents four questions on certiorari to this court:
(1) whether the ICA erred in affirming the circuit court’s grant of summary
judgment to Bank of America; (2) whether the ICA erred in affirming the
dismissal of her counterclaims; (3) whether the ICA erred in affirming the
circuit court’s denial of her motion for reconsideration of the dismissal of
(continued . . .)
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erred in affirming the circuit court’s grant of summary judgment
A. Summary Judgment
America “where the evidence proved” that Bank of America did not
Homeowner asserts that she “does not have to prove who owns the
her counterclaims and HRCP Rule 54(b) request for certification; and (4)
whether the ICA erred in affirming the denial of her request “to use her home
as the supersedeas bond.”
9
“We review the circuit court’s grant or denial of summary
judgment de novo.” Querubin v. Thronas, 107 Hawaiʻi 48, 56, 109 P.3d 689, 697
(2005). The court views all the evidence and inferences in the light most
favorable to the party opposing the motion. Durette v. Aloha Plastic
Recycling, Inc., 105 Hawaiʻi 490, 501, 100 P.3d 60, 71 (2004). The moving
party bears the burden of demonstrating that there is no genuine issue as to
any material fact with respect to the essential elements of the claim or
defense and must prove that the moving party is entitled to judgment as a
matter of law. French v. Haw. Pizza Hut, Inc., 105 Hawaiʻi 462, 470, 99 P.3d
1046, 1054 (2004). “A fact is material if proof of that fact would have the
effect of establishing or refuting one of the essential elements of a cause
of action or defense asserted by the parties.” Durette, 105 Hawaiʻi at 501,
100 P.3d at 71 (quoting Haw. Cmy. Fed. Credit Union v. Keka, 94 Hawaiʻi 213,
221, 11 P.3d 1, 9 (2000)).
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mortgage.” In both her application for writ of certiorari and
her opening brief to the ICA, Homeowner argued that there was no
Haw. App. 545, 551, 654 P.2d 1370, 1375 (1982) (citing 55 Am.
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rights of a holder, the plaintiff is entitled to recovery unless
10
See also Bank of Am., N.A. v. Hermano, 138 Hawaiʻi 140, 377 P.3d
1058 (App. 2016) (SDO) (interpreting HRS § 490:3-301 to require that
plaintiff establish that it is the holder of, or otherwise entitled to
enforce, the promissory note and mortgage in order to be entitled to summary
judgment in a foreclosure action).
11
The standing inquiry involves consideration of whether the
plaintiff suffered an actual or threatened injury as a result of the
defendant’s conduct; whether the injury is traceable to the challenged
action; and whether the injury is likely to be remedied by a favorable
judicial decision. Mottl, 95 Hawaiʻi at 391, 23 P.3d at 726.
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reduce a claim to judgment, foreclose, or otherwise enforce the
is the default on the note that gives rise to the action. See
default).
Disciplinary Bd. of Haw. Supreme Ct., 91 Hawaiʻi 51, 55, 979 P.2d
Haw. Tourism Auth., 100 Hawaiʻi 242, 257, 59 P.3d 877, 892 (2002)
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the case”). Accordingly, a foreclosing plaintiff does not have
was entitled to enforce the note that has been defaulted on.
See Hanalei, BRC Inc. v. Porter, 7 Haw. App. 304, 310, 760 P.2d
Morgan Chase Bank Nat. Ass’n, 79 So. 3d 170, 173 (Fla. Dist. Ct.
Nat. Trust Co. v. Johnston, 369 P.3d 1046, 1052 (N.M. 2016)
12
It is noted that the Porter case allowed for the curing of the
premature commencement by the filing of an amended complaint after the
plaintiff came into possession of the instrument. We note that this case
does not present the issue of whether an amended complaint will cure the
premature filing of a foreclosure action, and therefore we do not address
this aspect of the Porter case.
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(holding that “standing must be established as of the time of
Collymore, 890 N.Y.S.2d 578, 580 (N.Y. App. Div. 2009) (noting
of N.Y. Mellon v. Grund, 27 N.E.3d 555, 559 (Ohio Ct. App. 2015)
U.S. Bank Nat. Ass’n v. Kimball, 27 A.3d 1087, 1092 (Vt. 2011)
the homeowner where the bank could not prove it was the holder
of the note).
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The requirement that a foreclosing plaintiff prove its
Deutsche Bank Nat. Trust Co. v. Johnston, 369 P.3d 1046, 1052
(N.M. 2016); see Porter, 7 Haw. App. at 308, 760 P.2d at 679
13
See, e.g., Wells Fargo Bank, N.A. v. Marchione, 887 N.Y.S.2d 615,
617 (N.Y. App. Div. 2009) (foreclosing bank claimed standing based on an
assignment of the relevant mortgage and note that was executed after the
commencement of the action).
14
See, e.g., Shaun Barnes et al., In-House Counsel’s Role in the
Structuring of Mortgage-Backed Securities, 2012 Wis. L. Rev. 521, 528 (2012)
(“Unfortunately, over the years procedural standards in mortgage
(continued . . .)
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even the plaintiffs may be sure if they actually own the notes
securitizations appear to have deteriorated along with loan-underwriting
standards. As a result, in some, if not many or most, cases, notes were
neither indorsed nor delivered to the [special purpose vehicle] or its agent
in accordance with the delivery instructions. Moreover, it appears that
mortgage loan servicers seeking to enforce notes on behalf of the [special
purpose vehicle] did not always bother to take physical possession of the
notes in accordance with state law.”); Elizabeth Renuart, Uneasy
Intersections: The Right to Foreclose and the U.C.C., 48 Wake Forest L. Rev.
1205, 1209-10 (2013) (“The evidence reveals the failure to deliver the
original notes with proper indorsements to the trustee or its document
custodian, the routine creation of unnecessary lost note affidavits, the
destruction of the original notes, and the falsification of necessary
indorsements.”); Alan M. White, Losing the Paper - Mortgage Assignments, Note
Transfers and Consumer Protection, 24 Loy. Consumer L. Rev. 468, 475 (2012)
(“Much anecdotal evidence suggests that servicers of private-label
securitized mortgages either delivered original notes without endorsements to
document custodians for the trust, routinely prepared lost note affidavits in
lieu of delivering notes to foreclosure attorneys and trustees, routinely
destroyed original notes, and/or obtained or forged necessary endorsements
long after the transfers were supposed to have taken place.” (footnotes
omitted)).
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Whether a party is entitled to enforce a promissory
15
A “holder in due course” is defined as follows:
(2) The holder took the instrument (i) for value, (ii) in
good faith, (iii) without notice that the instrument is
overdue or has been dishonored or that there is an uncured
default with respect to payment of another instrument
issued as part of the same series, (iv) without notice
that the instrument contains an unauthorized signature or
has been altered, (v) without notice of any claim to the
instrument described in section 490:3-306, and (vi)
without notice that any party has a defense or claim in
recoupment described in section 490:3-305(a).
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The negotiation asserted by Bank of America involved
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judgment, a material question of fact exists as to whether Bank
which was made after the filing of the complaint in this case,
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fact with respect to the essential elements of a foreclosure
action. See French v. Haw. Pizza Hut, Inc., 105 Hawaiʻi 462,
whether Bank of America held the Note at the time it filed the
17
An assignment of the Mortgage to Bank of America prior to the
commencement of the action would not be sufficient to establish standing as
an injury to the plaintiff in a foreclosure proceeding, which is premised on
the default under the note. Although the security follows the debt, the debt
does not automatically follow the security. See HRS § 490:9-203(g) & cmt. 9
(2008) (codifying the common law rule that a transfer of an obligation
secured by a security interest or other lien on personal or real property
also transfers the security interest or lien); see also, e.g., Vega v. CTX
Mortg. Co., LLC, 761 F. Supp. 2d 1095, 1097 (D. Nev. 2011) (“The Traditional
Rule is that the mortgage or deed of trust (the security instrument)
automatically follows the secured debt, but not vice versa.”); Restatement
(Third) of Property (Mortgages) § 5.4(c) (1997) (“A mortgage may be enforced
only by, or in behalf of, a person who is entitled to enforce the obligation
the mortgage secures.”).
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America’s motion for summary judgment.18 In light of this
of Homeowner’s counterclaims.
18
It is noted that this decision does not modify notice pleading
standards. See Johnston, 369 P.3d at 1055 (explaining that in foreclosure
cases a foreclosing plaintiff satisfies notice pleading requirements by
simply alleging that it is the holder of the note without attaching any
additional documentary evidence).
19
HRS § 641-1(a) (Supp. 2012) provides, “Appeals shall be allowed
in civil matters from all final judgments, orders, or decrees of circuit and
(continued . . .)
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and district courts. Thus, a party typically does not have a
foreclosure.
district courts and the land court to the intermediate appellate court,
subject to chapter 602.”
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title to the foreclosed property pursuant to the order
confirming sale.
130 Hawaiʻi 11, 16, 304 P.3d 1192, 1197 (2013). This is
Invs., Inc., 51 Haw. 375, 380, 463 P.2d 525, 528 (1969)).
20
Orders confirming sale, deficiency judgments, orders directing
the distribution of proceeds, and other orders issued subsequent to the
decree of foreclosure are separately appealable pursuant to HRS § 667-
51(a)(2)-(3) and therefore “fall within the second part of the bifurcated
proceedings.” Mortg. Elec. Registration Sys., Inc. v. Wise, 130 Hawaiʻi 11,
16, 304 P.3d 1192, 1197 (2013); see also Sec. Pac. Mortg. Corp. v. Miller, 71
Haw. 65, 70, 783 P.2d 855, 858 (1989) (treating an appeal from an order
confirming sale and for deficiency judgment as separate from an appeal from
the decree of foreclosure); E. Sav. Bank, FSB v. Esteban, 129 Hawaiʻi 154, 296
P.3d 1062 (2013) (treating an appeal from the judgment confirming the
foreclosure sale as a separate matter from the judgment of foreclosure).
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Judgment was final and complied with HRCP Rule 58,21 the ICA had
Hawaiʻi 386, 396, 114 P.3d 892, 902 (2005) (quoting Pioneer Mill
Co. v. Ward, 34 Haw. 686, 694 (1938)); see also Lussier v. Mau-
Van Dev., Inc., 4 Haw. App. 359, 395-96, 667 P.2d 804, 827
21
HRCP Rule 58 (2010), provides in relevant part, “Every judgment
shall be set forth on a separate document.”
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in addition to the Foreclosure Decree.22 See Ueoka v. Szymanski,
Mortg. Corp. v. Miller, 71 Haw. 65, 67 n.1, 783 P.2d 855, 856
n.1 (1989) (stating that the use of the term “interlocutory” has
22
This conclusion logically follows well-settled law addressing the
scope of issues that may be raised on appeal from a foreclosure decree and
from an order confirming the foreclosure sale. Issues that are not “unique”
to the confirmation of sale must be raised with respect to the foreclosure
decree. See, e.g., Wise, 130 Hawaiʻi at 17-18, 304 P.2d at 1198-99
(concluding that mortgagors were precluded from challenging nominee’s
standing to bring foreclosure action in an appeal from an order confirming
the foreclosure sale). None of the counterclaims would be considered
“unique” to the confirmation of sale, and, thus, they must be addressed
simultaneously with the foreclosure decree. See id. at 17, 304 P.2d at 1198
(“[W]here an appellant challenges the right of a party to obtain a deficiency
judgment in a foreclosure case, he must take his appeal in a timely fashion
from the order which finally determined the right to a deficiency, i.e., the
order granting summary judgment.” (internal quotation marks omitted) (quoting
Miller, 71 Haw. at 71, 783 P.2d at 858)).
23
It appears that the characterization of the Foreclosure Decree as
an “interlocutory decree” stems from Bank of America’s motion for summary
judgment, which requested that “Pursuant to Rule 54(b) of the HRCP, Plaintiff
moves for a determination and direction that there is no just reason for the
delay in entry of Judgment and Decree of Foreclosure as a final judgment.”
HRCP Rule 54(b) provides that, when there are multiple claims for relief
presented in an action, the court may “direct the entry of a final judgment
as to one or more but fewer than all of the claims or parties upon an express
determination that there is no just reason for delay and upon an express
direction for the entry of judgment.” It was unnecessary for Bank of America
to request a judgment pursuant to HRCP Rule 54(b) because the decree of
foreclosure is a final appealable order as discussed above.
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reflecting that it is entered in accordance with HRCP Rule
interlocutory orders.
and Certification. Given that the ICA did not reach the merits
counterclaims.25
III. CONCLUSION
24
HRCP Rule 54(b) (2000), provides in relevant part:
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2014 Judgment is also vacated to the extent it grants summary
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