October, 2020 - Case Summaries - Foreclosure Law

*Disclaimer* - the below case summaries are not to be construed as legal advice, they are nonexhaustive, and they contain only my own summary/interpretation of the cases so noted.

TOPICS INCLUDE: Standing after Reyes-Toledo; Rule 60 Relief vs Appellate Relief

NO. CAAP-17-0000746

U.S. BANK TRUST, N.A v. PATRICK LOWELL VERHAGEN

 Argument on Appeal: “Verhagen argues the Circuit Court erred in granting summary judgment in favor of Plaintiff-Appellee U.S. Bank Trust, N.A., as Trustee for LFS9 Master Participation Trust (U.S. Bank), when there were genuine issues of material fact as to whether U.S. Bank had standing to bring a foreclosure action against Verhagen.

 Background:

Facts:

  • Bank had complied with verification affidavit req's. then sought and was granted MSJ. But then Mattos came down and so Bank motioned under Rule 60 (ariyoshi) for court to ratify its prior order in light of mattos:

  • U.S. Bank thus asserted that the new requirements in Mattos arguably had not been considered by the Circuit Court and thus U.S. Bank sought to have the Circuit Court clarify that it had considered the evidence under the appropriate legal standard that now existed following Reyes-Toledo and Mattos.

  • Motion to ratify included new affidavits.

ICA Says: The Motion to Ratify was in essence a request for the Circuit Court to indicate that it would take further action on U.S. Bank's motion for summary judgment, considering the additional submissions of Patterson's supplemental declaration and the other attachments thereto.

 

Standing Rules in Foreclosure:

  • Standing: In order to establish a right to foreclose, the foreclosing plaintiff must establish standing, or entitlement to enforce the subject note, at the time the action was commenced. Reyes-Toledo I, 139 Hawaii at 367-70, 390 P.3d at 1254-57. As expressed by the Hawaii Supreme Court, a foreclosing plaintiff must prove "the existence of an agreement, the terms of the agreement, a default by the mortgagor under the terms of the agreement, and giving of the cancellation notice," as well as prove entitlement to enforce the defaulted upon note. Bank of America, N.A. v. Reyes-Toledo, 143 Hawai#i 249, 263-64, 428 P.3d 761, 775-76 (2018) (quoting Reyes-Toledo I, 139 Hawai#i at 367-68, 390 P.3d at 1254-55) (format altered).

  • Declarations: Moreover, a declaration in support of a summary judgment motion must be based on personal knowledge, contain facts that would be admissible in evidence, and show that the declarant is competent to testify to the matters contained within the declaration. Wells Fargo Bank, N.A. v. Behrendt, 142 Hawai#i 37, 44, 414 P.3d 89, 96 (2018) (citing Mattos, 140 Hawaii at 30, 398 P.3d at 619; Hawai#i Rules of Civil Procedure Rule 56(e); Rules of the Circuit Courts of the State of Hawaii Rule 7(g)). Inadmissible evidence "cannot serve as a basis for awarding or denying summary judgment." Id. (quoting Haw. Cmty. Fed. Credit Union v. Keka, 94 Hawaii 213, 221, 11 P.3d 1, 9 (2000)).

 

Holding:

  • Problem - verification good, but person who did it may not have biz recoreds person type thing: Here, neither the verification by Jackson, the declaration by Salyers, nor the supplemental declaration by Patterson, contain the necessary foundation to support admission of the Note under Mattos, Behrendt or Kanahele to establish that U.S. Bank had possession of the Note when it commenced this foreclosure action, as required by Reyes-Toledo I.

  • Supplemental Declaration Fails As Well: even the supplemental declaration by Patterson fails to establish under Mattos and Behrendt that she is a custodian of records or a qualified witness for purposes of admitting the Note as evidence pursuant to HRE Rule 803(b)(6). 

 

SCWC-18-0000185

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

PENNYMAC CORP vs. GODINEZ

 Summary: In 2017, the Circuit Court of the Second Circuit found Lewanna Godinez in default on her mortgage and granted summary judgment in favor of Respondent/Plaintiff PennyMac Corp., issuing a decree of foreclosure and entering final judgment. Before a foreclosure sale took place, Godinez filed an HRCP Rule 60(b) motion, raising the issue of PennyMac’s standing to bring a foreclosure action against her. The circuit court denied the motion, and Godinez appealed. The Intermediate Court of Appeals (ICA) affirmed the circuit court’s denial, holding that res judicata barred Godinez’s HRCP Rule 60(b) challenge to standing, citing to this court’s decision in Mortgage Electronic Registration Systems v. Wise, 130 Hawaiʻi 11, 17, 304 P.3d 1192, 1198 (2013). We hold that res judicata did not preclude Godinez’s post-judgment HRCP Rule 60(b) motion and that Wise is inapplicable under these circumstances. Nevertheless, we agree with the ICA that the circuit court did not abuse its discretion in denying Godinez’s HRCP Rule 60(b) motion. Accordingly, we affirm the judgment of the ICA.

 

Timing Issue - Reyes Case Came Out During the Case: After the summary judgment hearing but before a written summary judgment order was filed, this court decided Bank of America, N.A. v. Reyes-Toledo, 139 Hawaiʻi 361, 390 P.3d 1248 (2017),

  • Bank Argues Res Judicata: barred under the law of the case doctrine because the circuit court had already resolved the issue and orally granted PennyMac’s motion for summary judgment. Nevertheless, recognizing that Reyes-Toledo required foreclosing parties to show they had possession of the note at the time the foreclosure complaint was filed, PennyMac asked the circuit court for “leave to supplement the record to support its (or its predecessor’s), standing to commence this action.”

  • Court Allows Supplements From Bank: court allowed PennyMac an opportunity to supplement the record to support its standing. Upon receipt of PennyMac’s supplemental Reyes-Toledo declaration, on November 22, 2017, the circuit court entered written findings of fact, conclusions of law, and an order granting PennyMac’s motion for summary judgment. Accordingly, the circuit court issued the Foreclosure Decree and Judgment, appointing a Commissioner to oversee the sale.

 

No Appeal Filed - Only Rule 60 Motion: Godinez did not appeal the order granting summary judgment or the Foreclosure Decree and Judgment. Instead, on January 16, 2018, Godinez filed a pro se HRCP Rule 60(b) motion for relief from the Foreclosure Decree. In the motion, Godinez alleged, inter alia, that newly discovered evidence rendered the Foreclosure Decree void and showed that PennyMac lacked standing. She maintained that the evidence was “newly discovered” because her previous attorney had “overlooked it.”

Res Judicata:

  • Rule: By definition, the doctrine of res judicata only applies to new suits: It is inapplicable in a continuation of the same suit. 18 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice & Procedure § 4404 (3d ed. 2020) (“Res judicata applies as between separate actions, not within the confines of a single action on trial or appeal.”); cf. Ditto, 98 Hawaiʻi at 128 n.6, 44 P.3d at 279 n.6 (2002) (noting that the doctrine of collateral estoppel5 wasinapplicable where the issues involved “essentially a continuation of the same suit and same claim”); see also Esteban, 129 Hawaiʻi at 159, 296 P.3d at 1067 (applying res judicata based on a “previous lawsuit”); Bremer, 104 Hawaiʻi at 54, 85 P.3d at 161 (same, as to “original suit”); Kauhane, 71 Haw. at 464, 795 P.2d at 279 (“both actions”); In re Bishop, 36 Haw. 403, 416 (Haw. Terr. 1943) (“new action”).

  • Issue: Accordingly, the determinative question on appeal is whether Godinez’s post-judgment HRCP Rule 60(b) motion was a new action or a continuation of the same action. We conclude that that Godinez’s HRCP Rule 60(b) motion was a continuation of the foreclosure decree and judgment, and therefore the ICA erred by applying the doctrine of res judicata.

  • Hold: We agree with Godinez and hold that the ICA erred in applying res judicata to her HRCP Rule 60(b) motion.

 

Abuse of Discretion:

Rule re Rule 60 Discretion:

  • Trial courts are vested with “a very large measure of discretion” in deciding HRCP Rule 60(b) motions, Hawaiʻi Housing Authority v. Uyehara, 77 Hawaiʻi 144, 147, 883 P.2d 65, 68 (1994), and, as the ICA recognized, “Godinez makes no discernible argument on appeal as to whether the [c]ircuit [c]ourt abused its discretion in entering the Order Denying Relief[.]”

  • A party seeking relief under HRCP Rule 60(b)(6) after the time for appeal has run must establish the existence of “extraordinary circumstances” that prevented or rendered them unable to prosecute an appeal. Uyehara, 77 Hawaiʻi at 148–49, 883 P.2d at 69–70. This is because HRCP Rule 60(b)(6) “is not for the purpose of relieving a party from free, calculated and deliberate choices [they have] made.” Id. at 149, 883 P.2d at 70 (quoting In re Hana Ranch Co., 3 Haw. App. 141, 147, 642 P.2d 938, 942 (1982)).

Two Bites: Godinez fully litigated the question of standing before the trial court, filing numerous motions, challenging the documents submitted by PennyMac, and arguing the issue before the court at the summary judgment hearing as well as at the hearing on her motion to dismiss after this court decided ReyesToledo. Nothing in the record suggests that Godinez did not have a full and fair opportunity to litigate the issue. And, as the ICA noted, Godinez failed to timely appeal from the circuit court’s summary judgment order.