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Sunday – January 6, 2019

Previewing the 2019 Foreclosure Defense Agenda of the Hawaii Supreme Court

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In recent years the Hawaii Supreme Court has gained national recognition for its leadership in attempting to bring fairness to and modernizing the Hawaii judge-made foreclosure defense system.

In doing so, the Hawaii Supreme Court has openly even rejected in its decisions the contrary holdings by our local Hawaii federal district court impinging on the rights of Hawaii mortgage borrowers.

The result has been a number of far reaching decisions that have arguably afforded more protection to mortgage borrowers today than in any State in the Nation.

Among such significant decisions, discussed on our prior shows available for listening in the Past Broadcast Section of our Website at www.foreclosurehour.com, have been:

1. Santiago v. Tanaka, 137 Haw. 137, 366 P.3d 612 (2015), restoring, inter alia, as a precondition to the right to foreclose the service of notice of a mortgage borrower’s right to cure whether or not contractually provided for;

2. Kondaur Capital Corp. v. Matsuyoshi, 136 Haw. 227, 361 P.3d 454 (2015), restoring, inter alia, good faith in nonjudicial auction sales requiring evidence of fair market value at time of sale;

3. Bank of America v. Reyes-Toledo 1, 139 Haw. 361, 390 P.3d 1248 (2017), restoring, inter alia, jurisdictional validity in judicial foreclosures requiring proof of a foreclosing plaintiff’s ownership of the underlying note and mortgage at the time the foreclosure action was first brought;

4. U.S. Bank v. Mattos, 140 Haw. 26, 398 P.3d 615 (2017), restoring, inter alia, a foreclosing plaintiff’s evidentiary burden of proof in judicial foreclosures requiring personal knowledge supporting the elements necessary to foreclose, including default, notice of default, and standing to foreclose;

5. Wells Fargo v. Behrendt, 142 Haw. 37, 414 P.3d 89 (2018), restoring, inter alia, standing in judicial foreclosures as a jurisdictional requirement not based on contract alone, enabling any interested third-party non-borrower to challenge the standing of a plaintiff to foreclose; and

6. Bank of America v. Reyes-Toledo 2, 2018 Haw. LEXIS 214, 2018 WL 4870719, restoring, inter alia, common law notice pleading standards contrary to federal newly stringent dismissal standards which impose unfair pleading burdens on mortgage borrowers, and also permitting mortgage borrowers for the first time to sue or counterclaim for wrongful foreclosure without waiting until a judicial foreclosure lawsuit is concluded.

The 2019 foreclosure defense agenda of the Hawaii Supreme Court moreover is off to a good start at the very beginning of the New Year and promises equally significant bellwether decisions, so far consisting of potentially three Hawaii Intermediate Court of Appeals decisions granted certiorari review and three more in various pending stages.

The three now accepted for review and before the Hawaii Supreme Court include:

1. Bank of Hawaii v. Bruser (In the Matter of the Trust Agreement Dated June 6, 1974, as Amended), SCWC 15-0000623 (no oral argument deemed necessary by the Hawaii Supreme Court), questioning, inter alia, whether a Probate Court has jurisdiction to interpret and revise a lease contract between a Trustee and a third party, raising fees leading to foreclosure;

2. Hawaii USA Federal Credit Union v. Monalim, SCWC-16-0000807 (oral argument January 11, 2019), questioning, inter alia, for the first time various aspects of the judge-made foreclosure deficiency judgment system in the context of a judicial foreclosure case where the foreclosing plaintiff waited four years to eventually seek a deficiency judgment and without the lower court conducting an evidentiary hearing to determine the true value of the foreclosed property at time of sale, notwithstanding the forced sale auction price; and

3. Nationstar Mortgage LLC v. Kanahele, SCWC-16-0000319 (oral argument scheduled for January 17, 2019), questioning, inter alia, whether summary judgment is appropriate where a foreclosing plaintiff summits contradictory supporting declarations, whether a foreclosing plaintiff who is not a holder in due course is subject to a defendant’s affirmative defenses, and whether the lower court abused its discretion by denying a defendant’s motion to compel discovery when a foreclosing party refuses to answer interrogatories and refuses to respond to requests for admissions.

The other three foreclosure appeals requesting or about to request certiorari review by the Hawaii Supreme Court at the start of 2019 include:

1. Kiowa v. Christiana Trust, CAAP-16-0000728, decided by the Hawaii Intermediate Court of Appeals on September 28, 2018, holding that although a promissory note may be unenforceable due to the expiration of the six-year contract statute of limitations in Hawaii, the underlying property may still be foreclosed on as the statute of limitations governing the enforceability of a mortgage as a real property interest is supposedly 20 years (a certiorari petition requesting Hawaii Supreme Court certiorari review will shortly be filed);

2. HSBC Bank USA v. Marcantonio, CAAP-17-0000807, decided by the Hawaii Intermediate Court of Appeals on December 28, 2018, holding, inter alia, that a mortgage borrower against whom summary judgment has been granted and who did not appeal the granting of summary judgment cannot defeat confirmation of sale even though having proof that the foreclosing plaintiff had no right to foreclose, not even owning the mortgage loan, and even if the foreclosing plaintiff had committed fraud on the court, and even though the lower court had no subject matter jurisdiction to hear the foreclosure case at the outset, because of the doctrine of res judicata based supposedly on an earlier decision of the Hawaii Supreme Court in Mortgage Electronic Registration Systems, Inc. v. Wise, 130 Haw. 11, 304 P.3d 1192 (2013) (a certiorari petition requesting Hawaii Supreme Court certiorari review will shortly be filed); and

3. Sakal v. AOAO Hawaiian Monarch, CAAP-15-0000573, decided by the Hawaii Intermediate Court of Appeals on July 26, 2018, reversing in the mortgage borrower’s favor, Sakal, confirming that a power of sale is contractual and not created by statute, which against the ICA decision the AOAO recently requested Hawaii Supreme Court review on behalf of reportedly thousands of Hawaii condo Associations; yet certiorari review was denied by the Hawaii Supreme Court last month in SCWC-15-0000529, leaving remaining Sakal’s own petition for writ of certiorari on another discussed nondispositive issue in the case where the Hawaii Intermediate Court of Appeals mentioned that the entry of a new ownership certificate called a TCT in Land Court records cuts off all mortgage borrowers’ defenses to foreclosure, however a TCT not filed in this case until after the foreclosure, now challenged by Sakai as being unconstitutional state action needing correction (certiorari petition pending on that separate issue before the Hawaii Supreme Court).

The above cases not only should have enormous potential interest locally, but nationally as well, and which outcome might well make a huge difference in many of our listeners’ foreclosure cases.

At the conclusion of today’s show, time permitting, we will also have an important announcement regarding foreclosure defense in California.

Please join John and me for another informative Foreclosure Hour as a weekly public service of the Dubin Law Offices.

Gary Dubin

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