Opinion ID: 2622549
Heading Depth: 3
Heading Rank: 1

Heading: Beneficial Hawaii's case

Text: At trial, Michele Kobayashi testified that she had had a personal intimate relationship with Kida between 1989 and 1995 and that she had intermittently cohabited with Kida at 2526 Booth Road between 1989 and 1991. She testified that she had purchased the property at issue in the present matter jointly with Kida by way of an agreement of sale (the agreement) between her company, R & M Associates, and Kida, as purchasers, and Thelma Choy, as the seller, for the price of $400,000.00. Kida advanced $150,000.00 as a cash down payment upon the signing of the agreement. According to Kobayshi's testimony, Kida had suggested that they purchase the property. Kobayashi further testified that she and Kida had discussed the manner of paying off the agreement of sale and that Kida had directed her to take care of it. Kobayashi asserted that she had informed Kida that The Mortgage Warehouse would pay off the agreement of sale through a loan arranged by her in Kida's name. According to Kobayashi, Kida did not object. Kobayashi testified that Kida provided her with various documents she needed for the loan application, including bank statements of Kida's business, K. Kida Fishing Supplies, Kida's personal bank statements, documents pertaining to Kida's two prior divorces, copies of Kida's tax returns for 1991 and 1992, Kida's driver's license, and the general excise tax license for Kida's business, all of which were introduced into evidence as exhibits. Regarding the loan documents, Kobayashi testified that, in approximately May 1994, Kida had signed, in her presence, a promissory note for $300,000.00 in favor of The Mortgage Warehouse, as well as a mortgage on the property securing the note. Kobayashi stated that these documents had become stale, inasmuch the loan had not been funded within thirty days of the first mortgage payment date specified in the documents; therefore, new documents were required in order to comply with the guidelines of the lender. However, Kobayashi was uncertain as to what the lender's precise requirements had been. Kobayashi testified that The Mortgage Warehouse was a partnership between her and Jerry McGarvey, which was involved in financing mortgage loans. On cross-examination, Kobayashi testified that she had personally delivered the paperwork to the Department of Commerce and Consumer Affairs in order to register The Mortgage Warehouse as a Hawai`i general partnership but had not obtained a certificate of registration. She also testified that The Mortgage Warehouse had an office in California but not in Hawai`i. On recross examination, Kobayashi testified that The Mortgage Warehouse was a trade name of Financial M.D. Associates. On approximately July 25, 1994, without Kida's knowledge, Kobayashi assembled a new set of loan documents by replacing the first page of the note and signing Kida's name on the mortgage and other documents sent to her from California. Kobayashi maintained that she was authorized by Kida to sign the documents pursuant to a power of attorney that Kida had executed; however, she was unable to produce the power of attorney, and it had not been recorded. The original loan documents that Kida had signed had been discarded. Kobayashi testified that, prior to July 29, 1994, the agreement of sale had been paid off with the proceeds of the loan. The closing statement for the transaction, dated July 29, 1994, identified Kida as the borrower and his address as that of Kobayashi's company, Financial M.D. Associates. The lender was identified as The Mortgage Warehouse and the payoff amount as $269,400.00. Kobayashi testified that she had been the loan broker involved in the transaction, but, upon further questioning, she stated that Financial M.D. Associates had actually been the broker, as identified in the closing statement. The mortgage agreement, dated July 25, 1994, identified Kida as the mortgagor and his address as that of the property. The Mortgage Warehouse was identified in the mortgage statement as the mortgagee, the address of Financial M.D. Associates being the mortgagee's address, although a California address was designated as the mailing address. Through Kobayashi, Beneficial Hawaii introduced an assignment agreement, dated May 25, 1994, and recorded on July 29, 1994, by which R & M Associates purported to assign its interest in the property to Kida, into evidence. Kobayashi testified, in spite of the assignment agreement, that she had retained an interest in the property due to her relationship with Kida. Kobayashi further testified on direct examination that Kida had informed her of telephone calls from a commercial entity, styled Novus, regarding collection of the loan at some time between 1994 and 1996. Kida had not, however, indicated that he believed that she, Kobayashi, was the borrower on the loan, nor had he accused her of forgery until the time of the present lawsuit. On cross-examination, Kobayashi testified that, in 1991, Kida and she intended to merge the property with that of Kida's residence and develop the combined property in anticipation of their retirement. She testified that she and Kida had cohabited until 1993. Kobayashi testified that Kida had negotiated the agreement of sale with Thelma Choy without her participation and that she had not realized that she was a personal guarantor of the agreement. She further testified that, after Choy had vacated the property, her companyR & M Associateshad made payments to Choy under the agreement. Kobayashi admitted that her mortgage broker's license had expired in 1992, but asserted that, at that point, she had formed Financial M.D. Associates, which was a licensed mortgage broker in 1994. She asserted that any broker's fees received by her or R.M. Financial, which was her trade name, from the closing of Kida's loan would have been payable to Financial M.D. Associates, but was uncertain whether a check payable to R.M. Financial had been issued by the escrow company as part of the closing of the loan. Neither R.M. Financial nor The Mortgage Warehouse was a licensed mortgage broker in Hawai`i. Kobayashi further testified on cross-examination that she had not informed anyone about the power of attorney, purportedly signed by Kida in 1992, or about the fact that she had written Kida's name on the loan application and closing documents. The power of attorney was purportedly notarized at Kobayashi's behest. Both Kobayashi and her mother, Elaine Naito, were notaries. Although Kobayashi claimed to have regarded herself as Kida's mortgage broker in connection with the loan transaction, she had not informed Kida of that fact or disclosed to him that either she or Financial M.D. Associates would receive a fee or commission when the loan closed. Without Kida's knowledge, Kobayashi had opened an escrow account to handle the loan. Admitting that she signed the mortgage agreement in Kida's name, Kobayashi testified that the signature had been notarized by her notary. In this connection, Kobayashi testified that it was her mother's practice to notarize Kida's signature even if he had not signed the document in question in her presence. Kobayashi explained that the July 1994 transfer of R & M Associates' interest in the property to Kida had been effected because the loan had been approved as an owner occupant residential loan, which was subject to a lower interest rate than was an investment loan. R & M Associates, as a corporation, did not qualify for such a loan. Kida had personally signed the assignment agreement. On redirect examination, Beneficial Hawaii attempted to establish the precise identity of the mortgage broker for Kida's loan. Kobayashi stated that The Mortgage Warehouse was the lender and broker. She explained that The Mortgage Warehouse was licensed as a wholesale broker in California and had acted as such in the present transaction, which was actually funded by Novus Financial.
Margaret Meyer, who, as an officer of the escrow companyTI of Hawaiiin 1994, handled the escrow involved in the closing of the agreement of sale between Kida and Choy. Meyer testified that Kobayashi opened the escrow on behalf of The Mortgage Warehouse. According to the escrow records, the proceeds of the loan from The Mortgage Warehouse to Kidaprincipal in the amount of $269,400.00 and interest in the amount of $3,906.30were disbursed to Choy, and the balance was utilized to pay various closing costs. Four documents were recorded simultaneously as a result of the closing of the loan: (1) the assignment agreement between R & M Associates and Kida; (2) the mortgage; (3) the deed in satisfaction of the agreement of sale; and (4) the assignment of the mortgage from The Mortgage Warehouse to Novus Financial. Based on the procedures utilized in the closing of the loan, Meyer characterized The Mortgage Warehouse as both the lender and the broker, but also stated that [t]echnically, Financial MD [Associates] was the mortgage broker.
Through an officer of Novus Financial, Barbara Scherschligt, Beneficial Hawaii introduced Novus Financial's records of its efforts to collect on the loan into evidence. The records reflect that an application for Kida's loan was pending in July 1994, at which time Novus Financial required new loan documents because the originals had expired before the loan could be funded. On July 29, 1994, Novus Financial sent a welcome letter to Kida at 2526 Booth Road, advising him that his Warehouse Mortgage loan had been transferred to Novus Financial. Novus Financial placed its first collection call to Kida on September 16, 1994. According to Novus Financial's records, Kida told a loan collection officer that his bookkeeper was paying the loan and provided the collection officer with the telephone number of Kobayashi's office. The collection officer was unable to reach Kobayashi, and Kida promised to check with her to make sure that a payment was received by September 19, 1994. Novus Financial called Kida again on September 20, 1994. Kida advised Novus Financial to contact Kobayashi; Kobayashi, in turn, promised to forward two payments via an overnight carrier. A total of approximately forty-four collection calls from Novus Financial to Kida ensued between September 1994 and January 1996. Scherschligt quoted some of the collection officers' comments, all of which reflected that Kida was referring the collection efforts to Kobayashi, variously denominated as his bookkeeper, accountant, CPA, property manager, or broker. Although Kida was insisting that payments either had been made or would be made imminently, the payments were not made as promised. The collection officers informed Kida that the loan was his obligation, not Kobayashi's, that he was responsible for paying it, and that the delinquencies would affect his credit. According to Novus Financial's records, Kida acknowledged the collection officers' assertions but continued to rely on Kobayashi to make the payments. The collection officers described Kida as uncooperative, nonchalant, and unconcerned. Although they advised Kida that it was not their responsibility to call Kobayashi, they did attempt to contact her when Kida asked them to do so. They were usually unable to reach her, but on the two or three occasions when they did succeed in speaking with her, the collection officers' comments indicated that Kobayashi had been terse with them, had insisted that the payments had been made, and had hung up the telephone. In December 1995, Kida advised the collection officers that he was refinancing the loan through Kobayashi and that the loan would soon be paid off. Nevertheless, neither Kida nor Kobayashi requested Novus Financial to quantify the payoff figure. In January 1996, two payments were made on the loan, and the account became current. On March 31, 1996, Novus Financial sold the loan to Beneficial Mortgage. The loan file, including the note and an assignment of the mortgage, was transferred to Beneficial Mortgage on April 30, 1996.
Barbara Renquinha, one of Beneficial Hawaii's managers, testified that Beneficial Hawaii owned the note and mortgage at issue in the present matter. The note and mortgage were dated July 11, 1994 and reflected that the original lender had been The Mortgage Warehouse, that the mortgage had been recorded on July 29, 1994, and that the note had been assigned from The Mortgage Warehouse to Novus Financial, which assigned it to Beneficial Mortgage, which assigned it to Beneficial Hawaii. The loan documents were transferred from Beneficial Mortgage to Beneficial Hawaii in August 1996, and the assignment was recorded on October 8, 1996. Renquinha testified that, beginning on May 24, 1996, Beneficial Mortgage had sent Kida several collection letters, including, on June 4, 1996, a notice of intent to foreclose. In a letter dated July 16, 1996, Beneficial Mortgage informed Kida that Beneficial Hawaii would be servicing his loan commencing on August 15, 1996. Renquinha was familiar with Kobayashi as a Beneficial Hawaii broker since the time that Renquinha had transferred to Hawaii in 1994 from another of Beneficial's offices. At Beneficial's request, she had contacted Kobayashi regarding the loan several times before Beneficial's collection efforts were transferred to Hawai`i. Thus, on July 26, 1996, Renquinha had telephoned Kobayashi to request that she appear at Beneficial Hawaii's office in order to execute a check in the amount of $2,300.00 that had been received unsigned from Kobayashi. On August 8, 1996, Kobayashi contacted Beneficial Mortgage and stated that she would be in touch with Renquinha. Beneficial Mortgage sought Renquinha's assistance, and Renquinha telephoned Kobayashi to request payment. Renquinha had her first contact with Kida on August 15, 1996, when he telephoned to ask for copies of two mortgage documents, one of which was the mortgage at issue in the present matter. On August 21, 1996, Kobayashi telephoned Renquinha, who explained to Kobayashi that she needed $5,606.00 to eliminate the loan's delinquency. Kobayashi stated that she had several mortgage closings scheduled and ought to have the requested funds available by August 27, 1996. Following her conversation with Kobayashi, Renquinha telephoned Karen Arakawa of Island Title, an escrow company, to arrange to have Kobayashi's commissions assigned to Beneficial Hawaii. Renquinha's next contact with Kida was on August 29, 1996, when she telephoned to inform him that he owed her company over half a million dollars on two loans, that he was delinquent in his payments, that there had been numerous broken promises to pay, and that Kobayashi was not a signatory to either of the loans. According to Renquinha, Kida stated that Kobayashi was paying his mortgage. Renquinha informed Kida that she had learned from Kobayashi that Kobayashi had been trying to obtain a mortgage to pay off the loans. Kida agreed to speak with Kobayashi and to advise Renquinha of the outcome of the conversation. The next day, August 30, 1996, Renquinha telephoned Kida once more. Kida stated that Kobayashi would make a payment by the end of the day, but no payment was tendered to Beneficial Hawaii. Renquinha informed Kida that Beneficial Hawaii was commencing a foreclosure action against the two properties that were securing his loans. Renquinha noted that Kida did not seem to her to be concerned. She asked Kida why Kobayashi was making his loans payments, to which Kida responded that Kobayashi had promised to do so. Renquinha testified that, on September 10, 1996, Gary Yonamine, Beneficial Hawaii's senior manager, had personally visited Kida at his store. Yonamine informed Kida that a payment of $2,226.00 was required at that time and that a foreclosure proceeding was imminent. Kida promised to confer with Kobayashi. Yonamine informed Kida that Beneficial Hawaii wished to work with Kida directly without the involvement of any third parties. On October 16, 1996, Beneficial Hawaii's attorneys sent Kida a notice of default and a demand for payment, both by registered and first class mail, identifying November 18, 1996 as the deadline for payment. Renquinha testified that, according to Beneficial Hawaii's records, Kida telephoned Yonamine on October 23, 1996 in order to inquire whether Kobayashi had made payment. Yonamine apprised Kida that Kida's attorney did not wish Beneficial Hawaii to communicate with Kida. Kida insisted that he wished to discuss the situation because he was concerned about the demand letter that he had received from Beneficial Hawaii's attorneys, notwithstanding that, on his attorney's advice, he had not accepted the copy sent by registered mail. Yonamine advised Kida that Beneficial Hawaii had received a payment in the amount of $2,803.40, which, however, was insufficient to bring the loan into good standing. Yonamine telephoned Kida on November 14, 1994 to inquire whether any further payments would be forthcoming. Kida returned the call the next day to state that he would check with Kobayashi about the payments.