Opinion ID: 3157323
Heading Depth: 1
Heading Rank: 1

Heading: factual background/procedural history

Text: A. The Underlying Mortgage and Related Proceedings In February 2007, Jun Matsuyoshi and others conveyed a residential property located in Līhuʻe, Kauaʻi (Property) by 1 Compare Lima v. Deutsche Bank Nat’l Trust Co., 943 F. Supp. 2d 1093 (D. Haw. 2013), with Field v. Bank of Am., N.A. (In re Gibbs), 522 B.R. 282 (Bankr. D. Haw. 2014). 2 All references to “non-judicial foreclosures” in this opinion do not encompass non-judicial foreclosures conducted pursuant to Hawaii Revised Statutes (HRS) Chapter 667, Part II. When referring to this type of foreclosure, a specific statutory designation is included. Similarly, the use of “foreclosure statute” in this opinion, when not modified by a specific statutory section, excludes HRS Chapter 667, Part II. 2 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER warranty deed to Leigh Matsuyoshi (Matsuyoshi). The following month, Matsuyoshi signed a mortgage on the Property (Mortgage) and a promissory note (Note) promising to pay $500,000 to Resmae Mortgage Corporation (Resmae) in return for a loan that Matsuyoshi had received. Resmae recorded the Mortgage with the Bureau of Conveyances (Bureau). The Mortgage listed Matsuyoshi as the borrower of $500,000, and it included an acceleration and power of sale clause, which provided, among other things, that Matsuyoshi would be given at least 30 days to cure a default of payment. In May 2008, Lester K.M. Leu (Leu), an attorney authorized to act on behalf of Resmae Liquidation Properties LLC (RLP), sent a Notice of Intent to Foreclose to Matsuyoshi (notice of default). The notice of default stated that Matsuyoshi’s loan was in default because scheduled payments had not been made since April 1, 2008, and that the amount due was $9,704.34. The notice of default stated further that Matsuyoshi must pay this amount by June 20, 2008, or the loan would be accelerated and the Property referred for foreclosure action. In August 2008, an assignment of the Mortgage from Resmae to RLP was recorded. Matsuyoshi was personally served with a Notice of Mortgagee’s Non-Judicial Foreclosure Under Power of Sale (Notice of Sale). The Notice of Sale stated that 3 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER RLP intended to sell the Property at an auction to be held in Honolulu on November 13, 2008. The Notice of Sale also stated that the Property would be sold “AS IS” and “WHERE IS.” Thereafter, the Property was auctioned off at a foreclosure sale in Honolulu. In the Mortgagee’s Affidavit of Foreclosure Under Power of Sale (Affidavit of Sale), Leu certified that in compliance with Hawai’i Revised Statutes (HRS) §§ 667-5 through 667-10 3 and the Note and Mortgage, Mortgagee or its representative, or Affiant, conducted the public auction sale on November 13, 2008, “at the date, time, and place set forth in the Notice and under the conditions stated therein, and Affiant, or her representative, declared the Property sold to [RLP] for $416,900.20, which was the highest bid at said sale.” Leu stated that the default remained uncured at the time of sale. On November 17, 2008, the Affidavit of Sale was recorded in the Bureau. In January 2009, RLP executed a quitclaim deed, which was subsequently recorded, conveying the Property to itself. In July 2010, a quitclaim deed was executed by RLP conveying the Property to Kondaur Capital Corporation (Kondaur). 4 The 3 HRS §§ 667-5 to 667-10 governed the process of foreclosure by power of sale (i.e., non-judicial foreclosure) and were within Part I of Chapter 667. HRS §§ 667-5 to 667-8 were repealed by the legislature in 2012. 2012 Haw. Sess. Law Act 182, § 50 at 684. 4 In relevant part, the quitclaim deed recited that (continued . . .) 4 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER quitclaim deed expressly stated that “[n]otwithstanding anything in this deed to the contrary, [RLP] makes no representations, warranties or promises regarding any claims by LEIGH MATSUYOSHI, her heirs, successors or assigns.” Kondaur recorded its quitclaim deed the following year, in February 2011. Thereafter, Kondaur gave Matsuyoshi notice to vacate; Matsuyoshi did not leave the Property. B. Kondaur’s Ejectment Action Against Matsuyoshi On June 5, 2012, Kondaur filed a complaint for possession of the Property against Matsuyoshi in the Circuit Court of the Fifth Circuit (circuit court). The complaint requested a judgment for immediate and exclusive possession of the Property and a writ of possession. The complaint stated that Kondaur had “acquired title and current ownership of the (. . . continued) for ONE AND NO/100 DOLLARS ($1.00) and other valuable consideration paid by [Kondaur], the receipt of which is hereby acknowledged, [RLP] does hereby release, remise and quitclaim unto [Kondaur], as TENANT IN SEVERALTY, his/her heirs, personal representatives, successors and assigns, all of that certain real property described in Exhibit “A” attached hereto and made a part hereof. Exhibit A to the quitclaim deed refers to [a]ll of that certain parcel of land situate at Kalapaki, Lihue, District of Puna, Island and County of Kauai, State of Hawaii, being LOT 148 of the “LIHUE TOWN ESTATES”, as shown on File Plan Number 1408, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 6,000 square feet, more or less. Exhibit A further indicates Matsuyoshi as the previous owner. 5 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER Property through a Quitclaim Deed recorded on February 24, 2011.” On June 27, 2012, Kondaur filed a Motion for Summary Judgment Against All Defendants on Complaint filed June 5, 2012 (MSJ). Kondaur requested that the circuit court grant the MSJ and enter a Judgment for Possession of the Property for Kondaur and against Matsuyoshi, issue a Writ of Possession, enter the judgment as final, and set a time and date for a trial on damages. A declaration by Ann Pham (Pham) attached to the MSJ stated that she was an asset manager for Kondaur and a custodian of Kondaur’s records. Pham declared that according to regular business records maintained by Kondaur, Kondaur owned the Property pursuant to Kondaur’s quitclaim deed. Pham also declared that Kondaur had given Matsuyoshi notice to vacate, and Matsuyoshi “has so far continued to reside at the Property and has otherwise failed or refused to leave.” Also attached to the MSJ were several exhibits. 5 5 Exhibit A was a certified copy of Kondaur’s quitclaim deed. Exhibit B was a certified copy of RLP’s quitclaim deed. Exhibit C was a certified copy of the Mortgagee’s Affidavit of Foreclosure Under Power of Sale. Exhibit C also included a copy of the deed from Jun Matsuyoshi, et al., to Matsuyoshi; the Note; the Mortgage; the Assignment of Mortgage and Note from Resmae to RLP; the notice of default; the Notice of Sale; a list of parties “who have recorded encumbrances, liens, and/or other claims against the Property or who have requested notice” and received the Notice of Sale; the returns and acknowledgments of service from those parties listed; an Affidavit of Posting of the Notice of Sale on the Property; an Affidavit of Publication of the Notice of Sale in the Honolulu (continued . . .) 6 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER In its memorandum in support of the MSJ, Kondaur asserted that it had undisputed title to the Property and that Matsuyoshi was residing on the Property as a trespasser. Kondaur argued that its quitclaim deed was prima facie evidence of the conveyance to it from RLP, and that, therefore, it was the owner of the Property and entitled to immediate and exclusive possession. Kondaur also contended that the Affidavit of Sale was evidence that the power of sale was duly executed. Kondaur maintained that the foreclosure sale extinguished Matsuyoshi’s interest in the Property and that RLP “subsequently conveyed the Property to Kondaur by virtue of the Quitclaim Deed dated July 14, 2010.” Kondaur asserted that because Matsuyoshi failed to cure her default in payments prior to the sale, “she is without standing to contest the validity of the foreclosure conducted by [RLP] and the superior title to the Property subsequently acquired by Kondaur.” Kondaur concluded that Matsuyoshi had no interest in the Property, Matsuyoshi must vacate it immediately, and a judgment for possession and writ of ejectment should be issued. (. . . continued) Star-Bulletin; and a report from the Department of Defense Manpower Data Center stating that Matsuyoshi was not an active duty member of the military. 7 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER On July 6, 2012, Kondaur requested an entry of default against Matsuyoshi pursuant to Hawaii Rules of Civil Procedure (HRCP) Rule 55(a) “for her failure to answer or otherwise respond” to Kondaur’s complaint. Default was entered by the clerk of the circuit court on the same day. On August 15, 2012, Matsuyoshi filed, through counsel, her opposition to the MSJ, which was later amended on August 21, 2012. Matsuyoshi acknowledged that she “fell behind on her mortgage payments,” but she maintained that technical violations of HRS § 667-5 voided the foreclosure sale. Matsuyoshi argued “that all notices and acts required by the power contained in the [M]ortgage shall be complied with.” According to Matsuyoshi, RLP’s foreclosure against her was void because RLP did not comply with the notice requirement under the Mortgage and because the auction sale was conducted on Oahu rather than on Kauai, the county where the Property is located. Finally, Matsuyoshi noted that Kondaur stood in privity of contract with RLP based on the quitclaim deed that Kondaur received from RLP. In its reply, Kondaur contended that Matsuyoshi’s “failure . . . to establish by admissible evidence that the Note and Mortgage were not in default at the time of the non-judicial foreclosure is dispositive.” Kondaur maintained that Matsuyoshi 8 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER presented no admissible evidence showing that she did not receive notice of her default under the terms of the Mortgage. At the hearing on the MSJ, 6 Matsuyoshi argued that the foreclosure sale violated the foreclosure statute because it was carried out on Oʻahu when the Property was on Kauaʻi. Matsuyoshi contended that the sale on Oʻahu precluded her from exercising her right to redeem the Property. Matsuyoshi also emphasized that RLP “was the only bidder” at the foreclosure sale. Kondaur replied that, in 2008, “there was no prohibition in . . . [HRS] Chapter 667 . . . that prohibited a lender from doing a foreclosure sale [for a property located on Kauaʻi] on the island of Oahu.” According to Kondaur, there was no prejudice because the purpose of a judicial sale is to get the highest price possible, and “the market on Oahu is obviously much bigger than the market on Kauai in terms of prospective purchasers.” 7 At the conclusion of the hearing, the circuit court granted Kondaur’s MSJ. On September 18, 2012, the circuit court 6 The Honorable Randal G.B. Valenciano presided. 7 In relation to this point, Matsuyoshi argued: And if Plaintiff’s argument is Oahu has a bigger market, then why aren’t these foreclosure sales uniformly conducted in Los Angeles? Why aren’t they conducted in New York City? Why aren’t they conducted right next to the bank that has the ability to pay for these large mortgages in the first place and out bid [sic] each other? 9 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER entered its “Order Granting [Kondaur’s] [MSJ]” (MSJ Order), which included an order for a writ of possession to issue. The circuit court also issued its judgment (MSJ Judgment). On September 20, 2012, the circuit court issued a writ of possession. After the MSJ Judgment was rendered, Matsuyoshi submitted a declaration averring that she was “absolutely positive that the [M]ortgage . . . was not signed by [her] before a notary public” and that the notarization on the Mortgage is false. Further, Matsuyoshi claimed that the mortgage documents were not explained to her, nor was she given copies of the documents that she signed. Finally, Matsuyoshi declared that she did not sign the mortgage application and that the amounts listed as her income in the application are false. Matsuyoshi filed post-judgment motions, including a Motion to Set Aside the MSJ Judgment and a Motion to Set Aside Entry of Default pursuant to HRCP Rule 55(c). Matsuyoshi contended that the entry of default should be set aside because her postjudgment declaration presented a meritorious defense to Kondaur’s action. The circuit court denied the Motion to Set Aside Entry of Default. Matsuyoshi timely filed a Notice of Appeal from the MSJ Judgment, but she did not appeal from the circuit court’s order denying her post-judgment motions. 10 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER