Court Opinion

ID: 9914300
Source: CourtListenerOpinion
Date Created: 2023-12-29 22:02:40.303337+00
Date Added: 2024-06-11T13:11:05.944209
License: Public Domain

FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

                                        Electronically Filed
                                        Intermediate Court of Appeals
                                        CAAP-XX-XXXXXXX
                                        29-DEC-2023
                                        09:00 AM
                                        Dkt. 154 ORD

            IN THE INTERMEDIATE COURT OF APPEALS

                   OF THE STATE OF HAWAI#I

                          ---o0o---

                         CAAP-XX-XXXXXXX
  WILMINGTON SAVINGS FUND SOCIETY, FSB, DOING BUSINESS AS
CHRISTIANA TRUST, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY
     AS TRUSTEE FOR BCAT 2015-14BTT, Plaintiff-Appellee,
                                v.
       ISABELO PACPACO DOMINGO; MICHELE ELANOR DOMINGO,
                     Defendants-Appellants,
                               and
BANK OF AMERICA, N.A.; HALEWILI PLACE COMMUNITY ASSOCIATION,
                      Defendants-Appellees
                               and
   JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
      DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
              GOVERNMENTAL UNITS 1-50, Defendants

                             AND

                         CAAP-XX-XXXXXXX
  WILMINGTON SAVINGS FUND SOCIETY, FSB, DOING BUSINESS AS
CHRISTIANA TRUST, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY
     AS TRUSTEE FOR BCAT 2015-14BTT, Plaintiff-Appellee,
                                v.
       ISABELO PACPACO DOMINGO; MICHELE ELANOR DOMINGO,
                     Defendants-Appellants,
                               and
BANK OF AMERICA, N.A.; HALEWILI PLACE COMMUNITY ASSOCIATION,
                      Defendants-Appellees
                               and
   JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
      DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
              GOVERNMENTAL UNITS 1-50, Defendants

                     NO. CAAP-XX-XXXXXXX
           (Consolidated with No. CAAP-XX-XXXXXXX)
 FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

         APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
                        (CIVIL NO. 13-1-202K)

                             DECEMBER 29, 2023

           GINOZA, CHIEF JUDGE, LEONARD AND NAKASONE, JJ.

     ORDER DISMISSING APPEAL AS MOOT BY GINOZA, CHIEF JUDGE

          These consolidated appeals arise out of a foreclosure
action in which Defendants-Appellants Isabelo Pacpaco Domingo and
Michele Elanor Domingo (together, the Domingos) appeal from the
following entered by the Circuit Court of the Third Circuit
(Circuit Court): (1) "Findings of Fact and Conclusions of Law;
Order Granting Plaintiff's Renewed Motion for Summary Judgment
and for Interlocutory Decree of Foreclosure" (Foreclosure Order)
and "Judgment" (Foreclosure Judgment), both filed on January 29,
2018; (2) "Order Approving Commissioner's Report and Granting
Plaintiff's Motion for Confirmation of Foreclosure Sale,
Allowance of Costs, Commissions and Fees, Distribution of
Proceeds, Directing Conveyance and for Writ of
Possession/Ejectments" (Confirmation Order) and "Judgment"
(Confirmation Judgment), both filed on August 15, 2018; and (3)
"Writ of Possession" filed on August 20, 2018.1
          On April 1, 2022, Plaintiff-Appellee Wilmington Savings
Fund Society, FSB, doing business as Christiana Trust, Not in Its
Individual Capacity, but Solely as Trustee for BCAT 2015-14BTT
(Wilmington) filed a Motion to Dismiss Appeal contending the
appeal is moot because the Domingos failed to obtain a stay and
the subject property had been sold and conveyed to a third-party
good-faith purchaser, BBNY REO LLC, a Florida Limited Liability
Company (BBNY).
          As discussed below, we initially held that the appeal
was moot and dismissed the appeal. However, the Hawai#i Supreme

     1
         The Honorable Robert D.S. Kim presided.

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Court vacated that decision and instructed that we remand the
case to the Circuit Court for an evidentiary hearing on whether
BBNY was a third-party good-faith purchaser. On remand, the
Circuit Court determined that BBNY was a third-party good-faith
purchaser and also that subsequent buyers were third-party good-
faith purchasers.
          The Domingos now challenge the Circuit Court's
determinations during remand and argue that their appeal is not
moot. We hold that the Domingos' appeal is moot because no
effective relief can be granted and the appeal must be dismissed.
                         I. BACKGROUND
          On August 26, 2022, this court entered an Amended
Summary Disposition Order concluding the appeal is moot because
the Domingos failed to obtain a stay pending the appeal and no
effective relief can be granted to the Domingos given the sale of
the property to BBNY. The Hawai#i Supreme Court granted the
Domingos' application for writ of certiorari. On February 15,
2023, the Hawai#i Supreme Court filed a Memorandum Opinion
vacating this court's Amended Summary Disposition Order, with
instructions to temporarily remand the case to the Circuit Court
for an evidentiary hearing to determine whether BBNY is a third-
party good-faith purchaser. Wilmington Sav. Fund Soc'y, FSB v.
Domingo, No. SCWC-XX-XXXXXXX, 2023 WL 2017392 (Haw. Feb. 15,
2023) (mem. op.).
          On February 24, 2023, pursuant to the supreme court's
Memorandum Opinion, we entered an Order for Temporary Remand to
the Circuit Court.
          After an evidentiary hearing on April 11, 2023, the
Circuit Court entered "Findings of Fact and Conclusions of Law
Regarding Evidentiary Hearing to Determine Good Faith of
Purchaser" on April 12, 2023 (4/12/23 FOFs/COLs). The Circuit
Court found, inter alia, that BBNY purchased the subject property
from Wilmington for a fair price under the circumstances; BBNY is
not related or connected to Wilmington or its loan servicer
Selene Finance, LP in any way; the sale of the subject property

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was completed after negotiations with other interested parties
failed; the sale of the property from Wilmington to BBNY was
negotiated in good-faith and at arms-length; a Special Warranty
Deed and Corrective Special Warranty Deed was recorded in the
Land Court conveying the property to BBNY; and in purchasing the
property, BBNY noted that the Domingos did not obtain a stay of
proceedings and did not post any bond in connection with this
consolidated appeal. The Circuit Court also found that the
Domingos filed an action on October 1, 2018, in the Circuit Court
of the First Circuit (Civil No. 18-1-1561) asserting claims
against Wilmington for damages for wrongful foreclosure and to
quiet title. A Notice of Pendency of Action (lis pendens)
relating to the civil case was recorded in the Land Court and
Wilmington's Certificate of Title to the subject property lists
the lis pendens as an encumbrance.
          The Circuit Court determined, inter alia, that without
a supersedeas bond, BBNY's knowledge of the Domingos' claims
against Wilmington, including the pending consolidated appeal and
lis pendens, did not prohibit Wilmington from selling the
property to BBNY; and BBNY was a good-faith third-party purchaser
of the subject property.
          The Circuit Court also found that after purchasing the
property from Wilmington, BBNY took possession of the property,
marketed the property for sale, and sold it to another third-
party purchaser; the sale of the property from BBNY to the
subsequent purchasers was also negotiated in good-faith and at
arms-length; and a Special Warranty Deed was executed and
recorded in the Land Court. The Circuit Court determined the
subject property is currently owned by the subsequent purchasers
who are also third-party, good-faith purchasers of the property.
          Pursuant to the Order for Temporary Remand,
jurisdiction automatically reverted to this court on April 14,
2023, upon the filing of the supplemental record on appeal.

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           On June 30, 2023, this court issued an order allowing
the parties to file supplemental briefs to challenge the Circuit
Court's 4/12/23 FOFs/COLs.2
           On July 13, 2023, the Domingos filed their supplemental
brief challenging the Circuit Court's COLs determining that BBNY
is a good-faith purchaser of the property. The Domingos contend
a supersedeas bond was not required where Wilmington purchased
the property at the foreclosure sale and BBNY is not a bona fide
or good-faith purchaser because it had knowledge of the Domingos'
lis pendens and Wilmington's certificate of title listed the lis
pendens as an encumbrance.3 The Domingos also assert that any
subsequent purchaser of the property is not a good-faith
purchaser.
           The Domingos do not dispute that they failed to obtain
a supersedeas bond and thus failed to obtain a stay pending this
appeal. The Domingos also do not dispute the Circuit Court's
findings of fact, which are thus binding on appeal. See Okada
Trucking Co. v. Bd. of Water Supply, 97 Hawai#i 450, 459, 40 P.3d
73, 82 (2002).
                           II. DISCUSSION
          We review the Circuit Court's conclusions of law de
novo, under the right/wrong standard. Hawai#i Nat'l Bank v.
Cook, 100 Hawai#i 2, 7, 58 P.3d 60, 65 (2002).
          The Domingos first rely on Bank of New York Mellon v.
R. Onaga, Inc., 140 Hawai#i 358, 366-67, 400 P.3d 559, 567-68
(2017), which applied this court's decision in City Bank v. Saje
Ventures II, 7 Haw. App. 130, 748 P.2d 812 (App. 1988). In
Onaga, the Hawai#i Supreme Court addressed whether a supersedeas

      2
         After jurisdiction reverted to this court, we initially issued an
order on June 20, 2023, dismissing the case as moot based on the Circuit
Court's 4/12/23 FOFs/COLs. However, the Domingos filed a motion for
reconsideration in which they requested an opportunity to file supplemental
briefing, which we granted.
      3
         The Domingos also argue that contrary to Wilmington's arguments
raised in the Circuit Court, Hawaii Revised Statutes ( HRS) § 501-118 does not
preclude the Domingos' civil action. However, Wilmington did not cite HRS
§ 501-118 in its motion to dismiss and the Circuit Court does not mention HRS
§ 501-118.

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bond was required for a stay, stating:
          The ICA's opinion in City Bank is instructive on this point.
          In City Bank, the bank filed a complaint to foreclose on the
          defendant's mortgage, and the circuit court granted summary
          judgment in favor of the bank and a junior mortgagee. 7 Haw.
          App. at 132, 748 P.2d at 814. The property was sold to the
          highest bidder, and the circuit court entered an order
          confirming the sale and directing distribution of the
          proceeds. Id. The defendants timely appealed the order
          confirming sale. Id. at 133, 748 P.2d at 814.
          The ICA stated, "[t]he general rule is that the right of a
          good faith purchaser 'to receive property acquired at a
          judicial sale cannot be affected by the reversal of an order
          ratifying the sale where a [supersedeas] bond has not been
          filed.'" Id. (quoting Leisure Campground & Country Club
          Ltd. P'ship v. Leisure Estates, 280 Md. 220, 372 A.2d 595,
          598 (1977)). The ICA explained that the purpose of the rule
          is to advance "the stability and productiveness of judicial
          sales." Id. (quoting 47 Am. Jur. 2d Judicial Sales § 55
          (1969)). It noted that the exceptions to this rule are when
          the reversal is based on jurisdictional grounds or when the
          purchaser is the mortgagee, explaining that the mortgagee in
          that case "does not free himself from the underlying dispute
          to which he is a party." See id. (quoting Leisure
          Campground, 372 A.2d at 598) (brackets omitted).
          The ICA then noted that the purchaser of the property was a
          third party, good faith purchaser, and that "[t]here was no
          stay of the execution of the confirmation order and the sale
          of the Property has been closed." See id. at 133, 748 P.2d
          at 814-15. Thus, the ICA concluded that "the appeal is moot
          and subject to dismissal." Id. at 134, 748 P.2d at 815.

Onaga, 140 Hawai#i at 366-67, 400 P.3d at 567-68 (emphasis added)
(footnotes deleted). The Domingos contend that under the second
exception to the general rule requiring a supersedeas bond, "the
fact that the Domingos did not post a supersedeas bond is of no
consequence to the justiciability of their consolidated appeals."
          Given the law of the case and the Circuit Court's
determinations during remand, we reject the Domingos' argument.
In our Amended Summary Disposition Order, we had held that under
the circumstances in this case, the second exception to the City
Bank rule does not apply because mortgagee Wilmington purchased
the property at the commissioner's sale, but has now sold the
property to a good-faith third-party purchaser, BBNY. Wilmington
Sav. Fund Soc'y, FSB v. Domingo, No. CAAP-XX-XXXXXXX, 2022 WL
2757363, at *3-5 (Haw. App. July 14, 2022), as amended, (Aug. 26,
2022) (SDO). The supreme court's Memorandum Opinion vacated the
Amended Summary Disposition Order, but did not hold that

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Wilmington's purchase of the property at the commissioner's sale
necessarily meant that the Domingos need not have obtained a
supersedeas bond. Rather, the supreme court noted that whether
BBNY was a third-party good-faith purchaser was a disputed
factual issue, and thus directed this court to remand the case to
the Circuit Court for an evidentiary hearing on that issue. 2023
WL 2017392, at *1, 8.
          The Domingos next argue that the recorded lis pendens
on Wilmington's Certificate of Title prevents BBNY and subsequent
buyers from being third-party good-faith purchasers. We note
that the Domingos did not raise this argument in their opposition
to Wilmington's motion to dismiss. Instead, the Domingos raised
this argument for the first time to this court in a motion for
reconsideration. Accordingly, in an Order Granting in Part
Motion for Reconsideration entered on August 26, 2022, we held
that,
          reconsideration is otherwise denied as unwarranted under
          Rule 40(b) of the Hawai#i Rules of Appellate Procedure, and
          because the Motion for Reconsideration asserts arguments and
          presents evidence that could have but were not presented in
          opposition to the Motion to Dismiss Appeal filed on April 1,
          2022. See Sousaris v. Miller, 92 Hawai#i 505, 513, 993 P.2d
          539, 547 (2000) ("Reconsideration is not a device to . . .
          raise arguments or evidence that could and should have been
          brought during the earlier proceeding.").

           Even if we assume, arguendo, that the lis pendens
argument is not waived, we disagree with the Domingos' argument.
"An innocent or good faith purchaser is one who, by an honest
contract or agreement, purchases property or acquires an interest
therein, without knowledge, or means of knowledge sufficient to
charge him in law with knowledge, of any infirmity in the title
of the seller." Bank of New York Mellon v. R. Onaga, Inc., 140
Hawai#i 358, 367 n.13, 400 P.3d 559, 568 n.13 (2017) (citation
and internal quotation marks omitted).
           In Onaga, the Hawai#i Supreme Court stated:
          [w]hen the Ferraras purchased the Property, the circuit
          court had already determined in the consolidated proceedings
          that [Bank of New York Mellon] had a first priority lien on
          the Property. Thus, at the time of the purchase, there
          would not have been an "infirmity in the title" based on
          Onaga's mortgage.

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Id.; see also TSA Int'l Ltd. v. Shimizu Corp., 92 Hawai#i 243,
265, 990 P.2d 713, 735 (1999) ("[T]he mere filing of a notice of
appeal does not affect the validity of a judgment[.]").
          Here, when BBNY purchased the subject property, the
Circuit Court had already issued its foreclosure decree via its
Foreclosure Order and Foreclosure Judgment, and confirmed the
foreclosure sale to Wilmington via the Confirmation Order and
Confirmation Judgment. Thus, when BBNY subsequently purchased
the property from Wilmington, there was no "infirmity in the
title" based on the Domingos' mortgage to bar BBNY from
purchasing the property in good-faith.
          Further, the lis pendens filed regarding the wrongful
foreclosure civil case did not undermine BBNY's third-party good-
faith status. Essentially, the Domingos argue that the lis
pendens is an alternative to posting a supersedeas bond and
obtaining a stay of the Circuit Court's foreclosure judgment and
orders. The Domingos fail to cite to any authority to support
their use of the lis pendens in this manner.
          It is well established that "it is [the] appellant's
burden to seek a stay if post-appeal transactions could render
the appeal moot." Onaga, 140 Hawai#i at 367, 400 P.3d at 568
(quoting Lathrop v. Sakatani, 111 Hawai#i 307, 313, 141 P.3d 480,
486 (2006)).
          "[T]he doctrine of lis pendens protects a plaintiff
from having his or her claim to the property defeated by the
subsequent alienation of the property to a bona fide purchaser
during the course of the lawsuit." TSA Int'l, 92 Hawai#i at 266,
990 P.2d at 736. The Hawai#i Supreme Court has noted the
potential for abuse of the lis pendens doctrine and explained
that:
          The practical effect of a recorded lis pendens is to render
          a defendant's property unmarketable and unsuitable as
          security for a loan. The financial pressure exerted on the
          property owner may be considerable, forcing him or her to
          settle not due to the merits of the suit but to rid himself
          or herself of the cloud upon his or her title. The
          potential for abuse is obvious.

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Id. at 266-67, 990 P.2d at 736-37 (brackets omitted) (quoting S.
Utsunomiya Enters., Inc. v. Moomuku Country Club, 75 Haw. 480,
512, 866 P.2d 951, 967 (1994)).
          In Lathrop, the supreme court, citing In re Onouli–Kona
Land Co., 846 F.2d 1170 (9th Cir. 1988), noted that a lis pendens
does not serve the same function as a stay, explaining:
          In Onouli–Kona, a bankruptcy case, the United States Court
          of Appeals for the Ninth Circuit held that a notice of lis
          pendens does not serve the same function as a stay and does
          not preserve the requirement of a live case or controversy.
          Id. at 1175. In that case, which challenged the confirmation
          of a foreclosure sale, the Ninth Circuit determined that the
          sale of the property during the pendency of the appeal
          rendered the case moot, despite the filing of a notice of
          lis pendens because "filing of lis pendens does not
          substitute for debtor's failure to obtain a stay." Id.

111 Hawai#i at 313-14, 141 P.3d at 486-87 (emphases added)
(brackets omitted); see also Creative Dev. Corp. v. Bond, 367
A.2d 566, 567-70 (Md. Ct. Spec. App. 1976) (holding a foreclosure
defendant could not circumvent the posting of a supersedeas bond
by filing a separate action and invoking the doctrine of lis
pendens).
           In Creative Development, the appellant-defendant
(Creative) granted Calhoun Bond (Bond) two deeds of trust as to
sixty-eight condominium dwelling units. 367 A.2d at 567. Bond
was the trustee designated by the lender, Chase Manhattan
Mortgage and Realty Trust (Chase) for both deeds of trust. Id.
Creative defaulted and Bond, as trustee, commenced foreclosure
proceedings under both deeds. Id. The Maryland circuit court
entered a decree for the sale of the property subject to the
deeds of trust and denied Creative's motion to enjoin the sale.
Id. at 567-68. The property was then sold at public auction to
Chase. Id. at 568.
          Creative appealed both the foreclosure decree and the
sale. Id.
          Subsequent to the ratification of the sale, Creative, unable
          to post a supersedeas bond to stay the effect of the
          ratification and sale of the condominium units to third
          persons, conceived of another method, designed to accomplish
          the same purpose as a supersedeas bond but without the costs
          of such a bond. Creative simply filed another suit, this
          time seeking to enjoin Chase's sale of the condominium units
          pending the outcome of the two previous appeals.
Id.

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          During oral arguments, the Court of Special Appeals of
Maryland was informed that all the condominium units had been
sold to individual purchasers and Chase no longer had title to
any of the property. Id. When asked why the appeals were not
moot as a result of the sale, Creative argued that the lis
pendens doctrine applied because a separate injunction suit
placed purchasers on notice of Creative's claim to the property.
Id.
          The Maryland appellate court noted the practical and
inequitable consequences of Creative's actions as follows:
          If courts were to sanction the practice upon which Creative
          would have us place a judicial approbation, we would cast a
          tremendous financial burden upon lenders who would be placed
          in the position of having won their case and lost it at the
          same time. Without any type of protection, the lenders
          would be compelled to hold the property that was the subject
          of the foreclosure pending the outcome of an appeal, would
          be hesitant to make improvements to the property, and might
          sustain a huge loss of interest income.

Id. at 568-69 (footnote omitted).       The court held that,
          The old maxim, 'he who seeks equity must do equity,' is
          applicable here. Equity will not countenance Creative's
          collateral attack and resultant collateral appeal to act as
          lis pendens and, at the same time, place upon Bond and Chase
          the onus of footing the vast expense and loss to which they
          would be subjected while the appeal is pending, without some
          assurance that, if Bond and Chase prevail, they will be made
          whole. Creative seeks to have it both ways: a viable appeal
          which ties up the property of Chase, while, at the same
          time, not going to the expense of posting a bond. It, thus,
          wants to gamble, as it were, with someone else's money. We
          recognize that which Creative labels lis pendens as an
          impostor, masquerading as an accepted equitable principle
          when, in law, equity, and fact, it is not. Lis pendens does
          not apply to this case.

Id. at 569-70 (emphases added).
          The same policy concerns are salient here. It is
undisputed that after the foreclosure judgment and orders were
entered against them, the Domingos moved to stay the proceedings
pending the consolidated appeal but failed to post the required
supersedeas bond and thus failed to obtain a stay. Rather than
post the required bond, the Domingos chose to rely on the lis
pendens filed in their separate wrongful foreclosure suit against
Wilmington. Like the appellant in Creative, the Domingos placed

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the burden on Wilmington without providing adequate assurances by
posting the supersedeas bond. Under the circumstances of this
case, we hold that the Domingos' lis pendens did not prevent BBNY
from purchasing the property from Wilmington in good-faith.
          The Domingos do not argue that an exception to the
mootness doctrine applies, and none of the recognized exceptions
to the mootness doctrine apply here. See Hamilton ex rel. Lethem
v. Lethem, 119 Hawai#i 1, 5-10, 193 P.3d 839, 843-48 (2008)
(explaining that the Hawai#i Supreme Court has recognized the
public interest exception, the "capable of repetition, yet
evading review" exception, and adopting the collateral
consequences exception).
                          III. CONCLUSION
           Based on the foregoing, we dismiss the Domingos' appeal
as moot.

On the motion:

Frederick J. Arensmeyer,             /s/ Lisa M. Ginoza
for Defendants-Appellants            Chief Judge

David B. Rosen,                      /s/ Katherine G. Leonard
David E. McAllister,                 Associate Judge
Justin S. Moyer,
Christina C. Macleod,                /s/ Karen T. Nakasone
(Aldridge Pite, LLP)                 Associate Judge
for Plaintiff-Appellee

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