Court Opinion

ID: 8214324
Source: CourtListenerOpinion
Date Created: 2022-10-14 19:02:58.888604+00
Date Added: 2024-06-11T16:42:29.524902
License: Public Domain

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

                                                  Electronically Filed
                                                  Intermediate Court of Appeals
                                                  CAAP-XX-XXXXXXX
                                                  14-OCT-2022
                                                  08:03 AM
                                                  Dkt. 68 SO

                           NO. CAAP-XX-XXXXXXX

                 IN THE INTERMEDIATE COURT OF APPEALS

                         OF THE STATE OF HAWAI#I

         AURORA LOAN SERVICES, LLC, Plaintiff-Appellee,
                                 v.
   JOSEPH KALANUI KALAHIKI, JR.; MERRILLE KANOELANI KALAHIKI;
       STATE OF HAWAI#I – DEPARTMENT OF TAXATION; BENCHMARK
      LENDING GROUP, INC.; MORTGAGE ELECTRONIC REGISTRATION
              SYSTEMS, INC., Defendants-Appellants,
                                and
               JOHN AND MARY DOES 1-10, Defendants

          APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
                       (CIVIL NO. 1CC111000375)

                      SUMMARY DISPOSITION ORDER
   (By:    Hiraoka, Presiding Judge, Nakasone and McCullen, JJ.)

          Defendants-Appellants Joseph Kalanui Kalahiki, Jr. and
Merrille Kanoelani Kalahiki (the Kalahikis) appeal from the
"Judgment" and the "Judgment for Possession" in favor of
Plaintiff-Appellee Aurora Loan Services, LLC, both entered by the
Circuit Court of the First Circuit on March 13, 2018.1 For the
reasons explained below, we vacate the Judgment and the Judgment
for Possession and remand for further proceedings.
           The Kalahikis owned a home in Moanalua on the island of
O#ahu (the Property). The Property was registered on land court
certificate no. 482803.      The Property secured a Note and Mortgage

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            The Honorable Jeannette H. Castagnetti presided.
  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

given by the Kalahikis to Benchmark Lending Group, Inc.
Benchmark assigned the Mortgage to Aurora.     The Kalahikis
defaulted on the Note. Aurora completed a nonjudicial
foreclosure of the Property. The Property was conveyed to Aurora
by Quitclaim Deed recorded in Land Court on January 18, 2011.
          Aurora then filed the action below, seeking to eject
the Kalahikis from the Property. Aurora filed a motion for
summary judgment (MSJ). The MSJ was heard on November 22, 2017.
An order granting the MSJ, the Judgment, a writ of possession,
and the Judgment for Possession were entered on March 13, 2018.
This appeal followed.
          The Kalahikis contend that the circuit court erred by
granting Aurora's MSJ because: (1) Aurora "failed to establish
that it had unimpeachable title to the" Property; (2) Aurora
"failed to show that, in exercising [its] alleged right to non-
judicial foreclosure under a power of sale, [it] exercised this
alleged right in a manner that is fair, reasonably diligent, and
in good faith, and [it] also failed to demonstrate that an
adequate price was procured for the property"; and (3) Aurora
"has not adequately addressed the issue that the subject mortgage
was assigned to [Aurora] through fraudulent action."
          We review a circuit court's grant of summary judgment
de novo using the same standard applied by the circuit court.
Nozawa v. Operating Eng'rs Loc. Union No. 3, 142 Hawai#i 331,
338, 418 P.3d 1187, 1194 (2018). Summary judgment is appropriate
if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.
Id. at 342, 418 P.3d at 1198.
          (1) Aurora submitted a copy of Certificate of Title
No. 1010531 (the New Certificate) in support of its MSJ.       If the
New Certificate was properly before the circuit court, Aurora's
title to the Property would be "conclusive and unimpeachable."

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Aames Funding Corp. v. Mores, 107 Hawai#i 95, 102-03, 110 P.3d
1042, 1049-50 (2005).
          The Kalahikis objected to the New Certificate because
the document did not bear the seal of the land court. The
circuit court did not rule on the objection. Aurora also asked
that the circuit court take judicial notice of the New
Certificate. The circuit court did not rule on Aurora's request.
          The Kalahikis' objection to the New Certificate had
merit. HRS § 501-88 (2006) provides:

          The original certificate in the registration book, and any
          copy thereof duly certified under the signature of the
          registrar or assistant registrar, and the seal of the [land]
          court, shall be received as evidence in all the courts of
          the State and shall be conclusive as to all matters
          contained therein, except as otherwise provided in this
          chapter.

(Emphasis added.) The document proffered by Aurora did not bear
the seal of the land court. It was not admissible under HRS
§ 501-88.
          Nor would it have been appropriate for the circuit
court to have taken judicial notice of the New Certificate. In
Wells Fargo Bank v. Omiya, 142 Hawai#i 439, 420 P.3d 370 (2018)
the supreme court noted:

          HRS § 501-75 expressly provides that an original certificate
          of title "shall be signed by the assistant registrar and
          sealed with the seal of the court," and, as stated, new
          certificates of title "shall be in like form" to the
          original certificate. HRS § 501-83.

Id. at 451 n.20, 420 P.3d at 382 n.20. Hawaii Rules of Evidence
Rule 201(d) (2016) provides that "[a] court shall take judicial
notice if requested by a party and supplied with the necessary
information."   (Emphasis added.)       Aurora did not provide the
circuit court with the information necessary to take judicial
notice — that is, a copy of the New Certificate sealed with the
seal of the land court.
          Aurora did not establish that it had "conclusive and
unimpeachable" title to the Property.

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          (2)   The action below was one for ejectment.          To
maintain an ejectment action, the plaintiff must prove that it
has "the title to and right of possession of" the property at
issue, and that "possession is unlawfully withheld by another."
Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai#i 227, 241, 361 P.3d
454, 468 (2015) (citations omitted).
           To establish it had title to the Property, Aurora also
submitted a copy of the Quitclaim Deed. The Quitclaim Deed
resulted from a nonjudicial foreclosure. Thus, Aurora had to
show that the foreclosure sale "was fairly conducted and resulted
in an adequate price under the circumstances." Omiya, 142
Hawai#i at 457 n.37, 420 P.3d at 388 n.37 (quoting Hungate v. L.
Off. of David B. Rosen, 139 Hawai#i 394, 409, 391 P.3d 1, 16
(2017) (citing Kondaur, 136 Hawai#i at 240-42, 361 P.3d at 467-
69)).
           In support of its motion, Aurora submitted the
"Mortgagee's Affidavit of Foreclosure Sale Under Power of Sale"
filed in the land court. The Affidavit of Foreclosure Sale
purported to describe the circumstances of the foreclosure
auction:

          Upon the scheduled date, time and place, the sale was
          conducted and the subject mortgaged property declared sold
          to Aurora Loan Services, LLC, a Delaware Limited Liability
          Company, or its nominee, for $759,658.79, which was the
          highest bid at said sale.

          In opposition to Aurora's motion, Merrille Kalahiki
submitted a declaration stating (among other things) that the
real property tax assessed value of the Property was
"approximately $1,000,000[.]"
          The supreme court has held:

                We further clarify that the mortgagee's duty to seek
          the best price under the circumstances does not require the
          mortgagee to obtain the fair market value of the property.
          Indeed, many commentators have observed that the foreclosure
          process commonly fails to produce the fair market value for
          foreclosed real estate. There are several reasons why
          foreclosure sales fail to attract fair market value bids,
          such as the difficulty in inspecting the subject properties,

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            technical publication notices, marketable title concerns,
            and the lack of a willing seller. While final bids on
            foreclosed property need not equate to fair market values,
            the mortgagee nonetheless has a duty to use fair and
            reasonable means to conduct the foreclosure sale in a manner
            that is conducive to obtaining the best price under the
            circumstances.

Hungate, 139 Hawai#i at 408-09, 391 P.3d at 15-16 (cleaned up).
          Aurora offered none of the information mentioned by the
supreme court to show that its nonjudicial foreclosure was fairly
conducted and resulted in an adequate price under the
circumstances. On the record before us, there was a genuine
issue of material fact about whether the nonjudicial foreclosure
was fairly conducted and resulted in an adequate price under the
circumstances. The circuit court thus erred by granting Aurora's
MSJ.2
          (3) The Kalahikis argue that Benchmark assigned the
Mortgage to Aurora "through fraudulent action." They cite no
evidence in the record to support their contention of fraud;3
they rely solely upon "information and belief."
          Moreover, as mortgagors, the Kalahikis lack standing to
challenge the validity of the assignment. "Typically, borrowers
do not have standing to challenge the validity of an assignment
of its [sic] loans because they are not parties to the
[assignment] agreement and because noncompliance with a[n
assignee] trust's governing document is irrelevant to the
assignee's standing to foreclose." U.S. Bank Nat'l Ass'n v.
Salvacion, 134 Hawai#i 170, 175, 338 P.3d 1185, 1190 (App. 2014)
(citations omitted).

       2
             We express no opinion about whether, if Aurora establishes on
remand that a new certificate of title was issued based upon the Quitclaim
Deed, it need still show that the nonjudicial foreclosure was fairly conducted
and resulted in an adequate price under the circumstances. See Omiya, 142
Hawai#i at 449, 420 P.3d at 380 ("[A] mortgagor's right to directly impeach a
foreclosure proceeding is 'expressly limited to the period before entry of a
new certificate of title.'") (quoting Aames, 107 Hawai#i at 101, 110 P.3d at
1048).
      3
            Fraud must be proved by "clear and convincing evidence." Hancock
v. Kulana Partners, 145 Hawai#i 374, 377 n.3, 452 P.3d 371, 374 n.3 (2019)

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          For the foregoing reasons, the Judgment and the
Judgment for Possession, both entered by the circuit court on
March 13, 2018, are vacated, and this case is remanded to the
circuit court for further proceedings consistent with this
summary disposition order.
          DATED: Honolulu, Hawai#i, October 14, 2022.

On the briefs:
                                       /s/ Keith K. Hiraoka
Gary V. Dubin,                         Presiding Judge
Frederick J. Arensmeyer,
Matthew K. Yoshida,                    /s/ Karen T. Nakasone
for Defendants-Appellants              Associate Judge
Joseph Kalanui Kalahiki, Jr.
and Merrille Kanoelani Kalahiki.       /s/ Sonja M.P. McCullen
                                       Associate Judge
Andrew J. Lautenbach,
Sianha M. Gualano,
for Plaintiff-Appellee.

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