Court Opinion

ID: 4201257
Source: CourtListenerOpinion
Date Created: 2017-09-05 21:07:39.914294+00
Date Added: 2024-06-11T14:14:07.176532
License: Public Domain

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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCWC-16-0000025
                                                               05-SEP-2017
                                                               09:22 AM
            IN THE SUPREME COURT OF THE STATE OF HAWAII

                            ---oOo---
________________________________________________________________

   DEUTSCHE BANK NATIONAL TRUST COMPANY AS INDENTURE TRUSTEE
      FOR AMERICAN HOME MORTGAGE INVESTMENT TRUST 2006-1,
             MORTGAGE-BACKED NOTES, SERIES 2006-1,
                 Respondent/Plaintiff-Appellee,

                                     v.

        PHILIP E. KOZMA, Petitioner/Defendant-Appellant,
   and E*TRADE BANK; THE ASSOCIATION OF OWNERS OF KAHALA KUA
              aka KAHALA KUA COMMUNITY ASSOCIATION,
                Respondents/Defendants-Appellees.
                     (CIVIL NO. 10-1-0686-03)

                                     AND

             THE ASSOCIATION OF OWNERS OF KAHALA KUA aka
        KAHALA KUA COMMUNITY ASSOCIATION, A HAWAII NONPROFIT
         CORPORATION, BY AND THROUGH ITS BOARD OF DIRECTORS,
                    Respondent/Plaintiff-Appellee,

                                     v.

        PHILIP E. KOZMA, Petitioner/Defendant-Appellant,
   and AMERICAN HOME MORTGAGE SERVICING, INC.; E*TRADE BANK,
                Respondents/Defendants-Appellees.
                     (CIVIL NO. 08-1-1850-09)
________________________________________________________________

                             SCWC-16-0000025

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
                         (CAAP-16-0000025)
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                            SEPTEMBER 5, 2017

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

                 OPINION OF THE COURT BY McKENNA, J.

                             I.   Introduction

    Philip E. Kozma (“Kozma”) seeks review of the Intermediate

Court of Appeals’ (“ICA”) Order Denying Without Prejudice the

March 30, 2017 Request for Attorneys’ Fees and Costs (“order”).

This appeal is related to a foreclosure action brought by

Deutsche Bank National Trust Company As Indenture Trustee For

American Home Mortgage Investment Trust 2006-1, Mortgage-Backed

Notes, Series 2006-1 (“Deutsche Bank”).          On December 22, 2015,

the Circuit Court of the First Circuit (“circuit court”) granted

Deutsche Bank’s motion for summary judgment and decree of

foreclosure, and Kozma appealed to the ICA.           The ICA vacated the

circuit court’s judgment and remanded for further proceedings

after determining Deutsche Bank failed to meet its burden of

demonstrating that it was entitled to summary judgment.             Kozma

then filed a “Request and Declaration of Counsel” (“request”)

seeking attorney’s fees and costs related to his appeal, which

the ICA denied after determining Kozma was not a “prevailing

party” at this point in the proceeding.

    Since the ICA essentially placed Kozma “back where he

started,” there is no “prevailing party” entitled to attorney’s

fees under Hawaii Revised Statutes (“HRS”) § 607-14 (2016).
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Therefore, the ICA did not err in denying Kozma’s request for

attorney’s fees.        With regard to the request for costs, however,

the ICA applied an erroneous legal standard, which resulted in

the incorrect conclusion that Kozma was not entitled to costs

pursuant to Hawai‘i Rules of Appellate Procedure (“HRAP”) Rule 39

(2016).

       We accepted certiorari to clarify the law regarding

requests for appellate attorney’s fees and costs after an

appellate decision setting aside a trial court grant of summary

judgment and remanding the case for further proceedings.                  We

hold that when an appellate court vacates a circuit court

judgment entered in favor of a foreclosing mortgagee seeking

summary judgment, the mortgagor is not a “prevailing party”

entitled to attorney’s fees pursuant to HRS § 607-14.                We

further clarify that when an appellate court vacates a circuit

court judgment entered in favor of a foreclosing mortgagee

seeking summary judgment, pursuant to HRAP Rule 39, the

appellate court must then use its discretion to determine which

party, on balance, prevailed on the appeal for the purpose of an

award of costs.

                                II.   Background

A.     Circuit court proceedings

       On March 31, 2010, Deutsche Bank initiated a foreclosure

action against Kozma, alleging in its complaint that (1) it was

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the owner of the promissory note and mortgage executed by Kozma

in December 2005,1 and (2) it was entitled to foreclosure due to

Kozma defaulting on the loan.          Deutsche Bank attached a copy of

the note and mortgage to the complaint, along with copies of the

assignments.      In his Answer, Kozma admitted he was in default,

but countered that Deutsche Bank was not the real party-in-

interest able to initiate foreclosure proceedings because the

assignments were not valid.

      Deutsche Bank then filed a “Motion for Summary Judgment As

Against All Defendants And For Interlocutory Decree of

Foreclosure” (“MSJ”).        Kozma filed his memorandum in opposition,

arguing numerous genuine issues of material fact existed, such

as whether Deutsche Bank possessed the original of the documents

of the mortgage, note, and claimed assignments.             The circuit

court2 granted summary judgment in favor of Deutsche Bank.

      Kozma then filed a motion for reconsideration.             The circuit

court granted the motion for reconsideration and denied without

prejudice Deutsche Bank’s MSJ after determining that it was

unclear whether the bankruptcy trustee for AHMAI and AHMSI’s

1
      The note and mortgage were allegedly first assigned by American Home
Acceptance, Inc. (“AHMAI”) to American Home Mortgage Servicing, Inc.
(“AHMSI”) by assignment dated January 8, 2008 (“first assignment”) and
further assigned to Deutsche Bank by assignment dated March 3, 2009 (“second
assignment”). Both were recorded in Land Court. AHMAI and AHMSI had a
consolidated bankruptcy case pending at the time of the first assignment.
2
      The Honorable Bert I. Ayabe presided.

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consolidated bankruptcy case had authorized the first

assignment.

       Deutsche Bank later filed a Renewed Motion for Summary

Judgment (“renewed MSJ”), stating that, as the holder of the

subject promissory note, it was entitled to enforce the subject

mortgage.       Deutsche Bank also asserted that AHMAI and AHMSI’s

pending bankruptcy case did not render the assignments void.

Kozma opposed the renewed MSJ.           The circuit court3 granted

Deutsche Bank’s second motion for summary judgment on December

22, 2015 after it determined that Deutsche Bank was the holder

of the indorsed in-blank Note which was secured by the Mortgage

and thus, entitled to the foreclosure of its Mortgage.

           Kozma appealed to the ICA.

B.     ICA proceedings

       The ICA reviewed Kozma’s appeal in light of this court’s

opinion in Bank of America, N.A. v. Reyes-Toledo, 139 Hawai‘i

361, 390 P.3d 1248 (2017) (holding if a foreclosing plaintiff

has not demonstrated that it possessed the note at the time it

commenced foreclosure proceedings, then a genuine issue of

material fact exists as to whether the plaintiff is entitled to

foreclose and summary judgment is inappropriate).               The ICA

determined that neither the copy of the note attached to

3
       The Honorable Jeannette H. Castagnetti presided.

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Deutsche Bank’s complaint nor the supporting declaration

established that Deutsche Bank possessed the note at the time it

filed its complaint.         Deutsche Bank Nat’l Trust Co. v. Kozma,

CAAP-16-0000025 (Mar. 23, 2017) (mem.) at 4.              The ICA concluded,

              viewing the facts and inferences in the light most
              favorable to Kozma, there is a genuine issue of material
              fact as to whether Deutsche Bank held the subject note at
              the time it filed the complaint . . . In light of this
              ruling, we need not address Kozma’s other arguments.
              Accordingly, the Circuit Court’s December 22, 2015 Judgment
              is vacated and this case is remanded to the Circuit Court
              for further proceedings.

Id.    The ICA remanded the case for further proceedings so

Deutsche Bank could supplement the record to show it possessed

the note at the time it filed its complaint.              Id.

C.     Request for attorney’s fees and costs

       Kozma then timely filed a request for attorney’s fees and

costs pursuant to HRS § 607–14 and HRAP Rule 39, seeking $440.52

in costs and $16,625.00 in attorney’s fees.

       The ICA denied Kozma’s request, stating (1) “HRS § 607-14

does not provide authority for an award of fees where the First

Circuit Court judgment has been vacated and the case remanded

for further proceedings”; and (2) “appellate costs, pursuant to

HRAP 39(d), are not awardable because a prevailing party has not

been determined thus far.”

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                           III.    Standard of Review

       This court reviews an ICA order granting or denying

attorney’s fees and costs under the abuse of discretion

standard.       Oahu Publ’ns, Inc. v. Abercrombie, 134 Hawai‘i 16, 22,

332 P.3d 159, 165 (2014).          “[A]n abuse of discretion occurs

where the . . . court has clearly exceeded the bounds of reason

or disregarded rules or principles of law or practice to the

substantial detriment of a party litigant.”               Id. (citing Ranger

Ins. Co. v. Hinshaw, 103 Hawai‘i 26, 30, 79 P.3d 119, 123

(2003)).

                                  IV.   Discussion

A.     When an appellate court vacates a summary judgment entered
       in favor of a foreclosing mortgagee seeking summary
       judgment and remands for further proceedings, the
       mortgagor is not a “prevailing party” entitled to
       attorney’s fees pursuant to HRS § 607-14.

       A prevailing party is entitled to attorney’s fees pursuant

to HRS § 607-14, which provides in relevant part,

              In all the courts, in all actions in the nature of
              assumpsit and in all actions on a promissory note or other
              contract in writing that provides for an attorney’s fee,
              there shall be taxed as attorneys’ fees, to be paid by the
              losing party and to be included in the sum for which
              execution may issue, a fee that the court determines to be
              reasonable; provided that the attorney representing the
              prevailing party shall submit to the court an affidavit
              stating the amount of time the attorney spent on the action
              and the amount of time the attorney is likely to spend to
              obtain a final written judgment. . . .

It follows that the first issue this court must resolve

regarding Kozma’s request for attorney’s fees is whether Kozma

is the prevailing party on appeal.            See Kaleikini v. Yoshioka,

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129 Hawai‘i 454, 460, 304 P.3d 252, 258 (2013) (“The first issue

this court must resolve regarding Kaleikini’s request for

attorney’s fees and costs is whether Kaleikini is the prevailing

party on appeal.”); see also Sierra Club v. Dep’t of Transp.,

120 Hawai‘i 181, 215, 202 P.3d 1226, 1260 (2009) (“The first

issue that must be determined regarding the fee and cost award

is whether Sierra Club was the prevailing party.”).

     To determine which party “prevailed,”

           the court “is required to first identify the principle
           issues raised by the pleadings and proof in a particular
           case, and then determine, on balance, which party prevailed
           on the issues.” A party “will be deemed to be the
           successful party for the purpose of taxing costs and
           attorney’s fees” “where [that] party prevails on the
           disputed main issue, even though not to the extent of his
           original contention[.]”

Kaleikini, 129 Hawai‘i at 461, 304 P.3d at 259 (internal

citations omitted).      However, a prevailing party cannot always

be determined following the adjudication of an appeal.             See Sapp

v. Wong, 62 Haw. 34, 42, 609 P.2d 137, 142 (1980) (“[W]e must

reverse this case on appeal, vacate the judgment and remand for

a new trial.    Hence, appellants cannot at this time be

considered to be the losing parties[.]”).          When a judgment on

appeal “merely vacates a trial court judgment unfavorable to [a

party] and places [that party] back where the [party] started,”

the judgment “does not, in itself, provide any grounds for an

award of attorney’s fees to the [party].”          Nelson v. Univ. of

Hawai‘i, 99 Hawai‘i 262, 266, 54 P.3d 433, 437 (2002).

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       On certiorari, Kozma argues that he prevailed on a disputed

main issue because he sought to have the decree of foreclosure

vacated and remanded to the trial court.             Kozma alleged in his

opposition to the renewed MSJ and on appeal to the ICA that

Deutsche Bank was not entitled to summary judgment as a matter

of law because a genuine issue of material fact existed as to

whether the assignments were valid.

       The ICA did not address the issue of the validity of the

assignments nor any of the other issues raised by Kozma when

disposing of Kozma’s appeal.          Instead, the ICA only addressed

whether, under the requirement recently iterated in Reyes-

Toledo, Deutsche Bank had met its burden of demonstrating that

it was entitled to summary judgment as a holder of the note at

the time it filed the foreclosure complaint.              Kozma, mem. op. at

4.    After determining that, in light of Reyes-Toledo, a genuine

issue of material fact existed as to whether Deutsche Bank held

the subject note at the time it filed the complaint, the ICA

vacated the circuit court judgment and remanded for further

proceedings.       Id.   This served the procedural function of

putting Kozma “back in the place he started” with regard to the

foreclosure action without addressing a “disputed main issue.”

Therefore, Kozma is not a “prevailing party” and is not entitled

to attorney’s fees under HRS § 607-14.             Thus, the ICA did not

err in denying Kozma’s request for attorney’s fees.

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       The facts in Kozma’s appeal are common in requests for fees

and costs following appeals related to foreclosure proceedings.

Thus, we now clarify that when the ICA vacates a summary

judgment entered in favor of a foreclosing mortgagee and remands

the case for further proceedings, the mortgagor is not a

“prevailing party” entitled to attorney’s fees pursuant to HRS §

607-14.

B.     The ICA applied an erroneous legal standard in its order
       denying Kozma’s request for costs.

       On certiorari, Kozma argues that he is the prevailing party

entitled to costs pursuant to HRAP Rule 39.

       HRAP Rule 39 provides, in relevant part, “if a judgment is

affirmed in part and reversed in part, or is vacated, or a

petition granted in part and denied in part, the costs shall be

allowed only as ordered by the appellate court.”               HRAP Rule

39(a) (2016).       “The intent of [HRAP Rule 39] is to allow the

party prevailing on appeal to recover those costs reasonably

incurred in prosecuting the appeal.”            Jou v. Argonaut Ins. Co.,

133 Hawai‘i 471, 477, 331 P.3d 449, 455 (2014) (quoting Leslie v.

Estate of Tavares, 93 Hawai‘i 1, 7, 994 P.2d 1047, 1053 (2000))

(emphasis in original).         To determine which party prevailed on

appeal, the appellate court may “evaluat[e] the remedy sought by

the appellant in conjunction with the remedy granted on appeal,”

or “determine, on balance, which party prevailed on the

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[disputed main] issues.”       Jou, 133 Hawai‘i at 477-78, 331 P.3d at

455-56 (citations and emphases omitted).

     Hawaiian Ass’n of Seventh-Day Adventists v. Wong, 130

Hawai‘i 36, 50, 305 P.3d 452, 466 (2013), illustrates the

application of HRAP Rule 39 when a summary judgment is vacated

and remanded.    A dispute arose between Seventh-Day Adventists

(“SDA”) and Wong regarding whether a lease agreement prohibited

certain uses of the cabins on the leased property.            Seventh-Day

Adventists, 130 Hawai‘i at 43, 46, 305 P.3d at 459, 462.             Both

parties filed motions for summary judgment and the trial court

granted motions for summary judgment to each party on different

counts.   130 Hawai‘i at 43, 305 P.3d at 459.         SDA appealed from

one grant of summary judgment in favor of Wong; Wong cross-

appealed from three of the grants of summary judgment in favor

of SDA.   Id.   The ICA vacated one of the trial court’s grants of

summary judgment for SDA and affirmed the trial court’s decision

as to the remaining grants of summary judgment.           130 Hawai‘i at

44, 305 P.3d at 460.      SDA requested fees and costs related to

the appeal, and the ICA granted an award of costs after

determining SDA had prevailed on the appeal.           Id.   On

certiorari, this court determined that an ambiguity in the lease

at issue meant several of the trial court’s grants of summary

judgment were inappropriate and vacated the trial court’s

decisions on these counts.       130 Hawai‘i at 49, 305 P.3d at 465.
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As both parties had stipulated that the lease was unambiguous,

this court “[concluded] that neither party [had] prevailed on

the appeal” and vacated the ICA’s award of costs for SDA.                130

Hawai‘i at 46, 50, 305 P.3d at 462, 466 (emphasis added).

     Seventh-Day Adventists helps elucidate the application of

HRAP Rule 39 when a grant of summary judgment is vacated and

remanded, as does Jou, 133 Hawai‘i 471, 331 P.3d 449.            The

holding in Jou established that an appellate court should not

look outside the appellate proceedings when determining an award

of costs pursuant to HRAP Rule 39.         Id.   In Jou, this court

vacated the ICA’s order denying costs after determining the ICA

erroneously looked at the entire proceeding when determining a

prevailing party for an award of costs pursuant to HRAP Rule 39.

133 Hawai‘i at 480, 331 P.3d at 458.         Jou appealed from two

circuit court orders granting motions in favor of Hawai‘i

Employers Medical Insurance Company, one of which the ICA

vacated and remanded for further proceedings.           133 Hawaiʻi at

473-74, 331 P.3d 451-52.       Jou then requested costs related to

that order pursuant to HRAP Rule 39.         133 Hawai‘i at 475, 331
P.3d at 454.    The ICA denied Jou’s request and concluded,

“[a]ppellate costs are not awardable absent a prevailing party

in the case.”    Id. (emphasis added).       On certiorari, this court

determined that, contrary to the legal standard applied by the

ICA, the standard iterated in Seventh-Day Adventists required
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the ICA to determine which party prevailed on the appeal for the

purpose of awarding costs under HRAP Rule 39.           Jou, 133 Hawai‘i

at 480, 331 P.3d at 458.       After applying the correct legal

standard, this court concluded that since the ICA “granted Jou

the sole remedy he sought,” he was the prevailing party on

appeal entitled to costs pursuant to HRAP Rule 39.            133 Hawai‘i

at 481, 331 P.3d at 459.

    The ICA’s order here states that costs are not awardable

because “a prevailing party has not been determined thus far,”

and cites to Seventh-Day Adventists.         However, this case is

distinguishable from Seventh-Day Adventists because in the

latter, neither party prevailed on appeal since summary

judgments for each party were vacated on a ground that both

parties had stipulated did not exist.         This case is instead very

similar to Jou.     As it did in Jou, the ICA looked beyond the

appellate procedure to determine whether there was a prevailing

party entitled to HRAP Rule 39 costs.         We use this opportunity

to make explicit that when the ICA vacates a circuit court

judgment entered in favor of a foreclosing mortgagee seeking

summary judgment, then the appellate court must use its

discretion to determine which party prevailed on the appeal for

the purpose of an award of costs pursuant to HRAP Rule 39.

Since the ICA vacated the grant of summary judgment for Deutsche

Bank, which was the remedy Kozma sought, it follows that Kozma

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was the successful party on appeal entitled to HRAP Rule 39

costs.

                               V.   Conclusion

    For the aforementioned reasons, we affirm the portion of

the judgment denying attorney’s fees pursuant to HRS § 607-14

and vacate the portion of the ICA’s judgment denying costs

pursuant to HRAP Rule 39.

R. Steven Geshell                   /s/ Mark E. Recktenwald
for petitioner
                                    /s/ Paula A. Nakayama
J. Blaine Rogers
and Lori King Stibb                 /s/ Sabrina S. McKenna
for respondent/
plaintiff-appellee                  /s/ Richard W. Pollack
Deutsche Bank National
Trust Company                       /s/ Michael D. Wilson

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