Court Opinion

ID: 6338545
Source: CourtListenerOpinion
Date Created: 2022-05-06 19:06:14.810834+00
Date Added: 2024-06-11T15:49:07.689974
License: Public Domain

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

                                                   Electronically Filed
                                                   Intermediate Court of Appeals
                                                   CAAP-XX-XXXXXXX
                                                   22-APR-2022
                                                   07:51 AM
                                                   Dkt. 74 SO

                 NOS. CAAP-XX-XXXXXXX & CAAP-XX-XXXXXXX

                  IN THE INTERMEDIATE COURT OF APPEALS

                          OF THE STATE OF HAWAI#I

             MTGLQ INVESTORS, L.P., Plaintiff-Appellee,
                                   v.
            ASSOCIATION OF APARTMENT OWNERS OF ELIMA LANI
                  CONDOMINIUMS, Defendant-Appellant,
                                  and
          NOAH HENRY CLIFFORD; THE BANK OF NEW YORK MELLON
           FKA THE BANK OF NEW YORK, AS SUCCESSOR TRUSTEE
         TO JPMORGAN CHASE BANK, N.A., AS TRUSTEE ON BEHALF
         OF THE CERTIFICATEHOLDERS OF THE CWHEQ INC., CWHEQ
          REVOLVING HOME EQUITY LOAN TRUST, SERIES 2005-F;
        WAIKOLOA VILLAGE ASSOCIATION, Defendants-Appellees,
                                  and
      JOHN DOES 1-20; JANE DOES 1-20; DOE CORPORATIONS 1-20;
        DOE ENTITIES 1-20; and DOE GOVERNMENTAL UNITS 1-20,
                              Defendants

          APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
                        (CIVIL NO. 17-1-0299K)

                       SUMMARY DISPOSITION ORDER
          (By: Ginoza, C.J., and Wadsworth and McCullen, JJ.)

          In these consolidated appeals, Defendant-Appellant
Association of Apartment Owners of Elima Lani Condominiums (the
AOAO) appeals from:       (1) the June 27, 2019 Amended Judgment
(Foreclosure Judgment) entered by the Circuit Court of the Third
Circuit (Circuit Court)1/ in favor of Plaintiff-Appellee MTGLQ
Investors, L.P. (MTGLQ) and against Defendant-Appellees Noah
Henry Clifford (Clifford); The Bank of New York Mellon fka The
Bank of New York, as Successor Trustee to JPMorgan Chase Bank,

     1/
             The Honorable Melvin H. Fujino presided.
 NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

N.A., as Trustee on Behalf of the Certificateholders of the CWHEQ
Inc., CWHEQ Revolving Home Equity Loan Trust, Series 2005-F (Bank
of New York); Waikoloa Village Association (WVA); and the AOAO
(collectively, Defendants); and (2) the June 26, 2020 Judgment
(Confirmation Judgment) entered by the Circuit Court in favor of
MTGLQ and against Defendants. The AOAO also challenges the
Circuit Court's: (1) June 17, 2019 "Amended Findings of Fact,
Conclusions of Law and Order Granting [MTGLQ's] Motion for
Default Judgment Against [Clifford, Bank of New York, and WVA]
and Summary Judgment Against [the AOAO] and for Interlocutory
Decree of Foreclosure" (Foreclosure Decree); and (2) June 26,
2020 "Order Confirming Foreclosure Sale, Approving Commissioner's
Report, Allowance of Commissioner's Fees, Attorney's Fees, Costs,
Directing Conveyance and for Writ of Ejectment" (Confirmation
Order).
          For the reasons explained below, we affirm the
Foreclosure Judgment and the Confirmation Judgment.

                           I.   Background

          On September 27, 2017, MTGLQ filed a Complaint for
Mortgage Foreclosure against Defendants regarding the subject
property (Property). The AOAO answered the complaint; the
remaining defendants did not.
          Prior to the filing of the complaint, the AOAO
conducted a nonjudicial foreclosure of its lien on the Property.
On July 23, 2015, the AOAO recorded an affidavit of nonjudicial
foreclosure under power of sale in the State of Hawaii Bureau of
Conveyances (Bureau). On July 27, 2015, a Quitclaim Deed
transferring title to the Property to the AOAO was recorded in
the Bureau. The Quitclaim Deed stated that it was "subject . . .
to all encumbrances of record[.]"
          On October 29, 2018, MTGLQ filed a motion for default
judgment against all Defendants and for an interlocutory decree
of foreclosure (Motion for Default Judgment). Default had been
previously entered against all Defendants on August 9, 2018, but
on January 11, 2019, the entry of default against the AOAO was
set aside via stipulation and order.

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          On January 25, 2019, MTGLQ filed a motion for summary
judgment against the AOAO and for an interlocutory decree of
foreclosure (Motion for Summary Judgment). The AOAO filed a
limited memorandum in opposition to the Motion for Default
Judgment and a similar limited memorandum in opposition to the
Motion for Summary Judgment. The AOAO contended that as the
owner of the Property, it should continue "to maintain possession
of the Property, manage and preserve the Property, and if
appropriate, continue to rent the Property until completion of
the current foreclosure action under [Hawaii Revised Statutes
(HRS)] § 514B-146(b)." The AOAO also reserved its position
regarding its right to collect a six-month special assessment
under HRS § 514B-146(j), (k), and (l).
          On June 17, 2019, the Circuit Court entered the
Foreclosure Decree, which, inter alia, granted the Motion for
Default Judgment and the Motion for Summary Judgment. The
Circuit Court appointed a commissioner, authorizing and directing
him: "to take possession and control of the Property, including
but not limited to, collecting rental payments and to sell the
Property at a public sale . . . [,]" subject to confirmation by
the Circuit Court. The Foreclosure Judgment was entered on
June 27, 2019. The AOAO filed a timely notice of appeal,
initiating CAAP-XX-XXXXXXX.
          On January 21, 2020, the Commissioner filed his report,
stating, inter alia, that MTGLQ had placed the first (and it
appears, only) bid at the foreclosure auction – a credit bid in
the amount of $193,600. The Commissioner also stated that he had
collected $3,275.00 in rent before the tenant vacated the unit on
November 1, 2019.
          On February 2, 2020, MTGLQ filed a motion for an order
confirming the foreclosure sale, approving the Commissioner's
Report, allowing the Commissioner's fees, attorneys' fees, and
costs, directing conveyance, and for a writ of ejectment (Motion
to Confirm).   The AOAO filed a limited opposition in which it
opposed MTGLQ's request that rent collected by the Commissioner
be paid to MTGLQ.

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          Following a hearing on the Motion to Confirm, the
Circuit Court entered the June 26, 2020 Confirmation Order,
which, inter alia, confirmed the sale of the Property to MTGLQ,
denied AOAO's request that it be paid the $3,275.00 in rental
income collected by the Commissioner, ordered that rent on the
Property collected by the Commissioner be paid to MTGLQ, and
ordered that all named Defendants junior to MTGLQ's interest be
terminated from any right, title, and interest in the Property.
The Confirmation Judgment was entered on the same date. The AOAO
filed a timely notice of appeal, initiating CAAP-XX-XXXXXXX.

                        II.   Points of Error

          The AOAO raises three points of error.
          In CAAP-XX-XXXXXXX, the AOAO contends:
          1. "The [C]ircuit [C]ourt committed reversible error
when it purportedly vested the Commissioner with and divested the
[AOAO] of equitable and legal title to the Property owned by the
[AOAO]"; and
          2. "The [C]ircuit [C]ourt committed reversible error
when it agreed with [MTGLQ] that the right to possess and collect
rental income from the Property was within the Commissioner's
discretion upon the entry of the [Foreclosure Decree], and
ordered the Commissioner 'to take possession and control of the
Property' owned by the [AOAO], including the collection and
retention of rents."
          In CAAP-XX-XXXXXXX, the AOAO additionally contends:
"The Circuit Court committed reversible error when it awarded
[MTGLQ] the rents previously collected by the Commissioner from
the [AOAO's] tenant where no excess rents were found to exist."
(Formatting altered.)

                          III.   Discussion

A.   Appeal from the Foreclosure Decree and Judgment

          The AOAO contends that the Circuit Court erred in
vesting the Commissioner with equitable and legal title to the
Property by way of the Foreclosure Decree, which authorized and
directed the Commissioner "to take possession and control of the

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 NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Property, including but not limited to collecting rental
payments[.]" However, the Foreclosure Decree does not purport to
vest title in the Property to the Commissioner, and the AOAO does
not explain how the quoted language accomplished that alleged
result.
          Moreover, the Circuit Court did not err or abuse its
discretion in ordering the Commissioner to take possession and
control of the Property, including the collection of rents, and
to sell the Property at public auction. The AOAO's title to the
Property was subject to MTGLQ's mortgage lien, and a judgment of
foreclosure is a final determination of a foreclosed party's
ownership interest in the subject property. In other words,
AOAO's ownership rights in the Property were foreclosed when the
Foreclosure Judgment was entered, even though further proceedings
were necessary to enforce and otherwise effectuate the
Foreclosure Decree and the Foreclosure Judgment. See Bank of
N.Y. Mellon v. Larrua, 150 Hawai#i 429, 439-40, 504 P.3d 1017,
___ (App. 2022); U.S. Bank Tr., N.A. v. Ass'n of Apartment Owners
of Waikoloa Hills Condo. Phase I, ___ Hawai#i ___, ___, ___ P.3d
___, ___, No. CAAP-XX-XXXXXXX, 2022 WL 574511, at *8 (Haw. App.
Feb. 25, 2022).
          Accordingly, the AOAO's appeal from the Foreclosure
Decree and Judgment is without merit.

B.   Appeal from the Confirmation Order and Judgment

           The AOAO contends that the Circuit Court erred in
ordering that "rent on the Property collected by the
Commissioner, if any, shall be paid to [MTGLQ] and forwarded in
care of [MTGLQ]'s attorneys." The AOAO cites HRS § 514B-146(n)
(2018),2/ arguing that the Circuit Court should have allowed the

     2/
          HRS § 514B-146(n) states:

          After any judicial or nonjudicial foreclosure proceeding in
          which the association acquires title to the unit, any excess
          rental income received by the association from the unit
          shall be paid to existing lien holders based on the priority
          of lien, and not on a pro rata basis, and shall be applied
          to the benefit of the unit owner. For purposes of this
          subsection, excess rental income shall be any net income
          received by the association after a court has issued a final
                                                              (continued...)

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AOAO to retain rental proceeds from the Property until completion
of the foreclosure action under HRS § 514B-146(b).
          This issue was also addressed in Larrua. There, this
court construed HRS § 514B-146(k) (Supp. 2017)3/ as follows:

            HRS § 514B-146(k) therefore addresses only how an AOAO must
            utilize any rental income it receives after its own
            foreclosure on the unit, when its interest is subsequently
            foreclosed upon by a mortgagee, instructing it to pay
            amounts for delinquent assessments that might remain
            outstanding against the unit owner, maintenance fee
            delinquencies, fees and costs related to the AOAO's
            foreclosure, and any costs incurred by the association while
            in possession of the unit. The statute does not, however,
            necessarily entitle an AOAO to receive such rental income
            from a unit following the subsequent entry of a foreclosure
            decree and judgment in favor of a mortgagee.

Larrua, 150 Hawai#i at 443-44, 504 P.3d at ___; see id. at 446,
504 P.3d at ___ ("HRS § 514B-146(k) . . . does not necessarily
entitle the AOAO to receive rental income from a unit after the
entry of a foreclosure decree and judgment in favor of the
pre-existing mortgagee, but merely addresses the allocation of
any such income.").
          Moreover, as in Larrua, the Confirmation Order here

     2/
          (...continued)
             judgment determining the priority of a senior mortgagee and
             after paying, crediting, or reimbursing the association or a
             third party for:

                  (1)   The lien for delinquent assessments pursuant to
                        subsections (a) and (b);

                  (2)   Any maintenance fee delinquency against the
                        unit;
                  (3)   Attorney's fees and other collection costs
                        related to the association's foreclosure of the
                        unit; or

                  (4)   Any costs incurred by the association for the
                        rental, repair, maintenance, or rehabilitation
                        of the unit while the association is in
                        possession of the unit including monthly
                        association maintenance fees, management fees,
                        real estate commissions, cleaning and repair
                        expenses for the unit, and general excise taxes
                        paid on rental income;

            provided that the lien for delinquent assessments under
            paragraph (1) shall be paid, credited, or reimbursed first.
     3/
            In 2018, HRS § 514B-146(k) was recodified as HRS § 514B-146(n).
See Larrua, 150 Hawai#i at 442 n.14, 504 P.3d at ___ n.14 (citing 2018 Haw.
Sess. Laws Act 195, § 4 at 672). The operative language of HRS § 514B-146(k)
and HRS 514B-146(n) is identical.

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"does not pertain to any income 'received by the association' or
otherwise affect the distribution or allocation of any such
income." Id. at 446, 504 P.3d at ___. Instead, the Confirmation
Order concerns only distribution of "rent on the Property
collected by the Commissioner, if any[.]" Id. In addition, as
in Larrua, the Confirmation Order "does not purport to entitle
the Commissioner to the collection of rental income or [MTGLQ] to
the receipt of all income received from the Property, in
particular, the rents collected by the AOAO." Id.
          Accordingly, the AOAO's appeal from the Confirmation
Order and Judgment is without merit.

                            IV.   Conclusion

          For the reasons discussed above, the June 27, 2019
Amended Judgment and the June 26, 2020 Judgment, entered by the
Circuit Court of the Third Circuit, are affirmed.

          DATED:   Honolulu, Hawai#i, April 22, 2022.

On the briefs:
                                        /s/ Lisa M. Ginoza
R. Laree McGuire and                    Chief Judge
Brendan K. Ogata
(Porter McGuire Kiakona, LLP)
for Defendant-Appellant                 /s/ Clyde J. Wadsworth
                                        Associate Judge
Charles R. Prather,
Peter T. Stone
(TMLF Hawaii LLLC)                      /s/ Sonja M.P. McCullen
for Plaintiff-Appellee in               Associate Judge
CAAP-XX-XXXXXXX

Charles R. Prather,
Jason L. Cotton, and
Peter T. Stone
(TMLF Hawaii LLLC)
for Plaintiff-Appellee in
CAAP-XX-XXXXXXX)

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