Court Opinion

ID: 9958641
Source: CourtListenerOpinion
Date Created: 2024-04-09 19:03:53.489012+00
Date Added: 2024-06-11T08:18:32.685971
License: Public Domain

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

                                             Electronically Filed
                                             Intermediate Court of Appeals
                                             CAAP-XX-XXXXXXX
                                             09-APR-2024
                                             07:50 AM
                                             Dkt. 82 SO

                        NO. CAAP-XX-XXXXXXX

               IN THE INTERMEDIATE COURT OF APPEALS
                      OF THE STATE OF HAWAI#I

        WILMINGTON TRUST, NATIONAL ASSOCIATION, NOT IN ITS
          INDIVIDUAL CAPACITY, BUT SOLELY AS TRUSTEE FOR
              MFRA TRUST 2015-1, Plaintiff-Appellee,
                                  v.
               REID I. TAMAYOSE; NADINE K. TAMAYOSE,
                       Defendants-Appellants,
                                 and
    CADERLOCK JOINT VENTURE, L.P.; ADVANTAGE ASSETS II, INC.;
      RENEY ANN K.M. CHING; CACH, LLC, Defendants-Appellees,
                                 and
                      JOHN AND MARY DOES 1-20;
      DOE PARTNERSHIPS, CORPORATIONS OR OTHER ENTITIES 1-20,
                             Defendants

       APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT
                     (CASE NO. 5CC121000044)

                    SUMMARY DISPOSITION ORDER
  (By: Leonard, Acting Chief Judge, Nakasone and McCullen, JJ.)

          Defendants-Appellants Reid I. Tamayose and Nadine K.

Tamayose (the Tamayoses) appeal from the October 1, 2019 Judgment

(Judgment) entered against them and in favor of Plaintiff-

Appellee Wilmington Trust, National Association, not in its

Individual Capacity, but Solely as Trustee for MFRA Trust 2015-1

(Wilmington Trust), by the Circuit Court of the Fifth Circuit
  NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

(Circuit Court).1     The Tamayoses also challenge the Circuit

Court's October 1, 2019 Findings of Fact, Conclusions of Law, and

Order Granting [Wilmington Trust's] Motion for Summary Judgment

and for Interlocutory Decree of Foreclosure (Foreclosure Decree).

            The Tamayoses raise a single point of error, contending

that the Circuit Court erred by granting Wilmington Trust's July

31, 2019 Motion for Summary Judgment and for Interlocutory Decree

of Foreclosure (Summary Judgment Motion) because Wilmington Trust

failed to establish its standing to sue, and failed to meet its
prima facie burden of proof.

            Upon careful review of the record and the briefs

submitted by the parties, and having given due consideration to

the arguments advanced and the issues raised by the parties, we

resolve the Tamayoses' point of error as follows:

            The Circuit Court granted the Summary Judgment Motion

based in part on its finding that Residential Credit Solutions,

Inc. (RCS), which had filed the original Complaint to Foreclose

Mortgage (Complaint) on February 2, 2012, possessed the original

subject blank-indorsed Adjustable Rate Note (Note),2 which was

secured by the subject mortgage (Mortgage).           The Circuit Court

found that RCS held the Note and Mortgage at the time it filed

the January 27, 2014 First Amended [Complaint], and on that

basis, the Circuit Court concluded that RCS had standing to file

this foreclosure action.       Thus, the Circuit Court further

      1
            The Honorable Randal G.B. Valenciano presided.
      2
             An Allonge to Note, which contains an indorsement in blank, is
attached to the Note (Allonge).

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concluded that Wilmington Trust, as the current holder of the

Note and Mortgage, and the substituted real-party-in-interest,

also had standing.

            The Tamayoses contend that Wilmington Trust did not

meet its burden of demonstrating that RCS was in possession of

the blank-indorsed Note at the time the Complaint was filed.

            A foreclosing party must demonstrate that all

conditions precedent to foreclosure under the note and mortgage

are satisfied and that all steps required by statute have been
strictly complied with to prove entitlement to foreclose.       Bank

of Am., N.A. v. Reyes-Toledo, 139 Hawai#i 361, 367, 390 P.3d

1248, 1254 (2017).    Typically, this requires that the plaintiff

prove the existence of an agreement, the terms of the agreement,

a default by the mortgagor under the terms of the agreement, and

giving of the cancellation notice.    Id.   A foreclosing plaintiff

must also prove that the plaintiff is entitled to foreclose the

note and mortgage.    Id.

            The "burden to prove entitlement to enforce the note

overlaps with the requirements of standing in foreclosure

actions."    Id. (quoting Mottl v. Miyahira, 95 Hawai#i 381, 388,

23 P.3d 716, 723 (2001)).    Under the doctrine of standing, a

plaintiff typically must have suffered an injury-in-fact to

"justify exercise of the court's remedial powers on his or her

behalf."    Id. at 368, 390 P.3d at 1255 (citing Mottl, 95 Hawai#i

at 389, 23 P.3d at 724).    For a foreclosing plaintiff, the

injury-in-fact is the mortgagor's "failure to satisfy its

obligation to pay the debt obligation to the note holder."       Id.

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Thus, a person seeking to judicially foreclose on a mortgage

following a promissory note default must establish that it was

the "person entitled to enforce the note," as defined by Hawaii

Revised Statutes (HRS) § 490:3-301 (2016) at the time the

foreclosure complaint was filed to satisfy standing and to be

entitled to prevail on the merits.    Id. at 368-69, 390 P.3d at

1255-56; see also U.S. Bank N.A. v. Mattos, 140 Hawai#i 26, 33,

398 P.3d 615, 622 (2017).

          Here, Wilmington Trust relied on the Declaration of
Melissa Sequete, which was submitted in support of the Motion for

Summary Judgment (Sequete; Sequete Declaration).      Sequete was a

former Assistant Vice President-Director of Special Assets at

RCS, and is the current Vice President at Fay, the loan servicing

agent for Wilmington Trust (Fay).     Wilmington Trust contends that

Sequete properly authenticated the blank-indorsed Note, the

Mortgage, a notice of default allegedly sent to the Tamayoses by

RCS in 2008 (Notice of Default), and other business records,

because Sequete had personal knowledge of both RCS and Fay's

record-keeping systems.

          The Tamayoses argue that Sequete did not aver to having
seen the original blank-indorsed Note, did not otherwise attest

to witnessing the Note being in RCS's possession or how it was

kept by RCS, and that Wilmington Trust offered no business

records or other evidence demonstrating RCS was in possession of

the Note when the Complaint was filed.     The Tamayoses further

argue that the business records hearsay exception criteria have

not been satisfied.

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            Relevant to the issue of RCS's possession of the blank-

indorsed Note, Sequete declared under oath:
                  10. I was Assistant Vice President-Director of Special
            Assets of RCS at the time RCS initiated this foreclosure action
            against Defendants. Accordingly, I have personal knowledge of
            RCS's business records, including its electronic records and the
            information relating to the Loan. Based on my personal knowledge
            of the business records kept by RCS, which were subsequently
            incorporated into the business records of Fay, RCS was in
            possession of the original Note at the time the Complaint and
            First Amended Complaint in this action were filed.

            The Sequete Declaration does not assert that she was a

custodian of records for RCS.3        Therefore, the RCS records

attached to her declaration are only admissible under Hawai#i
Rules of Evidence (HRE) Rule 803(b)(6) hearsay exception if she

is a qualified witness with respect to those records.             Merely

stating that she had "personal knowledge of RCS's business

records, including its electronic records and the information

relating to the Loan" does not establish Sequete as a qualified

witness with respect to the Note and Mortgage.           See Mattos, 140

Hawai#i at 26, 398 P.3d at 615.           Sequete did not, for example,

state that she had access to or was familiar with the Note and

Mortgage through the regular performance of her duties at RCS,
state that the documents to which she referred were created or

maintained in the regular course of RCS's business or consistent

with RCS's regular practice, state that she researched and/or

examined RCS's business records for the Note and Mortgage, or

provide any information whatsoever that would establish her as a

qualified witness.      See id. at 32, 398 P.3d at 621.        Sequete's

statement of her "personal knowledge" of RCS business records was

      3
            Sequete does state that she has personal knowledge of the facts
stated in the Sequete Declaration "as a custodian based on my review of Fay's
business records."

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inadequate to establish that RCS was in possession of the

original Note at the time the Complaint was filed.      The Sequete

Declaration does not state that the Note was indorsed in blank at

the time the Complaint was filed.     In short, there is no

admissible evidence that RCS was in possession of the Note or the

Allonge providing the blank endorsement at the time of the filing

of the Complaint.

          Wilmington Trust argues, alternatively, that the

Sequete Declaration established, inter alia, that the Note and

Mortgage were incorporated and kept in the normal course of Fay's

business and satisfied the requirements of the incorporated

records doctrine.   See Wells Fargo Bank, N.A. v. Behrendt, 142

Hawai#i 37, 45, 414 P.3d 89, 97 (2018); U.S. Bank Tr., N.A. as

Tr. for LSF9 Master Participation Tr. v. Verhagen, 149 Hawai#i

315, 325-27, 489 P.3d 419, 429-31 (2021).     Even if the Sequete

Declaration met the requirements of the incorporated records

doctrine (it did not), Wilmington Trust nevertheless failed to

produce admissible evidence that RCS possessed the blank-indorsed

Note at the time the Complaint was filed.     Therefore, the Circuit

Court erred in concluding that RCS had standing to foreclose.

          The Tamayoses further argue that Wilmington Trust

failed to proffer properly authenticated evidence that the Notice

of Default was given to the Tamayoses.     For the same reasons

discussed above with respect to the Note, the Sequete Declaration

does not properly authenticate the Notice of Default.      Even if

the Notice of Default had been properly authenticated, the terms

of the Note require in pertinent part:

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          8.    GIVING OF NOTICES
                Unless applicable law requires a different method, any
          notice that must be given to me under this Note will be
          given by delivering it or by mailing it by first class mail
          to me at the Property Address above or at a different
          address if I give the Note Holder a notice of my different
          address.

          The terms of the Mortgage require in pertinent part:
                14. Notices. Any notice to Borrower provided for in
          this Security Instrument shall be given by delivering it or
          by mailing it by first class mail unless applicable law
          requires use of another method. The notice shall be
          directed to the Property Address or any other address
          Borrower designates by notice to Lender.

          Sequete does not state whether the Notice of Default

was sent via first class mail, nor does Wilmington Trust offer

evidence that the Notice of Default was otherwise delivered to

the Tamayoses.   Thus, we conclude that Wilmington Trust failed to

establish that no genuine issue of material fact exists with

respect to whether proper notice was given under the terms of the

Mortgage or Note.

          For these reasons, the Circuit Court's October 1, 2019

Judgment and Foreclosure Decree are vacated, and this case is

remanded to the Circuit Court for further proceedings.

          DATED: Honolulu, Hawai#i, April 9, 2024.

On the briefs:                          /s/ Katherine G. Leonard
                                        Acting Chief Judge
Gary Victor Dubin,
Frederick J. Arensmeyer,                /s/ Karen T. Nakasone
for Defendants-Appellants               Associate Judge
 REID I. TAMAYOSE and
 NADINE K. TAMAYOSE.                    /s/ Sonja M.P. McCullen
                                        Associate Judge
Matthew C. Shannon,
Lianne T. Chung,
(Bays Lung Rose & Holma),
for Plaintiff-Appellee.

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