Bank of Am., N.A. v. Reyes-Toledo

• Decision Date: 28 February 2017
• Docket Number: SCWC-15-0000005
• Citation: 390 P.3d 1248
• Parties: BANK OF AMERICA, N.A., Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing LP, Respondent/Plaintiff-Appellee, v. Grisel REYES-TOLEDO, Petitioner/Defendant-Appellant, and Wai Kaloi at Makakilo Community Association ; Makakilo Community Association ; and Palehua Community Association, Respondents/Defendants-Appellees.
• Court: Hawaii Supreme Court

390 P.3d 1248

BANK OF AMERICA, N.A., Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing LP, Respondent/Plaintiff-Appellee,

v. Grisel REYES-TOLEDO, Petitioner/Defendant-Appellant,andWai Kaloi at Makakilo Community Association ; Makakilo Community Association ; and Palehua Community Association, Respondents/Defendants-Appellees.

SCWC-15-0000005

Supreme Court of Hawai‘i.

FEBRUARY 28, 2017

R. Steven Geshell, Honolulu, for petitioner

Jade Lynne Ching, J. Blaine Rogers and Kee M. Campbell, Honolulu, for respondents.

NAKAYAMA, ACTING C.J., McKENNA, POLLACK, AND WILSON, JJ., AND CIRCUIT COURT JUDGE GARIBALDI, IN PLACE OF RECKTENWALD, C.J., RECUSED

OPINION OF THE COURT BY POLLACK, J.

This case raises issues of standing and appellate jurisdiction that pertain to foreclosure proceedings. We consider whether a foreclosing plaintiff seeking summary judgment must prove it had standing to foreclose on the homeowner's property at the commencement of the lawsuit to be entitled to foreclosure of the subject property. We also determine the extent of appellate jurisdiction over interlocutory orders leading up to a foreclosure decree.

I. BACKGROUND

The subject of the foreclosure proceedings is the home of Grisel Reyes-Toledo ("Homeowner"). On September 24, 2007, Homeowner executed a promissory note made payable to Countrywide Bank, FSB (the "Note"). The Note was secured by a mortgage on the property encumbering the property to mortgagee, Mortgage Electronic Registration Systems, Inc., as nominee for the lender, Countrywide Bank, FSB (the "Mortgage"). The Mortgage was recorded on September 28, 2007, in the Office of the Assistant Registrar of the Land Court of the State of Hawai‘i.

In early 2011, Homeowner received a notice of intent to accelerate from BAC Home Loans Servicing, LP, a Bank of America company, dated January 7, 2011. The acceleration notice stated that BAC Home Loans Servicing, LP, services the loan on her property "on behalf of the holder of the promissory note" and that her loan was in serious default because required payments had not been made.

An assignment of the Mortgage from Mortgage Electronic Registration Systems, Inc., "solely as nominee for Countrywide Bank, FSB," to Bank of America, N.A., a National Association, as successor by merger to BAC Home Loans Servicing, LP, was recorded in the Office of the Assistant Registrar of the Land Court of the State of Hawai‘i on October 19, 2011 (the "Assignment"). The Assignment was dated October 12, 2011.

On March 12, 2012, Bank of America, N.A., Successor by Merger to BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing LP ("Bank of America"), filed a complaint in the Circuit Court of the First Circuit (the "circuit court") seeking to foreclose on Homeowner's property. The complaint asserted that Bank of America was in possession of the Mortgage and Note and entitled to foreclosure of the Mortgage and sale of Homeowner's property.

Homeowner subsequently filed an answer and counterclaims on September 28, 2012, denying all allegations in the complaint except those relating to her personal background and the execution of the Note and Mortgage. Homeowner asserted numerous defenses, including that Bank of America was not the holder of the Note and Mortgage and therefore not entitled to foreclosure.¹ Homeowner attacked the validity of the Assignment² and any negotiation of the Note.³ Homeowner also asserted additional defenses that would apply if the Note and Mortgage were transferred into a trust and securitized. ⁴

Homeowner asserted four counterclaims: wrongful foreclosure, declaratory relief, quiet title, and unfair and deceptive trade practice.

Bank of America subsequently filed a motion to dismiss Homeowner's counterclaims, which was granted by the court in a February 12, 2013 order ("Order Granting Motion to Dismiss Counterclaims"). Homeowner filed a motion for reconsideration or certification for appeal, which the circuit court denied in a December 31, 2013 order ("Order Denying Motion for Reconsideration and Certification").

Bank of America moved for summary judgment and an interlocutory decree of foreclosure, asserting that it was entitled to judgment as a matter of law. Bank of America maintained that, in order to obtain summary judgment, it was required to prove the existence of an agreement, the terms of the agreement, default, and the giving of the requisite notice. Bank of America contended that no genuine issue as to any material fact existed because the declarations and exhibits attached to its motion demonstrated the existence of the Mortgage and Note, the terms of the Mortgage and Note, Homeowner's default, and the giving of the requisite notice to Homeowner.

The attachments to Bank of America's motion for summary judgment included a "Declaration of Indebtedness" by Katherine M. Egan, an officer of Bank of America ("Egan Declaration"). The Egan Declaration was dated January 27, 2014, and it stated that Bank of America "has possession" of the Note and that the Note "has been duly endorsed to blank." Also attached was a copy of the Note that was signed by Homeowner, which identified Countrywide Bank, FSB, as the lender. The Note included two stamps with undated signatures that read as follows:

PAY TO THE ORDER OF

WITHOUT RECOURSE

COUNTRYWIDE HOME LOANS, INC.

BY: [signature Michele Sjolander]

MICHELE SJOLANDER

EXECUTIVE VICE PRESIDENT

* * * * * *

PAY TO THE ORDER OF

COUNTRYWIDE HOME LOANS, INC

WITHOUT RECOURSE

COUNTRYWIDE BANK, FSB

BY: [signature Laurie Meder]

LAURIE MEDER

Senior Vice President

The attachments to the motion also included a copy of the Mortgage, a copy of the Assignment, a copy of the January 7, 2011 notice of intent to accelerate, and payment records for Homeowner's loan account.

In opposition to Bank of America's motion for summary judgment, Homeowner asserted that material questions of fact remained as to the validity of the Assignment and whether Bank of America was the lawful holder of the Note. Homeowner argued that she did "not have to prove who owns the note and mortgage" and that it was Bank of America's burden "to prove by a preponderance of the evidence that it owns the note and mortgage." Homeowner contended that the evidence produced by Bank of America was insufficient as there was no evidence of the date of the transfer of the Note. Homeowner also asserted that the motion for summary judgment should be denied because discovery was ongoing, or alternatively, that the circuit court should continue the hearing pending the completion of discovery.

The circuit court granted Bank of America's motion for summary judgment, entering its December 9, 2014 "Findings of Fact, Conclusions of Law, Order Granting Plaintiffs Motion for Summary Judgment Against All Parties and for Interlocutory Decree of Foreclosure Filed April 4, 2014" ("Foreclosure Decree"). The court found that Bank of America was the "current holder" of the Note and Mortgage.⁵ The court concluded that Bank of America was entitled to foreclosure of the Mortgage and sale of the property. The Foreclosure Decree also provided that it was "entered as a final judgment pursuant to Rule 54(b) of the Hawai‘i Rules of Civil Procedure (HRCP) as there was no just reason for delay." The court also entered a separate judgment on December 9, 2014, directing that the Foreclosure Decree was entered "as a final judgment in favor of Plaintiff and against all Defendants as there [was] no just reason for delay pursuant to [HRCP] Rule 54(b)" (the "Judgment").

Homeowner timely filed a notice of appeal from the Judgment.⁶ On appeal to the Intermediate Court of Appeals (ICA), Homeowner asserted that the circuit court erred in holding that Bank of America had standing to bring the foreclosure action, in granting summary judgment to Bank of America, in dismissing her counterclaims, and in denying her motion for reconsideration of the dismissal of her counterclaims.

In a summary disposition order, the ICA affirmed the circuit court's Judgment. The ICA's decision first addressed Homeowner's assertion that Bank of America lacked standing to foreclose. With regard to Bank of America's standing to enforce the Note, the ICA concluded that Bank of America produced sufficient evidence to establish its authority to enforce the Note.⁷ The ICA reasoned that Bank of America "provided evidence that it was in possession of the Note, the blank endorsement established that [Bank of America] was the ‘holder’ of the Note, and the Egan Declaration stated that the Note was a true and correct copy of the Note in [Bank of America's] possession."

The ICA also considered whether it had appellate jurisdiction over Homeowner's challenge to the Order Granting Motion to Dismiss Counterclaims and Order Denying Motion for Reconsideration and Certification. The ICA concluded that it did not have jurisdiction over these orders as they were not final appealable orders and had not been reduced to a final appealable judgment. The ICA reasoned that it had jurisdiction over the appeal of the Judgment on the Foreclosure Decree as a final and appealable order under Hawaii Revised Statutes (HRS) § 667-51(a)(1) but that HRS § 667-51 did not provide appellate jurisdiction over the orders regarding the counterclaims. Thus, the ICA affirmed the circuit court Judgment.

Homeowner filed an application for writ of certiorari with this court, which was granted.

II. DISCUSSION

There are two primary issues presented in Homeowner's application to this court.⁸ The first issue is whether the ICA erred in affirming the circuit court's grant of summary judgment in favor of Bank of America. The second issue is whether the appellate courts have jurisdiction to review the circuit court's Order Granting Motion to Dismiss Counterclaims and related Order Denying the Motion for Reconsideration and Certification under HRCP Rule 54(b), which were issued prior to the Judgment.

A. Summary Judgment

Homeowner argues that the ICA erred in affirming the...