Wells Fargo Bank, N.A. v. Omiya

• Decision Date: 15 June 2018
• Docket Number: SCWC-13-0000133
• Citation: 420 P.3d 370
• Parties: WELLS FARGO BANK, N.A. as Trustee for Option One Mortgage Loan Trust 2007-4 Asset-backed Certificates, Series 2007-4, Petitioner/Plaintiff-Appellant, v. Daniel Tsukasa OMIYA, Respondent/Defendant-Cross-Claimant-Appellee, and Association of Apartment Owners of Ilikai Apartment Building, Defendant/Cross-Claim Defendant-Appellee.
• Court: Hawaii Supreme Court

420 P.3d 370

WELLS FARGO BANK, N.A. as Trustee for Option One Mortgage Loan Trust 2007-4 Asset-backed Certificates, Series 2007-4, Petitioner/Plaintiff-Appellant,

v.Daniel Tsukasa OMIYA, Respondent/Defendant-Cross-Claimant-Appellee,andAssociation of Apartment Owners of Ilikai Apartment Building, Defendant/Cross-Claim Defendant-Appellee.

SCWC-13-0000133

Supreme Court of Hawai‘i.

JUNE 15, 2018

Gary Y. Okuda, Honolulu, for petitioner.

Charles A. Price, Honolulu, for respondent.

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

OPINION OF THE COURT BY POLLACK, J.

Under Hawai‘i law, in the case of non-judicial foreclosure of real property registered with the Land Court, the mortgagor or other person in interest may directly impeach the foreclosure proceedings affecting the property prior to the entry of a new certificate of title. However, after a new certificate of title has been entered, no judgment recovered on the mortgage note for any balance due shall operate to open the foreclosure or affect the title to the registered property (with some exceptions for fraud).

This case concerns whether a certificate of title is entered when a deed is accepted by the Office of the Assistant Registrar of the Land Court and stamped with a new certificate of title number. Because we conclude that assignment of a new certificate of title number is not the statutory equivalent of an entry of a certificate of title, we hold that the evidence did not establish that a certificate of title had been entered. Accordingly, the plaintiff in this case was not barred from maintaining an action against the purchaser-defendant for recovery of the foreclosed property. Additionally, because the evidence presents an issue of material fact as to whether the foreclosure sale was conducted through reasonable means to secure an adequate purchase price, we vacate the grant of summary judgment and remand the case for further proceedings.

I. BACKGROUND

Wells Fargo, N.A. (Wells Fargo) foreclosed via a nonjudicial foreclosure sale on its mortgage lien against apartment unit 1731 (Property), located in the Ilikai Apartment Building in Honolulu, Hawai‘i. Wells Fargo paid $318,750.00 for the Property, and a mortgagee quitclaim deed was recorded in the Office of the Assistant Registrar of the Land Court in favor of Wells Fargo on March 30, 2009.

Thereafter, another non-judicial foreclosure sale was held on August 18, 2010 by the Association of Apartment Owners of Ilikai Apartment Building (AOAO) at which Daniel Tsukasa Omiya purchased the Property for $15,000.¹ According to the filings, the AOAO foreclosed on the Property to recover maintenance fees the AOAO claimed it was owed.² The AOAO executed a quitclaim deed to Omiya which was accepted in the Office of the Assistant Registrar on September 15, 2010 and bears a stamp that reads in relevant part as follows:

STATE OF HAWAII

OFFICE OF ASSISTANT REGISTRAR

RECORDED

SEP 15, 2010 08:01 AM

Doc No(s) 3999421

on Cert(s) 940,974

Issuance of Cert(s) 996,234

A. Circuit Court Proceedings

1. Wells Fargo's Complaint

On November 3, 2010, Wells Fargo filed a complaint against Omiya and the AOAO in the Circuit Court of the First Circuit (circuit court), alleging that the sale of the Property to Omiya was not conducted in accordance with applicable Hawai‘i law because, inter alia, Omiya did not pay reasonable value for the Property.³ The complaint also stated that Omiya

claims to the be owner of the Property by virtue of that certain Quitclaim Deed filed on September 15, 2010 ... in the Office of the Assistant Registrar of the Land Court, State of Hawaii which resulted in the issuance of Transfer Certificate of Title No. 996,234 registering title in the name of Defendant Omiya.

In addition to other relief, Wells Fargo asked that the Assistant Registrar of the Land Court be directed to take such action as necessary to restore legal title to Wells Fargo, including but not limited to, cancellation of Transfer Certificate of Title (TCT)⁴ No. 996,234. Omiya answered and filed a cross-claim against the AOAO.

2. Omiya's Summary Judgment Motion

On December 21, 2011, Omiya filed a motion for summary judgment asserting that the quitclaim deed to Omiya was recorded and the Land Court had issued TCT No. 996,234. Thus, according to Omiya, Wells Fargo's arguments to invalidate the AOAO's foreclosure sale were untimely because they were not raised before the issuance of the new certificate of title, which was final and binding. (Citing Aames Funding Corp. v. Mores, 107 Hawai‘i 95, 103, 110 P.3d 1042, 1050 (2005).) As a result, Omiya argued, no relief could be obtained against him or the Property because he was statutorily protected as a subsequent purchaser for value.⁵ (Citing Hawaii Revised Statutes (HRS) § 501-82 (Supp. 2016).)⁶

In its opposition to the summary judgment motion, Wells Fargo asserted that there was a genuine issue of material fact as to whether a new certificate of title had issued. Wells Fargo pointed to the declaration of its counsel Anya Perez (Perez Declaration), which stated that she went to the Office of the Assistant Registrar of the Land Court and, after searching its computer records, was able to see that the new certificate of title was only partially prepared. The certificate of title was not complete and not certified, Perez averred, because the legal description was missing. Perez further declared that a staff person at the office initially told her that a new TCT No. 996,234 had been issued, "because it is certified by [the quitclaim deed]." The staff member went on to explain, Perez averred, that the certificate of title had not been checked and signed by an assistant registrar, which was required for the certificate of title to be certified.

Wells Fargo also asserted that there was a genuine issue of material fact as to whether the sale price was adequate. Wells Fargo again pointed to the Perez Declaration, which stated that, based on a 2012 tax assessment found in an online search of the City and County of Honolulu's Real Property Assessment and tax billing information website, the assessed value of the Property as of October 1, 2011 was $308,300.00. A copy of the search results was attached to the Perez Declaration.⁷

Omiya countered that the tax assessed value of the Property found on the internet was inadmissible hearsay and an unqualified expert opinion. As to whether a new certificate of title was issued, Omiya maintained that the complaint admitted that the filing of the quitclaim deed in the Office of the Assistant Registrar resulted in the issuance of TCT No. 996,234, registering title in Omiya's name. Additionally, Omiya asserted that the lack of a physical hard copy of a certificate of title was merely the result of clerical or bureaucratic delay and that "treating an issued certificate of title as ineffective" would result in arbitrary and inconsistent Land Court protections, which was contrary to the intent of the Land Court statute.⁸

Omiya submitted a supplemental declaration by Sandra Furukawa, a title insurance provider who formerly served as Registrar of the Bureau of Conveyances and Assistant Registrar of the Land Court (Furukawa Declaration). Furukawa stated that the Office of the Assistant Registrar of the Land Court at that time was nearly four years behind in physically producing and certifying new certificates of title for properties registered in the Land Court system.

Wells Fargo filed a supplemental memorandum, asserting that the rule that the certificate of title is conclusive is predicated on the ability of an interested person to inspect the actual, physical document at will. Wells Fargo argued that Omiya had not presented a certificate of title as defined by the Rules of the Land Court (RLC) Rule 52 (1989), which provides that a "[c]ertificate means a certificate of title showing the owner's name, a description of the land and a summary of encumbrances affecting the land, if any." Because a certificate of title had not been issued, Wells Fargo contended, it was not prevented from challenging the non-judicial foreclosure.

Following a further hearing on the summary judgment motion, the circuit court framed the dispositive issue as whether "the issuance of the TCT number is sufficient" to provide Omiya with statutory protection. The court concluded that "there's no genuine issue of material fact regarding" whether Omiya was protected and thus granted the summary judgment motion in favor of Omiya.

The court issued an order granting summary judgment and an amended partial final judgment. Wells Fargo filed a timely notice of appeal to the Intermediate Court of Appeals (ICA).

B. ICA Proceedings

On appeal, Wells Fargo contended that the circuit court erred in (1) concluding that because a certificate number had been issued, this court's precedent prevented Wells Fargo from challenging the AOAO's foreclosure of the Property and (2) granting the summary judgment motion because the sale price of the Property shocked the conscience.⁹

In a memorandum opinion, the ICA held that the circuit court did not err in granting summary judgment because there was no genuine issue of material fact as to Omiya's ownership of the Property.¹⁰ The ICA cited RLC Rule 59(d) (1989), which provides that in recording a deed, "the purchaser presents the deed which contains the proper number of the certificate of the land affected and also contains or has endorsed upon it a full memorandum of all encumbrances affecting the land, if any." The ICA noted that Omiya followed this procedure by presenting the quitclaim deed to the Land Court. Pursuant to HRS § 501-107 (Supp. 2016), the ICA stated, the instrument is stamped with the date, hour, and minute of reception, and, with that, the instrument is regarded as registered from the date and time noted.

The ICA then pointed to HRS § 501-118 (2006), which precludes a mortgagor or other person in interest from impeaching foreclosure proceedings after the entry of a new certificate...