Citibank, NA as Trustee for WAMU Series 2007-HE2 Trust v. Gaspar

• Decision Date: 28 June 2019
• Docket Number: NO. CAAP-18-0000493,CAAP-18-0000493
• Citation: 443 P.3d 126 (Table)
• Parties: CITIBANK, NA AS TRUSTEE FOR WAMU SERIES 2007-HE2 TRUST, Plaintiff-Appellee, v. William GASPAR ; Joyal Gaspar, Defendants-Appellants, and Hawaiian Ocean View Estates Road Maintenance Corporation, Defendant-Appellee, and John Does 1-50; Jane Does 1-50; Doe Partnerships 1-50; Doe Corporations 1-50; Doe Entities 1-50; and Doe Governmental Units 1-50, Defendants
• Court: Hawaii Court of Appeals

443 P.3d 126 (Table)

CITIBANK, NA AS TRUSTEE FOR WAMU SERIES 2007-HE2 TRUST, Plaintiff-Appellee,

v. William GASPAR ; Joyal Gaspar, Defendants-Appellants,andHawaiian Ocean View Estates Road Maintenance Corporation, Defendant-Appellee,andJohn Does 1-50; Jane Does 1-50; Doe Partnerships 1-50; Doe Corporations 1-50; Doe Entities 1-50; and Doe Governmental Units 1-50, Defendants

NO. CAAP-18-0000493

Intermediate Court of Appeals of Hawai‘i.

June 28, 2019.

On the briefs:

William Gaspar, and Joyal Gaspar, Defendants-Appellants.

Marvin S.C. Dang, and Amy Jackson, Honolulu, (Law Offices of Marvin S.C Dang, LLLC) for Plaintiff-Appellee.

(By: Ginoza, Chief Judge, Chan and Hiraoka, JJ.)

SUMMARY DISPOSITION ORDER

Defendants-Appellants William Gaspar and Joyal Gaspar (collectively, the Gaspars) appeal from the Judgment (Foreclosure Judgment) entered in favor of Plaintiff-Appellee¹ Citibank, NA as Trustee for WAMU Series 2007-HE2 Trust (Citibank) pursuant to the "Findings of Fact; Conclusions of Law; Order Granting Plaintiff's Motion for Summary Judgment as Against All Defendants and for Interlocutory Decree of Foreclosure" (Foreclosure Decree), both filed on May 18, 2018, in the Circuit Court of the Third Circuit (circuit court).²

On appeal, the Gaspars contend that the circuit court erred by granting Citibank's December 15, 2017 "Motion for Summary Judgment as Against All Defendants and for Interlocutory Decree of Foreclosure" (MSJ) because genuine issues of material fact remained as to whether Citibank had standing to foreclose on the subject mortgage. Specifically, the Gaspars appear to contend that there was no evidence that Citibank was in possession of the subject "Fixed/Adjustable Rate Balloon Note" (Note) at the time it filed its Complaint and that any purported evidence was inadmissible.³

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, as well as the relevant case law, we resolve the Gaspars' appeal as follows.

The appellate court reviews "the circuit court's grant or denial of summary judgment de novo ." Accordingly, "[o]n appeal, an order of summary judgment is reviewed under the same standard applied by the circuit courts. Summary judgment is proper where the moving party demonstrates that there are no genuine issues of material fact and it is entitled to a judgment as a matter of law. In other words, summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law."

Kawashima v. State, 140 Hawai‘i 139, 148, 398 P.3d 728, 737 (2017) (block quote format altered) (internal citations omitted). In reviewing a circuit court's grant or denial of a motion for summary judgment, the appellate court "must view all of the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion." Crichfield v. Grand Wailea Co., 93 Hawai‘i 477, 483, 6 P.3d 349, 355 (2000) (internal quotation marks, brackets, and citation omitted).

The Gaspars first contend that the undated indorsement in blank associated with the Note and attached to the Complaint presents a genuine issue of material fact as to whether Citibank had possession of the Note at the time the Complaint was filed.

"A foreclosing plaintiff must [ ] prove its entitlement to enforce the note and mortgage." Bank of America, N.A. v. Reves-Toledo, 139 Hawai‘i 361, 367, 390 P.3d 1248, 1254 (2017) (citations omitted). "A foreclosing plaintiff's burden to prove entitlement to enforce the note overlaps with the requirements of standing in foreclosure actions as ‘[s]tanding is concerned with whether the parties have the right to bring suit.’ " Id. (quoting Mottl v. Miyahira, 95 Hawai‘i 381, 388, 23 P.3d 716, 723 (2001) ). "As standing relates to the invocation of the court's jurisdiction, it is not surprising that standing must be present at the commencement of the case." Id. at 368, 390 P.3d at 1255 (citing Sierra Club v. Haw. Tourism Auth., 100 Hawai‘i 242, 257, 59 P.3d 877, 892 (2002) ). Thus, a foreclosing plaintiff must establish entitlement to enforce the note and standing to foreclose on the mortgaged property at the commencement of the suit. See id.

A blank indorsement occurs when an indorsement is made by the holder of an instrument and is not a special indorsement; in other words, a blank indorsement is not payable to an identified person. When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer or possession alone until specially indorsed.

Id. at 370, 390 P.3d at 1257 (internal citations omitted) (citing Hawaii Revised Statutes (HRS) § 490:3-205(b)⁴ (2008)

). When a note being foreclosed upon is indorsed in blank, the relevant question is whether the foreclosing plaintiff possessed the note, or was otherwise a holder of the note, not only at the time the foreclosing plaintiff filed for summary judgment, but also at the time the foreclosing plaintiff brought the foreclosure action. Id. To be entitled to summary judgment, there must be affirmative evidence that the note and indorsement in blank were in the foreclosing plaintiff's possession at the time the complaint was filed. U.S. Bank N.A. v. Mattos, 140 Hawai‘i 26, 33, 398 P.3d 615, 622 (2017).

Here, on April 21, 2017, Citibank filed its Complaint against the Gaspars seeking to foreclose on the Gaspars' property due to their alleged breach of the Note and Mortgage originally executed in favor of Washington Mutual Bank. The Complaint indicates that Citibank subsequently acquired the interest in the Note and Mortgage by an "Assignment of Mortgage" recorded in the State of Hawai‘i Bureau of Conveyances on April 27, 2009, and that Citibank "is now the owner and holder of the Note and the Mortgage." Attached to the Complaint was the Note with an undated, blank indorsement stamp on the reverse side of the final signature page.

Citibank submitted with its MSJ a "Declaration of Plaintiff in Support of Motion" (Fullmer Declaration) made by Ryan Fullmer, an employee of Select Portfolio Servicing, Inc., (SPS), as affirmative evidence that Citibank possessed the Note at the time of the Complaint. The Fullmer Declaration states that the original Note was executed and delivered to Washington Mutual Bank on January 10, 2007, and that a true and correct copy of the Note including any allonge or endorsement is attached as an exhibit to the MSJ. The Fullmer Declaration further states that the Gaspars' mortgage was assigned to Citibank via an assignment of mortgage recorded in the Bureau of Conveyances of the State of Hawai‘i as Document Number 2009-063098 on April 27, 2009. The Fullmer Declaration does not provide a date for any physical transfer of the Note to Citibank's possession.

However, such issue was yet remediable so as to merit summary judgment if Citibank presented affirmative evidence that it was the physical holder of the Note at the time the Complaint was filed. Id. The Fullmer Declaration states that "SPS currently services the loan as attorney-in-fact for [Citibank]." The Fullmer Declaration further states that "[Citibank], directly or through an agent, has possession of the note in this instant action [ ], which has been duly endorsed, and was in possession of the Note at the time of the filing of the complaint." (Emphasis added). The MSJ also included as exhibits documents granting SPS Limited Power of Attorney to act as Citibank’s agent and a document from SPS's internal records verifying that the Note was physically located in an SPS facility at the time the Complaint was filed.

If such evidence was admissible and properly authenticated, addressed infra , then Citibank would have successfully met its burden under Mattos and Reyes-Toledo to present affirmative evidence that it was the holder of the physical Note at the time the Complaint was filed.

However, the Gaspars next contend that there were multiple issues regarding the admissibility of the Fullmer Declaration under Hawaii Rules of Evidence (HRE) Rule 803(b)(6) (2016), which provides a hearsay exception for the admission of business records.⁵

Any evidence submitted by a foreclosing plaintiff in support of its motion for summary judgment must be admissible, else it "cannot serve as a basis for awarding or denying summary judgment." Wells Fargo Bank, N.A. v. Behrendt, 142 Hawai‘i 37, 44, 414 P.3d 89, 96 (2018) (citations omitted). To qualify as such admissible evidence, a declaration in support of a motion for summary judgment under Hawai‘i Rules of Civil Procedure (HRCP) Rule 56(e) (2000),⁶ "must be based on personal knowledge, contain facts that would be admissible in evidence, and show that the declarant is competent to testify as to the matters contained within the declaration." Id. at 44, 414 P.3d at 96 (quoting Mattos, 140 Hawai‘i at 30, 398 P.3d at 619 ).

In this case, per HRE Rule 803(b)(6), the Fullmer Declaration stated that Fullmer was an officer of SPS, servicer for Citibank related to the Caspars' loan, and that Fullmer had access to and was familiar with the Gaspars' loan records through the regular performance of his job. Furthermore, the Fullmer Declaration indicated that the documents to which Fullmer referred to in preparing his declaration were "maintained by SPS in the course of its regularly conducted business activities and are made at or near the time of the event, by or from information transmitted by a person with personal knowledge. It is the regular practice to keep such records in the ordinary course of a regularly conducted business activity." Thus, the Fullmer Declaration established that Fullmer was a "qualified witness" as to SPS's records because SPS relies on the documents related to the Gaspars' loan, there are further indicia of...