Delapinia v. Nationstar Mortg. LLC

• Citation: 458 P.3d 929
• Decision Date: 12 February 2020
• Docket Number: NO. CAAP-17-0000387,CAAP-17-0000387
• Parties: Ray A. DELAPINIA and Robyn M. Delapinia, Plaintiffs-Appellants, v. NATIONSTAR MORTGAGE LLC; Federal National Mortgage Association; Terry Louise Cole; Mortgage Electronic Registration Systems, Inc.; American Savings Bank, F.S.B., Defendants-Appellees, and Doe Defendants 1-50, Defendants
• Court: Court of Appeals of Hawai'i

458 P.3d 929

Ray A. DELAPINIA and Robyn M. Delapinia, Plaintiffs-Appellants,

v.NATIONSTAR MORTGAGE LLC; Federal National Mortgage Association; Terry Louise Cole; Mortgage Electronic Registration Systems, Inc.; American Savings Bank, F.S.B., Defendants-Appellees,andDoe Defendants 1-50, Defendants

NO. CAAP-17-0000387

Intermediate Court of Appeals of Hawai‘i.

FEBRUARY 12, 2020

On the briefs:

James J. Bickerton, Stanley H. Roehrig, Bridget G. Morgan, (Bickerton Dang, LLLP), John F. Perkin, (Perkin & Faria LLLC), and Van-Alan Shima, (Affinity Law Group), Honolulu, for Plaintiffs-Appellants.

Michael C. Bird, Jonathan W.Y. Lai, Thomas J. Berger, and Summer H. Kaiawe, (Watanabe Ing LLP), Honolulu, for Defendants-Appellees Terry Louise Cole and American Savings Bank, F.S.B.

Patricia J. McHenry, (Cades Schutte LLP), Honolulu, for Defendant-Appellee Mortgage Electronic Registration Systems, Inc.

David A. Nakashima, Jade Lynne Ching, Honolulu, Kanoelani S. Kane, (Nakashima Ching LLC), for Defendants-Appellees Nationstar Mortgage LLC and Federal National Mortgage Association.

GINOZA, CHIEF JUDGE, CHAN and HIRAOKA, JJ.

OPINION OF THE COURT BY CHAN, J.

In this appeal arising out of a foreclosure action, Plaintiffs-Appellants Ray A. Delapinia and Robyn M. Delapinia (the Delapinias) appeal from the Final Judgment entered by the Circuit Court of the Second Circuit (circuit court),¹ on April 18, 2017, against the Delapinias and in favor of Defendants-Appellees Nationstar Mortgage LLC (Nationstar), Federal National Mortgage Association (Fannie Mae), Terry Louise Cole (Cole), Mortgage Electronic Registration Systems, Inc. (MERS), and American Savings Bank, F.S.B. (ASB). The Delapinias also challenge the following orders upon which the Final Judgment was based: (1) the January 9, 2017 order granting Nationstar and Fannie Mae's motion for judgment on the pleadings or in the alternative for summary judgment (Order Granting Nationstar and Fannie Mae's MJP); (2) the January 18, 2017 order granting with prejudice Cole's motion to dismiss the Delapinias' First Amended Complaint and ASB's substantive joinder thereto (Order Granting Cole and ASB's MTD); and (3) the March 21, 2017 order granting MERS’ motion to dismiss the Delapinias' First Amended Complaint (Order Granting MERS' MTD).

As explained below, we conclude that the circuit court erred in dismissing the Delapinias' claims against Nationstar, Fannie Mae, Cole, and ASB, but did not err in dismissing the claim against MERS. As to Nationstar and Fannie Mae, we conclude that the Delapinias' wrongful foreclosure claim based on deprivation of ownership was subject to, and properly brought within, the six-year statute of limitations under Hawaii Revised Statutes (HRS) § 657-1(4) (2016) and the circuit court therefore erred in concluding that the claim was time-barred. As to MERS, we conclude that dismissal was proper where the Delapinias failed to allege that they have tendered or are able to tender the amount of their indebtedness to Nationstar under the mortgage, pursuant to the tender rule. As to Cole and ASB, we conclude that the Delapinias pleaded sufficient factual allegations for their quiet title and ejectment claims to survive dismissal under the notice pleading standard. Accordingly, this case must be remanded for further proceedings.

I. BACKGROUND

A. Factual Background²

In November 2007, the Delapinias purchased real property on the island of Maui (the Property). The Delapinias executed a note and mortgage (Mortgage) in favor of GMAC Mortgage USA Corporation (GMAC), through its nominee MERS, in connection with the purchase of the Property. The Mortgage granted the mortgagee a power of sale in the event the Delapinias defaulted on their loan.

In March 2010, the Mortgage was assigned to Nationstar. Shortly after, Nationstar executed a "Notice of Mortgagee's Intention to Foreclose Under Power of Sale" (Notice of Sale), recorded on March 30, 2010, due to the Delapinias’ continued default on the mortgage loan. Under the Notice of Sale, the foreclosure sale was originally scheduled for April 23, 2010. Nationstar published the Notice of Sale in The Maui News on March 26, April 2, and April 9, 2010.

The foreclosure sale was postponed until August 6, 2010, at which time the Property was sold to Nationstar or its designee as the highest bidder. The postponed date was never published.

On August 27, 2010, Nationstar recorded a "Mortgagee's Affidavit of Foreclosure Sale Under Power of Sale" (Foreclosure Affidavit) pertaining to the foreclosure sale. The Foreclosure Affidavit was signed by an attorney who was not licensed in Hawai‘i.

Nationstar conveyed the Property to Fannie Mae by deed recorded on February 16, 2011. Fannie Mae then sold and conveyed the Property to Cole by limited warranty deed recorded on December 10, 2012.

Cole granted a first mortgage on the Property to MERS³ as nominee of Pinnacle Capital Mortgage Corporation, recorded on December 10, 2012, and a second mortgage to ASB, recorded on September 2, 2015.

B. Procedural Background

On August 5, 2016, the Delapinias filed a Complaint alleging wrongful foreclosure. On October 20, 2016,⁴ the Delapinias filed a First Amended Complaint (FAC), asserting two counts: (1) quiet title, ejectment, and declaratory relief against all Defendants-Appellees; and (2) wrongful foreclosure against Nationstar and Fannie Mae.

On November 7, 2016, Nationstar and Fannie Mae filed an answer to the FAC. On the same day, Cole filed a motion to dismiss the FAC. On November 14, 2016, ASB filed a substantive joinder to Cole's motion to dismiss the FAC.⁵

On November 22, 2016, Nationstar and Fannie Mae filed a motion for judgment on the pleadings or in the alternative for summary judgment (Nationstar and Fannie Mae's MJP).

On November 23, 2016, MERS filed a motion to dismiss the FAC (MERS’ MTD).

On December 15, 2016, the circuit court held a hearing on Nationstar and Fannie Mae's MJP and Cole and ASB's MTD, at which it orally granted both motions. The circuit court stated:

Even when accepting Plaintiffs' factual allegations as true, dismissal of the claims against Terry Cole, American Savings Bank and Nationstar is appropriate.^[6]

The wrongful foreclosure tort claim accrued, at the latest, at the time of the auction on August 6, 2010 because the plaintiff knew or should have known the purported wrong occurred at that particular time.

The complaint was filed August 5th, 2016, nearly six years after the alleged improper foreclosure sale. Plaintiff cites authority applying the six-year statute of limitations to the tort-contracts hybrids. However, as pled and argued, the claim sounds solely in tort. Therefore, Plaintiffs' wrongful foreclosure claim is barred by the two-year statute of limitations under HRS 657-7.

As to the sale being void or voidable, any reading of the law in Hawaii is improperly completed nonjudicial foreclosure sales are voidable -- my reading of the law, excuse me, is that nonjudicial foreclosure sales are voidable if the claim is timely and the current owners are not bona fide purchasers.

There's no allegation that Defendants did not pay value for the property, and there is no allegation that the current owners had actual notice of Plaintiffs' claims.

There is no allegation that Plaintiffs or anyone else recorded any kind of documentation reasonably indicating Plaintiffs had any interest in the subject party (sic). Therefore, the argument for the non-bona fide purchaser status under constructive or inquiry notice fails as well. So I'm going to go ahead and grant both motions.

On January 9, 2017, the circuit court filed its Order Granting Nationstar and Fannie Mae's MJP.

On January 10, 2017, the circuit court held a hearing on MERS' MTD, at which it orally granted the motion. The circuit court stated:

Even when accepting Plaintiffs’ factual allegations as true, dismissal of the claims against MERS is appropriate.

As to the sale being void or voidable, the Court's reading of the law in Hawaii is improperly completed nonjudicial foreclosure sales are voidable if the claim is timely and the current owners are not bona fide purchasers.

There’s no allegation that Cole didn't acquire the property for value and no allegation that she had notice of any of Plaintiffs' outstanding claims, if any. So Cole is a bona fide purchaser.

The Court has already dismissed claims against the current owners consequent to their innocent bona fide purchaser status. As the mortgagee, MERS receives the same protection.

Further, Plaintiff fails to state a quiet title claim and they don't allege that they have paid or are able to tender the amount of indebtedness that would be due under the mortgage.

The notice of sale complied with the mortgage. The notice of sale properly described the property under HRS 667-7 (a) (1). The notice of sale publishing has complied with HRS 667-7. A Hawaii attorney is not required to sign the notice of sale or affidavit of foreclosure.

And lastly, written publication of an auction postponement is not necessary.

The Court's going to go ahead and grant the motion. The matter is dismissed with prejudice.

On January 18, 2017, the circuit court filed its Order Granting Cole and ASB's MTD. On March 21, 2017, the circuit court filed its Order Granting MERS' MTD.

The circuit court entered its Final Judgment on April 18, 2017, pursuant to the Order Granting Nationstar and Fannie Mae's MJP, the Order Granting Cole and ASB's MTD, and the Order Granting MERS' MTD. The Delapinias timely appealed.

II. POINTS OF ERROR

On appeal, the Delapinias argue that the circuit court erred in granting Nationstar & Fannie Mae's MJP, Cole & ASB's MTD, and MERS' MTD. Specifically, the Delapinias argue that the circuit court erred in making the following conclusions: (1) the wrongful foreclosure claim was time-barred because the statute of limitations for a wrongful foreclosure claim is two years and commences on the date of the foreclosure sale; (2) the Delapinias' allegation that Cole was not a...