Hawaii Community Federal Credit Union v. Keka, 22631.

• Court: Supreme Court of Hawai'i
• Citation: 11 P.3d 1,94 Haw. 213
• Docket Number: No. 22631.,22631.
• Parties: HAWAII COMMUNITY FEDERAL CREDIT UNION, Plaintiff-Appellee, v. Arthur K. KEKA and Shirley A. Keka, Defendants-Appellants.
• Decision Date: 17 October 2000

11 P.3d 1

94 Haw. 213

HAWAII COMMUNITY FEDERAL CREDIT UNION, Plaintiff-Appellee, v. Arthur K. KEKA and Shirley A. Keka, Defendants-Appellants.

No. 22631.

Supreme Court of Hawai`i.

October 17, 2000.

Gary V. Dubin, on the briefs, Honolulu, for the defendants-appellants Arthur K. Keka and Shirley A. Keka.

Matthew G. Jewell and Keith M. Yonamine, (of Ashford & Wriston), on the briefs, Honolulu, for the plaintiff-appellee Hawaii Community Federal Credit Union.

MOON, C.J., LEVINSON, NAKAYAMA, RAMIL, and ACOBA, JJ.

Opinion of the Court by LEVINSON, J.

The defendants-appellants Arthur K. Keka and Shirley A. Keka (collectively, the Kekas) appealed from the judgment of the circuit court of the third circuit, entered on May 26, 1999, pursuant to a summary judgment order against the Kekas and in favor of the plaintiff-appellee Hawaii Community Federal Credit Union (the Credit Union) with respect to (1) all claims asserted by the Credit Union in its complaint to foreclose mortgage and (2) the Kekas' counterclaims. Pursuant to this court's order, filed on May 30, 2000, the circuit court entered an amended final judgment. On appeal, the Kekas argue that the circuit court erred in: (1) granting summary judgment in favor of the Credit Union, inasmuch as the Credit Union's motion was unsupported by admissible evidence sufficient to establish either a defaulted loan or a past due amount; (2) granting summary judgment in favor of the Credit Union, inasmuch as there were genuine issues of material fact as to the Kekas' liability and the rights asserted in their counterclaims; (3) granting the Credit Union a certification of finality pursuant to Hawaii Rules of Civil Procedure (HRCP) Rule 54(b) (2000),¹ inasmuch as there were unresolved issues concerning the Kekas' affirmative defenses and counterclaims; (4) failing to allow the Kekas a continuance in order to conduct discovery pursuant to HRCP Rule 56(f) (2000),² inasmuch as counsel, who had first appeared for the Kekas at the hearing on the motion for summary judgment, needed additional time to obtain necessary evidence; and (5) failing to enter adequate findings of fact. We agree with the Kekas that (1) the Credit Union failed to support its motion for summary judgment with admissible evidence of the Kekas' alleged default in the repayment of their loan and (2) genuine issues of material fact precluded summary judgment with respect to the Kekas' counterclaims based on (a) alleged violations of the Truth in Lending Act (15 U.S.C. §§ 1601 through 1692), (b) alleged unfair or deceptive trade practices in violation of Hawaii Revised Statutes (HRS) ch. 480, and (c) alleged fraudulent misrepresentation.³ Accordingly, we partially vacate the circuit court's amended final judgment, filed on June 14, 2000 in favor of the Credit Union and against the Kekas, and remand the matter to the circuit court for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual History

On June 7, 1994, the Kekas borrowed $65,000.00 from the Credit Union, to be repaid in monthly installments over twenty years with interest at an annual rate of nine percent. The loan was secured by a mortgage on the Kekas' residence. The purpose of the loan was to refinance a previous loan. The Kekas allege that they had a prior agreement with the Credit Union that the interest rate on their loan would be seven and one-fourth percent, but that they were offered a nine percent interest rate at the time of the closing of the transaction on June 7, 1994. They allege that they were "induced" to enter into the transaction by a loan officer of the Credit Union, who represented that it would be "no problem" to change the interest rate at a later time, "when the in house rate changes." They further allege that, one year later, they attempted to have the interest rate on their loan lowered to seven and one-fourth percent, but the same loan officer represented to them that it would be "too much trouble." The Kekas have no finance or business experience and relied on the Credit Union's loan officer when they entered into the transaction. The Kekas allege that, on June 7, 1994, they were "induced" to sign a copy of the "Notice of the Right to Cancel" and "Disclosure Statement" required by the Truth in Lending Act (TILA), but that they did not receive copies of those documents until April 1998. On August 17, 1998, the Kekas attempted to cancel their mortgage loan by sending a letter to the Credit Union, stating:

I am exercising my right to cancel my mortgage loan with [the Credit Union], pursuant to the 1995 amendments to the Truth in Lending Act and Regulation Z. By operation of Federal Law, the security interest and mortgage note is void automatically upon your receiving of this notice of rescission by way of recoupment.

The violation committed by your company is the failure to provide the required notice of right to cancel....

B. Procedural History

On October 5, 1998, the Credit Union filed a complaint to foreclose mortgage against the Kekas, in which it alleged that the Kekas had defaulted on the installment payments prescribed by the loan and owed the Credit Union $59,802.47, in addition to interest and other charges. On November 24, 1998, the Kekas, proceeding pro se, responded with a counterclaim, in which they alleged in relevant part as follows:

. . . Plaintiff's [sic] raise defenses under Title 15 U.S.C. § 1601, Truth in Lending Act (TILA), rescission by way of recoupment, unfair and deceptive practices, and misrepresentation as a counterclaim against the foreclosure action brought by [the Credit Union.]

. . . .

COUNT I

. . . .

Defendant's [sic] negligently misrepresented material facts to the Keka's [sic] which Mr. And Mrs. Keka reasonably relied; and said false statements induced the Keka's [sic] to take a security interest on the Keka's principal dwelling which the Keka's [sic] relied to their substantial detriment and as direct and proximate result have sustained substantial damages.

COUNT II

. . . .

The loan documents were not presented to Keka's [sic], including but not limited to incompleteness and/or absence of the Disclosure Statement and the Notice of the Right to Cancel and Defendants presented Plaintiff more than 3 years after the 3 day cancellation period, with the intent of and for the purpose of defrauding the Keka's [sic] and as a direct and proximate result of said fraud, Plaintiff has sustained pecuniary general and special damages in an amount of not less than $65,000.

COUNT III

. . . .

[The Credit Union] has violated Chapter 480, ... Hawaii Revised Statutes, by engaging in unfair and deceptive trade practices and as a direct and proximate result, Plaintiff has sustained substantial pecuniary, general and special damages in an amount not less than $65,000.00 and said sums are being trebled pursuant to Chapter 480....

COUNT IV

. . . .

Defendants conduct is in direct violation of 15 U.S.C. § 1601, et seq., Regulation Z, 15 U.S.C. § 1635(b), and as a direct and proximate result, Plaintiffs have sustained statutory damages of $1,000.

COUNT V

. . . .

Defendants, and each of them, intentionally and/or negligently caused Plaintiff to sustain severe emotional distress, and as a direct and proximate result, Plaintiff has sustained general and special damages in an amount to be proved at trial.

The Kekas attached affidavits to their counterclaim, asserting, inter alia, (1) that they did not receive copies of the "Notice of the Right to Cancel" and "Disclosure Statement" until April 1998, (2) that they were first informed by the Credit Union's loan officer that the interest rate on their loan would be nine percent, instead of seven and one-fourth percent, on June 7, 1994, the day loan documents were signed, which "caught [them] unprepared," and (3) that the Credit Union was mistaken as to the amount owed by the Kekas.

On January 5, 1999, the Credit Union filed a motion for summary judgment against the Kekas with respect to (1) the relief sought in its complaint of foreclosure and (2) the claims for relief asserted in the Kekas' counterclaim; correlatively, the Credit Union sought HRCP Rule 54(b) certification, see supra note 1, and the entry of a final judgment. In support of its motion, the Credit Union attached the affidavit of Charles E. Paranial, who averred that he was an officer of the Credit Union "personally familiar with the payment history of [the Kekas]," that the Kekas were "in default under the terms of the Note and Mortgage for failing to timely make the payments due and owing thereunder," and that the unpaid balance as of December 30, 1998 was as follows:

Principal: $59,802.47 Accrued Interest: 4,417.81 Accrued Late Charges: 263.16 Total: $64,483.44

Regarding the Kekas' counterclaim, Paranial attached "true" copies of the "Right to Cancel" and "Truth in Lending Disclosure Statement" forms, signed by the Kekas on June 7, 1994.

On February 9, 1999, still proceeding pro se, the Kekas filed a memorandum in opposition to the Credit Union's motion for summary judgment, in which they argued, inter alia, (1) that they had a right to rescind their loan and mortgage on the grounds that the Credit Union had committed (a) various violations of TILA and (b) common law "fraud in inducement" and (2) that Paranial's affidavit contained inadmissible hearsay that (a) did not generate a rebuttable presumption of the delivery of the "disclosures" required by 15 U.S.C. § 1635(c)⁴ and (b) violated the requirements of HRCP Rule 56(e) (2000),⁵ as construed by this court in Pacific Concrete Federal Credit Union v. Kauanoe, 62 Haw. 334, 614 P.2d 936 (1980). The Kekas attached a declaration of Arthur Keka to their memorandum, in which he averred, inter alia, (1) that the Credit Union (a) had failed to deliver the notice of right to cancel and disclosure statements required by TILA, (b) "induced" the Kekas to sign copies of the notice of right to cancel and disclosure statement when the...