Kondaur Capital Corp. v. Matsuyoshi, SCWC–12–0000867.

CourtSupreme Court of Hawai'i
Writing for the CourtOpinion of the Court by POLLACK, J.
Citation136 Hawai'i 227,361 P.3d 454
Parties KONDAUR CAPITAL CORPORATION, Respondent/Plaintiff–Appellee, v. Leigh MATSUYOSHI, Petitioner/Defendant–Appellant.
Docket NumberNo. SCWC–12–0000867.,SCWC–12–0000867.
Decision Date23 November 2015

136 Hawai'i 227
361 P.3d 454

KONDAUR CAPITAL CORPORATION, Respondent/Plaintiff–Appellee,
Leigh MATSUYOSHI, Petitioner/Defendant–Appellant.

No. SCWC–12–0000867.

Supreme Court of Hawai‘i.

Nov. 23, 2015.

361 P.3d 456

James J. Bickerton, Honolulu, Bridget G. Morgan and Joe Moss, for petitioner.

Michael C. Bird and Thomas J. Berger, Honolulu, for respondent.


Opinion of the Court by POLLACK, J.

136 Hawai'i 229

In Ulrich v. Security Investment Co., 35 Haw. 158 (Haw.Terr.1939), we held that a personal property mortgagee seeking to enforce a non-judicial foreclosure sale bears the burden of establishing that the sale was conducted in a manner that is fair, reasonably diligent, and in good faith and that an adequate price was procured for the property. In the years after Ulrich was decided, the legislature made several amendments to the non-judicial foreclosure statute, and the viability of Ulrich in light of these amendments, as well as Ulrich's applicability to real property non-judicial foreclosures, has recently been questioned, with federal courts in Hawai‘'i reaching conflicting results.1

We hold that the duties set forth in Ulrich remain viable law and are applicable to non-judicial foreclosures of real property mortgages.2 Additionally, in situations where a mortgagee acts as both the seller and the purchaser of the subject property at a non-judicial foreclosure sale, that mortgagee, or its quitclaim transferee or non-bona fide successor, bears the burden of proving compliance with the requirements of Ulrich.

361 P.3d 457
136 Hawai'i 230


A. The Underlying Mortgage and Related Proceedings

In February 2007, Jun Matsuyoshi and others conveyed a residential property located in Lihu‘e, Kaua‘i (Property) by warranty deed to Leigh Matsuyoshi (Matsuyoshi). The following month, Matsuyoshi signed a mortgage on the Property (Mortgage) and a promissory note (Note) promising to pay $500,000 to Resmae Mortgage Corporation (Resmae) in return for a loan that Matsuyoshi had received.

Resmae recorded the Mortgage with the Bureau of Conveyances (Bureau). The Mortgage listed Matsuyoshi as the borrower of $500,000, and it included an acceleration and power of sale clause, which provided, among other things, that Matsuyoshi would be given at least 30 days to cure a default of payment.

In May 2008, Lester K.M. Leu (Leu), an attorney authorized to act on behalf of Resmae Liquidation Properties LLC (RLP), sent a Notice of Intent to Foreclose to Matsuyoshi (notice of default). The notice of default stated that Matsuyoshi's loan was in default because scheduled payments had not been made since April 1, 2008, and that the amount due was $9,704.34. The notice of default stated further that Matsuyoshi must pay this amount by June 20, 2008, or the loan would be accelerated and the Property referred for foreclosure action.

In August 2008, an assignment of the Mortgage from Resmae to RLP was recorded. Matsuyoshi was personally served with a Notice of Mortgagee's Non–Judicial Foreclosure Under Power of Sale (Notice of Sale). The Notice of Sale stated that RLP intended to sell the Property at an auction to be held in Honolulu on November 13, 2008. The Notice of Sale also stated that the Property would be sold "AS IS" and "WHERE IS."

Thereafter, the Property was auctioned off at a foreclosure sale in Honolulu. In the Mortgagee's Affidavit of Foreclosure Under Power of Sale (Affidavit of Sale), Leu certified that in compliance with Hawai‘i Revised Statutes (HRS) §§ 667–5 through 667–103 and the Note and Mortgage, Mortgagee or its representative, or Affiant, conducted the public auction sale on November 13, 2008, "at the date, time, and place set forth in the Notice and under the conditions stated therein, and Affiant, or her representative, declared the Property sold to [RLP] for $416,900.20, which was the highest bid at said sale." Leu stated that the default remained uncured at the time of sale. On November 17, 2008, the Affidavit of Sale was recorded in the Bureau.

In January 2009, RLP executed a quitclaim deed, which was subsequently recorded, conveying the Property to itself. In July 2010, a quitclaim deed was executed by RLP conveying the Property to Kondaur Capital Corporation (Kondaur).4 The quitclaim deed expressly stated that "[n]otwithstanding anything in this deed to the contrary, [RLP] makes no representations, warranties or promises regarding any claims by LEIGH MATSUYOSHI, her heirs, successors or assigns." Kondaur recorded its quitclaim deed the following year, in February 2011. Thereafter, Kondaur gave Matsuyoshi notice to

136 Hawai'i 231
361 P.3d 458

vacate; Matsuyoshi did not leave the Property.

B. Kondaur's Ejectment Action Against Matsuyoshi

On June 5, 2012, Kondaur filed a complaint for possession of the Property against Matsuyoshi in the Circuit Court of the Fifth Circuit (circuit court). The complaint requested a judgment for immediate and exclusive possession of the Property and a writ of possession. The complaint stated that Kondaur had "acquired title and current ownership of the Property through a Quitclaim Deed recorded on February 24, 2011."

On June 27, 2012, Kondaur filed a Motion for Summary Judgment Against All Defendants on Complaint filed June 5, 2012 (MSJ). Kondaur requested that the circuit court grant the MSJ and enter a Judgment for Possession of the Property for Kondaur and against Matsuyoshi, issue a Writ of Possession, enter the judgment as final, and set a time and date for a trial on damages. A declaration by Ann Pham (Pham) attached to the MSJ stated that she was an asset manager for Kondaur and a custodian of Kondaur's records. Pham declared that according to regular business records maintained by Kondaur, Kondaur owned the Property pursuant to Kondaur's quitclaim deed. Pham also declared that Kondaur had given Matsuyoshi notice to vacate, and Matsuyoshi "has so far continued to reside at the Property and has otherwise failed or refused to leave." Also attached to the MSJ were several exhibits.5

In its memorandum in support of the MSJ, Kondaur asserted that it had undisputed title to the Property and that Matsuyoshi was residing on the Property as a trespasser. Kondaur argued that its quitclaim deed was prima facie evidence of the conveyance to it from RLP, and that, therefore, it was the owner of the Property and entitled to immediate and exclusive possession.

Kondaur also contended that the Affidavit of Sale was evidence that the power of sale was duly executed. Kondaur maintained that the foreclosure sale extinguished Matsuyoshi's interest in the Property and that RLP "subsequently conveyed the Property to Kondaur by virtue of the Quitclaim Deed dated July 14, 2010."

Kondaur asserted that because Matsuyoshi failed to cure her default in payments prior to the sale, "she is without standing to contest the validity of the foreclosure conducted by [RLP] and the superior title to the Property subsequently acquired by Kondaur." Kondaur concluded that Matsuyoshi had no interest in the Property, Matsuyoshi must vacate it immediately, and a judgment for possession and writ of ejectment should be issued.

On July 6, 2012, Kondaur requested an entry of default against Matsuyoshi pursuant to Hawai‘i Rules of Civil Procedure (HRCP) Rule 55(a) "for her failure to answer or otherwise respond" to Kondaur's complaint. Default was entered by the clerk of the circuit court on the same day.

On August 15, 2012, Matsuyoshi filed, through counsel, her opposition to the MSJ, which was later amended on August 21, 2012. Matsuyoshi acknowledged that she "fell behind on her mortgage payments," but she maintained that technical violations of HRS § 667–5 voided the foreclosure sale. Matsuyoshi argued "that all notices and acts required by the power contained in the [M]ortgage shall be complied with." According to Matsuyoshi, RLP's foreclosure against her was void because RLP did not comply with

136 Hawai'i 232
361 P.3d 459

the notice requirement under the Mortgage and because the auction sale was conducted on O‘ahu rather than on Kaua‘i, the county where the Property is located. Finally, Matsuyoshi noted that Kondaur stood in privity of contract with RLP based on the quitclaim deed that Kondaur received from RLP.

In its reply, Kondaur contended that Matsuyoshi's "failure ... to establish by admissible evidence that the Note and Mortgage were not in default at the time of the non-judicial foreclosure is dispositive." Kondaur maintained that Matsuyoshi presented no admissible evidence showing that she did not receive notice of her default under the terms of the Mortgage.

At the hearing on the MSJ,6 Matsuyoshi argued that the foreclosure sale violated the foreclosure...

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