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Mortgage Electronic Registration Systems, Inc. v. Wise

Supreme Court of Hawaii

June 28, 2013

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., solely as nominee, Respondent/Plaintiff-Appellee,
v.
SHARON KEHAULANI WISE and BLOSSOM ILIMA NIHIPALI, Petitioners/Defendants-Appellants, andEWA BY GENTRY COMMUNITY ASSOCIATION, Respondent/Defendant-Appellee.

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-11-0000444; CIVIL NO. 09-1-1064)

Gary Victor Dubin, Frederick J. Arensmeyer, and Zeina Jafar, for petitioners

David B. Rosen, and David McAllister, for respondent

NAKAYAMA, ACTING C.J., ACOBA, MCKENNA, POLLACK, AND CIRCUIT JUDGE NISHIMURA, IN PLACE OF RECKTENWALD, C.J., RECUSED

OPINION

ACOBA, J.

We hold that Petitioners/Defendants-Appellants Sharon Kehaulani Wise (Wise) and Blossom Ilima Nihipali (Nihipali) (collectively Petitioners), mortgagors under the mortgage herein, are precluded from raising the standing of Respondent/Plaintiff-Appellee Mortgage Electronic Registration Systems, Inc. (MERS, or Respondent) to bring the foreclosure action herein inasmuch as (1) a standing objection is not "unique" to a confirmation of sale proceeding, see Security Pacific Mortg. Corp. v. Miller, 71 Haw. 65, 70, 783 P.2d 855, 858 (1989), from which Petitioners appeal, and (2) Petitioners' failure to appeal the foreclosure judgment barred challenges to Respondent's standing under the doctrine of res judicata. In consonance with these holdings, the April 29, 2011 judgment of the Circuit Court of the First Circuit (the court)[1], and the January 2, 2013 judgment of the Intermediate Court of Appeals (ICA) are affirmed, but for the reasons set forth herein.

I.

On September 8, 2006, Petitioners executed a promissory note (Note) secured on a mortgage (Mortgage) on their residence located in Ewa Beach, Hawaii, in the amount of $416, 250.00 from Flexpoint Funding Corporation (Flexpoint) a California corporation. The Mortgage stated that it "secured to [Flexpoint], " inter alia, "the repayment of the loan." Respondent was listed in the mortgage as "mortgagee"[2] and "nominee."[3] The Mortgage provided that "[Respondent] holds only legal title to the interests granted by [Petitioners] in this Mortgage; but, if necessary to comply with law or custom, [Respondent], (as nominee for Lender and Lender's successors and assigns), has the right: to exercise any and all of those interests, including, but not limited to, the right to foreclose and sell the Property."

On May 6, 2009, Respondent, as Plaintiff and acting "solely as nominee, " filed a Complaint against Petitioners, alleging that Petitioners had failed to make payments pursuant to the terms of the Note and that Respondent sought foreclosure of the mortgage, sale of the property, and a deficiency judgment if the proceeds of the sale did not satisfy Petitioners' debt. Copies of the Note and Mortgage were attached to the Complaint.

On July 8, 2009, Respondent filed a Motion for Summary Judgment as Against All Defendants and for Interlocutory Decree of Foreclosure. Respondent attached a Declaration of Barbara Huidmer, an "officer, collection officer, or employee, " of JP Morgan Chase Bank National Association (Chase), a "servicing agent" for Respondent. The Declaration stated that Chase was in possession of the Note and that Petitioners had failed to make payments "as required" under the Note. The Note, Mortgage, and records establishing that Petitioners had failed to make timely payments were attached as exhibits to the motion.

On July 13, 2009, Respondent secured a clerk's entry of default against Petitioners for failing to respond to the Complaint.

On July 27, 2009, Wise, proceeding pro se, filed Petitioners' Answer to Respondent's Motion for Summary Judgment as Against All Defendants and for Interlocutory Decree of Foreclosure ("Answer"), [4] stating, inter alia, that Respondent lacked standing to file the Complaint.

On August 5, 2009, a hearing was held on Respondent's Motion for Summary Judgment. Wise was apparently present at the hearing. A transcript of the hearing is not a part of the record.

On May 12, 2010, the court granted Respondent's Motion for Summary Judgment and filed Findings of Fact, Conclusions of Law (conclusions), and an Order Granting Motion for Summary Judgment as Against All Defendants and for Interlocutory Decree of Foreclosure. The court's conclusions provided, inter alia, that "[Respondent] is entitled to have its first mortgage foreclosed upon the Mortgaged Property and to have the property sold in a manner subscribed by law." The Order stated that the mortgage "shall be and is hereby foreclosed as prayed, and the Mortgaged Property shall be sold at public auction .... The sale shall not be final until approved and confirmed by the court." A foreclosure judgment was also entered on May 12 and incorporated the court's order.

The ultimate time to appeal the foreclosure judgment expired on July 12, 2010, assuming Petitioners would have sought an extension of time to appeal. See Hawai'i Rules of Appellate Procedure Rule 4 (stating that a notice of appeal "shall be filed within 30 days of the judgment" and that an extension may be obtained but that "no such extension shall exceed 30 days past the prescribed time"). Petitioners did not appeal.

On September 23, 2010, the commissioner issued his report stating that Petitioners' property was sold to Respondent for $329, 986.80. On the same day, Respondent filed a Motion for Confirmation of Sale, for Writ of Possession and for Disposal of Personal Property (Motion for Confirmation). The Motion for Confirmation was heard on October 14, 2010. At the hearing, Petitioners apparently "objected to confirmation on the grounds that Respondent was acting as a nominee for an undisclosed principal and had no standing to foreclose in the first place." The hearing on the Motion for Confirmation was continued to March 10, 2011.

On February 8, 2011, Respondent filed an Amended Notice of Hearing of its Motion for Confirmation (Amended Motion). Respondent attached to the Amended Motion a Declaration (Mikell Declaration) from a Lora A. Mikell, "Senior Lead Operations Specialist, " who was also with Chase. The Mikell Declaration stated that Chase "as holder of the [N]ote and [M]ortgage securing the [N]ote, confirms the actions taken to date, " and "specifically authorized [Respondent] ... to bring and to continue proceeding in this foreclosure action and any related legal action in connection with the [N]ote and the [M]ortgage." The court interpreted this statement as "ratification" under Hawai'i Rules of Civil Procedure (HRCP) Rule 17.[5] Neither party has challenged this interpretation.

Copies of the Note and Mortgage were attached to the Declaration. Appended to a copy of the Note was an endorsement transferring the Mortgage from Flexpoint to Washington Mutual Bank, which was entitled an "allonge, [6]" and an endorsement in blank[7] signed by a Robin B. Tango, a Vice President at Washington Mutual Bank. The Declaration explained that the Note and a copy of the Mortgage had been "kept by Chase in the ordinary course of ...


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