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Drake v. Caspar

Intermediate Court of Appeals of Hawaii

November 12, 2013

DOUGLAS H. DRAKE, Plaintiff-Appellee/Cross-Appellee,
v.
EARL K. CASPAR AND DIANA DANMEYER-GASPAR, Defendants-Appellants/Cross-Appellees, and UNITED STATES OF AMERICA (DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE), MAKALEI ESTATES COMMUNITY ASSOCIATION, DIANE ELLIS, Defendants-Appellees/Cross-Appellees, and FRANKLIN PAUL EMBERNANTE, LEILANI PAULINE EMBERNANTE, Defendants-Appellees/Cross-Appellants AND DOUGLAS H. DRAKE, Plaintiff-Appellee,
v.
FRANKLIN PAUL EMBERNANTE, individually and as Trustee of the Franklin Paul Embernante Trust dated February 27, 2 006 and LEILANI PAULINE EMBERNANTE, individually and as Trustee of the Leilani Pauline Embernante Trust dated February 27, 2006, Defendants-Appellants and UNITED STATES OF AMERICA (DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE), EARL K. CASPAR, AND DIANA DANMEYER-GASPAR, MAKALEI ESTATES COMMUNITY ASSOCIATION; DIANE ELLIS, Defendants-Appellees

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 10-1-0067K).

Franklin Paul Embernate and Leilani Pauline Embernate, Pro Se Defendants-Appellees/ Appellants/Cross-Appellants.

Douglas H. Drake, Pro Se Plaintiff-Appellee/ Cross-Appellee

Nakamura, C.J., Reifurth and Ginoza, JJ.

MEMORANDUM OPINION

This case represents the consolidation of two separately-brought appeals. In appellate case number CAAP-10-0000019, Defendants-Appellants Earl K. Gaspar and Diana Danmeyer-Gaspar ("Gaspars") appealed from the August 17, 2 010 Order Granting Plaintiff's Motion for Summary Judgment ("Order"), filed in the Circuit Court of the Third Circuit ("Circuit Court").[1] In appellate case number CAAP-10-0000168, Defendants-Appellants Franklin P. Embernate and Leilani P. Embernate ("Embernates"), who are also parties in their trustee capacities, see infra, appealed from the October 20, 2010 Findings of Fact, Conclusions of Law and Interlocutory Judgment of Foreclosure and Judgment for Specific Performance on Complaint Filed February 22, 2 010 ("Judgment"), filed in the Circuit Court.[2]

On January 27, 2011, this court, upon motion by Plaintiff-Appellee Douglas H. Drake ("Drake"), consolidated both cases under appellate case number CAAP-10-0000019, and directed the Embernates to designate themselves as cross-appellants and to file their opening brief as cross-appellants under that case number. On June 20, 2011, this court dismissed the Gaspars' appeal from the Order for want of prosecution, while noting that the Embernates' now designated cross-appeal from the Judgment remained pending.

On cross-appeal, the Embernates contend that the Circuit Court erred (1) "in adjudicating [Drake's] right to a deficiency judgment against [the Embernates, individually] when the trial court entered [its Judgment], " and (2) "in the inclusion of [Finding of Fact paragraph 15]." We vacate that part of the Judgment declaring the Embernates liable for a deficiency judgment and remand to the Circuit Court for proceedings consistent with this opinion. I. BACKGROUND

A. The Parties' Arrangement

The Embernates, in their capacities as trustees of their respective individual trusts ("Embernates-Trustees"), and the Gaspars sought to obtain financing to construct a home for the purpose of selling it for a profit. Drake provided the financing via a promissory note in the amount of $500, 000 ("Mortgage Note"), backed by a mortgage ("Mortgage") issued by the Embernates-Trustees and the Gaspars ("Mortgagors"), on property located at 72-1147 Ho'opai Way, Kailua-Kona, HI 96740 (the "Property").[3] The Mortgage Note, signed by the Mortgagors, specified that any borrower-trustee personally guaranteed any obligations arising under the note.

The arrangement did not go as planned. The Property was developed and apparently sale-ready but the Embernates could not find a buyer. The Mortgagors defaulted on the Mortgage, and Drake sought to foreclose.

B. The Complaint

On February 22, 2 010, Drake filed his complaint to foreclose on the Mortgage ("Complaint") against, among others, the Gaspars, the Embernates, and the Embernates-Trustees. He alleged that the Mortgagors had breached the Mortgage and Mortgage Note, that he was thereby entitled to foreclosure and an order of sale of the Property, and that he should be awarded all sums due under the Mortgage. As to the foreclosure, Drake prayed for the following relief .[4]

1. That process of this Court issue commanding the Defendants above named to appear and answer the allegations of this complaint and to perform and abide by all such orders, directions and decrees as may be herein made and entered.
2. That upon hearing, there be ascertained the total amount due to Plaintiff at the time of judgment upon the Note and Mortgage . . . and that this Court determine and enter its judgment.
3. That there is due and owing to Plaintiff by virtue of the terms of said Note and Mortgage and all of the proofs adduced, a certain sum of money in the amount of $837, 3 87.16, . . . and that said sum of money [plus interest and other costs and fees] be declared to be a lien senior to the liens, if any, of the defendants herein (except [the owners' association and Diane Ellis, a defendant-lienholder of a senior mortgage]), upon the Property [.]
5. That this Court appoint a Commissioner to [effect a foreclosure sale].
6. That [proceeds from such sale be properly applied by the Commissioner].
8. That if the proceeds of the sale shall be insufficient to pay the aforesaid sums to the Plaintiff and it shall appear that a deficiency exists, that judgment then be entered for such deficiency against Defendant Mortgagors, jointly and severally, and that Plaintiff shall have execution therefore.
9. That upon the foreclosure sale prayed for herein, Defendants named herein (other than [the owners' association] and Diane Ellis) and all persons or entities claiming by, through, or under said Defendants be forever barred and foreclosed . . . ...

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