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U.S. Bank N.A. v. Mattos

Supreme Court of Hawaii

June 6, 2017

U.S. BANK N.A. IN ITS CAPACITY AS TRUSTEE FOR THE REGISTERED HOLDERS OF MASTR ASSET BACKED SECURITIES TRUST 2005-NC1, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-NC1, Respondent/Plaintiff-Appellee,
v.
JOSEPH KEAOULA MATTOS, CHANELLE LEOLA MENESES, Petitioners/Defendants-Appellants, and CITIFINANCIAL, INC., ASSOCIATION OF APARTMENT OWNERS OF TERRAZA/CORTEBELLA/LAS BRISAS/TIBURON, EWA BY GENTRY COMMUNITY ASSOCIATION, Respondents/Defendants-Appellees.

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-14-0001134; CIVIL NO. 11-1-1539)

          Gary Victor Dubin for petitioners

          J. Blaine Rogers for respondent U.S. Bank N.A.

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          McKENNA, J.

         I. Introduction

         This appeal arises from a judicial decree of foreclosure granted in favor of plaintiff "U.S. Bank N.A. in its Capacity as Trustee for the registered holders of MASTR Asset Backed Securities Trust 2005-NCl, Mortgage Pass-Through Certificates, Series 2005-NCl" ("U.S. Bank") against defendants Joseph Keaoula Mattos ("Mattos") and Chanelle Leola Meneses ("Meneses") (collectively, "Defendants"). At issue is whether the Circuit Court of the First Circuit[1] ("circuit court") properly granted U.S. Bank's "Motion for Summary Judgment and Decree of Foreclosure Against All Defendants on Complaint Filed July 21, 2011" ("motion" or "motion for summary judgment"). In its published opinion, the Intermediate Court of Appeals ("ICA") affirmed the circuit court. U.S. Bank N.A. v. Mattos, 137 Hawai'i 209, 367 P.3d 703 (App. 2016) .[2]

         Defendants assert the ICA erred in concluding that the circuit court properly granted summary judgment due to the existence of genuine issues of material fact. Specifically, Defendants allege U.S. Bank lacked standing to foreclose because:

1. the two mortgage assignments to the securitized trust in the chain of U.S. Bank's alleged ownership of [Defendants'] loan were "robo-signed" by persons with insufficient authority or personal knowledge as to what they swore to, and whose signatures differed among similar mortgage assignments that they had supposedly signed and/or notarized;
2. the two mortgage assignments to the securitized trust in the chain of U.S. Bank's alleged ownership of [Defendants'] loan violated the securitized trust's governing instrument, known as its Pooling and Servicing Agreement [("PSA")]. . . .
3. the two mortgage assignments to the securitized trust in the chain of U.S. Bank's alleged ownership of [Defendants'] loan were unproven as supported only by hearsay declarations inadmissible pursuant to [Hawai'i Rules of Civil Procedure ("HRCP")] Rule 56(e) and Hawaii Evidence Rule 803 (b) (3) [sic][3] as U.S. Bank's Declarants had no personal knowledge of how earlier business records had been compiled in addition to the two mortgage assignments having been invalid, supra.

         We address the third issue on certiorari first. We hold that the ICA erred by concluding the declaration of Richard Work ("Work"), the Contract Management Coordinator of Ocwen Loan Servicing, LLC ("Ocwen"), rendered him a "qualified witness" under State v. Fitzwater, 122 Hawai'i 354, 227 P.3d 520 (2010) for U.S. Bank's records under the Hawai'i Rules of Evidence ("HRE") Rule 803(b)(6) hearsay exception for records of regularly conducted activity. In addition, U.S. Bank failed to establish that it was a holder entitled to enforce the note at the time the foreclosure complaint was filed. See Bank of America, N.A. v. Reyes-Toledo, 139 Hawai'i 361, 370-71, 390 P.3d 1248, 1257-58 (2017).

         With respect to the first issue on certiorari, because it is unclear what Defendants mean by "robo-signing" and because a ruling on the legal effect of "robo-signing" is not necessary to the determination of this case, we set aside the ICA's holding that conclusory assertions that fail to offer factual allegations or a legal theory indicating how alleged "robo-signing" caused harm to a mortgagee are insufficient to establish a defense in a foreclosure action. Addressing the factual allegations underlying the "robo-signing" claim, however, we conclude there is a genuine issue of material fact as to whether Ocwen had the authority to sign the second assignment of mortgage to U.S. Bank.

         With respect to the second issue on certiorari, we affirm the ICA in part. We adopt the majority rule followed by the ICA in U.S. Bank Nat. Ass'n v. Salvacion, 134 Hawai'i 170, 338 P.3d 1185 (App. 2014) and hold that a third party unrelated to a mortgage securitization pooling and servicing agreement lacks standing to enforce an alleged violation of its terms unless the violation renders the mortgage assignment void, rather than voidable, but we limit the holding to the judicial foreclosure context.

         Accordingly, we vacate the ICA's March 9, 2016 Judgment on Appeal, as well as the circuit court's August 26, 2014 Findings of Fact, Conclusions of Law and Order Granting Plaintiff's Motion for Summary Judgment and Decree of Foreclosure Against All Defendants on Complaint Filed July 21, 2011, and remand this case to the circuit court.

         II. Background

         On October 15, 2004, Mattos signed a mortgage and a note for $296, 000 in favor of New Century Mortgage Corporation ("New Century"). The mortgage was recorded in the Land Court on October 25, 2004.

         On July 21, 2011, U.S. Bank filed a foreclosure complaint. U.S. Bank alleged it was the owner of the mortgage by virtue of an Assignment of Mortgage dated January 3, 2007 ("first assignment") and an Assignment of Mortgage dated September 10, 2010 ("second assignment"), both of which were recorded in the Land Court (the mortgage, first assignment, and second assignment are sometimes collectively referred to as "the mortgage documents"). Attached to the complaint were copies of the note with an allonge[4] and the mortgage documents. The allonge was apparently executed by Ocwen as New Century's attorney-in-fact pursuant to a Limited Power of Attorney. The allonge was dated June 22, 2010, although it stated it was effective January 31, 2005.

         On January 23, 2014, U.S. Bank filed a motion for summary judgment. The motion was supported by a declaration from Work, which purported to authenticate various attached exhibits, including the underlying note, allonge, and mortgage documents.

         On April 15, 2014, Defendants filed their opposition to U.S. Bank's motion. In summary, Defendants alleged that U.S. Bank lacked standing to foreclose because (1) it failed to show it was the holder of the note at the time of foreclosure, (2) the mortgage assignments contained various alleged defects, and (3) the motion's supporting documents were inadmissible hearsay. Defendants' opposition was also based on an affidavit from Maria Giddings ("Giddings"), a purported forensic and securitization analysis expert retained to opine as to whether U.S. Bank owned the note and mortgage. Giddings asserted the assignments "suffer[ed] from several fatal flaws, " namely that the signers and notaries were known "robo-signers" who were employed by Ocwen and appeared to have differing signatures on several documents. Giddings also claimed the assignments violated the securitized trust's PSA. On July 18, 2014, after a hearing, the circuit court granted U.S. Bank's motion for summary judgment.

         Defendants appealed to the ICA. In its opinion, the ICA rejected Defendants' arguments and affirmed the grant of summary judgment in U.S. Bank's favor. Mattos, 137 Hawai'i at 214, 367 P.3d at 708. The ICA rejected Defendants' first argument regarding "robo-signing" because their opposition to U.S. Bank's motion "failed to assert facts or law explaining how the alleged 'robo-signing' caused them harm or damages." 137 Hawai'i at 210, 367 P.3d at 704. The ICA rejected Defendants' second argument that the assignments were void, holding, "This court, however, has held that the non-compliance with a PSA does not render the assignment void. Given our holding in Salvacion, Appellants have no standing to challenge U.S. Bank's alleged noncompliance with the PSA." 137 Hawai'i at 211, 367 P.3d at 705. Finally, the ICA rejected Defendants' third argument, determining that Work was a "qualified witness" pursuant to Fitzwater who was able to authenticate the records attached to his declaration for admission under HRE Rule 803(b)(6). 137 Hawai'i at 211-213, 367 P.3d at 705-07.

         We now address the questions presented on certiorari.

         III. Standard of Review

         An award of summary judgment is reviewed de novo and "is appropriate where there is no genuine issue as to the material fact and the moving party is entitled to judgment as a matter of law." French v. Hawaii Pizza Hut, Inc., 105 Hawai'i 462, 466, 99 P.3d 1046, 1050 (2004) (citing Ross v. Stouffer Hotel Co., 76 Hawai'i 454, 457, 879 P.2d 1037, 1040 (1994)).

         Furthermore,

The burden is on the party moving for summary judgment (moving party) to show the absence of any genuine issue as to all material facts, which, under applicable principles of substantive law, entitles the moving party to judgment as a matter of law. This burden has two components.
First, the moving party has the burden of producing support for its claim that: (1) no genuine issue of material fact exists with respect to the essential elements of the claim or defense which the motion seeks to establish or which the motion questions; and (2) based on the undisputed facts, it is entitled to summary judgment as a matter of law. Only when the moving party satisfies its initial burden of production does the burden shift to the non-moving party to respond to the motion for summary judgment and demonstrate specific facts, as opposed to general allegations, that present a genuine issue worthy of trial.
Second, the moving party bears the ultimate burden of persuasion. This burden always remains with the moving party and requires the moving party to convince the court that no genuine issue of material fact exists and that the moving ...

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