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Nationstar Mortgage LLC v. Chase

Intermediate Court of Appeals of Hawaii

June 27, 2018

NATIONSTAR MORTGAGE LLC, Plaintiff-Appellee,
v.
ERWIN F. CHASE, III; KATHLEEN E. CHASE, Defendants-Appellants, and HFS FEDERAL CREDIT UNION; CACH, LLC; JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50; DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE GOVERNMENTAL UNITS 1-50, Defendants

          APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 14-1-0452)

          Al Thompson, for Defendant-Appellant.

          Charles R. Prather and Aaron Masser, for Plaintiff-Appellee.

          Ginoza, Chief Judge, Fujise and Leonard, JJ.

          SUMMARY DISPOSITION ORDER

         Defendant-Appellant Erwin F. Chase III (Chase)[1] appeals from the December 14, 2015 Judgment (Judgment) entered on the Findings of Fact, Conclusions of Law, Order Granting Plaintiff's Motion for Summary Judgment Against All Parties and for Interlocutory Decree of Foreclosure filed August 5, 2015 (Order) by the Circuit Court of the Third Circuit[2] (Circuit Court).

         On appeal, Chase alleges that the Circuit Court erred in granting summary judgment in favor of Plaintiff-Appellee Nationstar Mortgage LLC (Nationstar) because (1) the Property at issue was not subject to foreclosure; (2) the documents attached to Nationstar's Verified Complaint for Foreclosure (Complaint) constituted inadmissible hearsay; (3) the assignments of the mortgage were invalid; and (4) Nationstar was not entitled to enforce the Adjustable Rate Note (Note) executed by Chase.

         After a careful review of the record on appeal and the relevant legal authorities, and giving due consideration to the issues raised and the arguments advanced by the parties, we resolve these points of appeal as follows:

         Chase argues that the documents attached to the Complaint are hearsay that did not comply with the requirements of Hawaii Rules of Evidence (HRE) Rule 803(b)(6), and are therefore inadmissible to support Nationstar's motion for summary judgment.

In order to prove entitlement to foreclose, the foreclosing party must demonstrate that all conditions precedent to foreclosure under the note and mortgage are satisfied and that all steps required by statute have been strictly complied with. See 55 Am. Jur. 2d Mortgages § 575 (Nov. 2016 Update). This typically requires the plaintiff to prove the existence of an agreement, the terms of the agreement, a default by the mortgagor under the terms of the agreement, and giving of the cancellation notice. See Bank of Honolulu, N.A. v. Anderson, 3 Haw.App. 545, 551, 654 P.2d 1370, 1375 (1982) (citing 55 Am. Jur. 2d Mortgages § 554 (1971)) . A foreclosing plaintiff must also prove its entitlement to enforce the note and mortgage. HRS § 4 90:3-301 (providing who is entitled to enforce an instrument); see id. § 490:3-308 (concerning proof of signatures and status as a holder in due course); id. cmt. 2 (noting that "[i]f a plaintiff producing the instrument proves entitlement to enforce the instrument, either as a holder or a person with rights of a holder, the plaintiff is entitled to recovery unless the defendant proves a defense or claim in recoupment").
A foreclosing plaintiff's burden to prove entitlement to enforce the note overlaps with the requirements of standing in foreclosure actions as "[s]tanding is concerned with whether the parties have the right to bring suit." Mottl v. Miyahira, 95 Hawai'i 381, 388, 23 P.3d 716, 723 (2001). Typically, a plaintiff does not have standing to invoke the jurisdiction of the court unless the plaintiff has suffered an injury in fact. Id. at 391, 23 P.3d at 726. A mortgage is a conveyance of an interest in real property that is given as security for the payment of the note. HRS § 490:9-102 (defining "mortgage"). A foreclosure action is a legal proceeding to gain title or force a sale of the property for satisfaction of a note that is in default and secured by a lien on the subject property. HRS § 667-1.5 (providing for foreclosure by action); id. 490:9-601(a) (providing that after default, a secured party "[m]ay reduce a claim to judgment, foreclose, or otherwise enforce the claim, security interest, or agricultural lien by any available judicial procedure"). See generally 55 Am. Jur. 2d Mortgages § 573 (Nov. 2016 Update) (discussing the nature and purpose of a foreclosure suit). Thus, the underlying "injury in fact" to a foreclosing plaintiff is the mortgagee's failure to satisfy its obligation to pay the debt obligation to the note holder. Accordingly, in establishing standing, a foreclosing plaintiff must necessarily prove its entitlement to enforce the note as it is the default on the note that gives rise to the action. See HRS § 490:9-601 (providing for a secured party's rights after default).
. . . As standing relates to the invocation of the court's jurisdiction, it is not surprising that standing must be present at the commencement of the case. Sierra Club v. Haw. Tourism Auth., 100 Hawai'i 242, 257, 59 P.3d 877, 892 (2002) (noting that "standing must be established at the beginning of the case").

Bank of Am., N.A. v. Reyes-Toledo, 139 Hawai'i 361, 367-68, 390 P.3d 1248, 1254-55 (2017) (footnotes omitted).

         Nationstar alleged in its Complaint that on November 6, 2006, Chase executed the Note in favor of Lehman Brothers Bank, FSB. Although not alleged in the Complaint, the purported copy of the Note attached to the Complaint appears to bear a stamp, executed by E. Todd Whittemore, Vice President for Lehman Brothers Bank, FSB, indorsing the Note to Lehman Brothers Holdings, Inc. and another stamp, executed by "Paul E. Sveen, Authorized ...


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