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Paresa v. HSBC Bank USA, N.A.

United States District Court, D. Hawaii

September 6, 2018

HSBC BANK USA, N.A., Defendant.




         HSBC seeks summary judgment on Paresa's Count I claims for quiet title and ejectment. HSBC also seeks summary judgment on the portion of Paresa's Count II wrongful foreclosure claim that is predicated on the Bank's failure to offer prospective buyers of the Property a warranty deed. Because Paresa can neither establish his superior title to the Property nor that HSBC itself claims any interest in the Property, the Court GRANTS the Motion for Summary Judgment on Count I. HSBC's Motion for Partial Summary Judgment, however, is DENIED because, based on the record before the Court, whether HSBC's offer of only a quitclaim deed was fair and reasonable under the circumstances presents questions of fact precluding summary judgment.


         I. Factual Background

         The Court previously granted partial summary judgment to Paresa, as to liability only, on his Count II claim for wrongful foreclosure based upon HSBC's failure to publish written notice of the sale's postponement. Dkt. No. 36 (5/4/18 Order).[1] Because the Court and the parties are familiar with the facts, the Court recounts only those matters relevant to HSBC's present motions.

         A. Paresa's Mortgage and Default

         Paresa purchased real property located at 2888 Ala Ilima Street #2602, Honolulu, Hawaii 96813 (the “Property”).[2] To finance the purchase of the Property, Paresa obtained a loan secured by a Mortgage in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for lender New Century Mortgage Corporation, and executed an Adjustable Rate Note in the amount of $90, 000 (“Note”). The Mortgage was recorded in Land Court on November 29, 2006, as Document No. 3520036, and noted on Certificate of Title No. 321, 363. HSBC Ex. 1 (Recorded Mortgage); Dkt. No. 42-2. In 2009, MERS assigned the Mortgage to HSBC. The Assignment was recorded in Land Court on May 5, 2009 as Document No. 3854486 and noted on Certificate of Title No. 321, 363. HSBC Ex. 2 (Assignment), Dkt. No. 42-3.

         When Paresa defaulted on his loan and was unable to cure the default, HSBC initiated a nonjudicial foreclosure under former HRS, Chapter 667 Part I (2008), to exercise the power of sale in the Mortgage.[3] On December 10, 2010, HSBC recorded a Notice of Mortgagee's Intention to Foreclose Under Power of Sale (“Notice”) in the Hawaii Bureau of Conveyances. HSBC Ex. 3 (Ex. E to Aff. of Foreclosure), Dkt. No. 42-4. HSBC published notice of the foreclosure sale in the Honolulu Star-Advertiser on December 17, 24, and 31, 2010. HSBC Ex. 3 (Ex. G. to Aff. of Foreclosure). The published notice stated that the “Terms of the sale are: … Property sold without covenant or warranty, express or implied, as to title, possession or encumbrances … The property shall be conveyed by Mortgagee's quitclaim conveyance[.]” Id.

         On January 28, 2011, at the place and time originally scheduled for the sale, HSBC's agent publicly announced the sale would be postponed until February 11, 2011. However, HSBC did not publish any written notice of the postponement. HSBC Ex. 3 (Mortgagee's Aff.). HSBC then purchased the Property with a credit bid of $102, 000 at the public auction held on February 11, 2011. HSBC Ex. 3 (Mortgagee's Aff.). The Property's appraised value was $120, 000 as of April 22, 2011. HSBC Reply in Supp. of MPSJ at 11 n.9, Dkt. No. 62 (citing Smith Decl., Ex. K (4/22/2011 Appraisal), Dkt. No. 32-23).

         On November 2, 2011, HSBC conveyed the Property to itself by Mortgagee's Quitclaim Assignment of Condominium Conveyance Document Pursuant to Power of Sale (“Quitclaim Deed”), which was recorded in Land Court on November 23, 2011 as Document No. 4113759. HSBC Ex. 4 (Quitclaim Deed), Dkt. No. 42-5. On December 23, 2011, HSBC sold the Property to third-party purchasers David Ufai Lao and Caitlyn Sokfan Lao for $118, 000. The Limited Warranty Assignment of Condominium Conveyance Document (“Limited Warranty Deed”) conveying the Property to the Laos was recorded in Land Court on January 5, 2012 as Document No. 8039093. HSBC Ex. 6 (Limited Warranty Deed), Dkt. No. 40-7.

         The Mortgagee's Affidavit of Foreclosure under Power of Sale (“Affidavit of Foreclosure”), recorded in the Land Court on March 10, 2011, certified that the foreclosure was conducted pursuant to and in compliance with HRS §§ 667-5 through 667-10 and the Mortgage. HSBC Ex. 3, Dkt. No. 42-4. Paresa contends that HSBC undertook to exercise the power of sale for its own benefit, but did not satisfy the conditions precedent to the valid exercise of the power or the statute regulating it, former HRS § 667-5.

         II. Procedural Background

         On February 10, 2017, Paresa filed a two-count Complaint in state court, which HSBC removed on May 26, 2017. Notice of Removal, Dkt. No. 1.[4]

Count I, entitled “Quiet Title, Ejectment & Declaratory Relief, ” states that Paresa seeks to recover “return of title and possession” of the Property, Compl. ¶ 11, and asserts that the Quitclaim Deed and Limited Warranty Deed “which proximately caused Plaintiff to be deprived of his possession, record title, and use of the Property, were wrongful and void or voidable[.]” Compl. ¶ 19. With respect to the requested remedy, Paresa alternatively seeks restoration of title or equitable damages:

Because Plaintiff lost the Property without HSBC having the right to take record title to the Property or re-convey it in the manner and at the time and place that it did so, Plaintiff was unlawfully deprived of the title, possession, and use of his real property and is entitled to have possession and title to the Property restored to him. If such cannot be delivered by Defendants, then Plaintiff is entitled to rescissory damages or other equitable damages relief to approximate the return of the Property and compensate for the loss of use.

Compl. ¶ 21; see also Compl. ¶ 47 (“If for any reason title and possession are not restored to Plaintiff, Plaintiff is entitled to have the Court in equity fashion a remedy in money damages against HSBC that would be equivalent to having title and possession restored.”).

         Paresa's wrongful foreclosure claim, Count II, alleges in relevant part:

50. The deeds from HSBC to itself and from HSBC to the Laos separately caused new damage to Plaintiff to the extent they placed the Property beyond Plaintiff's reach and ability to recover possession, which reach and ability he would have had if HSBC had not purported to convey the Property to itself and then to the Laos, in contravention of its continuing duties under the power of sale not to sell the Property except after having conducted a lawful published auction and only to the winning bidder at such a lawful published auction.
51. Had HSBC acted honestly and fairly in accordance with its duties as mortgagee, the Laos would not have purchased the Property.
52. The conveyances from HSBC to itself and from HSBC to the Laos were separate acts in violation of HSBC's continuing duties as mortgagee (or one controlling the acts of the mortgagee), which duties had not ended because no lawful published auction ever occurred.
53. As a direct and proximate result of the wrongful acts of HSBC described herein, Plaintiff lost possession of, title to, use of and occupancy of the Property. The purported transfer of title to HSBC and the subsequent purported transfer of record title and possession to the Laos constituted a wrongful foreclosure and a conversion of the Property and deprived Plaintiff of his record title and possession of said Property.
54. As a direct and proximate result of the wrongful acts described above, Plaintiff lost the market value of his Property, and lost the use and rental value of his Property from and after the date he lost ...

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