United States District Court, D. Hawaii
ORDER (1) GRANTING DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT ON COUNT I; AND (2) DENYING DEFENDANT'S MOTION
FOR PARTIAL SUMMARY JUDGMENT
DERRICK K. WATSON UNITED STATES DISTRICT JUDGE
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.
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). Because the Court and the parties are
familiar with the facts, the Court recounts only those
matters relevant to HSBC's present motions.
Paresa's Mortgage and Default
purchased real property located at 2888 Ala Ilima Street
#2602, Honolulu, Hawaii 96813 (the
“Property”). 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.
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. 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.
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.
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.
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.
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.
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
wrongful foreclosure claim, Count II, alleges in relevant
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
51. Had HSBC acted honestly and fairly in accordance with its
duties as mortgagee, the Laos would not have purchased the
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 ...