United States District Court, D. Hawaii
WAYNE FERGERSTROM, SHENANDOAH KAIAMA, and WINDY KAIAMA, individually and on behalf of all others similarly situated, Plaintiffs,
PNC BANK, N.A., Defendant.
ORDER (1) GRANTING DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT; AND (2) DENYING PLAINTIFFS' MOTION TO CERTIFY
DERRICK K. WATSON, UNITED STATES DISTRICT JUDGE.
seeks dismissal of the claims for wrongful foreclosure and
violation of Hawaii Revised Statutes (“HRS”)
Chapter 480 brought by putative class representatives
Shenandoah and Windy Kaiama, and Wayne Fergerstrom, arising
from nonjudicial foreclosure sales conducted by PNC in 2009
and 2010. For their part, Fergerstrom and the Kaiamas move
for certification of the proposed class, and three
subclasses, of consumers who were subjected to notices of
foreclosure sale under HRS § 667-5, prepared by the law
firms of Routh Crabtree Olsen, P.S. or RCO Hawai'i LLLC
(together, “RCO”) on behalf of PNC.
Plaintiffs were required to assert their claims alleging
defects in their particular foreclosure proceedings, and
seeking to void the foreclosure sales, prior to the entry of
new Transfer Certificates of Title by the Land Court, and did
not do so, both Fergerstrom's and the Kaiamas'
individual claims are barred. As a matter of Hawai'i law,
the Land Court's entry of Certificates of Title is
conclusive and unimpeachable evidence of the subsequent
owners' title to the properties, and Plaintiffs'
claims, which seek to impeach the foreclosure proceedings,
and demand damages to compensate for the loss of title and
possession, are statutorily precluded. See Aames Funding
Corp. v. Mores, 107 Hawai'i 95, 101, 110 P.3d 1042,
1048 (2005) (citing HRS § 501-118). Accordingly, the
Court GRANTS PNC's Motion for Summary Judgment. Further,
because the prospective class representatives have no
remaining claims, the Court DENIES Plaintiffs' Motion for
Class Certification, as detailed below.
3, 2007, Fergerstrom executed a mortgage in favor of
PNC's predecessor, National City Bank
(“NCB”), as security for his performance under an
unrecorded promissory note in the amount of $585, 000 secured
by real property at 1066 Kina St., Kailua, Hawaii 96734
(“Fergerstrom Property”). The Fergerstrom
mortgage was recorded as Land Court No. 3599690. Decl. of
Dorothy J. Thomas ¶ 6, Dkt. No. 101-1; Ex. A.
(Fergerstrom Mortgage), Dkt. No. 101-3. Fergerstrom defaulted
on his loan in February 2009, and PNC commenced nonjudicial
foreclosure proceedings under the power of sale provision
contained in the mortgage.
August 3, 2009, PNC published a Notice of Mortgagee's
Intention to Foreclose Under the Power of Sale (“Notice
of Sale”) on the Fergerstrom Property. Thomas Decl.
¶ 13; Ex. J (Aff. of Foreclosure). The Notice of Sale
gave notice of a foreclosure auction of the Fergerstrom
Property that would take place on September 9, 2009.
Id. At Fergerstrom's request, PNC postponed the
September 9, 2009 sale and attempted to resolve the loan
delinquency through a forbearance agreement. Thomas Decl.
¶ 14. Under the agreement, the lender agreed to forbear
from conducting a foreclosure sale during the term of the
agreement until an event of default. Ex. F (Forbearance
Agreement); Dkt. No. 102-1. Although Fergerstrom made some
payments under the forbearance agreement, he failed to cure
his default, and, as a result, PNC proceeded with the
foreclosure sale on April 12, 2010.Thomas Decl. ¶ 15. PNC
was the successful bidder at the foreclosure auction with a
credit bid of $639, 637.97, the amount then owed by
Fergerstrom under the Note and Mortgage. Id.
conveyed the Fergerstrom Property to the Federal National
Mortgage Corporation (“Fannie Mae”), the investor
on the Fergerstrom Loan, by a quitclaim deed recorded on May
13, 2010. Thomas Decl. ¶ 16, Ex. G (5/13/10 Quitclaim
Deed), Dkt. No. 102-3. On May 13, 2010, the Land Court
entered Certificate of Title No. 981, 816, certifying that
Fannie Mae was the fee-simple owner of the Fergerstrom
Property, transferring title from Certificate No. 757, 612.
Decl. of Reid Davis, Ex. K (TCT No. 981, 916), Dkt. No.
103-11. Fannie Mae thereafter conveyed the Fergerstrom
Property to the current, third-party owners by Limited
Warranty Deed, which was filed in the Land Court on December
3, 2010, as Document 4026085 on Certificate of Title No. 981,
816, and reflects the issuance of a new Transfer Certificate
of Title (“TCT”) No. 1, 005, 710. Ex. L (12/3/10
Warranty Deed), Dkt. No. 102-7. The new TCT No. 1, 005, 710
indicates that it was issued and entered as of December 3,
2010, and also reflects that it was transferred “from
Certificate No. 981, 816, registered 05/13/2010.” Ex. M
(TCT No. 1, 005, 710), Dkt. No. 102-8.
September 26, 2006, National City Mortgage, a division of
NCB, executed a mortgage loan to Shenandoah and Windy Kaiama
in the amount of $248, 000 secured by property at 642 Mikia
Place, Kaunakakai, Molokai, Hawaii 96748 (“Kaiama
Property”). Ex. C (Kaiama Mortgage). PNC business
records reflect that the Kaiama loan became delinquent in
June 2009 and was never brought current. Thomas Decl. ¶
10; Ex. E, Dkt. No. 101-7. PNC commenced foreclosure
proceedings pursuant to the power of sale provision contained
in the mortgage, and on October 27, 2009, PNC published a
Notice of Sale. Ex. N (Aff. of Foreclosure), Dkt. No. 102-9.
The Notice of Sale identified the foreclosure sale auction
date as November 13, 2009 for the Kaiama Property and set
forth the terms and conditions of the sale. Id. PNC
postponed the sale scheduled for November 13, 2009 until
November 30, 2009. Thomas Decl. ¶ 18.
November 30, 2009 foreclosure auction, PNC was the successful
bidder with a credit bid of $178, 200, less than the $258,
302.16 owed by the Kaiamas on that date. Thomas Decl. ¶
19; Ex. E. PNC conveyed the Kaiama Property to itself by a
quitclaim deed recorded on April 15, 2010 in the Land Court
as Document No. 3955690 on Certificate No. 779, 406. Ex. O
(4/15/10 Quitclaim Deed), Dkt. No. 102-10. On April 15, 2010,
the Land Court issued and entered Certificate of Title No.
978, 781, certifying that PNC was the fee-simple owner of the
Kaiama Property. Ex. P (TCT No. 978, 781), Dkt. No. 102-11.
On September 2, 2011, PNC sold the Kaiama Property to a
third-party purchaser for $90, 000. Thomas Decl. ¶ 20.
PNC conveyed title to the subsequent purchaser by Limited
Warranty Deed filed in the Land Court on September 2, 2011,
as Document No. 4095680, which notes the issuance of a new
Certificate of Title No. 1, 031, 006. Ex. Q (9/2/11 Limited
Warranty Deed), Dkt. No. 102-12. The new TCT No. 1, 031, 006
reflects that it was issued and entered as of September 2,
2011, and includes the notation “Transfer from #978781,
registered 04/15/2010.” Ex. R. (TCT No. 1, 031, 006),
Dkt. No. 102-13.
September 16, 2013, Fergerstrom filed the original complaint,
alleging wrongful foreclosure against PNC and requesting
monetary damages. On May 18, 2018, Fergerstrom and the
Kaiamas filed their First Amended Complaint
(“FAC”), asserting claims for wrongful
foreclosure and violation of HRS Chapter 480, and seeking to
void the foreclosure sales, restore title and possession,
recover monetary damages. Plaintiffs' claims against PNC
are predicated on certain defects contained in the Notice of
Sale, and on PNC's alleged failure to properly publish
the Notice of Sale. FAC ¶¶ 30-33, 39-42.
asserts claims on behalf of Plaintiffs and all others
similarly situated under Federal Rule of Civil Procedure 23.
Plaintiffs allege that PNC “breached its duties to act
in good faith to sell the properties to the owners' best
advantage and to use reasonable diligence to secure the best
possible price, because [it] adopted foreclosure policies and
practices designed and intended to deter public participation
and ‘chill' bid prices at non-judicial
auctions.” FAC ¶ 6.
asserts a wrongful foreclosure claim based upon PNC's
practice of advertising that the property would be sold only
by quitclaim deed, FAC ¶ 45, but conveying the property
in certain instances to third-party bidders by limited
warranty deed, FAC ¶ 46, contrary to a foreclosing
mortgagee's duties under the power of sale and HRS
§§ 667-5 and 667-7. FAC ¶ 48. Plaintiffs also
allege that PNC violated publication notice and postponement
requirements contained in the power of sale clauses in the
mortgages and statutes. FAC ¶¶ 51-64. Plaintiffs
assert that the foreclosure sales of the Fergerstrom
Property, Kaiama Property, and “the sales of all
properties of the Class members were void, or at the very
least voidable” under the common law and by statute,
and that “Plaintiffs and the Class are entitled to
appropriate damages remedies as a result, including
restitution and/or rescissory damages designed to restore the
equivalent of the Properties to Plaintiffs and the
Class.” FAC ¶ 73.
II alleges both unfair and deceptive trade practices
(“UDAP”) and unfair methods of competition
(“UMOC”) claims under HRS § 480-2.
Plaintiffs contend that PNC's conduct violated HRS §
480-2 in the following manner-
(a) it violated a clear and established public policies
[sic]: (1) against “chilling the bidding”, (2) in
favor of the “widest publicity, ” (3) that the
provisions of H.R.S. §§ 667-5 et seq. and
the terms and conditions of mortgage contracts were to be
strictly followed by foreclosing mortgagees and that said
mortgagees sell the property pledged in a manner calculated
to give the best advantage to the owner of the property and
use reasonable efforts to secure the “best possible
price”; (2) [sic] it was immoral, unethical,
oppressive, unscrupulous, and/or (3) it was substantially
injurious to consumers, and constituted representations,
omissions, or practices that were objectively material and
misleading to the detriment of consumers such as Plaintiff,
and to other consumers, who were discouraged from bidding at
public auctions based on the purported terms of sale therein.
FAC ¶ 82. PNC also allegedly violated HRS § 480-2
“by advertising … the Properties for sale
without covenants or warranties as to title or encumbrances,
” because such “terms of sale were false,
deceptive, and misleading, inasmuch as successful third party
bidders almost always received limited warranty deeds, and
not quitclaims as advertised in the Class's notices of
sale.” FAC ¶ 83. Further, Plaintiffs allege injury
based upon “unfair and deceptive terms of sale, ”
including advertising in the Notices of Sale that the
successful bidders must close their sales within 30 days of
the auctions, FAC ¶ 84, retaining the 10% down payment
as liquidated damages for any delay in the purchaser's
closing, FAC ¶ 85, and that if the foreclosing mortgagee
should fail to convey title to a successful bidder for any
reason “other than Purchaser's own failure to
perform, ” the bidder would have “no further
recourse” against the foreclosing mortgagee or its
agents other than a return of its bid. FAC ¶ 86.
seek treble damages under HRS § 480-13, FAC ¶ 84,
because PNC “violated a clear and established public
policy that the provisions of HRS §§ 667-5 et
seq. and the terms and conditions of mortgage contracts
were to be strictly followed by foreclosing mortgagees and
that said mortgagees sell the property pledged in a manner
calculated to give the best advantage to the owner of the
property and use reasonable efforts to secure the ‘best
possible price.'” FAC ¶ 95. In addition to
damages, Count II also seeks redress for “all such
sales and sales contracts [that] are void under H.R.S.
Section 480-12[, ]” FAC ¶ 96, and “to
receive all proceeds and profits that PNC made or received by
virtue of its conduct, and to [sic] a declaration that each
such sale was void.” FAC ¶ 98.
1, 2018, PNC filed a Motion to Dismiss, Dkt. No. 94, and on
July 13, 2018, it filed a Motion for Summary Judgment, Dkt.
No. 100, requesting similar relief. As PNC's counsel
noted at the August 28, 2018 hearing on the motions, the
issues and grounds for relief raised in the Motion to Dismiss
are largely subsumed within the later-filed Motion for
Summary Judgment. The Court therefore addresses the issues
and evidentiary record presented by the parties in the
briefing on the summary judgment motion, and, unless
otherwise noted, does not separately address PNC's Motion
13, 2018, Plaintiffs filed a Motion for Class Certification,
for Approval of Class Notice and Dissemination Plan. Dkt. No.
103. The motion to certify requests an order granting
certification to the following proposed class:
All consumers within the meaning of H.R.S. Chapter 480 who
owned real property in Hawai'i land who were subjected to
a notice of foreclosure sale under H.R.S. § 667-5
prepared by Derek Wong or the law firm of Routh Crabtree
& Olson by or on behalf of Defendant PNC (or NCB before
its merger with PNC) claiming for PNC or NCB the rights of a
mortgagee with a power of sale and as to whose property
Defendant PNC or NCB thereby caused the sale or transfer of
the property on or after September 9, 2009.
Mot. for Class Cert. at 1, Dkt. No. 103. The proposed class
further includes subclasses “A, ” “B,
” and “C.” PNC opposes class treatment, for
among other reasons, that Plaintiffs are not typical or
adequate class representatives because they are subject to
the unique defenses raised in PNC's Motion for Summary
Judgment, namely, that their claims are time-barred under
statutory provisions applicable to Land Court registered
Federal Rule of Civil Procedure 56(a), a “party may
move for summary judgment, identifying each claim or
defense-or the part of each claim or defense-on which summary
judgment is sought.” A party is entitled to summary
judgment “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Id.
23 and its sub-rules are flexible and do not preclude summary
judgment prior to class certification.” Villa v.
San Francisco Forty-Niners, Ltd., 104 F.Supp.3d 1017,
1020 (N.D. Cal. 2015) (quoting Wright v. Schock, 742
F.2d 541, 543 (9th Cir. 1984) (explaining that the rules
deliberately avoid a mechanical approach)). “This is
especially true if the judgment will not be res judicata as
to other individual plaintiffs or other members of any class
that may be certified.” Khasin v. Hershey Co.,
No. 5:12-CV-01862-EJD, 2014 WL 1779805, at *2 (N.D. Cal. May
5, 2014) (citing Wright, 742 F.2d at 544).
claims for wrongful foreclosure and violation of HRS §
480-2, which seek to impeach the prior foreclosures and void
the resulting sales, are precluded under HRS § 501-118
in light of Plaintiffs' failure to assert them prior to
the Land Court's entry of new TCTs. PNC's Motion for
Summary Judgment is therefore granted. Because the Court
dismisses in full the class representatives' individual
claims, their motion for class certification is denied.
Plaintiffs' Individual Claims Are
turning to the merits of PNC's Motion, the Court first
examines the unique structure and requirements of the Land
Court registration system. As detailed below, Plaintiffs'
claims seeking to void their respective foreclosure sales
constitute impermissible actions to impeach the prior
foreclosure proceedings, and they are therefore barred by HRS
Hawaii's Land Court Recording System
State of Hawaii, there are two land recording systems for
registering title to real property: the Bureau of Conveyances
(“BOC”) and the Land Court. SeeWells Fargo Bank, N.A. v. Omiya, 142 Hawai'i
439, 446, 420 P.3d 370, 377 (2018) (citing GGS (HI), Inc.
v. N.Y. Diamond, Inc. (In re 2003 Ala Wai Blvd.), 85
Hawai'i 398, 405, 944 P.2d 1341, 1348 (App. 1997),
overruled on other grounds, Knauer v.
Foote, 101 Hawai'i 81, 63 P.3d 389 (2003)).
“Hawaii Land Court is a court of limited jurisdiction
created for the special purpose of carrying into effect the
Torrens title system of land registration.” Tilley
v. Bank of New York Mellon, No. CV 17-00524 HG-RLP, 2018