United States District Court, D. Hawaii
LIONEL LIMA, JR., et al., individually and on behalf of all others similarly situated, Plaintiffs,
DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant. EVELYN JANE GIBO, et al., individually and on behalf of all others similarly situated, Plaintiffs,
U.S. BANK NATIONAL ASSOCIATION, Defendant. DAVID EMORY BALD, et al., individually and on behalf of all others similarly situated, Plaintiffs,
WELLS FARGO BANK, N.A., Defendant.
ORDER CERTIFYING A QUESTION TO THE HAWAI‘I
to section 602-5(a)(2) of Hawai‘i Revised Statutes and
Rule 13 of Hawai‘i Rules of Appellate Procedure, this
court respectfully certifies the following question to the
Hawai‘i Supreme Court:
When (a) a borrower has indisputably defaulted on a mortgage
for real property, (b) a lender has conducted a nonjudicial
foreclosure sale but has not strictly complied with the
requirements governing such sales, and (c) the borrower sues
the lender over that noncompliance after the foreclosure sale
and, if the property was purchased at foreclosure by the
lender, after any subsequent sale to a third-party purchaser,
may the borrower establish the requisite harm for liability
purposes under the law of wrongful foreclosure and/or section
480-2 of Hawai‘i Revised Statutes by demonstrating the
loss of title, possession, and/or investments in the property
without regard to the effect of the mortgage on those items?
gist of the above question may be restated (assuming but not
including the underlying factual predicates) as a question
about which party has the burden of proof:
Is the effect of the mortgage considered only as a matter of
setoff that a lender has the burden of proving after the
borrower establishes the amount of the borrower's
damages, or does a borrower with no preforeclosure rights in
property except as encumbered by a mortgage bear the burden
of accounting for the effect of the mortgage in establishing
the element of harm in the liability case?
question of substantive Hawai‘i law is
“determinative of the cause” in three putative
class actions before this court and is not answered by
“clear controlling precedent in the Hawai‘i
judicial decisions.” Haw. R. App. P. 13(a).
three cases are Lionel Lima, et al. v. Deutsche Bank
National Trust Company, Civ. No. 12-00509 SOM-WRP
(“Lima”); Evelyn Jane Gibo, et al.
v. U.S. Bank National Association, Civ. No. 12-00514
SOM-WRP (“Gibo”); and David Emory
Bald, et al. v. Wells Fargo Bank, N.A., Civ. No.
13-00135 SOM-RT (“Bald”).
negative answer to the certified question will dispose of all
claims in each case. This court therefore respectfully asks
the Hawai‘i Supreme Court to exercise its discretion to
accept and decide the certified question.
STANDARD FOR CERTIFYING A QUESTION.
Hawai‘i Supreme Court has jurisdiction and power
“[t]o answer, in its discretion, any question of law
reserved by a circuit court, the land court, or the tax
appeal court, or any question or proposition of law certified
to it by a federal district or appellate court if the supreme
court shall so provide by rule[.]” Haw. Rev. Stat.
a federal district court or appellate court certifies to the
Hawai‘i Supreme Court that there is involved in any
proceeding before it a question concerning the law of
Hawai‘i that is determinative of the cause and that
there is no clear controlling precedent in the Hawai‘i
judicial decisions, the Hawai‘i Supreme Court may
answer the certified question by written opinion.” Haw.
R. App. P. 13(a).
court certifying a question must provide “a statement
of prior proceedings in the case, a statement of facts
showing the nature of the cause, the question of law to be
answered, and the circumstances out of which the question
arises.” Haw. R. App. P. 13(b).
STATEMENT OF PRIOR PROCEEDINGS AND OF FACTS.
three putative class actions have proceeded in a parallel
manner. Filed in 2012 in state court and removed to federal
court, these cases have lengthy histories, which the court
summarizes here only as relevant to the certified question.
arises from alleged conduct relating to the nonjudicial
foreclosure of properties owned by Plaintiffs Lionel Lima,
Jr., Barbara-Ann Delizo-Lima, Calvin Jon Kirby II, Leneen
Kron, Deirdre-Dawn K. Cabison, James C. Clay, Scott A.
Coryea, Katheryn Coryea, Richard H. Farnham, Nancy L.
Farnham, Timothy Ryan, Donna Ryan, Kaniala Salis, and Brian
S. Weatherly (all fourteen plaintiffs referred to
collectively as “the Lima Plaintiffs”). The Lima
Plaintiffs are suing Defendant Deutsche Bank National Trust
Company (“Deutsche Bank”). See Lima, ECF
No. 238 (Second Amended Complaint).
arises from alleged conduct relating to the nonjudicial
foreclosure of property owned by Plaintiffs Evelyn Jane Gibo,
Patrick Stephen Hemmens, Deanne Davidson Hemmens, Vincent
Labasan, and Jennifer Strike (all five plaintiffs referred to
collectively as “the Gibo Plaintiffs”). The Gibo
Plaintiffs are suing Defendant U.S. Bank National Association
(“U.S. Bank”). See Gibo, ECF No. 196
(Second Amended Complaint).
Bald arises from alleged conduct relating to the
nonjudicial foreclosure of property owned by Plaintiffs David
Emory Bald, Emily Lelis, James L.K. Dahlberg, Michael John
Myers, Jr., Tham Nguyen Myers, David Levy, and Thomas T. Au
(all seven plaintiffs referred to collectively as “the
Bald Plaintiffs”). The Bald Plaintiffs are suing
Defendant Wells Fargo Bank, N.A. (“Wells Fargo”).
See Bald, ECF No. 99 (First Amended
order refers to the Lima Plaintiffs, Gibo Plaintiffs, and
Bald Plaintiffs collectively as “Plaintiff
Borrowers” and to Deutsche Bank, U.S. Bank, and Wells
Fargo collectively as “Defendant
removed, the cases included claims not only against Defendant
Banks, but also against David Rosen, Defendant Banks'
attorney in the foreclosure proceedings. Plaintiff Borrowers
alleged that Defendant Banks and Rosen had breached their
duties in selling the properties when they advertised the
foreclosure sales as sales by quitclaim deed and postponed
the sales without publishing notices of new dates and times.
Borrowers owned properties in Hawai‘i encumbered by
mortgages. Each Plaintiff Borrower defaulted on his or her
mortgage. Each Bald Plaintiff's mortgage debt exceeded
the amount obtained through the foreclosure sale.
Bald, ECF No. 170-1, PageID # 3297. Although this
court has less detailed information for the Lima and Gibo
Plaintiffs, they also appear to have had mortgage balances
exceeding the foreclosure sales prices. Lima, ECF
No. 238-1, PageID #s 10594-96; Gibo, ECF No. 260-1,
PageID #s 11089-90. Further, Wells Fargo described some Bald
Plaintiffs as having deliberately chosen to default, as they
were investors who owned multiple properties and decided to
spend their funds on more profitable properties.
Bald, ECF No. 170-1, PageID # 3297.
the defaults, Defendant Banks, as mortgagees, initiated
nonjudicial foreclosure proceedings, and the properties were
sold in foreclosure between 2008 and 2011. Third parties
purchased some of the properties. Defendant Banks purchased
other properties themselves at the foreclosure sales and
later sold them to third-party purchasers.
Borrowers sued Defendant Banks, asserting violations of the
mortgages' power of sale clause, violations of section
667-5 of Hawai‘i Revised Statutes, and unfair and
deceptive acts or practices (“UDAP”) in violation
of section 480-2 of Hawai‘i Revised Statutes.
Lima, ECF No. 1-2; Gibo, ECF No. 1-2;
Bald, ECF No. 1-3.
court granted motions to dismiss filed by Defendant Banks and
Rosen in each case, dismissing all claims.Lima, ECF
No. 77; Gibo, ECF No. 94; Bald, ECF No. 45.
The court concluded that Hawai‘i's nonjudicial
foreclose law did not bar advertisements of sales by
quitclaim deeds and did not require publication of auction
postponements. Plaintiff Borrowers appealed the court's
orders to the Ninth Circuit. The Lima and
Gibo appeals were consolidated, and the same Ninth
Circuit panel presided over both the Lima/Gibo
appeal and the Bald appeal.
Ninth Circuit withheld any ruling pending the Hawai‘i
Supreme Court's decision in Hungate v. Law Office of
David B. Rosen, 139 Haw. 394, 391 P.3d 1 (2017).
Ultimately, in unpublished decisions, the Ninth Circuit,
relying on Hungate, reversed the dismissal of claims
against Defendant Banks and remanded the cases to this court.
Bald v. Wells Fargo Bank, N.A., 688 Fed.Appx. 472
(9th Cir. 2017); Lima v. Deutsche Bank Nat'l Tr.
Co., 690 Fed.Appx. 911 (9th Cir. 2017). The Ninth
Circuit held that Plaintiff Borrowers had standing as
“consumers” under section 480-2 of Hawai‘i
Revised Statutes, had adequately alleged that Defendant
Banks' advertising and postponement practices were unfair
within the meaning of section 480-2, and had alleged
sufficient facts showing injury under section 480-2. See
Bald, 688 Fed.Appx. at 474-77; Lima, 690
Fed.Appx. at 913. In the Lima/Gibo appeal, the Ninth
Circuit also held that the Lima and Gibo Plaintiffs had
sufficiently alleged Deutsche Bank's and U.S. Bank's
liability for the alleged conduct. Lima, 690
Fed.Appx. at 913-14. The Ninth Circuit affirmed the dismissal
of the claims against Rosen. Id. at 915.
remand, this court gave Plaintiff Borrowers leave to file
amended complaints. The amended complaints removed Rosen as a
defendant, added new plaintiffs, and added other practices
that Defendant Banks had allegedly wrongfully engaged in
during the nonjudicial foreclosure proceedings. Plaintiff
Borrowers complained of the following practices:
a. Recording and publishing Notices of Sale that did not
include a “description of the mortgaged property”
(a) as required by HRS Section 667-7(a)(1) (2008) and (b)
which was “sufficient to inform the public of the
nature of the property to be offered for sale” and
“calculated to interest purchasers, ” as required
by Ulrich v. Sec. Inv. Co., 35 Haw. 158, 172-73
(1939); b. Publishing and/or posting the Notice of Sale for
less time than required by statute; c. Selling the property
despite having failed to send the borrower a notice of
acceleration that gave the notice that the standard form
mortgage required about the unconditional right the borrower
had to bring a separate suit to stop the sale.
d. Issuing notices of sale that lacked a description of the
property that would interest prospective buyers and/or comply
e. Advertising the auctions of properties by “quitclaim
deed” and/or without any covenants or warranties of
f. Postponing auctions so frequently that the substantial
majority of sale dates advertised in the Class's
published notices of sale were not the actual auction dates;
g. Postponing auctions without publishing notices of the
rescheduled auctions' new dates and times;
h. Changing the location of the auction without publishing
the new location; and
i. Including as a term of sale that time was of the essence
and that successful bidders were expected to close their
sales within thirty days of their auctions, when in fact such
sales either never, or almost never, closed within the
Lima, ECF No. 182, PageID #s 6540-41; Gibo,
ECF No. 196, PageID #s 6520-21; see also Bald, ECF
No. 99, PageID #s 2577-78 (complaining of roughly half of the
their amended complaints, Plaintiff Borrowers now assert: (1)
a tort claim for wrongful foreclosure, and (2) a UDAP claim
under section 480-2.Lima, ECF No. 182, PageID #s
6550, 6564; Gibo, ECF No. ...