Deutsche Bank National Trust Company v. Bass

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
25-SEP-2024
08:25 AM
Dkt. 90 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

DEUTSCHE BANK NATIONAL TRUST COMPANY,
AS TRUSTEE FOR ARGENT SECURITIES INC., ASSET BACKED
PASS-THROUGH CERTIFICATES, SERIES 2006-M1, UNDER THE POOLING
AND SERVICING AGREEMENT DATED JUNE 1, 2006 AKA DEUTSCHE BANK
NATIONAL TRUST COMPANY, AS TRUSTEE FOR ARGENT SECURITIES INC.,
ASSET BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-M1,
Plaintiff/Counterclaim Defendant-Appellee, v.
LAURIE ANN BASS, Defendant/Counterclaim Plaintiff-Appellant,
and DOES 1-20, inclusive, Defendants.

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CIVIL NO. 3CC181000189)

SUMMARY DISPOSITION ORDER
(By: Leonard, Acting Chief Judge, Wadsworth and McCullen, JJ.)

Defendant/Counterclaim Plaintiff-Appellant Laurie Ann

Bass appeals from the Circuit Court of the Third Circuit's

August 3, 2020 "Findings of Fact, Conclusions of Law and Order
NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Granting Plaintiff's Motion for Summary Judgment and

Interlocutory Decree of Foreclosure" and Judgment. 1

On appeal, Bass contends the circuit court erred in

dismissing her wrongful foreclosure counterclaim and granting a

foreclosure decree in favor of Plaintiff/Counterclaim Defendant-

Appellee Deutsche Bank National Trust Company, as Trustee for

Argent Securities Inc., Asset Backed Pass-Through Certificates,

Series 2006-M1, Under the Pooling and Servicing Agreement Dated

June 1, 2006. She argues Deutsche Bank failed to prove it

(1) had standing to foreclose and (2) properly gave notice of

default. 2

"An award of summary judgment is reviewed de novo and

is appropriate where there is no genuine issue as to the

material fact and the moving party is entitled to judgment as a

matter of law." U.S. Bank N.A. v. Mattos, 140 Hawai‘i 26, 30,

398 P.3d 615, 619 (2017) (citations and internal quotation marks

omitted).

1 The Honorable Henry T. Nakamoto presided.

2 Bass also raises points of error related to the authentication of
records and certain findings and conclusions.

Bass contends Deutsche Bank failed to properly authenticate the
business records on which it relies. However, except as otherwise provided
herein, after reviewing the record, we conclude there was no error.

Bass challenges Findings of Fact (FOF) 5, 6, and 11, and conclusions of
law (COL) 3-6, 8, 9, 11, and 13. Based on our decision below, FOF 6 (a mixed
question of law and fact) and FOF 11 were clearly erroneous. COL 3-5, 8, 9,
11, and 13 were wrong, and a challenge to COL 6 was waived.

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Upon careful review of the record and the briefs

submitted by the parties and having given due consideration to

the issues raised and the arguments advanced, we resolve the

points of error as discussed below, and vacate and remand.

(1) Bass first contends Deutsche Bank failed to show

it had standing to bring the foreclosure action because it did

not establish it was the holder of the March 31, 2006 Adjustable

Rate Note, non-holder of the Note, or had "rightful possession"

of the Note when the Note was lost.

To establish standing to foreclose, the "plaintiff

must necessarily prove its entitlement to enforce the note as it

is the default on the note that gives rise to the action." Bank

of Am., N.A. v. Reyes-Toledo, 139 Hawaiʻi 361, 368, 390 P.3d

1248, 1255 (2017). "Whether a party is entitled to enforce a

promissory note is determined by application of [Hawai‘i Revised

Statutes (HRS)] § 490:3-301." Id. at 369, 390 P.3d at 1256.

HRS § 490:3-301 (2008) explains who is entitled to

enforce an instrument:

"Person entitled to enforce" an instrument means (i) the
holder of the instrument, (ii) a nonholder in possession of
the instrument who has the rights of a holder, or (iii) a
person not in possession of the instrument who is entitled
to enforce the instrument pursuant to section 490:3-309 or
490:3-418(d).

Related, HRS § 490:3-309 (2008) governs enforcement of a lost

instrument:

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(a) A person not in possession of an instrument is
entitled to enforce the instrument if (i) the person was in
rightful possession of the instrument and entitled to
enforce it when loss of possession occurred, (ii) the loss
of possession was not the result of a transfer by the
person or a lawful seizure, and (iii) the person cannot
reasonably obtain possession of the instrument because the
instrument was destroyed, its whereabouts cannot be
determined, or it is in the wrongful possession of an
unknown person or a person that cannot be found or is not
amenable to service of process.

(b) A person seeking enforcement of an instrument
under subsection (a) must prove the terms of the instrument
and the person's right to enforce the instrument. If that
proof is made, section 490:3-308 applies to the case as if
the person seeking enforcement had produced the instrument.
The court may not enter judgment in favor of the person
seeking enforcement unless it finds that the person
required to pay the instrument is adequately protected
against loss that might occur by reason of a claim by
another person to enforce the instrument. Adequate
protection may be provided by any reasonable means.

(Emphases added.)

To summarize, Deutsche Bank must prove that when it

lost possession of the Note: (1) it was validly assigned

ownership of the Note, and (2) the Note was physically delivered

to it for the purpose of giving it the right to enforce the

Note.

Based on this record, the circuit court could

determine that ownership of the Note was transferred to Argent

Securities, Inc. and assigned to Deutsche Bank as trustee of the

mortgage pool, and the Note was to be physically delivered to

Argent or its designee, i.e., Deutsche Bank, for the purpose of

giving it the right to enforce the Note.

As to physical possession, Deutsche Bank relies solely

on the declaration of Gina Feezer, which stated "[t]he Original

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Note was received by Deutsche Bank as Trustee on May 20, 2006

which maintained possession and custody of the Original Note

until January 3, 2011. At that time the Original Note was

released to . . . the servicer at that time," "the history of

the custody of the Note shows that the Note was transferred to

Deutsche Bank, as Trustee in 2006 and delivered," and the "Note

remained in Deutsche Bank, as Trustee's possession until 2011."

Feezer, however, did not indicate she had personal

knowledge of possession, nor did she specify on what records she

relied in determining Deutsche Bank received the Note on May 20,

2006 and maintained possession until it was lost. See Deutsche

Bank Nat'l Tr. Co. as Tr. for Morgan Stanley ABS Cap. I Inc. Tr.

2006-NC4 v. Yata, 152 Hawaiʻi 322, 327 n.11, 336, 526 P.3d 299,

304 n.11, 313 (2023) (concluding lender's "counsel's conclusory

declaration" that she was in possession of the note was

insufficient to establish possession).

Moreover, Deutsche Bank produced no documentary

evidence corroborating or supporting this written testimony.

Thus, the record not only lacks foundation for Feezer's written

testimony regarding possession, but even if foundation was laid,

such conclusive and uncorroborated testimony may still be

insufficient to establish possession. See U.S. Bank Tr., N.A.

as Tr. for LSF9 Master Participation Tr. v. Verhagen, 149 Hawaiʻi

315, 327-28, 489 P.3d 419, 431-32 (2021).

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Thus, Deutsche Bank did not meet its burden of showing

there was no genuine issue as to whether it was in physical

possession of the Note when the Note was lost.

(2) Bass next contends Deutsche Bank failed to

establish it provided her with adequate notice of the default.

To prevail on a foreclosure claim, a plaintiff must

prove it gave cancellation notice in accordance with the terms

of the mortgage. Reyes-Toledo, 139 Hawaiʻi at 367, 390 P.3d at

1254.

The Note was secured by a Mortgage, and Paragraph 15

of the Mortgage provided in part:

[a]ny notice to Borrower in connection with this Security
Instrument shall be deemed to have been given to Borrower
when mailed by first class mail or when actually delivered
to Borrower's notice address if sent by other means. . . .
The notice address shall be the Property Address unless
Borrower has designated a substitute notice address by
notice to Lender.

In her declaration, Feezer stated, "[a]ccording to

[the loan servicer]'s business records, Notice of the default

was provided on April 16, 2018. A true and correct copy of the

Notice kept and maintained in Servicer's business records is

attached as Exhibit 6." Exhibit 6 showed that the notice of

default was directed to Bass at an Idaho address, and the phrase

"VIA First Class Mail" was typed on the first page.

However, Feezer did not attach the Servicer's business

records or otherwise establish the Servicer's regularly-

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conducted business activities and record-keeping practices which

might evidence that the Notice was in fact mailed via first

class mail. In its reply in support of summary judgment,

Deutsche Bank stated that the Notice was mailed to the address

on file for Bass, but it pointed to no evidence in the record

supporting this claim.

Thus, we conclude that Deutsche Bank failed to meet

its burden of showing there was no genuine issue as to whether

it gave notice of default in accordance with the terms of the

Mortgage.

Based on the foregoing, we vacate the circuit court's

August 3, 2020 "Findings of Fact, Conclusions of Law and Order

Granting Plaintiff's Motion for Summary Judgment and

Interlocutory Decree of Foreclosure" and Judgment, and remand

this case for further proceedings consistent with this summary

disposition order.

DATED: Honolulu, Hawai‘i, September 25, 2024.

On the briefs: /s/ Katherine G. Leonard
Acting Chief Judge
Keith M. Kiuchi,
for Defendant/Counterclaim /s/ Clyde J. Wadsworth
Plaintiff-Appellant. Associate Judge

Peter Knapman, /s/ Sonja M.P. McCullen
for Plaintiff/Counterclaim Associate Judge
Defendant-Appellee.

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