Blue Mountain Homes, LLC v. Page

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
23-MAR-2023
07:53 AM
Dkt. 69 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

BLUE MOUNTAIN HOMES, LLC, Plaintiff-Appellee,
v.
PENNY PAGE, Defendant-Appellant,
and
JOHN DOES 1-5, and JANE DOES 1-5, Defendants

and

PENNY PAGE, Counterclaim Plaintiff/
Third-Party Plaintiff-Appellant,
v.
BLUE MOUNTAIN HOMES, LLC, Counterclaim Defendant-Appellee,
and
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK
AS TRUSTEE FOR THE CERTIFICATEHOLDERS CWALT, INC.
ALTERNATIVE LOAN TRUST 2005-69 MORTGAGE PASS-THROUGH
CERTIFICATE SERIES 2005-69, and DOE DEFENDANTS 1-20,
Third-Party Defendants

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CIVIL NO. 14-1-0037(2))

SUMMARY DISPOSITION ORDER
(By: Leonard, Presiding Judge, and Hiraoka and Wadsworth, JJ.)

This appeal arises from an ejectment action brought by
the third-party purchaser of real property following a non-
judicial foreclosure on, and later sale of, the property.
Defendant/Counterclaim Plaintiff/Third-Party Plaintiff-Appellant
Penny Page (Page) appeals from the November 9, 2018 "Judgment Re:
Order Granting Plaintiff[/Counterclaim Defendant-Appellee] Blue
Mountain Homes, LLC's [(Blue Mountain)] Motion for Summary
Judgment [Filed July 28, 2018]," entered in favor of Blue
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Mountain and against Page by the Circuit Court of the Second
Circuit (Circuit Court),1/ pursuant to Hawai#i Rules of Civil
Procedure (HRCP) Rule 54(b).2/ Page also challenges the
November 9, 2018 "Order Granting Blue Mountain['s] Motion for
Summary Judgment [Filed July 28, 2018]" (Summary Judgment Order).
On appeal, Page contends that the Circuit Court erred
"in granting summary judgment and holding that Blue Mountain
. . . was a bona fide purchaser for value, and thereby
erroneously disregarded the fact that the underlying nonjudicial
foreclosure was improperly conducted and therefore invalid."
Upon careful review of the record and the briefs
submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, as
well as the relevant statutory and case law, we resolve Page's
contention as follows and affirm.

I. Background

In February 2011, Third-Party Defendant The Bank of New
York Mellon FKA The Bank of New York, as Trustee for the
Certificate Holders CWALT, INC., Alternative Loan Trust 2005-69
Mortgage Pass-Through Certificates, Series 2005-69 (BNYM)
conducted a non-judicial foreclosure on the subject property
(Property).
In June 2013, Blue Mountain purchased the property from
BNYM. Specifically, pursuant to a Special Warranty Deed dated
June 4, 2013, and recorded in the Bureau of Conveyances on
July 30, 2013, BNYM conveyed the property to Blue Mountain.
On January 27, 2014, Blue Mountain filed a complaint
for ejectment against Page. On December 9, 2014, Blue Mountain
filed a motion for summary judgment. On March 20, 2015, the
Circuit Court entered its "Findings of Fact, Conclusions of Law

1/
The Honorable Peter T. Cahill presided.
2/
On October 1, 2019, pursuant to this court's August 30, 2019
order, the Circuit Court filed an Amended Judgment, which entered judgment for
possession in favor of Blue Mountain and against Page and dismissed all
remaining claims as to all parties. Page's December 5, 2018 notice of appeal
is timely as to the Amended Judgment, pursuant to Hawai #i Rules of Appellate
Procedure Rule 4(a)(2).

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and Order Granting . . . Blue Mountain['s] . . . Motion for
Summary Judgment," concluding that Blue Mountain was a bona fide
purchaser for value and granting summary judgment for Blue
Mountain. On the same date, the court also entered a judgment
for possession and a writ of possession in favor of Blue Mountain
and against Page.
On May 27, 2015, Page appealed from the judgment for
possession and writ of possession, initiating CAAP-XX-XXXXXXX.
See Blue Mountain Homes, LLC v. Page (Blue Mountain I), No CAAP-
XX-XXXXXXX, 2018 WL 2316520 (Haw. App. May 22, 2018) (SDO). Page
contended that the Circuit Court erred in granting summary
judgment because Blue Mountain had failed to "demonstrate 'that
the nonjudicial foreclosure sale was conducted in a manner that
was fair, reasonably diligent, and in good faith, and to
demonstrate that an adequate price was procured for the
property.'" Id. at *1 (brackets omitted). Blue Mountain argued
in part that it did not bear that burden, because it was a bona
fide purchaser of the Property. Id. at *2.
Addressing Blue Mountain's argument, we ruled that
"based on our review of the record, Blue Mountain did not carry
its initial burden to establish that it was a bona fide
purchaser." Id. at *4. We noted in particular that there was no
evidence in the record as to the amount that Blue Mountain paid
to acquire title to the Property. Id. at *3. We concluded there
were "genuine issues of material fact as to whether [BNYM]
purchased the property in good faith for valuable consideration."
Id. at *4. We thus concluded that summary judgment was
unwarranted and vacated the judgment for possession. Id.
On remand, Blue Mountain filed a motion for summary
judgment seeking determinations that Blue Mountain (1) paid
valuable consideration for the Property and (2) was a bona-fide
purchaser. Page filed a memorandum in opposition, arguing that
BNYM's nonjudicial foreclosure was invalid; Blue Mountain was not
a bona fide purchaser for value because it had constructive
notice of Page's possession, and thus her claims and defenses, at
the time of sale; and Blue Mountain failed to conduct reasonable
due diligence as a sophisticated investor with a heightened duty

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of inquiry.
At the October 19, 2018 hearing of Blue Mountain's
motion, the Circuit Court stated its understanding that on
remand, "the only thing that was going to be decided was whether
-- what was the price that was paid." During the hearing, Page
conceded that the amount paid for the Property constituted
valuable consideration, but asserted: "[t]he issue here is, did
[Blue Mountain] take the [P]roperty with notice, either actual or
constructive notice, of the claims, disputes of the borrower?"
Following oral argument the Circuit Court granted Blue Mountain's
motion for summary judgment and engaged in the following exchange
with Blue Mountain's counsel:

[BLUE MOUNTAIN'S COUNSEL]: I just wanted to confirm,
so the value is reasonable and we are a bona fide purchaser
for value?

THE COURT: Yes. Yes. I mean, . . . they're not
disputing the amount, and I'm making the necessary finding,
over their objection, noting that there is this argument
that . . . the original mortgagor/owner was still in
possession, but I don't think that that rises to the level
of the notice requiring your client to go back and make all
of these inquiries. . . .

On November 9, 2018, the Circuit Court entered the
Summary Judgment Order, concluding that: "(1) The amount paid by
[Blue Mountain] to purchase the subject real property was fair,
reasonable and valuable consideration; and (2) [Blue Mountain]
was a bona fide good faith purchaser for value." (Formatting
altered.)

II. Discussion

At the outset, we address a purported jurisdictional
issue raised in Blue Mountain's January 17, 2020 statement
contesting jurisdiction, which was joined by BNYM. Specifically,
Blue Mountain contends that "the scope of appellate jurisdiction
should be limited to the scope of remand set forth in this
Court's SDO [in Blue Mountain I]." Blue Mountain argues in turn
that the "scope of remand" was limited to "the discrete issue
. . . [of] whether the amount paid by [Blue Mountain] was
valuable consideration [.]" Based on this premise, Blue Mountain
appears to contend that our appellate jurisdiction should be

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limited to the "valuable consideration" issue and encompass no
other aspect of Blue Mountain's "[bona-fide purchaser] status."
We first note that we have jurisdiction over this
appeal pursuant to HRS § 641-1(a) (2016). That Page may have
raised an issue on remand beyond the scope of this Court's remand
order does not deprive this court of jurisdiction over the
Circuit Court's determination of that issue.
In any event, Blue Mountain's argument regarding the
scope of remand is without merit. In vacating the judgment for
possession in Blue Mountain I, we did not limit the scope of
remand to a determination as to whether the amount paid by Blue
Mountain for the Property constituted "valuable consideration."
See In re Hawai#i Elec. Light Co. (HELCO), 149 Hawai#i 239, 241-
42, 487 P.3d 708, 710-11 (2021) ("[T]he scope of remand is
determined 'not by formula, but by inference from the opinion as
a whole.'" (quoting United States v. Parker, 101 F.3d 527, 528
(7th Cir. 1996))). Rather, in addressing Blue Mountain's
argument that it is a bona fide purchaser of the Property, we
determined that: (1) "Blue Mountain must demonstrate that it
actually is a bona fide purchaser for value[;]" (2) in reviewing
the Circuit Court's grant of summary judgment, we were not bound
by the court's conclusion that Blue Mountain was a bona fide
purchaser; and (3) "based on our review of the record, Blue
Mountain did not carry its initial burden to establish that it
was a bona fide purchaser." Blue Mountain I, 2018 WL 2316520, at
*3-4. We noted that a bona fide purchaser is "one who acquires
an interest in a property for valuable consideration, in good
faith, and without notice of any outstanding claims which are
held against the property by third parties." Id. at *3 (quoting
Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai#i 277, 240 n.27, 361
P.3d 454, 467 n.27 (2015) (quoting 92A C.J.S. Vendor and
Purchaser § 547 (2010))). While our analysis pointed out the
lack of evidence in the record on the "valuable consideration"
issue, we ruled more generally that "[t]here are genuine issues
of material fact as to whether [Blue Mountain] purchased the
property in good faith for valuable consideration. Id. at *4
(emphasis added). We thus concluded that summary judgment was

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unwarranted and vacated the judgment for possession. Id. We did
not "explicitly delimit[] the purpose of the remand" or otherwise
give directions limiting the scope of the remand. HELCO, 149
Hawai#i at 242, 487 P.3d at 711 (2021); see Chun v. Bd. of Trs.
of Emps.' Ret. Sys. of State of Hawai#i, 106 Hawai#i 416, 439, 106
P.3d 339, 362 (2005) ("[I]t is the duty of the trial court, on
remand, to comply strictly with the mandate of the appellate
court according to its true intent and meaning, as determined by
the directions given by the reviewing court[.]" (quoting State v.
Lincoln, 72 Haw. 480, 485, 825 P.2d 64, 68 (1992))).
Moreover, it appears that the Circuit Court, after
indicating that it would consider only the valuable consideration
issue, ultimately decided not only that Blue Mountain paid
valuable consideration to purchase the Property, but also that
"[Blue Mountain] was a bona fide good faith purchaser for value."
In deciding the latter issue, the court specifically rejected
Page's argument that because she was still in possession of the
Property at the time of sale, Blue Mountain had constructive
notice of Page's claims. We thus consider the Circuit Court's
conclusion that Blue Mountain was a bona fide purchaser for
value.
"An 'innocent' or good faith purchaser is 'one who, by
an honest contract or agreement, purchases property or acquires
an interest therein, without knowledge, or means of knowledge
sufficient to charge him in law with knowledge, of any infirmity
in the title of the seller." Bank of New York Mellon v. R.
Onaga, Inc., 140 Hawai#i 358, 367 n.13, 400 P.3d 559, 568 n.13
(2017) (quoting Ka#u Agribusiness Co. v. Heirs or Assigns of
Ahulau, 105 Hawai#i 182, 193, 95 P.3d 613, 624 (2004)); see
Kondaur, 136 Hawai#i at 240 n.27, 361 P.3d at 467 n.27 (defining
a bona fide purchaser as "one who acquires an interest in a
property for valuable consideration, in good faith, and without
notice of any outstanding claims which are held against the
property by third parties" (quoting 92A C.J.S. Vendor and

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Purchaser § 547)).3/ "Purchasers who have constructive notice of
another's interest in a property 'cannot accurately be referred
to as innocent purchasers.'" Schick v. Nationstar Mortg. LLC,
No. CAAP-XX-XXXXXXX, 2022 WL 2315570, at *8 (Haw. App. June 28,
2022) (mem.) (quoting Pelosi v. Wailea Ranch Estates, 91 Hawai#i
478, 489, 985 P.2d 1045, 1056 (1999)). "Constructive notice
arises as a legal inference, where 'circumstances are such that a
reasonably prudent person should make inquiries, and therefore
the law charges a person with notice of facts which inquiry would
have disclosed.'" Id. (brackets omitted) (quoting In re Henshaw,
585 B.R. 605, 615 (D. Haw. 2018)).
Here, there is no dispute that Blue Mountain paid
valuable consideration for the Property. Rather, Page argues
that Blue Mountain is not a bona fide purchaser because it had
constructive notice of Page's claims "based upon her possession
of the property at the time of the alleged sale." Page further
argues that "Blue Mountain . . ., wh[ich] was aware that the
property was being sold 'AS IS,' failed to conduct reasonable due
diligence, and as a sophisticated foreclosed [sic] property
investor, had a heightened duty of inquiry, which it failed to
uphold, further precluding its status as a bona fide purchaser
for value."
We recently addressed similar arguments in Mount v.
Apao, No. CAAP-XX-XXXXXXX, 2021 WL 944203 (Haw. App. March 12,
2021) (mem.). There, the parties claiming bona-fide purchaser
status bought the property at issue at a public auction pursuant
to a nonjudicial foreclosure. There, as here, the appellants
cited a number of cases, including Achi v. Kauwa, 5 Haw. 298, 299
(Haw. Kingdom 1885), for the proposition that "a purchaser of
land takes his title subject to the claims of parties in
possession, and the possession is constructive notice to the
purchaser of all the rights of the possessor." Id. at *4. We
distinguished Achi as follows:

3/
Conversely,"[a] non-bona fide purchaser is one who does not pay
adequate consideration, 'takes with knowledge that his transferor acquired
title by fraud, or buys registered land with full notice of the fact that it
is in litigation between the transferor and a third party.'" Delapinia v.
Nationstar Mortgage LLC, 150 Hawai#i 91, 100 n.12, 497 P.3d 106, 115 n.12
(2021) (quoting Kondaur, 136 Hawai#i at 240 n.27, 361 P.3d at 467 n.27).

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There, the plaintiff's interest in the subject property was
through a grant under a recorded deed. The defendants
claimed rights under an unrecorded deed and showed that some
defendants lived on and were supported by the land,
cultivated and fenced part of the land, and had two houses
on the land that had stood for a long time. [5 Haw.] at
298. The plaintiff claimed the unrecorded deed was void
under a statute that provided such unrecorded deed "shall be
void against any subsequent purchaser in good faith and for
a valuable consideration not having actual notice of such
conveyance, whose conveyance shall be first duly recorded."
Id. The Achi court rejected the plaintiff's argument,
holding that:
In equity and at common law without reference to
special statutes; and, it seems to us, upon reason;
good faith requires a purchaser of land to take his
title subject to the claims of parties in possession
when he buys[.] Under our statute, if the party in
open possession is unable to show actual notice of his
unregistered deed to a subsequent purchaser, his
possession is constructive notice to such purchaser of
all his rights, and he cannot be disturbed therein.

Id. at 299. Whereas Achi involved the defendants' claims
under an unrecorded deed, in the instant case there are no
competing deeds related to the subject property. Rather,
the Mounts obtained title through the nonjudicial
foreclosure due to the default on the mortgage by the
Estate.

Id.
Similarly, here, there are no competing deeds related
to the Property. Blue Mountain obtained title from BNYM pursuant
to the Special Warranty Deed, after BNYM acquired title through
the nonjudicial foreclosure.
We recognize, however, that Page's possession of the
Property when it was sold to Blue Mountain was inconsistent with
record title, which was held by BNYM.4/ Under these

4/
It appears to be undisputed that Page was in open possession of
the Property when it was sold to Blue Mountain in June 2013. Blue Mountain
submitted evidence that the Property was occupied in 2013, and the purchase
agreement between Blue Mountain and BNYM provided, inter alia:
BUYER UNDERSTANDS AND ACKNOWLEDGES: (1) SELLER HAS ACQUIRED
TITLE TO THE PROPERTY THROUGH FORECLOSURE, DEED IN LIEU OF
FORECLOSURE, OR SIMILAR JUDICIAL, STATUTORY OR CONTRACTUAL
PROCESS; (2) SELLER HAS NEVER OCCUPIED THE PROPERTY; . . . .

BUYER AGREES IT IS BUYING THE PROPERTY AS IS, WHERE IS, AS
AVAILABLE, AND WITH ALL FAULTS AND LIMITATIONS (INCLUDING,
BUT NOT LIMITED TO, PHYSICAL CONDITION, NATURE AND EXTENT OF
IMPROVEMENTS, SUITABILITY FOR ANY PARTICULAR PURPOSE,
THIRD-PARTY OCCUPANCY/POSSESSION, RESTRICTIONS ON USE,
CLOUDS ON TITLE, TAX BURDENS, LIENS, COMPLIANCE WITH LAWS,
ETC.)
. . . .

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circumstances, Blue Mountain was required to make a reasonable
inquiry as to Page's claims or interests in the Property. Cf.
Mount, 2021 WL 944203, at *5 ("A purchaser does not have a duty
to inquire regarding any unknown claims or interests by a person
in possession of real property where the occupant's possession is
consistent with the recorded title on the property."); see Yee
Hop v. Young Sak Cho, 25 Haw. 494, 505, 506 (Haw. Terr. 1920)
(holding that "petitioners being in open possession the law
imposes upon respondents the duty to make reasonable inquiry as
to the rights of the persons in possession").
Here, as Blue Mountain points out, Page has provided
"no insight into what said 'inquiry would reveal.'" The record
reflects that at the time Blue Mountain purchased the Property,
there was no pending litigation filed by Page relating to the
Property.5/ It is also undisputed that Page had not filed a lis
pendens or taken any other action that could have provided notice
to Blue Mountain or others that Page had any claim or interest in
the Property. See Mount, 2021 WL 944203, at *6. It was two
weeks after Blue Mountain purchased the Property, on June 18,
2013, when Page filed a complaint against BNYM in the Circuit
Court, initiating Civil No. 13-1-0698.6/ Based on the undisputed
facts, Page's possession of the Property at the time of sale did
not give Blue Mountain constructive notice of any claims or
interests by Page in the Property. Accordingly, the Circuit
Court did not err in concluding that Blue Mountain was a bona
fide purchaser for value.

BUYER UNDERSTANDS THAT THE PROPERTY MAY BE OCCUPIED AND IN
THE PHYSICAL POSSESSION OF A THIRD-PARTY OR SUBJECT TO
CLAIMS THEREFORE. . . .
5/
We take judicial notice of the Circuit Court's docket entries and
records in Civil No. 11-1-0569, indicating that: (1) On August 24, 2011, BNYM
filed an ejectment action against Page; (2) On September 22, 2011, Page filed
a counterclaim and third-party complaint; (3) On April 4, 2012, the parties
filed a stipulation dismissing Page's counterclaim and third-party complaint
pursuant to HRCP Rule 41(c); and (4) On May 29, 2013, the Circuit Court
entered an order dismissing the complaint pursuant to then-Rules of the
Circuit Courts Rule 12(q). It thus appears that Page's claims relating to the
Property had been dismissed for over a year by the time Blue Mountain acquired
the Property from BNYM.
6/
We take judicial notice of the June 18, 2013 complaint, as well as
the January 31, 2014 stipulation for voluntary dismissal of the action, filed
in Civil No. 13-1-0698.

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In light of our conclusion, we need not reach Page's
contention that the nonjudicial foreclosure conducted by BNYM was
invalid.7/
For the reasons discussed above, we affirm the
following judgments entered by the Circuit Court of the Second
Circuit: (1) the November 9, 2018 "Judgment Re: Order Granting
Plaintiff Blue Mountain Homes, LLC's Motion for Summary Judgment
[Filed July 28, 2018]"; and (2) the October 21, 2019 Amended
Judgment.

DATED: Honolulu, Hawai#i, March 23, 2023.

On the briefs:

Frederick J. Arensmeyer /s/ Katherine G. Leonard
for Defendant/Counterclaim Presiding Judge
Plaintiff-Appellant.

Matson Kelley and /s/ Keith K. Hiraoka
Alex Wilkins Associate Judge
(Law Offices of Kelley &
Wilkins)
for Plaintiff/Counterclaim /s/ Clyde J. Wadsworth
Defendant-Appellee. Associate Judge

7/
As we stated in Blue Mountain I, "this case is different from
Kondaur to the extent that the deed transferring the property to Blue Mountain
does not contain any limitations to the transfer based on any of Page's
rights, the party who was subject to the nonjudicial foreclosure." 2018 WL
2316520, at *2. In addition, because Blue Mountain established that it was a
bona fide purchaser for value, it did not bear the burden of demonstrating
that the nonjudicial foreclosure sale was conducted in a manner that was
"fair, reasonably diligent, and in good faith and that an adequate price was
procured for the property." Id. (quoting Kondaur, 136 Hawai #i at 229, 361 P.3d
at 456); see also Delapinia, 150 Hawai#i at 116, 497 P.3d at 101 (holding that
a wrongful foreclosure in violation of the power of sale is voidable, not
void).

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