Deutsche Bank v. Scilla

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
24-SEP-2024
08:00 AM
Dkt. 119 SO

NOS. CAAP-XX-XXXXXXX AND CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI‘I

DEUTSCHE BANK AND TRUST COMPANY AMERICAS AS INDENTURE
TRUSTEE FOR AMERICAN HOME MORTGAGE INVESTMENT
TRUST 2006-2, MORTGAGE-BACKED NOTES, SERIES 2006-2,
Plaintiff-Appellee,
v.
JAMES ANTHONY SCILLA, Defendant-Appellant,
and
AMERICAN HOME MORTGAGE; STATE OF HAWAI‘I - DEPARTMENT
OF TAXATION; ASSOCIATION OF APARTMENT OWNERS OF
KO OLINA FAIRWAYS, Defendants-Appellees,
and
JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
GOVERNMENTAL UNITS 1-50, Defendants

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 1CC141000861)

SUMMARY DISPOSITION ORDER
(By: Leonard, Acting Chief Judge, Hiraoka and Nakasone, JJ.)
NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

In this consolidated appeal, Defendant-Appellant James
Anthony Scilla (Scilla) appeals from the Circuit Court of the
First Circuit's (Circuit Court) 1 April 13, 2020 Judgment entered
on a decree of foreclosure and its March 24, 2022 Judgment
entered on an order confirming the subsequent foreclosure sale.
Scilla raises ten points of error in which he contends the
Circuit Court erred in granting a foreclosure decree in favor of
Plaintiff/Counterclaim Defendant-Appellee Deutsche Bank and
Trust Company Americas as Indenture Trustee for American Home
Mortgage Investment Trust 2006-2, Mortgage-Backed Notes, Series
2006-2 (DB), and in confirming the subsequent foreclosure sale,
because DB failed to prove (1) that it had standing to foreclose
in its capacity as trustee or (2) that it was validly assigned
the subject mortgage (Mortgage). 2
Upon careful review of the record and the briefs
submitted, and having given due consideration to the arguments
advanced and the issues raised by the parties, we resolve
Scilla's arguments as follows, and affirm.
We review the grant of summary judgment de novo. U.S.
Bank N.A. v. Mattos, 140 Hawai‘i 26, 30, 398 P.3d 615, 619
(2017). To establish standing to foreclose, the "plaintiff must
necessarily prove its entitlement to enforce the [promissory]
note." Bank of Am., N.A. v. Reyes-Toledo, 139 Hawai‘i 361, 368,
390 P.3d 1248, 1255 (2017) (citation omitted). "Whether a party
is entitled to enforce a promissory note is determined by
application of [Hawaii Revised Statutes (HRS)] § 490:3-301

1 The Honorable Jeffrey P. Crabtree presided.

2 For clarity, we have consolidated the seven points raised in
CAAP-XX-XXXXXXX, the foreclosure appeal, with the three points raised in
CAAP-XX-XXXXXXX, the appeal from the order confirming the sale, into two main
contentions upon which all of Scilla's points rest.

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

. . . ." Id. at 369, 390 P.3d at 1256. HRS § 490:3-301 (2008)
provides that: "'Person entitled to enforce' an instrument
means (i) the holder of the instrument." When a note is
indorsed in blank, it "becomes payable to bearer and may be
negotiated by transfer or possession alone." Reyes-Toledo,
139 Hawai‘i at 370, 390 P.3d at 1257 (citation omitted). Thus,
when a lender forecloses on a mortgage secured by a blank-
indorsed note, the lender must establish that it held the note
at the time it filed the complaint. Id.
Here, the record shows that DB established standing to
foreclose. Notably, Scilla does not dispute that the subject
promissory note (Note) is indorsed in blank or that DB
physically possessed it at the time it filed the April 7, 2014
foreclosure complaint, but only argues that the indorsement is
not dated. See U.S. Bank Tr., N.A. as Tr. for LSF9 Master
Participation Tr. v. Verhagen, 149 Hawai‘i 315, 328 n.11,
489 P.3d 419, 432 n.11 (2021) ("[When] standing is based on
possession of a Note indorsed in blank, the admissible evidence
must also show that the blank indorsement occurred before the
initiation of the suit.") (citation omitted). DB produced
testimony in the form of a declaration by Sony Prudent
(Prudent), an employee of Ocwen Financial Corporation, "whose
indirect subsidiary" is the current loan servicer. Prudent
testified that, in June 2006, the subject loan was securitized
and transferred to the trust identified in the caption pursuant
to the terms of a mortgage loan purchase agreement, and as part
of the securitization, the original Note, indorsed in blank, was
"deliver[ed] to, and deposit[ed] with" DB as trustee. Scilla
fails to demonstrate that such testimony is inadmissible. 3 Thus,

3 Scilla's argument, that a foreclosing lender must also plead and
prove its capacity to act as trustee to establish standing to foreclose a

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

the record is sufficient for the Circuit Court to conclude the
Note was indorsed in blank when DB took possession of it, prior
to filing the Complaint. Cf. Reyes-Toledo, 139 Hawai‘i at 370,
390 P.3d at 1257 (observing a genuine issue of fact as to
standing because the blank-indorsed promissory note was not
dated and the declaration supporting the summary judgment motion
failed to "indicate when the indorsement occurred"). Therefore,
the Circuit Court did not err in concluding DB has standing to
foreclose as the holder of the Note under HRS § 490:3-301(i).
As to Scilla's argument that DB was not validly
assigned the Mortgage, the Circuit Court correctly concluded
that Scilla is barred from relitigating the validity of the
assignment of Mortgage to DB under principles of res judicata
and/or collateral estoppel, as that issue was already decided by
the United States District Court for the District of Hawai‘i in
Scilla v. Deutsche Bank Tr. Co. Americas, Civ. No. 11-00061 BMK.
Further, DB's possession of the blank-indorsed Note demonstrates
it is entitled to foreclose on the Mortgage, as the transfer of
a blank-indorsed promissory note also transfers the right to
enforce the mortgage. See HRS § 490:9-203(g) (2008)("The
attachment of a security interest in a right to payment or
performance secured by a security interest or other lien on
personal or real property is also attachment of a security
interest in the security interest, mortgage, or other lien.");
Reyes-Toledo, 139 Hawai‘i at 371 n.17, 390 P.3d at 1258 n.17
(stating that "the security follows the debt") (citations

Mortgage and Note held in trust, lacks merit. None of the cases Scilla cites
stand for that proposition. Rather, each case turned on whether the
foreclosing lender established standing by proving it was the note holder
when the complaint was filed, or that it had authority to act on behalf of
the holder or party to whom the note was specially indorsed.

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

omitted); Agard v. Deutsche Bank Nat. Tr. Co., No.
CAAP-XX-XXXXXXX, 2015 WL 337254, at *1 (Haw. App. Jan. 26, 2015)
(holding that the mortgage was automatically transferred with
the underlying note).
For these reasons, we affirm the April 13, 2020
Judgment and March 24, 2022 Judgment, both entered by the
Circuit Court of the First Circuit.
DATED: Honolulu, Hawai‘i, September 24, 2024.
On the briefs:
/s/ Katherine G. Leonard
R. Steven Geshell,
Acting Chief Judge
for Defendant-Appellant
/s/ Keith K. Hiraoka
Jade Lynne Ching,
Associate Judge
for Plaintiff-Appellee
/s/ Karen T. Nakasone
Associate Judge

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