Bank of New York Mellon v. Duncan

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
05-JUN-2023
08:04 AM
Dkt. 62 MO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI‘I

THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK AS TRUSTEE
FOR THE CERTIFICATEHOLDERS CWABS, INC. ASSET-BACKED
CERTIFICATES, SERIES 2004-12, Plaintiff-Appellee, v.
CHRISTIAN EDWARD DUNCAN; FATIMA DUNCAN, Defendants-Appellants,
COUNTRYWIDE HOME LOANS, INC.; MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., AS NOMINEE FOR COUNTRYWIDE HOME LOANS, INC.,
Defendants-Appellees, JOHN DOES 1-20; JANE DOES 1-20;
DOE CORPORATIONS 1-20; DOE ENTITIES 1-20;
AND DOE GOVERNMENTAL UNITS 1-20, Defendants.

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CIVIL NO. 16-1-0532(3))

MEMORANDUM OPINION
(By: Leonard, Presiding Judge, Nakasone and McCullen, JJ.)

Defendants-Appellants Christian Edward Duncan and

Fatima Duncan (Duncans) appeal from the Circuit Court of the

Second Circuit's July 26, 2019 (1) "Findings of Fact,

Conclusions of Law and Order Granting [Plaintiff-Appellee Bank
NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

of New York Mellon's (Bank of New York) 1] Motion for Summary

Judgment Against All Defendants and for Interlocutory Decree of

Foreclosure," and (2) Judgment entered in favor of Bank of New

York and against the Duncans. 2

On appeal, the Duncans argue that the circuit court

erred in granting summary judgment because (1) Bank of New York

did not establish it had standing when it commenced the action,

(2) Bank of New York did not establish foundation for the

business records, and (3) Bank of New York's witness was not

qualified to verify prior servicers' incorporation of records.

The standing issue is dispositive; we vacate and remand.

I. BACKGROUND

On October 10, 2016, Bank of New York filed a

complaint (Complaint), seeking to foreclose on the Duncans' real

property in Lahaina, Maui (Property). In the Complaint, Bank of

New York averred that it "is the current holder of the Note with

standing to prosecute the instant action and the right to

foreclose the subject Mortgage" and Bank of New York's

"foreclosure counsel is currently in rightful possession of the

endorsed Note[.]" Bank of New York did not include an original

or photocopy of the Note with the Complaint.

1 Bank of New York's title is Bank of New York Mellon FKA the Bank of
New York as Trustee for the Certificateholders CWABS, Inc. Asset-Backed
Certificates, Series 2004-12.

2 The Honorable Joseph E. Cardoza presided.

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Over two years later, in January 2019, Bank of New

York moved for summary judgment, averring that "no genuine issue

of material fact exists and that [it] is entitled to judgment as

a matter of law[.]" In its memorandum supporting its motion,

Bank of New York stated that "[a] true and correct copy of the

Note is attached as Exhibit '1.'" Bank of New York also stated

that Exhibit 2 was "[a] true and correct copy of the bailee

letter reflecting possession of the original Note, indorsed in

blank, by [its] attorneys as of the filing date of the

Complaint." Bank of New York claimed that when the Complaint

was filed on October 10, 2016, it "was entitled to enforce the

Note, indorsed in blank, with standing to bring and prosecute

this action."

Attached to the motion was a declaration executed on

November 27, 2018, by Elizabeth Gonzales (Gonzales), an

"authorized signer of Carrington Mortgage Services, LLC,

('Carrington'), which is [Bank of New York's] servicing agent

and attorney-in-fact for the subject loan . . ." (Gonzales

Declaration). Gonzales stated that Bank of New York "has

possession of the Note with standing to prosecute the instant

action and the right to foreclose the subject Mortgage. The

original Note has been indorsed in blank." Gonzales further

stated that Bank of New York "caused the original Note, indorsed

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in blank, to be delivered to [its] attorneys, TMLF Hawaii LLLC,

as agent for the" Bank of New York.

Gonzales then stated that "Carrington's records

indicate that [Bank of New York], by and through counsel, had

possession of the original Note, indorsed in blank, prior to

10/10/2016, the date of the filing of the Complaint for Mortgage

Foreclosure in this matter." Gonzales relied on the bailee

letter, claiming it "reflect[s] possession of the original Note,

indorsed in blank, by [Bank of New York's] attorneys" and noted

it was attached as Exhibit 2.

Exhibit 1 is a photocopy of the Note naming Full

Spectrum Lending as the lender, with an indorsement from Full

Spectrum Lending to Countrywide Home Loans and a blank

indorsement from Countrywide Home Loans. These indorsements are

not dated.

Exhibit 2 is the bailee letter from the Bank of New

York's attorney to Ditech Financial LLC dated April 15, 2016,

which was approximately six months prior to the filing of the

Complaint. The bailee letter stated, "We request the release of

the following Collateral Documents checked below for the purpose

of pursuing a foreclosure or legal action . . ." and the box for

"Original . . . Note/Allonge(s) and POA as applicable" was

checked.

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During the hearing on Bank of New York's motion for

summary judgment, counsel briefly discussed the bailee letter,

but gave no specific explanation regarding how the bailee letter

showed that Bank of New York possessed the original Note. As to

the Duncans' standing argument, Bank of New York did not respond

except to rest on its pleadings.

The circuit court granted Bank of New York's motion

for summary judgment and interlocutory decree of foreclosure,

and entered findings of fact and conclusions of law. The

Duncans timely appealed.

II. STANDARD OF REVIEW

"We review a trial court's grant of summary judgment

de novo." State ex. rel. Shikada v. Bristol-Myers Squibb Co.,

152 Hawai‘i 418, 439, 526 P.3d 395, 416 (2023) (citation

omitted). "To prevail, the moving party must demonstrate that

there's no genuine dispute about the material facts and the

'undisputed facts' show the court should grant summary judgment

as a matter of law." Id. at 442, 526 P.3d at 419. "A court

must consider the evidence in the light most favorable to the

non-moving party at summary judgment." Id. (citation and

internal quotation marks omitted).

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III. DISCUSSION

Again, the Duncans argue, inter alia, that Bank of New

York did not establish it had standing when it commenced this

action.

"A foreclosing plaintiff's burden to prove entitlement

to enforce the note overlaps with the requirements of standing

in foreclosure actions as standing is concerned with whether the

parties have the right to bring suit." Bank of Am., N.A. v.

Reyes-Toledo, 139 Hawai‘i 361, 367, 390 P.3d 1248, 1254 (2017)

(cleaned up and citations omitted). "Accordingly, in

establishing standing, a foreclosing plaintiff must necessarily

prove its entitlement to enforce the note as it is the default

on the note that gives rise to the action." Id. at 368, 390

P.3d at 1255 (citing Hawaii Revised Statutes § 490:9-601 (2008))

(providing for a secured party's rights after default)). Thus,

"a foreclosing plaintiff must establish its standing to bring a

lawsuit at the commencement of the proceeding, not merely at the

summary judgment stage." Deutsche Bank Nat'l Tr. Co. v. Yata,

152 Hawai‘i 322, 335, 526 P.3d 299, 312 (2023) (citations

omitted).

In its motion for summary judgment, Bank of New York

claimed that it possessed the Note at the time the Complaint was

filed and submitted the following to support its claim: (1) the

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Gonzales Declaration; (2) a photocopy of the Note; and (3) the

bailee letter.

The Gonzales Declaration stated that Bank of New York,

through its counsel, possessed the Note "prior to 10/10/2016,

the date of the filing of the Complaint . . . ." Gonzales

relied on the bailee letter stating, "A true and correct copy of

the bailee letter reflecting possession of the original Note,

indorsed in blank, by [Bank of New York's] attorneys is attached

as Exhibit '2' . . . ."

The bailee letter, however, did not establish that

Bank of New York was in possession of the Note when the

Complaint was filed. Assuming, without deciding, that the

bailee letter was admissible as evidence, it merely requested

that the Note be sent to Bank of New York's attorney. There was

no language in the bailee letter confirming Bank of New York's

attorney received, or was in possession of, the Note. And

although Bank of New York provided a photocopy of the Note, the

blank indorsement was undated and the Note alone provided no

indication that Bank of New York possessed it at the time the

Complaint was filed.

In short, Bank of New York did not establish that it

was entitled to judgment as a matter of law. To the contrary,

in viewing this evidence in the light most favorable to the

Duncans, there was a genuine issue as to whether Bank of New

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York possessed the Note at the time the Complaint was filed.

The circuit court, therefore, erred in granting Bank of New

York's motion for summary judgment. Accordingly, we need not

address the Duncans' remaining issues.

IV. CONCLUSION

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

July 26, 2019 "Findings of Fact, Conclusions of Law and Order

Granting [Bank of New York's] Motion for Summary Judgment

Against All Defendants and for Interlocutory Decree of

Foreclosure" and Judgment, and remand this case for further

proceedings.

DATED: Honolulu, Hawai‘i, June 5, 2023.

On the briefs: /s/ Katherine G. Leonard
Presiding Judge
Matthew K. Yoshida,
for Defendants-Appellants. /s/ Karen T. Nakasone,
Associate Judge
Charles R. Prather,
Robin Miller, /s/ Sonja M.P. McCullen
Sun Young Park, Associate Judge
Peter T. Stone,
for Plaintiff-Appellee.

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