Deutsche Bank National Trust Company v. Kozma. , 140 Haw. 494 ( 2017 )

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Electronically Filed
Supreme Court
SCWC-16-0000025
05-SEP-2017
09:22 AM
IN THE SUPREME COURT OF THE STATE OF HAWAII
---oOo---
________________________________________________________________
DEUTSCHE BANK NATIONAL TRUST COMPANY AS INDENTURE TRUSTEE
FOR AMERICAN HOME MORTGAGE INVESTMENT TRUST 2006-1,
MORTGAGE-BACKED NOTES, SERIES 2006-1,
Respondent/Plaintiff-Appellee,
v.
PHILIP E. KOZMA, Petitioner/Defendant-Appellant,
and E*TRADE BANK; THE ASSOCIATION OF OWNERS OF KAHALA KUA
aka KAHALA KUA COMMUNITY ASSOCIATION,
Respondents/Defendants-Appellees.
(CIVIL NO. 10-1-0686-03)
AND
THE ASSOCIATION OF OWNERS OF KAHALA KUA aka
KAHALA KUA COMMUNITY ASSOCIATION, A HAWAII NONPROFIT
CORPORATION, BY AND THROUGH ITS BOARD OF DIRECTORS,
Respondent/Plaintiff-Appellee,
v.
PHILIP E. KOZMA, Petitioner/Defendant-Appellant,
and AMERICAN HOME MORTGAGE SERVICING, INC.; E*TRADE BANK,
Respondents/Defendants-Appellees.
(CIVIL NO. 08-1-1850-09)
________________________________________________________________
SCWC-16-0000025
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-16-0000025)
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SEPTEMBER 5, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
Philip E. Kozma (“Kozma”) seeks review of the Intermediate
Court of Appeals’ (“ICA”) Order Denying Without Prejudice the
March 30, 2017 Request for Attorneys’ Fees and Costs (“order”).
This appeal is related to a foreclosure action brought by
Deutsche Bank National Trust Company As Indenture Trustee For
American Home Mortgage Investment Trust 2006-1, Mortgage-Backed
Notes, Series 2006-1 (“Deutsche Bank”). On December 22, 2015,
the Circuit Court of the First Circuit (“circuit court”) granted
Deutsche Bank’s motion for summary judgment and decree of
foreclosure, and Kozma appealed to the ICA. The ICA vacated the
circuit court’s judgment and remanded for further proceedings
after determining Deutsche Bank failed to meet its burden of
demonstrating that it was entitled to summary judgment. Kozma
then filed a “Request and Declaration of Counsel” (“request”)
seeking attorney’s fees and costs related to his appeal, which
the ICA denied after determining Kozma was not a “prevailing
party” at this point in the proceeding.
Since the ICA essentially placed Kozma “back where he
started,” there is no “prevailing party” entitled to attorney’s
fees under Hawaii Revised Statutes (“HRS”) § 607-14 (2016).
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Therefore, the ICA did not err in denying Kozma’s request for
attorney’s fees. With regard to the request for costs, however,
the ICA applied an erroneous legal standard, which resulted in
the incorrect conclusion that Kozma was not entitled to costs
pursuant to Hawai‘i Rules of Appellate Procedure (“HRAP”) Rule 39
(2016).
We accepted certiorari to clarify the law regarding
requests for appellate attorney’s fees and costs after an
appellate decision setting aside a trial court grant of summary
judgment and remanding the case for further proceedings. We
hold that when an appellate court vacates a circuit court
judgment entered in favor of a foreclosing mortgagee seeking
summary judgment, the mortgagor is not a “prevailing party”
entitled to attorney’s fees pursuant to HRS § 607-14. We
further clarify that when an appellate court vacates a circuit
court judgment entered in favor of a foreclosing mortgagee
seeking summary judgment, pursuant to HRAP Rule 39, the
appellate court must then use its discretion to determine which
party, on balance, prevailed on the appeal for the purpose of an
award of costs.
II. Background
A. Circuit court proceedings
On March 31, 2010, Deutsche Bank initiated a foreclosure
action against Kozma, alleging in its complaint that (1) it was
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the owner of the promissory note and mortgage executed by Kozma
in December 2005,1 and (2) it was entitled to foreclosure due to
Kozma defaulting on the loan. Deutsche Bank attached a copy of
the note and mortgage to the complaint, along with copies of the
assignments. In his Answer, Kozma admitted he was in default,
but countered that Deutsche Bank was not the real party-in-
interest able to initiate foreclosure proceedings because the
assignments were not valid.
Deutsche Bank then filed a “Motion for Summary Judgment As
Against All Defendants And For Interlocutory Decree of
Foreclosure” (“MSJ”). Kozma filed his memorandum in opposition,
arguing numerous genuine issues of material fact existed, such
as whether Deutsche Bank possessed the original of the documents
of the mortgage, note, and claimed assignments. The circuit
court2 granted summary judgment in favor of Deutsche Bank.
Kozma then filed a motion for reconsideration. The circuit
court granted the motion for reconsideration and denied without
prejudice Deutsche Bank’s MSJ after determining that it was
unclear whether the bankruptcy trustee for AHMAI and AHMSI’s
1
The note and mortgage were allegedly first assigned by American Home
Acceptance, Inc. (“AHMAI”) to American Home Mortgage Servicing, Inc.
(“AHMSI”) by assignment dated January 8, 2008 (“first assignment”) and
further assigned to Deutsche Bank by assignment dated March 3, 2009 (“second
assignment”). Both were recorded in Land Court. AHMAI and AHMSI had a
consolidated bankruptcy case pending at the time of the first assignment.
2
The Honorable Bert I. Ayabe presided.
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consolidated bankruptcy case had authorized the first
assignment.
Deutsche Bank later filed a Renewed Motion for Summary
Judgment (“renewed MSJ”), stating that, as the holder of the
subject promissory note, it was entitled to enforce the subject
mortgage. Deutsche Bank also asserted that AHMAI and AHMSI’s
pending bankruptcy case did not render the assignments void.
Kozma opposed the renewed MSJ. The circuit court3 granted
Deutsche Bank’s second motion for summary judgment on December
22, 2015 after it determined that Deutsche Bank was the holder
of the indorsed in-blank Note which was secured by the Mortgage
and thus, entitled to the foreclosure of its Mortgage.
Kozma appealed to the ICA.
B. ICA proceedings
The ICA reviewed Kozma’s appeal in light of this court’s
opinion in Bank of America, N.A. v. Reyes-Toledo, 139 Hawai‘i
361, 390 P.3d 1248 (2017) (holding if a foreclosing plaintiff
has not demonstrated that it possessed the note at the time it
commenced foreclosure proceedings, then a genuine issue of
material fact exists as to whether the plaintiff is entitled to
foreclose and summary judgment is inappropriate). The ICA
determined that neither the copy of the note attached to
3
The Honorable Jeannette H. Castagnetti presided.
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Deutsche Bank’s complaint nor the supporting declaration
established that Deutsche Bank possessed the note at the time it
filed its complaint. Deutsche Bank Nat’l Trust Co. v. Kozma,
CAAP-16-0000025 (Mar. 23, 2017) (mem.) at 4. The ICA concluded,
viewing the facts and inferences in the light most
favorable to Kozma, there is a genuine issue of material
fact as to whether Deutsche Bank held the subject note at
the time it filed the complaint . . . In light of this
ruling, we need not address Kozma’s other arguments.
Accordingly, the Circuit Court’s December 22, 2015 Judgment
is vacated and this case is remanded to the Circuit Court
for further proceedings.
Id. The ICA remanded the case for further proceedings so
Deutsche Bank could supplement the record to show it possessed
the note at the time it filed its complaint. Id.
C. Request for attorney’s fees and costs
Kozma then timely filed a request for attorney’s fees and
costs pursuant to HRS § 607–14 and HRAP Rule 39, seeking $440.52
in costs and $16,625.00 in attorney’s fees.
The ICA denied Kozma’s request, stating (1) “HRS § 607-14
does not provide authority for an award of fees where the First
Circuit Court judgment has been vacated and the case remanded
for further proceedings”; and (2) “appellate costs, pursuant to
HRAP 39(d), are not awardable because a prevailing party has not
been determined thus far.”
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III. Standard of Review
This court reviews an ICA order granting or denying
attorney’s fees and costs under the abuse of discretion
standard. Oahu Publ’ns, Inc. v. Abercrombie, 134 Hawai‘i 16, 22,
332 P.3d 159, 165 (2014). “[A]n abuse of discretion occurs
where the . . . court has clearly exceeded the bounds of reason
or disregarded rules or principles of law or practice to the
substantial detriment of a party litigant.” Id. (citing Ranger
Ins. Co. v. Hinshaw, 103 Hawai‘i 26, 30, 79 P.3d 119, 123
(2003)).
IV. Discussion
A. When an appellate court vacates a summary judgment entered
in favor of a foreclosing mortgagee seeking summary
judgment and remands for further proceedings, the
mortgagor is not a “prevailing party” entitled to
attorney’s fees pursuant to HRS § 607-14.
A prevailing party is entitled to attorney’s fees pursuant
to HRS § 607-14, which provides in relevant part,
In all the courts, in all actions in the nature of
assumpsit and in all actions on a promissory note or other
contract in writing that provides for an attorney’s fee,
there shall be taxed as attorneys’ fees, to be paid by the
losing party and to be included in the sum for which
execution may issue, a fee that the court determines to be
reasonable; provided that the attorney representing the
prevailing party shall submit to the court an affidavit
stating the amount of time the attorney spent on the action
and the amount of time the attorney is likely to spend to
obtain a final written judgment. . . .
It follows that the first issue this court must resolve
regarding Kozma’s request for attorney’s fees is whether Kozma
is the prevailing party on appeal. See Kaleikini v. Yoshioka,
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129 Hawai‘i 454, 460, 304 P.3d 252, 258 (2013) (“The first issue
this court must resolve regarding Kaleikini’s request for
attorney’s fees and costs is whether Kaleikini is the prevailing
party on appeal.”); see also Sierra Club v. Dep’t of Transp.,
120 Hawai‘i 181, 215, 202 P.3d 1226, 1260 (2009) (“The first
issue that must be determined regarding the fee and cost award
is whether Sierra Club was the prevailing party.”).
To determine which party “prevailed,”
the court “is required to first identify the principle
issues raised by the pleadings and proof in a particular
case, and then determine, on balance, which party prevailed
on the issues.” A party “will be deemed to be the
successful party for the purpose of taxing costs and
attorney’s fees” “where [that] party prevails on the
disputed main issue, even though not to the extent of his
original contention[.]”
Kaleikini, 129 Hawai‘i at 461, 304 P.3d at 259 (internal
citations omitted). However, a prevailing party cannot always
be determined following the adjudication of an appeal. See Sapp
v. Wong, 62 Haw. 34, 42, 609 P.2d 137, 142 (1980) (“[W]e must
reverse this case on appeal, vacate the judgment and remand for
a new trial. Hence, appellants cannot at this time be
considered to be the losing parties[.]”). When a judgment on
appeal “merely vacates a trial court judgment unfavorable to [a
party] and places [that party] back where the [party] started,”
the judgment “does not, in itself, provide any grounds for an
award of attorney’s fees to the [party].” Nelson v. Univ. of
Hawai‘i, 99 Hawai‘i 262, 266, 54 P.3d 433, 437 (2002).
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On certiorari, Kozma argues that he prevailed on a disputed
main issue because he sought to have the decree of foreclosure
vacated and remanded to the trial court. Kozma alleged in his
opposition to the renewed MSJ and on appeal to the ICA that
Deutsche Bank was not entitled to summary judgment as a matter
of law because a genuine issue of material fact existed as to
whether the assignments were valid.
The ICA did not address the issue of the validity of the
assignments nor any of the other issues raised by Kozma when
disposing of Kozma’s appeal. Instead, the ICA only addressed
whether, under the requirement recently iterated in Reyes-
Toledo, Deutsche Bank had met its burden of demonstrating that
it was entitled to summary judgment as a holder of the note at
the time it filed the foreclosure complaint. Kozma, mem. op. at
4. After determining that, in light of Reyes-Toledo, a genuine
issue of material fact existed as to whether Deutsche Bank held
the subject note at the time it filed the complaint, the ICA
vacated the circuit court judgment and remanded for further
proceedings. Id. This served the procedural function of
putting Kozma “back in the place he started” with regard to the
foreclosure action without addressing a “disputed main issue.”
Therefore, Kozma is not a “prevailing party” and is not entitled
to attorney’s fees under HRS § 607-14. Thus, the ICA did not
err in denying Kozma’s request for attorney’s fees.
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The facts in Kozma’s appeal are common in requests for fees
and costs following appeals related to foreclosure proceedings.
Thus, we now clarify that when the ICA vacates a summary
judgment entered in favor of a foreclosing mortgagee and remands
the case for further proceedings, the mortgagor is not a
“prevailing party” entitled to attorney’s fees pursuant to HRS §
607-14.
B. The ICA applied an erroneous legal standard in its order
denying Kozma’s request for costs.
On certiorari, Kozma argues that he is the prevailing party
entitled to costs pursuant to HRAP Rule 39.
HRAP Rule 39 provides, in relevant part, “if a judgment is
affirmed in part and reversed in part, or is vacated, or a
petition granted in part and denied in part, the costs shall be
allowed only as ordered by the appellate court.” HRAP Rule
39(a) (2016). “The intent of [HRAP Rule 39] is to allow the
party prevailing on appeal to recover those costs reasonably
incurred in prosecuting the appeal.” Jou v. Argonaut Ins. Co.,
133 Hawai‘i 471, 477, 331 P.3d 449, 455 (2014) (quoting Leslie v.
Estate of Tavares, 93 Hawai‘i 1, 7, 994 P.2d 1047, 1053 (2000))
(emphasis in original). To determine which party prevailed on
appeal, the appellate court may “evaluat[e] the remedy sought by
the appellant in conjunction with the remedy granted on appeal,”
or “determine, on balance, which party prevailed on the
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[disputed main] issues.” Jou, 133 Hawai‘i at 477-78, 331 P.3d at
455-56 (citations and emphases omitted).
Hawaiian Ass’n of Seventh-Day Adventists v. Wong, 130
Hawai‘i 36, 50, 305 P.3d 452, 466 (2013), illustrates the
application of HRAP Rule 39 when a summary judgment is vacated
and remanded. A dispute arose between Seventh-Day Adventists
(“SDA”) and Wong regarding whether a lease agreement prohibited
certain uses of the cabins on the leased property. Seventh-Day
Adventists, 130 Hawai‘i at 43, 46, 305 P.3d at 459, 462. Both
parties filed motions for summary judgment and the trial court
granted motions for summary judgment to each party on different
counts. 130 Hawai‘i at 43, 305 P.3d at 459. SDA appealed from
one grant of summary judgment in favor of Wong; Wong cross-
appealed from three of the grants of summary judgment in favor
of SDA. Id. The ICA vacated one of the trial court’s grants of
summary judgment for SDA and affirmed the trial court’s decision
as to the remaining grants of summary judgment. 130 Hawai‘i at
44, 305 P.3d at 460. SDA requested fees and costs related to
the appeal, and the ICA granted an award of costs after
determining SDA had prevailed on the appeal. Id. On
certiorari, this court determined that an ambiguity in the lease
at issue meant several of the trial court’s grants of summary
judgment were inappropriate and vacated the trial court’s
decisions on these counts. 130 Hawai‘i at 49, 305 P.3d at 465.
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As both parties had stipulated that the lease was unambiguous,
this court “[concluded] that neither party [had] prevailed on
the appeal” and vacated the ICA’s award of costs for SDA. 130
Hawai‘i at 46, 50, 305 P.3d at 462, 466 (emphasis added).
Seventh-Day Adventists helps elucidate the application of
HRAP Rule 39 when a grant of summary judgment is vacated and
remanded, as does Jou, 133 Hawai‘i 471, 331 P.3d 449. The
holding in Jou established that an appellate court should not
look outside the appellate proceedings when determining an award
of costs pursuant to HRAP Rule 39. Id. In Jou, this court
vacated the ICA’s order denying costs after determining the ICA
erroneously looked at the entire proceeding when determining a
prevailing party for an award of costs pursuant to HRAP Rule 39.
133 Hawai‘i at 480, 331 P.3d at 458. Jou appealed from two
circuit court orders granting motions in favor of Hawai‘i
Employers Medical Insurance Company, one of which the ICA
vacated and remanded for further proceedings. 133 Hawaiʻi at
473-74, 331 P.3d 451-52. Jou then requested costs related to
that order pursuant to HRAP Rule 39. 133 Hawai‘i at 475, 331
P.3d at 454. The ICA denied Jou’s request and concluded,
“[a]ppellate costs are not awardable absent a prevailing party
in the case.” Id. (emphasis added). On certiorari, this court
determined that, contrary to the legal standard applied by the
ICA, the standard iterated in Seventh-Day Adventists required
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the ICA to determine which party prevailed on the appeal for the
purpose of awarding costs under HRAP Rule 39. Jou, 133 Hawai‘i
at 480, 331 P.3d at 458. After applying the correct legal
standard, this court concluded that since the ICA “granted Jou
the sole remedy he sought,” he was the prevailing party on
appeal entitled to costs pursuant to HRAP Rule 39. 133 Hawai‘i
at 481, 331 P.3d at 459.
The ICA’s order here states that costs are not awardable
because “a prevailing party has not been determined thus far,”
and cites to Seventh-Day Adventists. However, this case is
distinguishable from Seventh-Day Adventists because in the
latter, neither party prevailed on appeal since summary
judgments for each party were vacated on a ground that both
parties had stipulated did not exist. This case is instead very
similar to Jou. As it did in Jou, the ICA looked beyond the
appellate procedure to determine whether there was a prevailing
party entitled to HRAP Rule 39 costs. We use this opportunity
to make explicit that when the ICA vacates a circuit court
judgment entered in favor of a foreclosing mortgagee seeking
summary judgment, then the appellate court must use its
discretion to determine which party prevailed on the appeal for
the purpose of an award of costs pursuant to HRAP Rule 39.
Since the ICA vacated the grant of summary judgment for Deutsche
Bank, which was the remedy Kozma sought, it follows that Kozma
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was the successful party on appeal entitled to HRAP Rule 39
costs.
V. Conclusion
For the aforementioned reasons, we affirm the portion of
the judgment denying attorney’s fees pursuant to HRS § 607-14
and vacate the portion of the ICA’s judgment denying costs
pursuant to HRAP Rule 39.
R. Steven Geshell /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
J. Blaine Rogers
and Lori King Stibb /s/ Sabrina S. McKenna
for respondent/
plaintiff-appellee /s/ Richard W. Pollack
Deutsche Bank National
Trust Company /s/ Michael D. Wilson
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