James B. Nutter & Company v. Namahoe, Sr. ( 2023 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
31-MAR-2023
07:46 AM
Dkt. 24 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
JAMES B. NUTTER & COMPANY,
Respondent/Plaintiff-Appellee,
vs.
ELTON LANE NAMAHOE, SR.,
Petitioner/Defendant-Appellant,
and
SECRETARY OF HOUSING AND URBAN DEVELOPMENT,
Respondent/Defendant-Appellant.
SCWC-XX-XXXXXXX
CERTIORARI FROM THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 12-1-0113)
MARCH 31, 2023
RECKTENWALD, C.J., NAKAYAMA, McKENNA, WILSON, AND EDDINS, JJ.
OPINION OF THE COURT BY RECKTENWALD, C.J.
I. INTRODUCTION
Elton Lane Namahoe, Sr. lost his home to a judicial
foreclosure of a reverse mortgage after he allegedly failed to
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make $500.00 worth of repairs. The lender, James B. Nutter
Company (JBNC), brought a foreclosure proceeding against Namahoe
for allegedly “default[ing] in the observance and performance of
the terms, covenants and conditions [of his mortgage] by failing
to repair the property as required by the Repair Rider to the
Loan Agreement in a timely manner.”
In the Circuit Court of the Third Circuit, JBNC filed
a Motion for Summary Judgment and Decree of Foreclosure against
Namahoe, which the court granted. More than two and a half
years after the foreclosure, Namahoe filed a Hawaiʻi Rules of
Civil Procedure (HRCP) Rule 60(b) (2006) Motion for Relief from
Judgment, specifically citing subsections 60(b)(3), (4), and
(6). The circuit court denied these motions, in addition to
Namahoe’s subsequently filed HRCP Rule 59 (2000) Motion for
Reconsideration. 1
On appeal to the Intermediate Court of Appeals (ICA),
Namahoe argued that JBNC sought foreclosure on impermissible
grounds and that: (1) the circuit court abused its discretion in
denying Namahoe’s HRCP Rule 60(b)(3) motion because JBNC and its
attorneys committed fraud in seeking the foreclosure; (2) under
HRCP Rule 60(b)(4), the circuit court’s judgment was void
because he was not properly served; (3) under HRCP Rule
1 The Honorable Greg K. Nakamura presided.
2
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60(b)(6), JBNC committed fraud on the court by failing to
disclose the facts supporting foreclosure and by failing to
satisfy statutory attorney affirmation requirements; and (4) the
circuit court erred in denying his HRCP Rule 59 Motion for
Reconsideration.
The ICA affirmed the circuit court’s judgment in favor
of JBNC. James B. Nutter & Co. v. Namahoe, No. CAAP-XX-XXXXXXX,
2022 WL 899896 at *12 (App. March 28, 2022). In his application
for certiorari, Namahoe asks this court to vacate the ICA’s
judgment affirming the circuit court’s denial of his motions
brought under HRCP Rule 60(b) and Rule 59.
We resolve Namahoe’s appeal as follows. We agree with
the ICA that the circuit court did not err in finding that
Namahoe was time-barred from raising a HRCP Rule 60(b)(3) motion
and that, under HRCP Rule 60(b)(4), the judgment was not void,
because he was personally served. Further, the ICA and circuit
court did not err in rejecting Namahoe’s Rule 59 Motion for
Reconsideration.
But we conclude that the ICA erred in affirming the
circuit court’s denial of Namahoe’s request for relief under
HRCP Rule 60(b)(6). Specifically, we hold that there are
grounds for relief both on a fraud on the court theory and under
the equitable principles governing foreclosure. JBNC submitted
a materially deficient attorney affirmation to the circuit court
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in support of its motion for summary judgment, and the balance
of equities weighed strongly against foreclosure. Accordingly,
we reverse the circuit court’s denial of Namahoe’s HRCP Rule
60(b)(6) motion and vacate the Decree of Foreclosure insofar as
it would otherwise preclude Namahoe from asserting a wrongful
foreclosure counterclaim.
II. BACKGROUND
A. Foreclosure and Circuit Court Proceedings
This case centers around a home equity conversion
mortgage (reverse mortgage) 2 on Elton Lane Namahoe, Sr.’s home,
which is located in Kurtistown, Hawaiʻi. Namahoe’s lender, JBNC,
through its former attorneys Clay Chapman Iwamura Pulice &
Nervell (Clay Chapman), brought a foreclosure action against
Namahoe for allegedly “default[ing] in the observance and
performance of the terms, covenants and conditions by failing to
repair the property as required by the Repair Rider to the Loan
Agreement in a timely manner.” Specifically, JBNC sought
foreclosure based on Namahoe’s alleged failure to complete
$500.00 worth of repairs to his home. 3
2 Although the loan at issue is more precisely a home equity
conversion mortgage, this opinion refers to the broader term “reverse
mortgage” for the sake of consistency with the parties’ briefs, circuit court
orders, and ICA opinion.
3 Lenders are required to set aside 150% of the estimated cost of
repairs. 24 C.F.R. § 206.19(f)(1) (2009). Because the Repair Rider set
(continued . . .)
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1. Reverse mortgage loan agreement
On October 19, 2009, Namahoe executed a promissory
note (Note) in favor of JBNC for the maximum principal sum of
$189,000.00. The agreement also included a home equity
conversion loan agreement (Loan Agreement) and a Repair Rider.
Namahoe also executed, as mortgagor, an adjustable rate home
equity conversion mortgage (Security Instrument) securing the
Note and Loan Agreement and incorporating his property located
at 16-1218 ʻŌpeʻapeʻa Road, Kurtistown (Property) into the
mortgage. According to the Loan Agreement, out of a “Principal
Limit” of $67,536.00, Namahoe was to receive a “Loan Advance” of
$52,462.48. The remaining balance was to cover the “Servicing
Fee Set Aside,” closing costs, and funds designated for repairs.
2. Alleged breach of the Repair Rider
JBNC alleged that Namahoe “defaulted in the observance
and performance of the terms, covenants and conditions” of the
Repair Rider by failing to make timely repairs on the Property.
The Repair Rider, in relevant part, states:
THIS REPAIR RIDER is made on October 19, 2009,
and is incorporated into and shall be deemed to
supplement the Loan Agreement of the same date made
by the undersigned Lender and the undersigned
Borrower and the Secretary of Housing and Urban
Development (“Secretary”).
(. . . continued)
aside a total of $750.00 for repairs, this indicates an estimated $500.00
cost of repairs.
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I. Lender’s Promises
A. The Lender shall set aside $750.00 from the
initial Principal Limit under the Loan
Agreement to be used for the purpose of
bringing the Property up to the property
standards required by the Secretary [of Housing
and Urban Development (HUD)] by repairing:
The hall and carport ceiling shows evidence of
water stains due to roof leak. The Front stair
rail showed evidence of water rot. All to be
repaired.
. . .
C. The Lender shall require one or more
inspections by a HUD-approved inspector during
the course of the repair work. The Lender
shall not release any funds for work which is
not complete and which is not approved by a
HUD-approved inspector. The Lender certifies
by executing this Repair Rider that the repairs
which are funded under this Repair Rider will
be completed in a manner to meet HUD property
standards required by the Secretary as
determined by a HUD-approved inspector.
. . .
E. Until a HUD-approved inspector finds that
all repairs required by Section I.A. of this
Repair Rider have been completed in a
satisfactory manner, the Lender shall not
release funds in excess of (i) the total value
of work satisfactorily completed, and (ii) the
value of materials or equipment delivered to,
and suitably stored at, the site but not yet
incorporated in the work, less (iii) ten
percent heldback, less (iv) prior advances
under this Repair Rider.
II. Borrower’s Promises
A. The Borrower will complete all repairs
required by Section I.A. of this Repair Rider
so that the Property meets the property
standards required by the Secretary as
determined by a HUD-approved inspector.
B. Borrower shall cause work to begin on
October 19, 2009. Borrower shall have work
completed by October 18, 2010. Work is to be
performed with reasonable diligence. Should
Borrower fail to comply with these terms, until
all repair work is satisfactorily completed
Borrower shall not request and Lender shall not
make any further payments under the Loan
Agreement except for payment of repairs
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required by Section I.A. of this Repair Rider
and Loan Advances required under Section 4.5.
of the Loan Agreement.
. . .
(Emphasis added.)
As a result of Namahoe’s alleged failure to complete
the enumerated repairs, JBNC demanded immediate payment in full
of all outstanding principal and accrued interest arising from
the reverse mortgage. 4 Although the Repair Rider does not
include an acceleration provision, section 9(b) of the Security
Instrument states that JBNC may require “immediate payment in
full of all sums secured by this Security Instrument, upon
approval by an authorized representative of the Secretary, if: .
. . (iii) [a]n obligation of the Borrower under this Security
Instrument is not performed.” Thus, a failure to satisfy the
duty to repair under the Repair Rider may qualify as a
sufficient breach to require immediate payment.
JBNC was required to notify Namahoe and the Secretary
of HUD (Secretary) if the loan ever became due and payable under
9(b), and was limited in its right to pursue foreclosure by the
terms of the Security Instrument:
4 Compliance with the Repair Rider was to be determined by a
HUD-approved inspector. As set forth below, the record does not establish
whether any HUD-approved inspectors surveyed the repairs or reported any
deficiencies with Namahoe’s repair work.
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Lender shall not have the right to commence
foreclosure until Borrower has had thirty (30) days
after notice to either:
(i) Correct the matter which resulted in the
Security Instrument coming due and payable;
or
(ii) Pay the balance in full; or
(iii) Sell the Property for the lesser of the
balance or 95% of the appraised value and
apply the net proceeds of the sale toward
the balance; or
(iv) Provide the Lender with a deed in lieu of
foreclosure.
The Loan Agreement and Note outlined the process for
notice. The Loan Agreement provided, in relevant part:
6.3. Notices. Any notice to Borrower provided for in this
Loan Agreement shall be given by delivering it or by
mailing it by first class mail unless applicable law
requires use of another method. The notice shall be
directed to the property address shown in the Security
Instrument or any other address all Borrowers jointly
designate.
The Note provided:
9. GIVING OF NOTICES
Unless applicable law requires a different method, any
notice that must be given to Borrower under this Note will
be given by delivering it or by mailing it by first class
mail to Borrower at the Property address above or at a
different address if Borrower has given Lender a notice of
Borrower’s different address.
(Emphases added.)
JBNC mailed a letter to Namahoe’s P.O. Box on
November 16, 2011 titled “Notice of Intent to Foreclose.” The
letter stated:
Our records reflect that a default now exists on the
above referenced loan. The default consists of the failure
to repair the property as required by the Repair Rider to
the Loan Agreement in a timely manner. As a result your
loan has been called due and payable because of non-
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compliance with the Deed of Trust/Mortgage securing the
Promissory Note underlying this home loan.
. . .
This letter serves as further notice that [JBNC]
intends to enforce the provisions of the Note and Deed of
Trust (Mortgage). Unless you cure the default on or before
30 days from the date of this letter, this shall serve as
further notice to you that immediately thereafter, and
without further demand or notice to you, [JBNC] shall
accelerate the entire amount due of both principal and
interest, which shall become immediately due and payable,
invoke any remedies provided for in the Note and Deed of
Trust (Mortgage), including but not limited to the
foreclosure sale of the property.
On April 6, 2012, JBNC sent another letter to Namahoe
at his P.O. Box. It stated, “[y]ou did not comply with the
Repair Rider to the Loan Documents in that you failed to repair
the property in a timely manner. Therefore, the Lender has
called the loan immediately due and payable.”
Namahoe’s alleged violation of the Repair Rider
triggered the acceleration of his total remaining balance.
Thus, for a $500.00 deficiency, Namahoe was presented with a
bill for $75,946.58 plus interest, and he ultimately lost his
home.
3. Foreclosure proceeding in the circuit court
On March 6, 2012, JBNC filed its foreclosure complaint
against Namahoe in the Circuit Court of the Third Circuit.
Robert A. Estacion, a civil process server, failed to serve the
complaint on Namahoe during his first three attempts.
Estacion’s stated reasons for non-service include “NO ONE HOME”
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and “NOT LIVING AT THIS ADDRESS (per neighbor and friend down
the street).” JBNC then filed two Freedom of Information Act
(FOIA) requests seeking information related to Namahoe’s mailing
address. In response to the FOIA request for a physical address
associated with Namahoe’s P.O. Box, the post office provided the
address as 16-1218 ʻŌpeʻapeʻa Road. JBNC also asserted that it
conducted a “skip trace” 5 on Namahoe and confirmed the Property
address as his current address.
On November 13, 2012, Estacion filed a Return and
Acknowledgment of Service which included what appeared to be
Namahoe’s signature, indicating personal service of the
complaint at Namahoe’s home. Based on the record, Namahoe did
not subsequently answer or otherwise respond to the Complaint. 6
On May 20, 2013, JBNC filed a Motion for Summary
Judgment and Decree of Foreclosure, exclusively relying on the
allegation that Namahoe had failed to repair the property in a
timely manner. 7
In support of the motion, JBNC attached a Declaration
of Indebtedness signed by JBNC’s Vice President Bruce Huey,
5 Here, “skip trace” refers to a LexisNexis Accurint report.
6 Four years later, in his declaration submitted in support of his
HRCP Rule 60(b) motion, Namahoe attested that he did not recall signing the
Return and Acknowledgement of Service and that he “would not have understood
it anyway.”
7 JBNC did not expressly inform the circuit court that Namahoe’s
alleged default concerned only $500.00 of repairs.
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attesting that he had personal knowledge that “based on [his]
review of the records and files related to the mortgage loan”
Namahoe “defaulted in the observance and performance of the
terms, covenants and conditions by failing to repair the
property, as required by the Repair Rider to the Loan Agreement,
in a timely manner.” Huey’s declaration included a copy of
HUD’s approval of JBNC’s request to call the loan due and
payable, and specified that written notice was given to Namahoe
regarding his obligation to pay in full all outstanding
principal and accrued interest due on the loan.
JBNC also attached an attorney affirmation signed by
Robert M. Ehrhorn, Jr. of Clay Chapman, pursuant to Hawaiʻi
Revised Statutes (HRS) § 667-17 (Supp. 2012) (repealed 2017)
(current version at HRS § 667-18), which stated:
2. On May 3, 2013, I received a written
communication from Bruce Huey, Vice President of James B.
Nutter & Company, who informed me that he personally
reviewed [JBNC’s] documents and records relating to this
loan file . . . [and] confirmed the factual accuracy of the
allegations set forth in the Motion for Summary Judgment[.]
3. Based upon the communication from the person
identified in Paragraph 2 above, as well as upon my own
inspection and other reasonable inquiry under the
circumstances, I affirm that, to the best of my knowledge,
information, and belief, the Motion for Summary Judgment,
and other papers filed or submitted to the Court in this
matter contain no false statements of fact or law and that
[JBNC] has legal standing to bring this foreclosure action.
I understand my continuing obligation to amend this
Affirmation in light of newly discovered material facts
following its filing.
4. To the best of Declarant’s knowledge,
information, and belief the allegations contained in the
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Motion for Summary Judgment are warranted by existing law
and have evidentiary support.
(Emphases added.)
Other than these declarations, JBNC did not provide
any evidence of Namahoe’s breach of the reverse mortgage terms
and failure to cure the default.
Namahoe did not oppose the Motion for Summary Judgment
and Decree of Foreclosure, and he did not appear before the
circuit court. The circuit court’s relevant Findings of Fact
and Conclusions of Law were as follows:
FINDINGS OF FACT
. . .
3. [Namahoe] defaulted in the observance and
performance of the terms, covenants and conditions by
failing to repair the property, as required by the Repair
Rider to the Loan Agreement, in a timely manner. [HUD]
approved [JBNC’s] Request to Call The Loan Due And Payable,
for immediate payment in full of all outstanding principal
and accrued interest as required by paragraph 7(B)(iii) of
the Note.
4. Written notice was given to [Namahoe] that
because of his failure to repair the property as required
by the Repair Rider to the Loan Agreement in a timely
manner, [JBNC] required immediate payment in full of all
outstanding principal and accrued interest due on the loan.
However, despite said notice the default was not cured and
the loan has not been paid off.
. . .
CONCLUSIONS OF LAW
. . .
3) [JBNC] is entitled to have its Mortgage
foreclosed, a commissioner appointed to take possession of
and sell the mortgaged property . . . and the proceeds of
sale applied, first, to the payment of delinquent of real
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property taxes, then to the amounts due on [JBNC’s]
Mortgage and the balance, if any, as determined by the
Court.
(Emphasis in original.)
Subsequently, JBNC purchased Namahoe’s home for
$85,904.96, and Namahoe was served with a Writ of Ejectment on
June 22, 2014. 8
4. Namahoe’s HRCP Rule 60(b) Motion for Relief
On January 3, 2017, more than two and half years after
being served with the Writ of Ejectment, Namahoe filed a HRCP
Rule 60(b) Motion for Relief from Judgment, citing subsections
60(b)(3), (4), and (6). 9
8 According to Namahoe, the loss of his only home caused him to
become unsheltered.
9 HRCP Rule 60(b) states, in relevant part:
Mistakes; inadvertence; excusable neglect; newly discovered
evidence; fraud, etc. On motion and upon such terms as are
just, the court may relieve a party or a party’s legal
representative from a final judgment, order, or proceeding
for the following reasons: . . . (3) fraud (whether
heretofore denominated intrinsic or extrinsic),
misrepresentation, or other misconduct of an adverse
party; (4) the judgment is void; . . . or (6) any other
reason justifying relief from the operation of the
judgment. The motion shall be made within a reasonable
time, and for reason[] . . .(3) not more than one year
after the judgment, order, or proceeding was entered or
taken. A motion under this subdivision (b) does not affect
the finality of a judgment or suspend its operation. This
rule does not limit the power of a court to entertain an
independent action to relieve a party from a judgment,
order, or proceeding, or to set aside a judgment for fraud
upon the court.
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Namahoe also submitted a declaration in which he
attested that he timely made the required repairs pursuant to
the Repair Rider, and that JBNC had no right to foreclose:
5. I understood I was supposed to make repairs after
I received the money. A neighbor (name forgotten) who was
a tenant of Nick Rapoza helped me repair the entire front
porch railing and I bought putty and we plugged the leak in
the carport roof and repaired the surface. There was no
leaking after the repairs were done. This was all done
right after I got the money and was simple to do. I used
my own money and some labor to make the repairs.
[ . . . ]
7. I do not remember [Estacion] handing me the
foreclosure Complaint on November 9, 2012. [Nor] do I
recall signing any paper that I received the Complaint. I
would not have understood it anyway.
8. My first memory about the foreclosure was a
telephone call from an attorney who said he wanted to
inspect my house and property because it was his job to
sell my house at a foreclosure auction. I was shocked! I
did not know of any foreclosure. How come no one wrote me,
telephoned me, or came to the house. I was always there
because I had no car, very little money and only a few
neighbors and relatives. I had to hitch rides from my
house in remote Hawaiian Acres to shop for food and collect
my mail at my post office box in Hilo. I was angry and
upset and never heard again from the attorney.
Namahoe’s HRCP Rule 60(b)(3) motion argued that JBNC
committed fraud by (1) failing to obtain an inspection by a HUD-
approved inspector as required by the Repair Rider, (2) failing
to use the $750.00 in set aside funds for repairs, and (3)
failing to give Namahoe a “realistic opportunity to have the
mortgage reinstated.” 10 Namahoe also argued that JBNC’s
attorneys, the law firm of Clay Chapman, committed fraud by
10 Namahoe does not provide any additional factual basis for these
claims beyond his declaration.
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failing to include pertinent facts and disclosures in its
attorney affirmations as required by HRS § 667-17.
Specifically, Namahoe alleged that Clay Chapman failed to
disclose the aforementioned instances of alleged fraud in their
HRS § 667-17 affirmation, and that the attorneys failed to amend
the affirmation after the companion Domingo case clarified that
noncompliance with a similar repair rider was an inadequate
basis for foreclosure. 11 James B. Nutter & Co. v. Domingo, No.
CAAP-XX-XXXXXXX, 2016 WL 5920412 (App. Oct. 11, 2016) (SDO).
Namahoe also argued that his motion was timely because the
“final act” in the foreclosure proceeding was March 26, 2016,
when JBNC allegedly sold the Property to a third party. 12
11 We take judicial notice of the court records in the unpublished
Domingo case, in accordance with Hawai‘i Rules of Evidence (HRE) Rule 201
(1993). James B. Nutter & Co. v. Domingo, No. CAAP-XX-XXXXXXX, 2016 WL
5920412 (App. Oct. 11, 2016) (summary disposition order). Because the
unpublished Domingo case figured prominently in the pleadings and oral
argument in this case, a brief summary is provided here.
The Domingo foreclosure was similar to the Namahoe foreclosure,
including a nearly identical repair rider and loan called due for alleged
failure to make repairs. Id. at *1. Both Domingo and Namahoe asserted that
they completed necessary repairs. See id. at *1—2.
The ICA affirmed the circuit court’s ruling that JBNC’s
assumption that Domingo had failed to make the required repairs was not a
sufficient justification to accelerate the mortgage note and seek
foreclosure. Id. The ICA affirmed the order and clarified that “JBNC’s
burden, . . . was to prove that at trial Domingo would be unable to prove
that the required repairs were done.” Id. at *2.
The Domingo foreclosure action discussed above is distinct from
the Domingo v. James B. Nutter & Co., Civil No. 16-1-0249, CAAP-XX-XXXXXXX,
wrongful foreclosure action pending before the ICA. The latter action is
discussed in further detail below.
(continued . . .)
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Next, Namahoe asserted that the Decree of Foreclosure
was void under HRCP Rule 60(b)(4) because, as a result of JBNC
allegedly “knowingly mailing notices to an address where there
was no mail delivery,” Namahoe was deprived of notice of the
foreclosure proceeding and an adequate opportunity to defend
against the action. 13
Finally, Namahoe raised a HRCP Rule 60(b)(6) claim,
arguing that JBNC committed fraud on the court. Unlike his HRCP
Rule 60(b)(3) fraud claim which centered on JBNC’s acts and
omissions in relation to Namahoe, the HRCP Rule 60(b)(6) motion
focused on an alleged “pattern of mortgage abuse” by lenders
such as JBNC who make it a part of their business operations to
bring “unfounded” foreclosure actions.
JBNC did not present any new evidence rebutting the
statements in Namahoe’s declaration. Rather, in response to
Namahoe’s HRCP Rule 60(b)(3) motion, JBNC responded that the
motion was untimely because the relevant final act in this case
was the July 2, 2013 Decree of Foreclosure. With regard to
(. . . continued)
12 Evidence of the alleged sale to a third party is not in the
record. However, JBNC did not dispute Namahoe’s claim that the property had
been sold on March 26, 2016.
13 Namahoe did not present a factual basis for this allegation
beyond that he “believes that in accordance with the standard practice of the
United States Postal Service [JBNC] was receiving the returned envelopes
marked undeliverable,” and that JBNC subsequently mailed pleadings to
Namahoe’s P.O. Box after JBNC “already knew that the post office box had been
closed.” (Emphasis added.)
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Namahoe’s HRCP Rule 60(b)(4) motion, JBNC maintained that
Namahoe was personally served with the Complaint on November 9,
2012, and that neither JBNC nor the circuit court had an
affirmative duty to “track Namahoe down” due to Namahoe’s
failure to inform the court of any changes to his mailing
address. Finally, on Namahoe’s HRCP Rule 60(b)(6) claim, JBNC
responded that even if it had committed fraud, which JBNC
disputes, the “substance of [Namahoe’s] allegations” fails to
rise to the level of “corruption of the judicial process itself”
as required by Cvitanovich-Dubie v. Dubie. 125 Hawaiʻi 128, 144,
254 P.3d 439, 455 (2011) (quoting Schefke v. Reliable Collection
Agency, Ltd., 96 Hawaiʻi 408, 431 n.42, 32 P.3d 52, 75 n.42
(2001), as amended (Oct. 11, 2001)). Rather, JBNC’s alleged
acts of fraud only concerned “a single litigant.” JBNC did not
present any additional evidence of Namahoe’s alleged
noncompliance with the terms of the reverse mortgage.
The circuit court denied Namahoe’s HRCP Rule 60(b)
motion in full. With regard to Namahoe’s HRCP Rule 60(b)(6)
fraud on the court argument, the court determined:
Regarding the fraud on the court type theories I’m
going to think that that’s more properly addressed in
[Domingo v. James B. Nutter & Co., Civil No. 16-1-0249,
CAAP-XX-XXXXXXX].[ 14] I see that case as being that
14 Domingo v. James B. Nutter & Co., Civil No. 16-1-0249, CAAP-17-
0000324, is pending before the ICA. It involves Domingo and Namahoe’s
wrongful foreclosure claims against JBNC. We take judicial notice of the
court records in this related case, in accordance with HRE Rule 201.
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independent action that’s mentioned under Rule 60(b). And
my impression is that independent action is not really a
60(b) type motion.
There’s still a fraud on the court type claim for
relief by Mr. Namahoe against Clay Chapman. And Mr.
Namahoe would have at least the opportunity to attempt to
amend the pleadings in that case to state, let’s say, clear
claims for relief against [JBNC]. So that's what the
Court’s belief is.
. . .
I think Mr. Namahoe still has a claim for relief
against . . . Clay Chapman. And then you have the
opportunity to amend. I’m thinking that you already have
that action already . . . . You did not need to go forward
on the . . . case regarding those theories cause they’re in
the [Domingo v. James B. Nutter & Co., Civil No. 16-1-0249,
CAAP-XX-XXXXXXX] action. You already have the forum for
that. It’s not as if I -- you know, the Court has to set
aside the judgment here for you to be able to address your
issues in the other case. It’s my thinking.
(Emphases added.)
The circuit court presented Namahoe with a catch-22.
The circuit court required Namahoe to pursue his fraud on the
court claim against JBNC in the wrongful foreclosure action,
Domingo v. James B. Nutter & Co., Civil No. 16-1-0249,
CAAP-XX-XXXXXXX. However, as noted at oral argument, Namahoe
was precluded by the circuit court from asserting a wrongful
foreclosure claim in that action due to the issuance of the
Decree of Foreclosure below. Thus, Namahoe’s path to recovery
was effectively blocked, and his only opportunity for relief is
the instant case.
On April 13, 2017, Namahoe filed a HRCP Rule 59 motion
for reconsideration of the circuit court’s order denying his
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motion for relief, arguing that Hungate v. Law Off. of David B.
Rosen, 139 Hawaiʻi 394, 391 P.3d 1 (2017), established the
importance of notice to foreclosure proceedings. 15 He added that
JBNC was aware that the notices mailed to the Property’s
physical address and the P.O. Box were deemed undeliverable and
any alleged personal service was ineffective because Namahoe’s
serious health conditions and his use of marijuana to treat his
pain impeded his comprehension. The circuit court denied
Namahoe’s motion on the grounds that HRCP Rule 5(a) only
required JBNC to serve Namahoe with the Complaint, and that
Hungate did not provide an adequate basis for altering or
amending the denial of Namahoe’s HRCP Rule 60(b) motion. See
HRCP Rule 5(a) (2019).
B. ICA Appeal
On appeal to the ICA, Namahoe raised two points of
error, arguing first that the circuit court erred in denying
Namahoe’s HRCP Rule 60(b) motion because (a) the Decree of
Foreclosure was obtained through JBNC’s fraud,
misrepresentation, and misconduct; (b) JBNC failed to provide
adequate notice to Namahoe; and (c) JBNC and its attorneys
15 Hungate was decided in the context of a non-judicial foreclosure,
in which there is, by definition, no judicial officer to supervise and ensure
the integrity of the foreclosure process. 139 Hawaiʻi at 398, 391 P.3d at 5.
Accordingly, Hungate is distinguishable from the immediate case and need not
be discussed further.
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committed fraud on the court, all of which prevented Namahoe
from fairly presenting his case. Namahoe next argued that the
circuit court abused its discretion by denying Namahoe’s HRCP
Rule 59 motion for reconsideration.
With regard to his HRCP Rule 60(b) arguments, Namahoe
largely reiterated points raised before the circuit court.
Namahoe reasserted the claims underpinning his HRCP Rule
60(b)(3) motion, arguing that JBNC had no legal authority to
seek foreclosure because (1) Namahoe did not receive notice of
the proceedings; (2) JBNC did not notify Namahoe of his right to
reinstatement; (3) JBNC did not perform a HUD inspection
required by the Repair Rider; and (4) JBNC’s attorneys failed to
include the previous facts in its affirmation and failed to
amend the affirmation to include the related Domingo foreclosure
action, which involved JBNC, their same attorneys, and “the same
justification for the reverse mortgage foreclosure” which the
circuit court found improper and in violation of HRS § 667-17.
Namahoe again raised his HRCP Rule 60(b)(4) claim,
asserting that the Decree of Foreclosure was void because
Namahoe lacked adequate notice of the proceeding, thus depriving
Namahoe of due process.
In his HRCP Rule 60(b)(6) claim, Namahoe argued that
he was entitled to relief from the Decree of Foreclosure because
JBNC and its attorneys did not disclose all relevant facts to
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the circuit court. Specifically, Namahoe asserted that JBNC’s
conduct rose to the level of fraud on the court because its
attorneys submitted an insufficient and misleading attorney
affirmation, as required by HRS § 667-17, despite the plain
language of the reverse mortgage not permitting foreclosure
under the circumstances. Namahoe also reasserted his HRCP Rule
60(b)(3) fraud arguments, stating that JBNC had not informed
Namahoe of his right to reinstatement, did not inspect the
property using a HUD-approved inspector, and pursued foreclosure
despite the ruling in the Domingo foreclosure action. These
errors by JBNC “went to the very heart of the circuit court’s
jurisdiction and [JBNC’s] ability to even foreclose.”
With respect to the circuit court’s denial of
Namahoe’s HRCP Rule 59 Motion for Reconsideration, Namahoe
argued that the circuit court mistakenly concluded that JBNC’s
notices were sufficient. Namahoe maintained that new evidence
provided in support of his HRCP Rule 59 motion demonstrated that
(1) JBNC was aware that Namahoe was not receiving mail at his
physical address and (2) Namahoe’s serious health conditions at
the time of the proceedings impeded his comprehension.
The ICA affirmed the circuit court’s orders denying
Namahoe’s HRCP Rule 60(b) motion for relief and HRCP Rule 59
motion for reconsideration. James B. Nutter & Co. v. Namahoe,
No. CAAP-XX-XXXXXXX, 2022 WL 899896 at *12 (App. March 28,
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2022). First, the ICA held that Namahoe’s HRCP Rule 60(b)(3)
motion asserting fraud was untimely, as the applicable
“judgment, order, or proceeding” in this case was the Decree of
Foreclosure entered on July 2, 2013 — nearly four years before
Namahoe’s HRCP Rule 60(b)(3) motion. Id. at *7. Second, the
ICA determined from the record that Namahoe was personally
served with the Complaint and was therefore not denied due
process. Id. at *7—9. Third, the ICA held that the circuit
court did not abuse its discretion when it denied Namahoe relief
under HRCP Rule 60(b)(6) on the grounds that Namahoe could seek
appropriate relief in an alternate forum, i.e., his separate
wrongful foreclosure action against JBNC raised in Domingo v.
James B. Nutter & Co., Civil No. 16-1-0249, CAAP-XX-XXXXXXX.
Id. at *10—11. The ICA also noted that by the time the JBNC
wrongful foreclosure suit was initiated by Domingo and Namahoe,
Namahoe’s property had already been purchased by JBNC at auction
and sold to a third party. Id. at *11.
Finally, the ICA affirmed the circuit court’s denial
of the Rule 59 motion and rejected Namahoe’s claims of new
evidence, finding that much of the evidence was not in fact new,
and that no “cogent argument” was raised as to why the allegedly
“new” evidence could not have been presented earlier. Id. at
*11—12.
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C. Supreme Court Proceedings
Namahoe filed a timely application for a writ of
certiorari.
First, he argues that the ICA erred in affirming the
lower court’s denial of his HRCP Rule 60(b)(3) motion because
(1) the one-year deadline began running on March 26, 2016, when
JBNC allegedly sold the property to a third party; (2) it did
not take into account the fact that JBNC’s foreclosure was based
on “allegedly unrepaired repairs” worth $500.00 and that JBNC
was aware that Namahoe actually made those repairs; and (3) it
“leave[s] the door open” for other bad actors to instigate
“bogus proceedings.” (Emphasis in original.)
Second, he argues that the ICA erred in affirming the
lower court’s denial of his HRCP Rule 60(b)(4) motion based on
the Return and Acknowledgement of Service. Namahoe asserts that
the fact that the signature on the Return and Acknowledgement of
Service is “markedly different” from his signature on the Note,
Loan Agreement, and Repair Rider should have been sufficient to
rebut the prima facie evidence of notice. He also argues that
the entire proceedings were void under Hungate, 139 Hawai‘i 394,
391 P.3d 1 (2017), because statutory notice requirements are
trumped by the more “stringent” notice requirements included in
the specific “loan/note/mortgage documents.”
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Third, Namahoe asserts that the ICA erred in affirming
the circuit court’s denial of his HRCP Rule 60(b)(6) motion
because the circuit court failed to reach the merits of the
issue and “merely punted” it by declaring that Namahoe could
bring the claim in the separate wrongful-foreclosure action.
Lastly, Namahoe asserts that the ICA erred by
affirming the circuit court’s denial of his HRCP Rule 59 motion,
because his counsel presented new information — after the
conclusion of his HRCP Rule 60(b) motion — regarding his P.O.
Box being closed in September 2013. He further argued that the
ICA “missed the issue” in distinguishing Hungate because it
actually “stands for the proposition” that when loan and
mortgage documents require additional notice requirements on top
of those required by the statutes, “failure to comply” with the
additional requirements is “fatal to the foreclosure itself.”
Hungate, 139 Hawai‘i at 404, 391 P.3d at 11.
III. STANDARDS OF REVIEW
A. HRCP Rule 60(b) Relief From Judgment or Order
“[T]he trial court has a very large measure of
discretion in passing upon motions under [HRCP] Rule 60(b) and
its order will not be set aside unless we are persuaded that
under the circumstances of the particular case, the court’s
refusal to set aside its order was an abuse of discretion.”
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Haw. Hous. Auth. v. Uyehara, 77 Hawai‘i 144, 147, 883 P.2d 65, 68
(1994) (quoting Paxton v. State, 2 Haw. App. 46, 48, 625 P.2d
1052, 1054 (1981)). Therefore, the circuit court’s decisions
related to Namahoe’s HRCP Rule 60(b) motion are reviewed for an
abuse of discretion. “The burden of establishing abuse of
discretion [in denying a HRCP Rule 60(b) motion] is on the
appellant, and a strong showing is required to establish it.”
Ditto v. McCurdy, 103 Hawai‘i 153, 162, 80 P.3d 974, 983 (2003).
Notwithstanding this general rule, “under HRCP Rule
60(b)(4), an order is ‘void only if the court that rendered it
lacked jurisdiction of either the subject matter or the parties
or otherwise acted in a manner inconsistent with due process of
law.’” In re Haw. Elec. Co., Inc., 149 Hawai‘i 343, 362—63, 489
P.3d 1255, 1274—75 (2021). As such, a denial of a HRCP Rule
60(b)(4) motion is reviewed de novo. See id.B. HRCP Rule 59 Motion for Reconsideration
As this court has often stated, “[t]he purpose of a
motion for reconsideration is to allow the parties to
present new evidence and/or arguments that could not have
been presented during the earlier adjudicated motion.”
Reconsideration is not a device to relitigate old matters
or to raise arguments or evidence that could and should
have been brought during the earlier proceeding.
Sousaris v. Miller, 92 Hawai‘i 505, 513, 993 P.2d 539, 547 (2000)
(citations omitted) (quoting First Ins. Co. of Haw. Ltd. v.
Lawrence, 77 Hawai‘i 2, 17, 991 P.2d 489, 504 (1994)).
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The appellate court reviews a “trial court’s ruling on
a motion for reconsideration . . . under the abuse of discretion
standard.” Ass’n of Apartment Owners of Wailea Elua, 100 Hawaiʻi
97, 110, 58 P.3d 608, 621 (2002). An abuse of discretion occurs
if the trial 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.” Amfac, Inc. v.
Waikiki Beachcomber Inv. Co., 74 Haw. 85, 114, 839 P.2d 10, 26
(1992).
C. Foreclosure Actions
Foreclosure is an equitable action. “Courts of
equity have the power to mold their decrees to conserve the
equities of the parties under the circumstances of the
case.” A court sitting in equity in a foreclosure case has
the plenary power to fashion a decree to conform to the
equitable requirements of the situation. Whether and to
what extent relief should be granted rests within the sound
discretion of the court and will not be disturbed absent an
abuse of such discretion.
Peak Cap. Grp., LLC v. Perez, 141 Hawaiʻi 160, 172, 407 P.3d 116,
128 (2017) (citations omitted) (quoting Honolulu, Ltd. v.
Blackwell, 7 Haw. App. 210, 219, 750 P.2d 942, 948 (1988)).
A circuit court abuses its equitable discretion “by
issuing a decision that clearly exceeds the bounds of reason or
disregard[s] rules or principles of law or practice to the
substantial detriment of the appellant.” Hawaii Nat’l Bank v.
Cook, 100 Hawaiʻi 2, 7, 58 P.3d 60, 65 (2002) (quoting Shanghai
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Inv. Co. v. Alteka Co., 92 Hawaiʻi 482, 493, 993 P.2d 516, 526
(2000)).
IV. DISCUSSION
A. Introduction
We hold that the ICA did not err in affirming the
circuit court’s denial of Namahoe’s motions under HRCP Rule 59,
Rule 60(b)(3), and Rule 60(b)(4). However, the ICA erred in
affirming the circuit court’s denial of relief under HRCP Rule
60(b)(6) for two reasons. First, the record establishes that
JBNC failed to comply with HUD regulations and Hawaiʻi state law
in pursuit of foreclosure against Namahoe. Thus, JBNC lacked
legal authority to foreclose and its attorneys provided the
lower court with an inadequate and misleading HRS § 667-17
attorney affirmation. This conduct constitutes fraud on the
court for purposes of HRCP Rule 60(b)(6).
Second, the balance of equities weighs heavily against
a decree of foreclosure for the alleged failure to complete
$500.00 worth of repairs. HRCP Rule 60(b) allows courts to
relieve a party from a final judgment or order “upon such terms
as are just[.]” Here, justice requires Namahoe to be afforded
an effective remedy.
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B. The Legal Framework Protecting Homeowners
Before analyzing JBNC’s conduct toward Namahoe in
isolation, a brief review of reverse mortgages and the relevant
regulatory landscape is warranted. Reverse mortgages are
distinct from conventional mortgages both in their function and
purpose. Reverse mortgages, of which home equity conversion
mortgages (HECMs) make up a significant portion, 16 are loans that
allow senior homeowners to withdraw a portion of their home’s
equity in the form of cash. Consumer Financial Protection
Bureau, Reverse Mortgages: Report to Congress 5—6 (June 2012).
This provides seniors with capital to pay for living expenses
and other costs, with the loan only reaching maturity when the
borrower dies, sells the home or moves out, or fails to maintain
the property or pay necessary fees and taxes. Id. at 5—6, 22;
see also HRS § 506-10 (2008) (listing the events that make a
reverse mortgage loan due). This transaction for cash at the
expense of ownership of one’s home — the largest and most
significant asset most Americans possess — has significant
ramifications for senior citizens, their families, and the
communities in which they live. Protecting Seniors: A Review of
16 The mortgage at issue in this case is specifically a home equity
conversion mortgage. HECMs are only available for seniors above 62 years of
age who own a property and occupy it as their principal residence. For
consistency with the briefs, circuit court documents, and ICA Memorandum
Opinion, this court uses the broader term “reverse mortgage.”
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the FHA’s Home Equity Conversion Mortgage (HECM) Program:
Hearing Before the Subcomm. on Housing, Community Development,
and Insurance of the H. Comm. on Financial Services, 116th Cong.
2 (2019) (statement of Rep. Wm. Lacy Clay, Chairman, H. Subcomm.
on Hous., Cmty. Dev., and Ins.) (“The racial wealth gap is
exacerbated as countless families[, largely racial minorities,]
are deprived of the chance to pass on their homes and other
property to their children and other heirs, leading to . . .
gutted city blocks, and less overall wealth.”)
Seniors face a significant risk of abuse by lenders,
and the consequences of reverse mortgages can be unclear at the
time of signing, but disastrous for mortgagors. See Reverse
Mortgages: Polishing Not Tarnishing the Golden Years: Hearing
Before the Senate Special Comm. on Aging, 110th Cong. 1 (2007)
(statement of Senator Herb Kohl, Chairman, Special Comm. on
Aging) (“[Reverse mortgage] [a]gents are targeting seniors
aggressively in ways that this Committee has seen before:
through direct mail, celebrity endorsements, and free lunch
seminars. Marketers often gloss over the risks of a reverse
mortgage, but they convey the pay-off quite clearly.”); Sarah
B. Mancini & Odette Williamson, Reversing Course: Stemming the
Tide of Reverse Mortgage Foreclosures Through Effective
Servicing and Loss Mitigation, 26 Elder L.J. 85, 86—87, 119—20
(2018) (“[o]lder adults who have taken out reverse mortgages are
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particularly resource-constrained. They tend to take out these
loans as a last resort, motivated by a lack of sufficient income
to cover rising medical costs and other essential expenses.”).
Namahoe appears to have been targeted in a similar manner;
according to his declaration: “some folks came to my door and
told me I could obtain a loan and not pay back anything while I
lived and resided at the property. I believed them and I
obtained what I understand was a reverse mortgage. . . . I spent
the money over the years paying bills and buying food.”
Due to the significant risks of abuse by lenders and
inadequate understanding of reverse mortgage agreements by many
senior citizens, reverse mortgages and foreclosures are subject
to stringent rules and regulations promulgated by both federal
and state authorities. Lenders offering loans backed by HUD, of
which reverse mortgages and HECMs are one type, are required to
make reasonable efforts to conduct face-to-face interviews with
delinquent mortgagors, 24 C.F.R. § 203.604 (2009), conduct loss
mitigation efforts to cure defaults, 24 C.F.R. §§ 203.605 (2009)
and 203.501 (2009), conduct pre-foreclosure review, 24 C.F.R.
§ 203.606 (2009), and facilitate reinstatement of the mortgage,
24 C.F.R. § 203.608 (2009). Failure to comply with these
regulations may result in civil penalties or the withdrawal of a
mortgagee’s HUD approval. 24 C.F.R. § 203.500 (2009).
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Our state legislature has also acted to combat
predatory lending in the context of reverse mortgages. Lenders
are required to refer borrowers to HUD-approved counselors, and
must be presented with a signed certification confirming that
the borrower has received counseling prior to accepting an
application for a reverse mortgage loan. HRS § 506-10.
Further, in the aftermath of economic crash and
foreclosure crisis in the early-2010s, the legislature passed
HRS § 667-17. The language of the attorney affirmation even
refers to the conditions that gave rise to the statute:
During and after August 2010, numerous and widespread
insufficiencies in foreclosure filings in various courts
around the nation were reported . . . , including failure
to review documents and files to establish standing and
other foreclosure requisites; filing of notarized
affidavits that falsely attest to such review and to other
critical facts in the foreclosure process; and
“robosignature” of documents.
HRS § 667-17.
Importantly for this appeal, HRS § 667-17 requires
attorneys filing on behalf of mortgagees seeking foreclosure to
sign and submit an affirmation that the attorney has verified
the accuracy of filed documents, and confirm that the lender has
an adequate factual and legal basis for pursuing foreclosure. 17
As officers of the court, attorneys for mortgagees seeking
17 HRS § 667-17 states, “[a]ny attorney who files on behalf of a
mortgagee seeking to foreclose on a residential property under this part
shall sign and submit an affirmation that the attorney has verified the
accuracy of the documents submitted, under penalty of perjury and subject to
applicable rules of professional conduct.” HRS § 667-17.
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foreclosure must affirm not only the accuracy of the factual
allegations underlying foreclosure, but also the legal
sufficiency of foreclosure claims. 18 Id. Attorneys are also
under a “continuing obligation to amend” the affirmation in the
event of newly discovered material facts after filing. Id.
It is within this expansive legislative and regulatory
framework that JBNC and its attorneys at Clay Chapman pursued
foreclosure on Namahoe’s only home — all on the basis of a
$500.00 repair obligation.
C. The ICA Did Not Err in Affirming the Circuit Court’s Denial
of Namahoe’s HRCP Rule 59, Rule 60(b)(3), and Rule 60(b)(4)
Motions
1. HRCP Rule 59 Motion for Reconsideration
Namahoe asserts that the ICA erred in affirming the
circuit court’s denial of his HRCP Rule 59 19 motion for
18 One of the form affirmations in § 667-17 states:
Based upon my communication with [the foreclosing
entity], as well as upon my own inspection and other
reasonable inquiry under the circumstances, I affirm that,
to the best of my knowledge, information, and belief, the
Summons, Complaint, and other papers filed or submitted to
the Court in this matter contain no false statements of
fact or law and that plaintiff has legal standing to bring
this foreclosure action.
(Emphasis added.)
19 HRCP Rule 59 states, in relevant part:
(a) Grounds. A new trial may be granted to all or
any of the parties and on all or part of the issues (1) in
an action in which there has been a trial by jury, for any
of the reasons for which new trials have heretofore been
(continued . . .)
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reconsideration despite (1) the existence of “new evidence”
showing the P.O. Box was closed in September 2013; and (2) the
supreme court decision in Hungate, decided shortly before his
HRCP Rule 60(b) motion, which stands for the proposition that
failure to comply with the terms of a mortgage is fatal to the
foreclosure itself. 20 Hungate v. Law Off. of David B. Rosen, 139
Hawaiʻi 394, 391 P.3d 1 (2017).
This court has stated, “[t]he purpose of a motion for
reconsideration is to allow the parties to present new evidence
and/or arguments that could not have been presented during the
earlier adjudicated motion.” Amfac, 74 Haw. at 114, 839 P.2d at
27. “Reconsideration is not a device to relitigate old matters
or to raise arguments or evidence that could and should have
(. . . continued)
granted in actions at law in the courts of the state; and
(2) in an action tried without a jury, for any of the
reasons for which rehearings have heretofore been granted
in suits in equity in the courts of the State. On a motion
for a new trial in an action tried without a jury, the
court may open the judgment if one has been entered, take
additional testimony, amend findings of fact and
conclusions of law or make new findings and conclusions,
and direct the entry of a new judgment.
20 The ICA correctly distinguished Hungate. In Hungate, this court
held that in a non-judicial foreclosure, the mortgagee has a duty to follow
statutory and contractual notice requirements in order to ensure the borrower
receives adequate notice of the foreclosure proceeding. Hungate, 139 Hawaiʻi
at 403-04, 391 P.3d at 10-11. While Namahoe is seeking to void a judgment in
a reverse-mortgage judicial-foreclosure proceeding, Hungate instead dealt
with non-judicial foreclosure — a distinct procedure. See id. at 399, 391
P.3d at 6. That is, Hungate is premised on clarifying the burdens on the
mortgagee in the context of a proceeding in which “[t]here is no neutral
party, such as a court, [to] supervis[e] the sale and ensur[e] a fair and
reasonable process.” Id. at 409, 391 P.3d at 16. Such is not the case here,
where the judgment of foreclosure was rendered by the circuit court.
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been brought during the earlier proceeding.” Sousaris, 92
Hawai‘i at 513, 993 P.2d at 547 (2000).
In order for reconsideration to be granted on the
basis of newly discovered evidence: “(1) it must be previously
undiscovered even though due diligence was exercised; (2) it
must be admissible and credible; (3) it must be of such a
material and controlling nature as will probably change the
outcome and not merely cumulative or tending only to impeach or
contradict a witness.” Kawamata Farms, Inc. v. United Agri
Products, 86 Hawai‘i 214, 251, 948 P.2d 1055, 1092 (1997)
(quoting Orso v. City & Cnty. of Honolulu, 56 Haw. 241, 250, 534
P.2d 489, 494 (1975), overruled on other grounds by Kahale v.
City & Cnty. of Honolulu, 104 Hawai‘i 341, 90 P.3d 233 (2004)).
Here, the ICA correctly noted that Namahoe’s arguments
regarding notice were already made as part of his HRCP Rule
60(b) motion. James B. Nutter & Co. v. Namahoe, No. CAAP-17-
0000496, 2022 WL 899896 at *11—12. Most importantly, as the ICA
concluded, “there is no cogent argument as to why the ‘new’
evidence and arguments concerning proper notice could not have
been presented earlier.” Id. at *11.
2. HRCP Rule 60(b)(3)
Namahoe asserts that the ICA erred in affirming the
circuit court’s denial of his HRCP Rule 60(b)(3) motion for
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untimeliness. According to the circuit court, the event that
triggered the countdown to the one-year deadline was the circuit
court’s July 2, 2013 Decree of Foreclosure. Namahoe filed his
HRCP Rule 60(b)(3) motion on January 3, 2017, well past the one-
year deadline. Namahoe contends that the “final act” was when
JBNC sold the property to a third party in 2016, thus making his
motion timely.
We disagree with Namahoe, and hold that his HRCP Rule
60(b)(3) motion was untimely. The ICA correctly noted that
“Namahoe argued that [JBNC’s] fraud, misrepresentation, and
misconduct occurred when [JBNC] sought and obtained foreclosure
against Namahoe on impermissible grounds.” James B. Nutter &
Co. v. Namahoe, No. CAAP-XX-XXXXXXX, 2022 WL 899896 at *7 (App.
March 28, 2022) (emphasis added). As a result, Namahoe was
seeking “relief from the Foreclosure Judgment itself . . . [and]
not from the sale of the Property to a third party after the
Property’s sale to [JBNC] was confirmed.” Id. at *7. Thus, the
final judgment, for purposes of HRCP Rule 60(b)(3), was the 2013
Decree of Foreclosure and Namahoe’s motion was untimely.
3. HRCP Rule 60(b)(4)
Namahoe next argues that the Decree of Foreclosure was
void due to lack of service, because JBNC allegedly mailed
notices to Namahoe’s home address despite that address not
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receiving mail delivery. 21 However, the November 9, 2012 Return
and Acknowledgment of Service was signed by Namahoe, comprising
prima facie evidence of valid service. Namahoe was served with
all required documents, including the Complaint, Foreclosure
Mediation Notice and Foreclosure Mediation Request, and Summons.
[ICA Dkt. 35:81] Furthermore, had Namahoe wanted to contest the
signature, HRS § 634-22 (2013) provides the means for him to
examine the process server. Namahoe requested no such
examination.
Having established that the above documents were
properly served, Namahoe was not deprived of notice. As the ICA
correctly states — and Namahoe does not challenge — under HRCP
Rule 5(a), “no service need be made on parties in default for
failure to appear, except that pleadings asserting new or
additional claims for relief against them shall be served upon
them in the manner provided for service of summons in Rule 4 of
these Rules.” HRCP Rule 5(a) (2000) (emphasis added).
Therefore, once the complaint was personally served on Namahoe,
JBNC was not required to serve subsequent filings, as long as it
did not assert additional claims.
21 Namahoe also alleges that JBNC continued sending mail to
Namahoe’s P.O. Box despite knowing that it had been deactivated.
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D. The ICA Erred in Affirming the Circuit Court’s Denial of
Namahoe’s HRCP Rule 60(b)(6) Motion
Namahoe is entitled to relief pursuant to his HRCP
Rule 60(b)(6) motion on two grounds: (1) JBNC and its attorneys
committed fraud on the court, and (2) principles of equity
necessitate relief from the operation of the foreclosure
judgment. Accordingly, we reverse the ICA’s decision affirming
the circuit court’s denial of Namahoe’s HRCP Rule 60(b)(6)
motion, and vacate the Decree of Foreclosure insofar as it would
preclude Namahoe from asserting a wrongful foreclosure claim
against JBNC. 22
1. JBNC committed fraud on the court
This case presents an opportunity to clarify the
applicability of a HRCP Rule 60(b)(6) fraud on the court theory
to this set of facts. Namahoe asserts that the circuit court
abused its discretion in “merely punt[ing]” his fraud on the
court claim in the separate Domingo wrongful foreclosure action
against JBNC, which is currently on appeal. We agree that the
circuit court’s denial of a remedy was an abuse of discretion,
and that Namahoe was entitled to relief in the immediate action.
This court has defined fraud on the court as “a wrong
against the institutions set up to protect and safeguard the
22 This decision has no bearing on the judgment confirming sale.
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public, institutions in which fraud cannot complacently be
tolerated consistently with the good order of society.” Schefke
v. Reliable Collection Agency, Ltd., 96 Hawaiʻi 408, 430, 32 P.3d
52, 74 (2001) (quoting Kawamata Farms, 86 Hawai‘i at 256, 948
P.2d at 1097). Our case law has provided examples of what rises
to the level fraud on the court. As this court further
explained:
Not any fraud connected with the presentation of a case
amounts to fraud on the court. It must be a “direct
assault on the integrity of the judicial process.” Courts
have required more than nondisclosure by a party or the
party’s attorney to find fraud on the court. Examples of
such fraud include “bribery of a judge,” and “the
employment of counsel in order to bring an improper
influence on the court.”
Schefke, 96 Hawai‘i at 431, 32 P.3d at 75 (citations omitted).
Pursuant to HRCP Rule 60(b)(6), courts have broad
authority to provide relief from final judgments obtained by
fraud on the court, upon a motion made “within a reasonable
time.” 23 Unlike other motions for relief or reconsideration of a
judgment, courts retain flexibility to exercise this power in
the face of fraud on the court, precisely because a decision
obtained through such means cannot be final. See Kenner v.
Comm’r of Internal Revenue, 387 F.2d 689, 691 (7th Cir. 1968)
(“[I]t can be reasoned that a decision produced by fraud on the
court is not in essence a decision at all, and never becomes
23 The “reasonable time” limit notably contrasts with the one-year
limit on HRCP Rule 60(b)(3) fraud claims.
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final.”); see also PennyMac Corp. v. Godinez, 148 Hawaiʻi 323,
328—329, 474 P.3d 264, 269—270 (2020) (noting that the purpose
of HRCP Rule 60(b) motions “is to authorize the reopening of a
closed case or a final order,” and that “[Appellant’s] HRCP Rule
60(b) motion was not a new action but rather a continuation of
the original foreclosure case.”). Further, we have expressed a
“preference for judgments on the merits over the finality of
judgments procured through fraud.” Matsuura v. E.I. du Pont de
Nemours and Co., 102 Hawai‘i 149, 157—58, 73 P.3d 687, 695—96
(2003).
Fraud on the court cannot be neatly defined, but it is
understood by courts, including this court, to affect more than
the litigants in the underlying dispute. Cvitanovich-Dubie, 125
Hawaiʻi at 144—46, 254 P.3d at 455—57. Like other jurisdictions,
we narrowly interpret fraud on the court. Compare id., with Ray
v. Ray, 647 S.E.2d 237, 239 (S.C. 2007) (“Generally speaking,
only the most egregious misconduct . . . in which an attorney is
implicated will constitute fraud on the court.”) (citation
omitted), and SEC v. N. Am. Clearing, Inc., 656 F. App’x 947,
949 (11th Cir. 2016) (stating that the fraud on the court
standard “is more exacting than the standard for fraud under
[Federal Rules of Civil Procedure (FRCP)] Rule 60(b)(3),
encompassing only the most egregious misconduct . . . .”).
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Otherwise, judgments would remain subject to challenge in
perpetuity, and the one-year time limitation on motions for
relief predicated on regular fraud pursuant to HRCP Rule
60(b)(3) would be hollowed.
Despite the high threshold for a finding of fraud on
the court, we find that JBNC committed fraud on the court in
pursuit of this foreclosure against Namahoe.
Namahoe’s fraud on the court claim is premised on
JBNC’s initiation of foreclosure proceedings “without fully
disclosing to the lower court the facts supporting the
foreclosure.” Specifically, Namahoe argues that JBNC did not
diligently verify whether he actually failed to make the
required repairs through use of a HUD-approved inspector, and
JBNC did not provide the court with evidence of Namahoe’s
alleged failure to make the repairs.
In response to Namahoe’s HRCP Rule 60(b)(6) motion,
JBNC did not present evidence of Namahoe’s alleged failure to
make the repairs. JBNC instead reiterates its assertion that
Namahoe failed to make the repairs, and argues that it was
simply following HUD protocol in calling the loan due and
payable — and pursuing foreclosure — as a result of Namahoe’s
failure to comply with the Repair Rider. JBNC also responds
that its actions in this case do not pass the threshold to
support a finding of fraud on the court because they involve the
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parties to the case only. In other words, their conduct does
not implicate the judicial process writ large. However, JBNC’s
conduct does not just involve Namahoe.
Attorneys representing foreclosing lenders must verify
and affirm to the court the accuracy of documents proffered by
the lender/client in order to prevent unwarranted foreclosures.
HRS § 667-17. Attorney affirmations in foreclosure proceedings
are a statutory means of protecting homeowners from wrongful
foreclosure, as they prevent the courts from advancing fraud by
lenders in foreclosure actions. Id. According to the statutory
mandate, attorneys shall file an affirmation with the court
“that the attorney has verified the accuracy of the documents
submitted, under penalty of perjury and subject to applicable
rules of professional conduct.” Id. The purpose of the statute
“is to prevent unwarranted foreclosure actions on residential
property by requiring an attorney who files a judicial
foreclosure . . . to also submit a signed affidavit to the court
. . . stating that the attorney has verified the accuracy of the
document submitted.” H. Stand Comm. Rep. No. 697-14, in 2014
House Journal, at 1127. The statute specifically notes that:
During and after August 2010, numerous and widespread
insufficiencies in foreclosure filings in various courts
around the nation were reported by major mortgage lenders
and other authorities, including failure to review
documents and files to establish standing and other
foreclosure requisites; filing of notarized affidavits that
falsely attest to such review and to other critical facts
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in the foreclosure process; and “robosignature” of
documents.
HRS § 667-17.
Failure to submit adequate documentation, including
the attorney affirmation, has been determined to be an adequate
basis for denial of a motion for summary judgment. Wells Fargo
Bank, N.A. v. Fong, 149 Hawaiʻi 249, 252, 255—56, 488 P.3d 1228,
1231, 1234—35 (2021). It is reasonably inferred that to require
attorney affirmations is to also require them to be accurate and
complete. Anything less would render the statutory requirement
meaningless. See In re City & Cnty. of Honolulu Corp. Counsel,
54 Haw. 356, 373, 507 P.2d 169, 178 (1973) (“It is a cardinal
rule of statutory construction that a statute ought upon the
whole be so construed that, if it can be prevented, no clause,
sentence or word shall be superfluous, void, or
insignificant.”); Korean Buddhist Dae Won Sa Temple of Haw. v.
Sullivan, 87 Hawaiʻi 217, 230, 953 P.2d 1315, 1328 (1998) (courts
can consider “[t]he reason and spirit of the law, and the cause
which induced the legislature to enact it . . . to discover its
true meaning.”) (bracket and ellipsis points in original).
Because attorney affirmations are representations to the court,
an inaccurate, incomplete, or otherwise misleading HRS § 667-17
affirmation may constitute a misrepresentation to the court.
Accordingly, an inadequate attorney affirmation may rise to the
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level of fraud on the court. In these instances, relief from
the Decree of Foreclosure is justified. 24
Here, the attorney affirmation submitted in support of
the foreclosure of Namahoe’s home was inaccurate and incomplete
in several respects. JBNC appears to have initiated foreclosure
despite having knowledge that it failed to comply with the
Repair Rider — the violation of which triggered the foreclosure.
According to the Repair Rider attached to JBNC’s complaint, the
burden was on JBNC to certify “that the repairs which are funded
under this Repair Rider will be completed in a manner to meet
HUD property standards required by the Secretary as determined
by a HUD-approved inspector.” However, the record is devoid of
any admissible evidence of Namahoe’s alleged failure to carry
out the repairs. As the ICA stated in its Memorandum Opinion,
“there is no declaration or other evidence in the record of the
24 The circuit court in the Domingo and Namahoe foreclosure
action in Domingo v. James B. Nutter & Co., Civil No. 16-1-0249,
CAAP-XX-XXXXXXX, highlighted the importance of the attorney affirmation:
If the representations contained in the affirmation
required under HRS § 667-17 are not directed to the
mortgagor, then to whom are they directed? Quite clearly
they are directed to the Court presiding over the
foreclosure case. The Court implicitly relies upon the
attorney affirmation. The attorney affirmation “helps
ensure that Hawaiʻi’s courts are not used as instruments of
fraud in foreclosure actions.” Conf. Comm. Rep. No. 62-12,
in 2013 House Journal, 27th Leg., Reg. Sess. at 1632 (Haw.
2013).
Since the attorney affirmation contains
representations to the Court, if the attorney affirmation
contains misrepresentations they are misrepresentations to
the Court. Sanctions and remedies may be available as a
result of these misrepresentations to the Court.
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particular repairs Namahoe allegedly failed to complete.” No.
CAAP-XX-XXXXXXX, 2022 WL 899896 at *11 n.10 (App. March 28,
2022) (emphasis added). Furthermore, nowhere in the record does
JBNC confirm that Namahoe’s property had been inspected by a
HUD-certified inspector. 25 Pursuant to the Repair Rider, JBNC
had the independent duty to ensure that a HUD-approved inspector
had inspected Namahoe’s property prior to initiating foreclosure
proceedings.
By submitting an attorney affirmation in support of
foreclosure against Namahoe, without first verifying that there
was an adequate factual and legal basis for foreclosure pursuant
HRS § 667-17, the attorney affirmation falsely affirmed the
sufficiency of the basis for the foreclosure. This failure by
JBNC and its attorneys supports a finding of fraud on the court.
In its Memorandum Opinion, the ICA concluded that the
circuit court did not abuse its discretion when it denied
Namahoe’s HRCP Rule 60(b) motion because “the foreclosure
proceedings were final and unappealable, Namahoe had been
ejected from his home, and the Property had been purchased by
[JBNC] and sold to a third party.” Id. at *11. Implicit in its
decision, and more directly addressed in JBNC’s Answering Brief,
25 Based on the current record, it is unknown whether any inspectors
were sent to survey the state of repairs on Namahoe’s property. Namahoe
attests that two individuals inspected his property, but that none indicated
any problems with Namahoe’s repairs.
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is that “any need for Namahoe to reopen these proceedings was
substantially outweighed by the value of finality in this
litigation.” However, JBNC’s conduct toward Namahoe and the
subsequent filing of a legally and factually deficient attorney
affirmation led the circuit court to conclude that applicable
statutes, regulations, and contractual provisions were followed.
These failures pass the threshold to constitute fraud on the
court, and, accordingly, the circuit court erred in denying
Namahoe’s HRCP Rule 60(b)(6) motion for relief insofar as it
would otherwise preclude Namahoe from asserting a wrongful
foreclosure counterclaim.
2. Principles of equity necessitate relief
Namahoe’s claim for relief under HRCP Rule 60(b)(6)
should also have been granted because JBNC had no equitable
basis to pursue foreclosure in these specific circumstances. We
hold that the circuit court abused its discretion in denying
Namahoe relief.
The function of the court in a foreclosure proceeding
is to ascertain the precise amount due under the mortgage.
Honolulu, Ltd. v. Blackwell, 7 Haw. App. 210, 219, 750 P.2d 942,
948 (1988). A key factor in the court’s determination of
whether and to what extent to provide equitable relief is
whether forfeiture would be harsh and unreasonable under the
circumstances. Jenkins v. Wise, 58 Haw. 592, 597—98, 574 P.2d
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1337, 1341 (1978). We can think of no better example of a harsh
and unreasonable forfeiture than foreclosure of one’s home based
on an alleged default of a $500.00 agreement.
A court’s discretionary decision shall not be set
aside “unless manifestly against the clear weight of the
evidence.” Id. at 598, 574 P.2d at 1342. Here, because JBNC
failed to disclose all pertinent evidence, the circuit court
issued its judgment and denied equitable relief without availing
itself of all relevant facts. A careful review of the record
leads us to conclude that the Decree of Foreclosure was in
error.
As we explained in Jenkins, “[e]quity, . . . abhors
forfeitures and where no injustice would thereby result to the
injured party, equity will generally favor compensation rather
than forfeiture against the offending party.” Id. at 597, 574
P.2d at 1341. We have also held in the wrongful foreclosure
context that “where the property has passed into the hands of an
innocent purchaser for value, . . . an action at law for damages
is generally the appropriate remedy.” Delapinia v. Nationstar
Mortgage LLC, 150 Hawai‘i 91, 101-02, 497 P.3d 106, 116-17 (2021)
(quoting Mount v. Apao, 139 Hawai‘i 167, 180, 384 P.3d 1268, 1281
(2016)).
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Accordingly, we hold that Namahoe’s HRCP Rule 60(b)(6)
motion should have been granted on this alternate ground, and
that, accordingly, he should not be precluded from seeking
relief in the form of a wrongful foreclosure counterclaim
against JBNC.
3. Namahoe’s HRCP Rule 60(b)(6) motion is not time barred
Unlike HRCP Rule 60(b)(3) fraud, which imposes a one-
year time limit, a party seeking relief under HRCP Rule 60(b)(6)
must bring their motion “within a reasonable time.” HRCP Rule
60(b). We have interpreted HRCP Rule 60(b)(6) as requiring
litigants to establish “the existence of ‘extraordinary
circumstances’ that prevented or rendered [them] unable to
prosecute an appeal” within the “reasonable time” period. Haw.
Hous. Auth. v. Uyehara, 77 Hawaiʻi 144, 148—49, 883 P.2d 65, 69—
70 (1994). Under the similar federal rule, relief is available
under FRCP Rule 60(b)(6) (2007) “within a reasonable time.”
FRCP Rule 60(c)(1) (2007). This phrasing has been interpreted
to mean that relief is available “only where extraordinary
circumstances prevented a litigant from seeking earlier, more
timely relief.” U.S. v. Alpine Land & Reservoir Co., 984 F.2d
1047, 1049 (9th Cir. 1993).
Our case law sets a high bar. In Uyehara, Uyehara
filed his Rule 60(b) motion over three-and-a-half years after
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the entry of the order. 77 Hawaiʻi at 149, 883 P.2d at 70(1994). Uyehara claimed that his delay in filing was “not
unreasonable because, throughout this period, [Uyehara] was
attempting to obtain counsel.” Id. This court concluded,
however, that “even under the more relaxed time limitations of
HRCP Rule 60(b)(6), it is unreasonable for Uyehara to claim that
three and one-half years is a reasonable time expenditure for
obtaining an attorney.” Id.; see Aiona v. Wing Sing Wo Co., 45
Haw. 427, 432, 368 P.2d 879, 882 (1962) (“‘There must be an end
to litigation someday, and free, calculated, deliberate choices
are not to be relieved from.’ Three years is far in excess of a
reasonable time within which to make a decision as to choice of
remedy.”) (quoting Ackermann v. U.S., 340 U.S. 193, 198 (1950)).
Here, Namahoe has demonstrated extraordinary
circumstances that would justify waiting more than three years
from the filing of the Decree of Foreclosure — and more than two
years from the filing of the Order Confirming Sale — to file his
Rule 60(b) motion. Namahoe recounted that he had “no memory of
being served or signing a paper that I was served,” and that he
was receiving care for an illness. Namahoe further claims that
after the Writ of Ejectment was served, he was forced to live in
a van “until it broke down.” This inquiry is fact-specific and
determined on a case-by-case basis. See Alpine Land, 984 F.2d
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at 1049. Here, Namahoe has shown that the delay was warranted
due to his personal circumstances which were, in significant
part, generated by JBNC’s conduct.
V. CONCLUSION
Namahoe presented two valid bases for relief from the
Decree of Foreclosure issued by the circuit court. We find that
JBNC committed fraud on the court, and that the balance of
equities weighed against foreclosure in this case. Thus, the
circuit court’s denial of Namahoe’s HRCP Rule 60(b)(6) motion is
hereby reversed, and the Decree of Foreclosure is vacated
insofar as it would preclude Namahoe from asserting a wrongful
foreclosure claim. We remand for further proceedings consistent
with this opinion.
Kai K.A. Lawrence, /s/ Mark E. Recktenwald
William J. Rosdil,
for petitioner /s/ Paula A. Nakayama
David J. Minkin, /s/ Sabrina S. McKenna
for respondent
/s/ Michael D. Wilson
/s/ Todd W. Eddins
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