Wilmington Savings Fund Society, FSB v. Domingo ( 2022 )

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
26-AUG-2022
08:33 AM
Dkt. 112 AMSDO
NOS. CAAP-XX-XXXXXXX AND CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
CAAP-XX-XXXXXXX
WILMINGTON SAVINGS FUND SOCIETY, FSB, DOING BUSINESS AS
CHRISTINA TRUST, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY
AS TRUSTEE FOR BCAT 2015-14BTT, Plaintiff-Appellee,
v.
ISABELO PACPACO DOMINGO; MICHELE ELANOR DOMINGO,
Defendants-Appellants,
and
BANK OF AMERICA, N.A.; HALEWILI PLACE COMMUNITY ASSOCIATION,
Defendants-Appellees,
and
JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
GOVERNMENTAL UNITS 1-50, Defendants
AND
CAAP-XX-XXXXXXX
WILMINGTON SAVINGS FUND SOCIETY, FSB, DOING BUSINESS AS
CHRISTINA TRUST, NOT IN ITS INDIVIDUAL CAPACITY, BUT SOLELY
AS TRUSTEE FOR BCAT 2015-14BTT, Plaintiff-Appellee,
v.
ISABELO PACPACO DOMINGO; MICHELE ELANOR DOMINGO,
Defendants-Appellants,
and
BANK OF AMERICA, N.A.; HALEWILI PLACE COMMUNITY ASSOCIATION,
Defendants-Appellees,
and
JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
GOVERNMENTAL UNITS 1-50, Defendants
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CIVIL NO. 13-1-202K)
AMENDED SUMMARY DISPOSITION ORDER
(By:
Ginoza, Chief Judge, Leonard and Nakasone, JJ.)
In these consolidated appeals arising out of a
foreclosure action, Defendants-Appellants Isabelo Pacpaco Domingo
(Isabelo Domingo) and Michele Elanor Domingo (together, the
Domingos) appeal from the following entered by the Circuit Court
of the Third Circuit (Circuit Court):
(1) a "Judgment" (Foreclosure Judgment), based on
"Findings of Fact and Conclusions of Law; Order Granting
Plaintiff's Renewed Motion for Summary Judgment and for
Interlocutory Decree of Foreclosure" (Foreclosure Order), both
entered on January 29, 2018;
(2) a "Judgment" (Confirmation Judgment), based on an
"Order Approving Commissioner's Report and Granting Plaintiff's
Motion for Confirmation of Foreclosure Sale, Allowance of Costs,
Commissions and Fees, Distribution of Proceeds, Directing
Conveyance and for Writ of Possession/Ejectments" (Confirmation
Order), both entered on August 15, 2018; and
(3) a "Writ of Possession" entered on August 20, 2018.
Each of the above were entered in favor of
Plaintiff-Appellee Wilmington Savings Fund Society, FSB, doing
business as Christiana Trust, Not in Its Individual Capacity, but
Solely as Trustee for BCAT 2015-14BTT (Wilmington) and against
the Domingos.1
The Domingos contend on appeal that the Circuit Court
erred in denying the Domingos' motion for summary judgment and in
granting summary judgment in favor of Wilmington, because
Wilmington admits it was never in possession of the original Note
executed by Isabelo Domingo and Wilmington is thus precluded
1
The Honorable Robert D.S. Kim presided.
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under Hawaii Revised Statutes (HRS) § 490:3-309 (2008) from
enforcing the Note.2
As discussed below, we conclude this appeal must be
dismissed based on mootness.
I. Brief Background
Bank of America, N.A. (Bank of America) initiated this
foreclosure action in 2013. Wilmington was later substituted
into the case as the plaintiff. In seeking summary judgment,
Wilmington presented evidence that the original Note was lost
while in the possession of Bank of America. The mortgage
securing the Note was assigned by Bank of America to Wilmington,
and an Assistant Vice-President for Bank of America executed an
Affidavit of Lost Note. Wilmington claims to have acquired the
rights to enforce the Note from Bank of America on or about
August 1, 2015, via the Affidavit of Lost Note. The evidence is
uncontested that Wilmington never held possession of the actual
Note.
2
HRS § 490:3-309 (2008), adopted in 1991, specifically addresses lost,
destroyed, or stolen notes, and provides:
§490:3-309. Enforcement of lost, destroyed, or stolen
instrument. (a) A person not in possession of an
instrument is entitled to enforce the instrument if
(i) the person was in rightful possession of the
instrument and entitled to enforce it when loss of
possession occurred, (ii) the loss of possession was
not the result of a transfer by the person or a lawful
seizure, and (iii) the person cannot reasonably obtain
possession of the instrument because the instrument
was destroyed, its whereabouts cannot be determined,
or it is in the wrongful possession of an unknown
person or a person that cannot be found or is not
amenable to service of process.
(b) A person seeking enforcement of an
instrument under subsection (a) must prove the terms
of the instrument and the person's right to enforce
the instrument. If that proof is made, section
490:3-308 applies to the case as if the person seeking
enforcement had produced the instrument. The court
may not enter judgment in favor of the person seeking
enforcement unless it finds that the person required
to pay the instrument is adequately protected against
loss that might occur by reason of a claim by another
person to enforce the instrument. Adequate protection
may be provided by any reasonable means.
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On January 29, 2018, the Circuit Court granted summary
judgment in favor of Wilmington by entering the Foreclosure
Order, which states in part:
7. At the time that Bank of America, N.A.
commenced this action, Bank of America, N.A. was
entitled to enforce the indorsed-in-blank Note as
evidence [sic] by a Lost Note Affidavit and the
Declaration of Bank of America, N.A. filed herein.
[Wilmington] is now the holder of the original Lost
Note Affidavit, and entitled to enforce the same.
The Circuit Court's Foreclosure Order also included findings
regarding Wilmington's acquisition of rights to enforce the lost
Note via the Lost Note Affidavit as well as on equitable grounds;
that at the time the Note and Mortgage had been executed, funds
from the loan had been used to pay off amounts owed by the
Domingos under a mortgage with Ameriquest Mortgage Company; and
the protection afforded to the Domingos under an indemnification
agreement from Bank of America to borrower Isabelo Domingo for
any loss or damage that might occur by reason of a claim by
another person to enforce the original Note. The Foreclosure
Judgment was also entered on January 29, 2018. The Domingos
appealed from the Foreclosure Order and Foreclosure Judgment,
which resulted in CAAP-XX-XXXXXXX.
On June 15, 2018, Wilmington filed a "Motion for
Confirmation of Foreclosure Sale, Allowance of Costs, Commissions
and Fees, Distribution of Proceeds, Directing Conveyance and for
Writ of Possession/Ejectments" (Motion for Confirmation). After
a hearing on July 10, 2018, the Circuit Court granted
Wilmington's Motion for Confirmation of the foreclosure sale and
found that Wilmington purchased the subject property at the
foreclosure auction and that "the price obtained by the
Commissioner fairly represents the market value of the Mortgaged
Property under the circumstances of the sale and present economic
conditions and that no other person indicated any interest in
submitting a higher bid." On August 15, 2018, the court entered
the Confirmation Order and Confirmation Judgment. On August 20,
2018, the Circuit Court entered the Writ of Possession. On
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September 14, 2018, the Domingos appealed from the Confirmation
Order, Confirmation Judgment, and Writ of Possession, which
became CAAP-XX-XXXXXXX. Subsequently, CAAP-XX-XXXXXXX was
consolidated with CAAP-XX-XXXXXXX.
While the appeal in CAAP-XX-XXXXXXX was pending, the
Domingos filed a "Motion to Set Supersedeas Bond for a Stay
Pending Appeal" in the Circuit Court on March 7, 2018. On April
16, 2018, the Domingos filed a Motion for Stay Pending Appeal in
CAAP-XX-XXXXXXX arguing that "though the Circuit Court has a
ministerial duty to set the amount of a supersedeas bond so that
Appellants may obtain a stay, following a hearing on April 5,
2018, the Circuit Court denied the motion by minute order on
April 10, 2018." (Footnote omitted.) The record shows that
after the hearing on April 5, 2018, the Circuit Court entered an
"Order Denying [Domingos'] Motion to Set Supersedeas Bond for a
Stay Pending Appeal" on May 8, 2018. On May 11, 2018, we granted
in part the Domingos' Motion for Stay Pending Appeal "on the
condition that Appellants submit to this court for its approval a
supersedeas bond in an amount of Three-Hundred Thousand and
no/100 Dollars ($300,000). The stay will take effect upon the
approval of the supersedeas bond by this court." The Domingos
failed to submit a supersedeas bond to this court and thus failed
to obtain a stay.
II. Motion to Dismiss Based on Mootness
On April 1, 2022, Wilmington filed a Motion to Dismiss
Appeal asserting that this appeal is moot because the Domingos
failed to obtain a stay pending appeal and the subject property
has recently been sold and conveyed to a third-party good-faith
purchaser during the pendency of the appeal. Wilmington argues
that it bought the subject property at the foreclosure auction
and has now sold the property to third-party good-faith purchaser
BBNY REO LLC, a Florida Limited Liability Company (BBNY).
Wilmington submits declarations and exhibits with its motion to
show that it sold and conveyed the property to BBNY, that a
Special Warranty Deed was recorded on January 4, 2022, and a
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Corrective Special Warranty Deed was recorded on March 7, 2022,
both in the Land Court.
The Domingos do not dispute that they failed to obtain
a supersedeas bond and thus failed to obtain a stay pending this
appeal. However, the Domingos argue that the authorities that
Wilmington relies upon are inapplicable to this case, the case is
not moot, and we should deny the motion to dismiss.
The Hawai#i Supreme Court has explained mootness as
follows:
A case is moot if it has lost its character as a present,
live controversy of the kind that must exist if courts are
to avoid advisory opinions on abstract propositions of law.
The rule is one of the prudential rules of judicial
self-governance founded in concern about the proper –- and
properly limited –- role of the courts in a democratic
society. We have said the suit must remain alive throughout
the course of litigation to the moment of final appellate
disposition to escape the mootness bar.
Kaho#ohanohano v. State, 114 Hawai#i 302, 332, 162 P.3d 696, 726
(2007) (citations and emphasis omitted). It is well established
that it is the appellant's burden to seek a stay if post-appeal
transactions could render the appeal moot. Bank of New York
Mellon v. R. Onaga, Inc., 140 Hawai#i 358, 367, 400 P.3d 559, 568
(2017) (quoting Lathrop v. Sakatani, 111 Hawai#i 307, 313, 141
P.3d 480, 486 (2006)).
The City Bank Rule
This court has stated "[t]he general rule is that the
right of a good faith purchaser to receive property acquired at a
judicial sale cannot be affected by the reversal of an order
ratifying the sale where a supersedeas bond has not been filed."
City Bank v. Saje Ventures II, 7 Haw. App. 130, 133, 748 P.2d
812, 814 (1988) (brackets, internal quotation marks and citation
omitted). "The purpose of the rule is to advance the stability
and productiveness of judicial sales." Id. (brackets, internal
quotation marks and citation omitted). Exceptions to this rule
are where the reversal is based on jurisdiction grounds or where
the purchaser is the mortgagee since he "does not free himself
from the underlying dispute to which he is a party." Id.6
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
(emphasis added) (brackets and citation omitted). In City Bank,
a mortgagor appealed from an order confirming a commissioner's
public auction sale. Id. at 131, 748 P.2d at 813. This court
noted there was nothing to indicate the third-party purchaser was
not a good-faith purchaser and there was no stay of the
confirmation order, and thus the appeal was deemed to be moot.
Id. at 133-34, 748 P.2d at 814-15.
In Onaga, 140 Hawai#i at 367, 400 P.3d at 568, the
Hawai#i Supreme Court explained "the City Bank rule makes
practical sense in the foreclosure context and is consistent with
the principles underlying the Land Court system . . . The policy
underlying this rule is to encourage nonparty individuals to bid
at foreclosure sales." (brackets, internal quotation marks and
citation omitted). The Hawai#i Supreme Court then expressly
adopted the City Bank rule "for application to Land Court
properties as well as properties administered pursuant to HRS
Chapter 502 (Regular System)[,]" and held that "an appellant
challenging a foreclosure must post a supersedeas bond or
otherwise obtain a stay pursuant to [Hawai#i Rules of Civil
Procedure (HRCP)] Rule 62 or Hawai#i Rules of Appellate Procedure
(HRAP) Rule 8." Onaga, 140 Hawai#i at 367, 400 P.3d at 568
(footnotes omitted). The supreme court concluded:
A party who wishes to stay an order confirming a foreclosure
sale pending appeal must post a supersedeas bond or
otherwise obtain a stay pursuant to HRCP Rule 62 or HRAP
Rule 8. If a stay is not obtained and the property is sold
to a bona fide purchaser, the appeal should be dismissed as
moot because no effective relief can be granted.
Id. at 370, 400 P.3d at 571.
The Domingos argue that Onaga only applies when the
third-party purchaser obtains the property from the commissioner
and should not apply here where Wilmington obtained the property
from the commissioner and then subsequently sold it to a third-
party. In other words, the Domingos argue that the second
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exception articulated in City Bank should apply because the
purchaser at the foreclosure sale is the mortgagee.3
We recognize the circumstances in Onaga are different
than the instant case because, in Onaga, the third-party
purchasers obtained the property directly from the foreclosure
sale. In that case, R. Onaga, Inc. (Onaga) and The Bank of New
York Mellon FKA the Bank of New York (BONY) each initiated
foreclosure proceedings against the owners of the subject
property and the circuit court granted summary judgment in favor
of BONY, determining that BONY had a first priority lien. Onaga,
140 Hawai#i at 360, 400 P.3d at 561. The Ferraras then bought
the property at the foreclosure sale. Id. Onaga initiated two
separate appeals, from the summary judgment in favor of BONY and
then from the judgment confirming the foreclosure sale, but Onaga
failed to post a supersedeas bond ordered by the Circuit Court
and thus did not obtain a stay pending the appeal. Id. The
supreme court held that Onaga failed to obtain a stay and thus
"may not attack a good-faith purchaser's title to property
purchased at a judicial sale and confirmed by court order." Id.
at 367, 400 P.3d at 568. The supreme court further determined
that the Ferraras had purchased the property in good-faith. Id.
at 367 n.13, 368, 400 P.3d at 568 n.13, 569.
Although the circumstances in Onaga vary from the
instant case, this court applied the City Bank rule to
circumstances akin to this case. In DB Private Wealth Mortg.,
Ltd. v. Bouley, No. CAAP–14–0000585, 2016 WL 3548347 (Haw. App.
June 28, 2016) (SDO), the foreclosing party was DB Private Wealth
Mortgage, Ltd. (DB), which obtained a foreclosure judgment
against the defendants (the Bouleys) and then obtained the
property via a Commissioner's Deed registered in Land Court. Id.
at *1-2. The Bouleys appealed from, inter alia, a stipulated
confirmation order. Id. at *1. In the meantime, DB conveyed the
3
The Domingos do not assert that the first exception to the City Bank
rule applies here, i.e., that the challenged Circuit Court judgments and
orders should be reversed on jurisdictional grounds.
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property to Zumirez Drive, LLC (Zumirez) by way of Quitclaim Deed
registered in Land Court, and thereafter, Zumirez sold the
property to the Trustees of the William C. and Donna K. Johnson
Revocable Trust (the Johnsons) with title transferring by
Warranty Deed. Id. at *2. This court addressed whether the
appeal was moot because the Bouleys had failed to obtain a stay
and the property had been sold to a good-faith third-party
purchaser.4 Id. Although this court recognized the exceptions
to the City Bank rule, we held that "neither exception applies
here, as the Bouleys do not request reversal of the orders based
on jurisdictional grounds, and the Johnsons were not the
mortgagee." Id. at *3; see also In re Nat'l Mass Media Telecomm.
Sys. Inc., 152 F.3d 1178 (9th Cir. 1998) (affirming a district
court's dismissal of plaintiff's appeal from bankruptcy court as
moot where plaintiff failed to obtain a stay, the lender
purchased plaintiff's property at a foreclosure sale and then
sold the property to a non-party).
Thus, in light of DB Private Wealth Mortg., we reject
the Domingos' argument that the second exception to the City Bank
rule applies in this case. Here, as in DB Private Wealth Mortg.,
mortgagee Wilmington purchased the property at the commissioner's
sale, but has now sold the property to a third-party, BBNY.
Further, as discussed below, we conclude that BBNY is a good-
faith third-party purchaser.
The Domingos assert Wilmington has not detailed who
BBNY is or how it is a good-faith purchaser.5 "An innocent or
good faith purchaser is one who, by an honest contract or
4
The Bouleys did not challenge or deny that the Johnsons were good-
faith third-party purchasers. Id. at *2.
5
The Domingos also argue that the matter must be remanded to the
Circuit Court for an evidentiary hearing to determine whether BBNY is a good-
faith purchaser because "[t]his Court is not a court where evidence can be
taken." However, in Onaga, the Ferraras intervened while the case was on
appeal and moved to dismiss, asserting the appeal was moot because they had
purchased the property. 140 Hawai#i at 360, 400 P.3d at 561. The Hawai#i
Supreme Court determined the appeal was moot without remanding to the circuit
court for fact finding. Id.
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agreement, purchases property or acquires an interest therein,
without knowledge, or means of knowledge sufficient to charge him
in law with knowledge, of any infirmity in the title of the
seller." Onaga, 140 Hawai#i at 367 n.13, 400 P.3d at 568 n.13
(citation and internal quotation marks omitted).
Wilmington has provided, inter alia, a declaration by
William J. Bymel, manager of BBNY (Bymel Declaration). Bymel
attests that BBNY entered into an agreement to purchase and did
purchase the subject property from Wilmington. Bymel further
attests that BBNY is not affiliated with or otherwise related to
or connected to Wilmington or its loan servicer, Selene Finance,
LP, and that the price and terms of the purchase were negotiated
at "arms-length." The Bymel Declaration indicates that BBNY is a
good-faith purchaser and the Domingos fail to show otherwise.
See City Bank, 7 Haw. App. at 133, 748 P.2d at 814-15 (noting
that the purchaser of the property was a third-party not involved
in the case and "[t]here is nothing in the record to indicate
that [the third-party purchaser] was not a good faith
purchaser"); see also Lathrop, 111 Hawai#i at 313-14, 141 P.3d
at 486-87 (noting in an appeal from an order expunging a lis
pendens that "it is appellant's burden to seek a stay if
post-appeal transactions could render the appeal moot" and
holding that a completed sale of the subject property rendered
the appeal moot).
We also note that, in Onaga, the Hawai#i Supreme Court
stated:
[w]hen the Ferraras purchased the Property, the circuit
court had already determined in the consolidated proceedings
that BONY had a first priority lien on the Property. Thus,
at the time of the purchase, there would not have been an
"infirmity in the title" based on Onaga's mortgage.
140 Hawai#i at 367 n.13, 400 P.3d at 568 n.13. Here, when BBNY
purchased the subject property, the Circuit Court had already
issued its foreclosure decree via its Foreclosure Order and
Foreclosure Judgment, and confirmed the foreclosure sale via the
Confirmation Order and Confirmation Judgment. Thus, at the time
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BBNY purchased the property from Wilmington, there was no
"infirmity in the title" based on the Domingos' mortgage to bar
BBNY from purchasing the property in good-faith.
III. Conclusion
Given the circumstances in this case, including the
Domingos' failure to obtain a stay, no effective relief can be
granted to the Domingos given the sale of the property to third-
party good-faith purchaser BBNY. Therefore, this appeal is
dismissed as moot.
DATED: Honolulu, Hawai#i, August 26, 2022.
Keith M. Kiuchi, /s/ Lisa M. Ginoza
(Gary Victor Dubin and Chief Judge
Frederick J. Arensmeyer
on the briefs), for /s/ Katherine G. Leonard
Defendants-Appellants Associate Judge
David B. Rosen, /s/ Karen T. Nakasone
David E. McAllister, Associate Judge
Justin S. Moyer,
Christina C. Macleod,
(Aldridge Pite, LLP)
for Plaintiff-Appellee
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