U.S. Bank National Association v. Thede ( 2020 )

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
07-APR-2020
07:50 AM
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR HARBORVIEW
MORTGAGE LOAN TRUST 2005-16, MORTGAGE LOAN PASS-THROUGH
CERTIFICATES, SERIES 2005-16, Plaintiff-Appellee,
v.
DYLAN THEDE, Defendant-Appellant,
and
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
SOLELY AS NOMINEE FOR COUNTRYWIDE HOME LOANS, INC.,
Defendant-Appellee,
and
JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; and DOE
GOVERNMENTAL UNITS 1-50, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT
(CIVIL NO. 12-1-0125)
SUMMARY DISPOSITION ORDER
(By: Ginoza, C.J., and Leonard and Wadsworth, JJ.)
This appeal arises out of a foreclosure decree entered
by the Circuit Court of the Fifth Circuit (Circuit Court) against
Defendant-Appellant Dylan Thede (Thede). On April 3, 2018, the
Circuit Court entered its Findings of Fact, Conclusions of Law
and Order Granting Plaintiff's Motion for Summary Judgment
Against All Defendants and for Interlocutory Decree of
Foreclosure (Foreclosure Decree), and the related Judgment
(Foreclosure Judgment), both in favor of Plaintiff-Appellee U.S.
Bank National Association, as Trustee for Harbor View Mortgage
Loan Trust 2005-16, Mortgage Loan Pass-Through Certificates,
Series 2005-16 (U.S. Bank), and against Thede and Defendant-
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Appellee Mortgage Electronic Registration Systems, Inc., Solely
as Nominee for Countrywide Home Loans, Inc.1/
Thede appeals from the Foreclosure Decree and the
Foreclosure Judgment.2/ He contends that the Circuit Court erred
in granting U.S. Bank's motion for summary judgment and
interlocutory decree of foreclosure (MSJ) by relying on "the
hearsay testimony of U.S. Bank's declaring witnesses" to
establish U.S. Bank's standing to foreclose on Thede's mortgaged
property.
After reviewing the record on appeal and the relevant
legal authorities, and giving due consideration to the issues
raised and the arguments advanced by the parties, we resolve
Thede's contention as follows and vacate and remand.
I. RELEVANT BACKGROUND
On April 19, 2012, U.S. Bank filed a Complaint for
Foreclosure (Complaint) in the Circuit Court.3/ U.S. Bank
alleged, among other things, that: (1) on August 10, 2005, Thede
obtained a $1,500,000 loan (Loan) from Countrywide Home Loans,
Inc. (Countrywide), by executing a promissory note (Note),
secured by a mortgage (Mortgage) recorded with respect to real
property located at 3657 Anini Rd., Princeville, Hawai#i 96722
(Property); (2) the Mortgage was assigned to U.S. Bank by an
Assignment of Mortgage recorded on December 8, 2009; (3) Thede
defaulted under the payment terms of the Note and Mortgage; (4)
following written notice to Thede and his failure to cure the
default, U.S. Bank exercised its option to accelerate the loan
and to declare the entire principal due under the Note and
secured by the Mortgage, plus interest, advances, and other
1/
The Honorable Randal G.B. Valenciano presided.
2/
Mortgage Electronic Registration Systems, Inc. did not appeal from
the Foreclosure Judgment and, as presumably a nominal appellee, did not file
an answering brief. See Hawai#i Rules of Appellate Procedure (HRAP) Rule
28(c).
3/
U.S. Bank initially referred to itself as U.S. Bank National
Association, as Trustee for the Benefit of Harborview 2005-16 Trust Fund, but
on December 15, 2016, obtained the Circuit Court's permission to change its
name in the caption as currently stated.
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charges, immediately due and payable; and (5) U.S. Bank was
entitled to foreclose the Mortgage and to sell the Property.
On October 12, 2017, U.S. Bank filed its MSJ, which
included an attached "Declaration of Indebtedness and on Prior
Business Records." Rebecca C. Wallace (Wallace) signed the
declaration (Wallace Declaration), "as an authorized signer of
Nationstar Mortgage LLC ('Nationstar'), which is Plaintiff's
servicing agent for the subject loan ('the loan')[.]" Wallace
declared, among other things, that "Nationstar's records indicate
that Plaintiff, by and through Nationstar had possession of the
original Note prior to 04/19/2012, the date of the filing of the
complaint in this foreclosure." However, Wallace also stated
that "Nationstar became Plaintiff's loan servicer for the Loan
being foreclosed in this action on 04/01/2014[,]" i.e., nearly
two years after the Complaint was filed, and that "[t]he prior
loan servicer for this mortgage loan was Select Portfolio
Servicing, Inc., N.A. ('Prior Servicer')."
On November 30, 2017, U.S. Bank filed the "Affidavit of
Bank of America, N.A. Re: Possession of Note as Prior Servicer."
Nichole Renee Williams (Williams) signed the affidavit (Williams
Affidavit), which stated, in relevant part:
1. I am authorized to sign this Declaration on
behalf of Bank of America, N.A. ("BANA"), which was the
prior servicer for the subject loan (the "Loan").
2. As prior servicer, BANA maintained records for
the Loan. As part of my job responsibilities for BANA, I am
familiar with the type of records that were maintained by
BANA in connection with the Loan. As such, I am authorized
to make this Declaration.
3. The information in this Declaration is taken
from BANA's business records. I have personal knowledge of
BANA's procedures for creating these records. They are: (a)
made at or near the time of the occurrence of the matters
recorded by persons with personal knowledge of the
information in the business record, or from information
transmitted by persons with personal knowledge; (b) kept in
the course of BANA's regularly conducted business
activities; and (c) created by BANA as a regular practice.
4. On 04/19/2012, the Complaint for Foreclosure;
Summons ("Complaint") was filed herein identifying the
Plaintiff as U.S. Bank National Association, as Trustee, for
the Benefit of Harborview 2005-16 Trust Fund. A true and
correct copy of the Complaint is attached hereto as Exhibit
"A".
5. At the time the Complaint was filed, BANA was
the servicer for the Loan.
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6. On 04/09/2012, BANA was in possession of the
original Adjustable Rate Note dated 08/10/2005 in the
principal amount of $1,500,000.00 executed by DYLAN THEDE in
favor of Countrywide Home Loans, Inc., endorsed in blank
("Note"). A true and correct copy of the Note is attached
as Exhibit "B".
On December 6, 2017, Thede filed a memorandum in
opposition to U.S. Bank's motion for summary judgment. He argued
that U.S. Bank offered no admissible evidence that it possessed
the Note when the Complaint was filed, and thus failed to
establish its standing to foreclose under Bank of America, N.A.
v. Reyes-Toledo, 139 Hawai#i 361, 390 P.3d 1248 (2017). In
particular, Thede argued that the Wallace Declaration: (1) did
not establish Wallace's personal knowledge of her assertion that
U.S. Bank, through Nationstar, had possession of the Note prior
to the filing of the Complaint; and (2) made contradictory
statements in asserting that Nationstar had possession of the
Note before it became U.S. Bank's servicer.
On February 6, 2018, U.S. Bank filed a supplemental
declaration in support of its MSJ. Christy Vieau (Vieau) signed
the declaration (Vieau Declaration), which stated, in relevant
part:
1. I am authorized to sign this Declaration on
behalf of Plaintiff U.S. BANK NATIONAL ASSOCIATION, AS
TRUSTEE FOR HARBORVIEW MORTGAGE LOAN TRUST 2005-16, MORTGAGE
LOAN PASS-THROUGH CERTIFICATES, SERIES 2005-16 ("Plaintiff")
as an authorized signer of Nationstar Mortgage, LLC
("Nationstar"), which is Plaintiff's servicing agent for the
subject loan ("the Loan").
2. Nationstar maintains records for the loan in its
capacity as Plaintiff's servicer. As part of my job
responsibilities for Nationstar, I am familiar with the type
of records maintained by Nationstar in connection with the
Loan. As such, I am authorized to make this Declaration in
support of Plaintiff's Motion for Summary Judgment Against
All Defendants and for Interlocutory Decree of Foreclosure
filed on 10/12/2017.
3. Nationstar is the Plaintiff and current loan
servicer, and acts as the exclusive representative and agent
of Plaintiff in the servicing and administering of mortgage
loans referred to Nationstar, including the Loan being
foreclosed in this action.
4. The information in this Declaration is taken
from Nationstar's business records, I have personal
knowledge of Nationstar's procedures for creating these
records. They are: (a) made at or near the time of the
occurrence of the matters recorded by persons with personal
knowledge of the information in the business record, or from
information transmitted by persons with personal knowledge;
(b) kept in the course of Nationstar's regularly conducted
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business activities; and (c) created by Nationstar as
regular practice.
5. On 04/19/2012, the Complaint for Foreclosure
("Complaint") was filed herein identifying the Plaintiffs as
U.S. Bank National Association, as Trustee, for the benfit
[sic] of Harborview 2005-16 Trust Fund.
6. At the time the Complaint for Foreclosure was
filed, Bank of America, N.A. ("BANA") was the servicer for
the Loan.
7. Based on the affidavit executed by Nichole Renee
Williams on 11/09/2017 as an authorized representative of
BANA ("Affidavit"), BANA was in possession of the original
Adjustable Rate Note dated 08/10/2015 in the principal
amount of $1,500,000.00 executed by Defendant DYLAN THEDE in
favor of Countrywide Home Loans, Inc., endorsed in blank
("Original Note"), when the Complaint was filed. Attached
hereto as Exhibit "9" is a true and correct filed copy of
BANA's Affidvit.
8. On 12/01/2012, servicing of the Loan was
transferred from BANA to Select Portfolio Servicing Inc.
("SPS"). On 04/01/2014, the subject Loan was further
transferred to Nationstar. As a result of the service
transfer, Plaintiff was substituted as the real party in
interest on 12/15/2016.
Vieau further stated:
12. In reviewing the records from BANA and SPS which
were incorporated into Nationstar's own business records,
Nationstar clarifies that Plaintiff at the time of the
Complaint for Foreclosure was filed on 04/19/2012 had
possession of the Original Note, by and through BANA.
On February 14, 2018, Thede filed a supplemental
memorandum opposing U.S. Bank's MSJ and addressing the Williams
Affidavit. Thede argued, among other things, that Williams's
testimony: (1) contradicted the Wallace Declaration, creating a
genuine issue of material fact as to who U.S. Bank's servicer was
and who was in possession of the Note when the Complaint was
filed; and (2) was not based on Williams's personal knowledge
that BANA possessed the Note when the Complaint was filed, and
constituted inadmissible hearsay.
On February 16, 2018, U.S. Bank filed a reply
memorandum in support of its motion for summary judgment.
Following a February 22, 2018 hearing on U.S. Bank's
motion for summary judgment, on April 3, 2018, the Circuit Court
entered the Foreclosure Decree and the Foreclosure Judgment.
Thede filed a timely notice of appeal.
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II. DISCUSSION
In Reyes-Toledo, the Hawai#i Supreme Court held that to
establish the right to foreclose, the foreclosing plaintiff must
establish standing, or entitlement to enforce the subject
promissory note, at the time the action was commenced. 139
Hawai#i at 367-70, 390 P.3d at 1254-57. The "foreclosing
plaintiff's burden to prove entitlement to enforce the note
overlaps with the requirements of standing in foreclosure actions
as '[s]tanding is concerned with whether the parties have the
right to bring suit.'" Id. at 367, 390 P.3d at 1254 (quoting
Mottl v. Miyahira, 95 Hawai#i 381, 388, 23 P.3d 716, 723 (2001)).
The supreme court further noted that "a foreclosing plaintiff
does not have standing to foreclose on mortgaged property unless
the plaintiff was entitled to enforce the note that has been
defaulted on." Id. at 368, 390 P.3d at 1255 (citing Hanalei, BRC
Inc. v. Porter, 7 Haw. App. 304, 310, 760 P.2d 676, 680 (1988)).
Here, it appears that the Circuit Court granted U.S.
Bank's MSJ based in part on the copy of the "Adjustable Rate
Note" that was attached to the Williams Affidavit and the Vieau
and Wallace Declarations (Attached Note). At the February 22,
2018 hearing, the court stated:
So in this particular case regarding the Reyes-Toledo
issue, the Court believes that given the Court's review of
the documents, there's sufficient evidence to show that at
the time of the complaint, the parties –- the plaintiffs or
the plaintiff's predecessor in interest had possession of
the documents, and so that would satisfy Reyes-Toledo.
As far as other qualified witness, the Court believes
that the declarants or affiants had sufficient information
and were in a sufficient position to make the allegations
that they made and I'm not -– I'm not ruling that in making
their declarations, that you need to attach –- like, you
know, when they say I reviewed the business records, they
don't have to attach all of the business records they
reviewed. That would be an onerous obligation, from this
Court's perspective.
So what the court will do is the Court will grant the
motion for summary judgment.
Thede contends that the Circuit Court erred in granting
U.S. Bank's MSJ by relying on "the hearsay testimony of U.S.
Bank's declaring witnesses" to establish U.S. Bank's standing to
foreclose. Thede also argues that U.S. Bank offered "no
admissible evidence" that it possessed the Note when the
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Complaint was filed.
"Under Hawai#i Rules of Civil Procedure Rule 56(e)
(2000) and Rules of the Circuit Courts of the State of Hawai#i
Rule 7(g) (1997), 'a declaration [or affidavit] in support of a
summary judgment motion must be based on personal knowledge,
contain facts that would be admissible in evidence, and show that
the declarant [or affiant] is competent to testify as to the
matters contained within the declaration.'" Wells Fargo Bank,
N.A. v. Behrendt, 142 Hawai#i 37, 44, 414 P.3d 89, 96 (2018)
(quoting U.S. Bank N.A. v. Mattos, 140 Hawai#i 26, 30, 398 P.3d
615, 619 (2017)). "Inadmissible evidence 'cannot serve as a
basis for awarding or denying summary judgment.'" Id. (quoting
Haw. Cmty. Fed. Credit Union v. Keka, 94 Hawai#i 213, 221, 11
P.3d 1, 9 (2000)).
U.S. Bank contends that the Attached Note was
admissible under the hearsay exception for records of regularly
conducted activity pursuant to Hawai#i Rules of Evidence (HRE)
Rule 803(b)(6).4/ U.S. Bank further argues that Williams, Vieau,
and Wallace were each a "qualified witness" with respect to the
Attached Note, and each satisfied the standards set out in Mattos
for admitting that document into evidence and establishing U.S.
Bank's standing to foreclose.
In Mattos and Behrendt, the supreme court reviewed the
sufficiency of declarations similar in certain key respects to
those at issue here, each of which attested to a promissory note
and other documents relating to a foreclosure under the HRE Rule
803(b)(6) business records exception. See Mattos, 140 Hawai#i at
31, 398 P.3d at 620; Behrendt, 142 Hawai#i at 44-45, 414 P.3d at
4/
HRE Rule 803(b)(6) (Supp. 2011) provides that the following are
not excluded by the rule against hearsay:
A memorandum, report, record, or data compilation, in
any form, of acts, events, conditions, opinions, or
diagnoses, made in the course of a regularly conducted
activity, at or near the time of the acts, events,
conditions, opinions, or diagnoses, as shown by the
testimony of the custodian or other qualified witness,
or by certification that complies with rule 902(11) or
a statute permitting certification, unless the sources
of information or other circumstances indicate lack of
trustworthiness.
(Emphasis added.)
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96-97. The court's decisions in Mattos and Behrendt are
therefore dispositive as to whether HRE Rule 803(b)(6) may serve
as a basis to admit the Attached Note into evidence.
With respect to the Williams Affidavit, Williams did
not aver that she was the custodian of records for BANA,
Countrywide,5/ or any other holder of the Note (e.g., U.S.
Bank6/). Thus, the Attached Note is admissible under HRE Rule
803(b)(6) only if the Williams Affidavit demonstrates that
Williams is a "qualified witness" with respect to that document.
See Mattos, 140 Hawai#i at 32, 398 P.3d at 621; Behrendt, 142
Hawai#i at 45, 414 P.3d at 97.
The supreme court has held that a witness may be
qualified to provide the testimony required by HRE Rule 803(b)(6)
even if the witness is not employed by the business that created
the document or lacks direct, personal knowledge of how the
document was created. See Mattos, 140 Hawai#i at 32, 398 P.3d at
621; Behrendt, 142 Hawai#i at 45, 414 P.3d at 97. While there is
"no requirement that the records have been prepared by the entity
that has custody of them," the testifying witness "must have
enough familiarity with the record-keeping system of the business
that created the record to explain how the record was generated
in the ordinary course of business." Behrendt, 142 Hawai#i at
45, 414 P.3d at 97 (quoting and citing Mattos, 140 Hawai#i at 32,
398 P.3d at 621).
The court in Behrendt further explained:
Records received from another business and incorporated into
the receiving business' records may in some circumstances be
regarded as 'created' by the receiving business.
Incorporated records are admissible under HRE Rule 803(b)(6)
5/
In its Complaint, U.S. Bank alleged that "[o]n or about August 10,
2005, [Thede], for value received, duly made, executed and delivered to
Countrywide" the Note. (Emphasis added.) In addition, the Note identifies
Countrywide as the "Lender" and, in turn, defines the "Note Holder" as the
"Lender or anyone who takes this Note by transfer and who is entitled to
receive payments under this Note." It therefore appears that Countrywide was
the original holder of the Note.
6/
The Complaint states: "By Assignment of Mortgage recorded December
8, 2009 . . . the mortgagee's interest in the Mortgage was assigned to [U.S.
Bank]." Because the debt does not automatically follow the security (Reyes-
Toledo, 139 Hawai#i at 371 n.17, 390 P.3d at 1258 n.17), it is not clear when
U.S. Bank became the holder of the Note. The Williams Affidavit states that
BANA was in possession of the Note on April 9, 2012, but does not indicate
when BANA's possession commenced.
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when a custodian or qualified witness testifies that the
documents were incorporated and kept in the normal course of
business, that the incorporating business typically relies
upon the accuracy of the contents of the documents, and the
circumstances otherwise indicate the trustworthiness of the
document.
Id. at 45, 414 P.3d at 97 (citation omitted) (citing Mattos, 140
Hawai#i at 32, 398 P.3d at 621).
Here, as in Mattos and Behrendt, the Williams Affidavit
does not establish that the Attached Note was received by BANA
and then incorporated into BANA's records. In addition, like the
declaration in Behrendt, the Williams Affidavit does not
establish that Williams was familiar with the record-keeping
system of Countrywide or any other prior holder of the Note. See
142 Hawai#i at 46, 414 P.3d at 98 (declaration of loan servicer
employee "ma[de] no assertions as to [the declarant's]
familiarity with the record-keeping systems of Funding Group or
Option One, which first created the Note and allonges"). Thus,
the Williams Declaration does not satisfy the foundational
requirements to make Williams a qualified witness with respect to
the Attached Note, and she could not authenticate it as a record
of a regularly conducted activity under HRE Rule 803(b)(6).
The Vieau and Wallace Declarations were similarly
deficient in providing the foundation necessary to admit the
Attached Note under HRE Rule 803(b)(6). Neither declarant stated
that she was the custodian of records for Nationstar or any prior
holder of the Note, so each had to demonstrate that she was a
"qualified witness" with respect to the Attached Note. Yet
neither declarant claimed to be familiar with the record-keeping
system of Countrywide or any other holder of the Note before
BANA. Indeed, the Wallace Declaration asserts, apparently
erroneously, that Nationstar possessed the Attached Note prior to
April 19, 2012, and does not assert that Wallace was even
familiar with BANA's record-keeping system. The Vieau
Declaration relies on the Williams Affidavit, which, for the
reasons previously stated, is insufficient to admit the Attached
Note under the business records exception.
Absent the declaration of a "qualified witness" with
respect to the Attached Note, U.S. Bank failed to establish its
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standing to foreclose. Because the Attached Note was not
admissible as asserted, U.S. Bank did not meet its burden of
establishing facts necessary for a grant of summary judgment.
See Behrendt, 142 Hawai#i at 46, 414 P.3d at 98. Absent
admission of the Note into evidence, U.S. Bank did not meet its
burden on summary judgment.
We therefore vacate the (1) Findings of Fact,
Conclusions of Law and Order Granting Plaintiff's Motion for
Summary Judgment Against All Defendants and for Interlocutory
Decree of Foreclosure, and (2) Judgment, both entered on April 3,
2018, by the Circuit Court of the Fifth Circuit. The case is
remanded to the circuit court for further proceedings consistent
with this Summary Disposition Order.
DATED: Honolulu, Hawai#i, April 7, 2020.
On the briefs:
Gary Victor Dubin and /s/ Lisa M. Ginoza
Frederick J. Arensmeyer Chief Judge
for Defendant-Appellant.
Andrew J. Lautenbach and /s/ Katherine G. Leonard
Sianha M. Gualano Associate Judge
(Starn O'Toole Marcus &
Fisher)
for Plaintiff-Appellee. /s/ Clyde J. Wadsworth
Associate Judge
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