Domingo v. James B. Nutter & Co.

153 Haw. 584

543 P.3d 1

Faustino Dasalla DOMINGO and Elton Lane Namahoe, Sr., Plaintiffs-Appellees/Cross-Appellees,

v.JAMES B. NUTTER & COMPANY, Defendant-Appellant/Cross-Appellee,andRobert M. Ehrhorn, Jr.; Clay Chapman Iwamura Pulice & Nervell, Attorneys at Law, a Law Corporation, Defendants-Appellees/Cross-Appellants,

and

John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; Doe Entities 1-10 and Doe Governmental Units 1-10, Defendants

Faustino Dasalla Domingo and Elton Lane Namahoe, Sr., Plaintiffs-Appellants/Cross-Appellees,

v.James B. Nutter & Company, Defendant-Appellee/Cross-Appellee,andRobert M. Ehrhorn, Jr.; Clay Chapman Iwamura Pulice & Nervell, Attorneys at Law, a Law Corporation, Defendants-Appellees/Cross-Appellants,

and

John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; Doe Entities 1-10 and Doe Governmental Units 1-10, Defendants

NOS. CAAP-17-0000324 and CAAP-17-0000859

Intermediate Court of Appeals of Hawai‘i.

December 20, 2023

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 16-1-0249)

On the briefs:

David J. Minkin, Jesse J.T. Smith, (McCorriston Miller Mukai MacKinnon LLP), Honolulu, for Defendant-Appellant/Cross-Appellee/Appellee.

William J. Rosdil, AAL, Hilo, and Rebecca A. Copeland, Maui County, (Law Office of Rebecca A. Copeland, LLC), for Plaintiffs-Appellees/Cross-Appellees/Appellants.

A. Bernard Bays, Matthew C. Shannon, (Bays Lung Rose & Holmas), Honolulu, for Defendants-Appellees/Cross-Appellants.

GINOZA, CHIEF JUDGE, LEONARD AND NAKASONE, JJ.

OPINION OF THE COURT BY LEONARD, J.

This consolidated appeal concerns wrongful-foreclosure-related claims brought in Civil No. 16-1-0249 by Plaintiffs-Appellees/Cross-Appellees/Appellants Faustino Dasalla Domingo (Domingo) and Elton Lane Namahoe, Sr. (Namahoe) (collectively, Plaintiffs) against Defendant-Appellant/Cross-Appellee/Appellee James B. Nutter & Company (Nutter), as well as related claims brought against Nutter’s attorneys.

In CAAP-17-000324, Nutter appealed from the March 6, 2017 Order Denying [Nutter’s] Motion for Judgment on the Pleadings as to Plaintiffs’ Complaint filed July 5, 2016 (Order Denying Nutter MJOP), entered by the Circuit Court of the Third Circuit (Circuit Court).¹ Nutter later moved to dismiss its appeal from the Order Denying Nutter MJOP. On January 25, 2019, this court entered an order granting Nutter’s motion and dismissing its appeal with prejudice.

In CAAP-17-0000324, Defendants-Appellees/Cross-Appellants/Appellees Robert M. Ehrhorn, Jr. (Ehrhorn) and Clay Chapman Iwamura Pulice & Nervell Attorneys at Law, a Law Corporation, (Clay Chapman) (collectively, Attorney Defendants) cross-appeal from: (1) the Order Denying Nutter MJOP; (2) the March 6, 2017 Order Denying [Attorney Defendants’] Substantive Joinder to [the Nutter MJOP]; and (3) the March 6, 2017 Order Denying [Attorney Defendants’] MJOP (Order Denying Attorney Defendants’ MJOP).

In CAAP-17-0000859, Plaintiffs appeal from the November 15, 2017 Final Judgment on Order Granting Plaintiffs’ Motion for HRCP 54(b) Certification of (1) Decision and Order on [Attorney Defendants’] Motion to Dismiss Plaintiffs’ Complaint with Prejudice, … and (2) Order Granting in Part and Denying in Part Plaintiffs’ Motion for Partial Summary Judgment Number One Against [Nutter and Attorney Defendants] (HRCP Rule 54(b) Judgment) entered by the Circuit Court. Plaintiffs also challenge (or appeal from) the following three orders: the December 15, 2016 Decision and Order on [Attorney Defendants’] Motion to Dismiss Plaintiffs’ Complaint with Prejudice (Partial Dismissal Order); the March 6, 2017 Order Granting in Part and Denying in Part Plaintiffs’ Motion for Partial Summary Judgment Number One Against [Nutter] and [Attorney Defendants] (Order Granting/Denying MPSJ); and the October 19, 2017 Order Granting [Plaintiffs’] Motion for HRCP 54(b) Certification of (1) the [Partial Dismissal Order]; and (2) the [(Order Granting/Denying MPSJ] (Order Granting HRCP Rule 54(b) Certification).

In CAAP-17-0000859, Attorney Defendants cross-appeal from the HRCP Rule 54(b) Judgment. Attorney Defendants challenge: (1) the Partial Dismissal Order; (2) the Order Granting/Denying MPSJ; and (3) the Order Granting HRCP 54(b) Certification.

Notably, on March 31, 2023, the Hawai‘i Supreme Court issued an opinion in a closely-related case, James B. Nutter & Co. v. Namahoe, 153 Hawai‘i 149, 528 P.3d 222 (2023) (generally referred to as the Nama- hoe Appeal).² Of significance here, the supreme court held that Namahoe was entitled to relief from the foreclosure judgment against him on two grounds, including that Nutter and its attorneys, Attorney Defendants herein, committed fraud on the court in the foreclosure action against Namahoe’s home. Id. at 158, 528 P.3d at 226.

[1–3] Here, in sum, we hold that: (1) the Circuit Court did not err in concluding that Plaintiffs’ action against. Attorney Defendants was not a strategic lawsuit against public participation (SLAPP) filed in violation of Hawaii Revised Statutes (HRS) Chapter 634F (2016) (repealed 2022); (2) this court has appellate jurisdiction to review the Partial Dismissal Order, but not the Order Granting/Denying MPSJ; and (3) the Circuit Court erred in part in granting the Partial Dismissal Order. In doing so, we further hold that: (1) the litigation privilege is not an absolute bar against an action by a borrower against a foreclosing lender’s attorney arising out of the attorney’s fraud on the court in a prior foreclosure action; (2) a private cause of action against an attorney for committing a fraud on the court through an egregious, legally and factually deficient, inaccurate and incomplete, materially false and misleading HRS § 667-17 affirmation, with respect to a foreclosure on a reverse mortgage, is hereby recognized; (3) a wrongful foreclosure claim per se is not cognizable against a lender’s attorney, even though certain wrongful-foreclosure-related claims may lie against the attorney for the attorney’s own wrongful conduct in limited circumstances; (4) the litigation privilege bars Plaintiffs’ claims for intentional infliction of emotional distress (IIED) in this case, but does not in every circumstance shield attorneys from defending a claim that they intentionally acted to defraud elderly borrowers out of their homes; (5) although we recognize Plaintiffs’ cause of action against Attorney Defendants for committing a fraud on the court through an egregious, legally and factually deficient, inaccurate and incomplete, materially false and misleading HRS § 667-17 affirmation under the circumstances of this case, the Circuit Court did not err in dismissing Plaintiffs’ additional fraud claims without prejudice; and (6) although Domingo and Namahoe are consumers based on their reverse mortgages with Nutter, and thus are consumers vis à vis Attorney Defendants, we decline to recognize a claim against Attorney Defendants pursuant to HRS chapters 480 and 481A here.

I. RELEVANT BACKGROUND

On July 5, 2016, Domingo and Namahoe filed a complaint against Nutter and Attorney Defendants asserting the following thirteen counts (the Complaint): (I) & (II) legal malpractice and gross legal malpractice (against Attorney Defendants only); (III) breach of fiduciary duty; (IV) wrongful foreclosure; (V) intentional infliction of emotional distress (IIED); (VI) unfair and deceptive trade practices (Chapters 480 and 481A Claims or UDAP Claims); (VII) abuse of process; (VIII) fraud (which the Circuit Court construed as including fraud on the court); (IX) fraud in the inducement (against Nutter only); (X) elder abuse; (XI) a prayer for injunctive relief (against Nutter only); (XII) slander of title; and (XIII) punitive damages.

The Complaint states factual allegations relating to two separate underlying foreclosure actions undertaken by Nutter, through then-counsel Attorney Defendants, against Domingo and Namahoe, respectively.

A. The Allegations Regarding the Domingo Foreclosure

With respect to Domingo, the Complaint alleges that on December 11, 2007, Domingo executed an Adjustable Rate Note (Domingo Note), Home Equity Conversion Loan Agreement (Domingo Loan Agreement), with an attached Repair Rider to Loan Agreement (Domingo Repair Rider), and an Adjustable Rate Home Equity Conversion Mortgage (Domingo Reverse Mortgage), which was assigned to Nutter on the same day. The Domingo Repair Rider contained a provision requiring Nutter to set aside $24,000 from the initial principal limit to be used for certain required repairs.³ The Complaint alleges that on November 3, 2009, nearly two years after Domingo executed the Domingo Reverse Mortgage, Nutter first communicated by letter to Domingo regarding the repairs identified in the Domingo Repair Rider, asking to be advised of the progress to date and to complete the required repairs as soon as possible, if not already completed. Domingo advised Nutter via letter on or about December 7, 2009, that he had completed and paid for the required repairs and requested the $24,000 set aside to complete additional upgrades in progress.

The Domingo Loan Agreement, provided that if the mortgagor failed to make the repairs, the reverse mortgage lender could access the property to make the repairs utilizing the funds withheld to make the repairs, and that foreclosure was not permitted under the "standard reverse mortgage" unless "the Loan Agreement was recorded contemporaneously with the Reverse Mortgage." The United States Department of Housing and Urban Development (HUD) regulations and best practices "prohibited foreclosure as a remedy for failure to timely repair, especially where funds were withheld from loan proceeds for repairs." Nevertheless, on April 19, 2012, through Attorney Defendants, Nutter filed a foreclosure complaint against Domingo, based solely on Domingo’s alleged failure to timely make the repairs required per the Domingo Loan Agreement and Domingo Repair...