Saplan v. U.S. Bank Nat'l Ass'n

154 Haw. 181

549 P.3d 266

Rosalinda Ganir SAPLAN and Recto Ramos Saplan, Respondents/Plaintiffs-Appellants,

v.U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR BAFC 2007-A, Petitioner/Defendant-Appellee.

SCWC-17-0000847

Supreme Court of Hawai'i.

May 20, 2024

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-17-0000847; CASE NO. 1CC151001465)

Jade Lynne Ching, Michelle N. Comeau (Ryan B. Kasten on the briefs) for petitioner/defendant-appellee

Keith M. Kiuchi (Frederick J. Arensmeyer on the briefs) for respondents/plaintiffs-appellants

RECKTENWALD, C.J., McKENNA, AND EDDINS, JJ., CIRCUIT JUDGE TO'OTO'O AND CIRCUIT JUDGE ASHFORD, ASSIGNED BY REASON OF VACANCIES

OPINION OF THE COURT BY RECKTENWALD, C.J.

I. INTRODUCTION

This case involves a nonjudicial foreclosure brought by U.S. Bank against Rosalinda Ganir Saplan and Recto Ramos Saplan (the Saplans). After foreclosing on the property, U.S. Bank filed an ejectment action against the Saplans in 2011, but then it inexplicably dropped the ball. It failed to schedule a required pretrial conference, so the circuit court dismissed the ejectment action for want of prosecution. Two more lawsuits have followed, and now the parties still dispute who has title to the property. We must determine (1) whether claim preclusion based on the 2011 action prevents U.S. Bank from claiming title, and (2) which party bears the bur- den of proof in this quiet title action brought by the Saplans.

In 2015, the Saplans brought the instant action to quiet title. They argued that the order dismissing the 2011 action for want of prosecution was an adjudication on the merits that quieted title in their favor and that U.S. Bank could not claim title after that. U.S. Bank moved for summary judgment, arguing the Saplans had not submitted any evidence in support of their claim of title. The circuit court granted the motion.

The Saplans appealed. The Intermediate Court of Appeals (ICA) held that the 2011 dismissal was on the merits for the purposes of claim preclusion, but it nonetheless did not preclude U.S. Bank’s later action because the parties across these lawsuits were different. The ICA also held that summary judgment was improperly granted because U.S. Bank had not provided evidence that its foreclosure sale was fair, reasonably diligent, and in good faith, and the price was adequate, pursuant to this court’s decision in Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai'i 227, 361 P.3d 454 (2015).

U.S. Bank raises two issues on appeal. First, it argues that the ICA erred in holding that the 2011 dismissal was on the merits for the purposes of claim preclusion. Second, U.S Bank argues that the ICA erred in holding that U.S. Bank had not met its burden of showing there were no genuine issues of material fact for trial.

We hold that the ICA erred on both issues. First, we hold that without a final judgment, there cannot be claim preclusion. Here, there was no final judgment, so there can be no claim preclusion against U.S. Bank. Second, the ICA incorrectly applied the summary judgment standard when it held that U.S. Bank had not met its burden. Because this is the Saplans’ quiet title action, the Saplans have the burden of proof on the issue of property ownership. U.S. Bank met its summary judgment burden by presenting some evidence in support of its claim of title and sale, and by pointing out that the Saplans presented no evidence in support of their own claim to title. This is sufficient to shift the burden to the Saplans. Requiring U.S. Bank to meet the Kondaur requirements would subject U.S. Bank to a higher standard on summary judgment than our precedents require, effectively demanding the same showing it would take to prevail in the case if U.S. Bank were the plaintiff.

We therefore vacate the ICA’s judgment and affirm the circuit court’s judgment.

II. BACKGROUND

In 2006, the Saplans purchased a residential property in Kailua-Kona and executed a promissory note with National City Bank for $475,200, secured by a mortgage on the property. Rosalinda Saplan, her husband Recto Saplan, and Ricky Saplan owned the property as tenants in common, each with an undivided 1/3 interest.¹ National City Bank assigned the mortgage to U.S. Bank. By December 2009, the Saplans defaulted on the mortgage, and Rosalinda Saplan wrote to the bank stating she and her husband no longer occupied the property. In 2011, U.S. Bank nonjudicially foreclosed on the property via PNC Bank, to which it had given limited power of attorney. U.S. Bank sold the property to itself pursuant to a foreclosure sale in March 2011 for $288,000. A quitclaim deed was recorded in the Bureau of Conveyances in July 2011.

Following the foreclosure sale, U.S. Bank filed an ejectment action in August 2011 to remove the Saplans and others from the property. In August 2013, the circuit court dismissed the complaint sua sponte under former Rules of the Circuit Courts of the State of Hawai'i (RCCH) Rule 12(q)(2015).²

The dismissal order noted it could be set aside for good cause within ten days. No party contested it, and no judgment was entered.

In April 2014, U.S. Bank filed another ejectment action for summary possession and ejectment against the Saplans, Ricky Saplan, John Does 1-50, and Jane Does 2-50. The record does not clearly reflect who was living on the property at the time, but the trial court dismissed Rosalinda and Recto Saplan as defendants, likely because Rosalinda had acknowledged in a 2009 letter that she and her husband no longer occupied the property. The writ of possession was served on Ricky Saplan and Latasha Ortiz (the domestic partner of the Saplans’ son, Riley), concluding the case. U.S Bank sold the property to a third party in March 2015.

In July 2015, the Saplans filed the instant case, a complaint for quiet title against U.S. Bank in the Circuit Court of the First Circuit.³ They claimed to be the true owners of the property. They argued that U.S. Bank’s 2011 ejectment action made "claims of Quiet Title and Ejectment" and that the claim had been dismissed with prejudice. The complaint also contained counts for ejectment, trespass, fraud on the court, unjust enrichment, and punitive damages.

U.S. Bank moved for summary judgment. First, it argued that res judicata barred the Saplans’ quiet title and other claims. Citing E. Sav. Bank, FSB v. Esteban, U.S. Bank argued that the three requirements for claim preclusion were met: (1) the 2014 judgment for possession was final and appealable, (2) there was privity between the parties because, even if the Saplans were dismissed from the 2014 action, they were in privity with Latasha Ortiz, and (3) the plaintiffs could have claimed quiet title in the 2014 action. 129 Hawai'i 154, 159, 296 P.3d 1062, 1067 (2013). U.S. Bank also argued that the Saplans’ claims were barred by mootness, laches, and estoppel.

U.S. Bank further argued that the Saplans could not establish title to the property. Citing Maui Land & Pineapple Co. v. Infiesto, U.S. Bank argued that the Saplans needed to prove "either that [they] ha[ve] paper title to the property or that [they] hold[ ] title by adverse possession." 76 Hawai'i 402, 407-08, 879 P.2d 507, 512-13 (1994). U.S. Bank argued that the Saplans cannot establish adverse possession or paper title, attaching a corroborating declaration from its loan serving agent,⁴ and the quitclaim deed obtained at the nonjudicial foreclosure. In response, the Saplans argued they were neither parties to the 2014 action nor in privity with the defendants. They also argued that because a claim to quiet title could have been raised in the 2011 suit, and that suit was dismissed on the merits, U.S. Bank was precluded from claiming quiet title in the 2014 suit and the Saplans have a superior claim to title.

The circuit court granted U.S. Bank’s summary judgment motion based on the following facts: (1) the Saplans defaulted on their 2006 mortgage loan; (2) a nonjudicial foreclosure sale occurred in March 2011; (3) PNC Bank bought the property at the foreclosure sale and assigned it to U.S. Bank; (4) a quitclaim deed was recorded in the bureau of conveyances in July 2011; (5) U.S. Bank prevailed on an ejectment action in 2014; and (6) U.S. Bank sold the property to a third party and a warranty deed was filed in March 2015.⁵

The court rejected the Saplans’ argument that the 2011 action determined ownership in the Saplans’ favor. It held that the RCCH Rule 12(q) dismissal was not set aside, so it operated as a dismissal on the merits. But the court further reasoned that the 2011 action was an ejectment action, not a quiet title action, and noted that the Saplans’ mo- tion to dismiss was denied before the RCCH Rule 12(q) dismissal was entered. The court determined in a minute order that "[a]lthough ownership is an issue in an ejectment case, a procedural dismissal of plaintiff's ejectment claim does not automatically, permanently or affirmatively adjudicate that the defendant in the ejectment case actually owns the property." It also observed that the Saplans had not raised any of these issues in the 2014 action. The court entered summary judgment for U.S. Bank in October 2017.

The ICA affirmed the circuit court’s decision that the dismissal of the 2011 action was an adjudication on the merits. It agreed with the Saplans that RCCH Rule 12(q) governed. However, the ICA also held that "the Saplans failed to show that the parties in the 2014 [a]ction were the same as the parties in the 2011 [a]ction." After the Saplans were dismissed in the 2014 action, the writ of possession affected only Ricky Saplan and Latasha Ortiz, neither of whom were parties to the 2011 action. The ICA affirmed the grant of summary judgment on the Saplans’ fraud on the court claim⁶ and vacated the circuit court’s grant of summary judgment as to the remaining claims. The ICA held that U.S. Bank failed to establish that the Saplans’ 2015 claims (i.e. the instant quiet title and related claims) were precluded by...