Schick v. Nationstar Mortg. LLC

151 Hawai‘i 327

511 P.3d 826 (Table)

Laura SCHICK, Personal Representative of the Estate of Robert A. Schick, Plaintiff-Appellant,

v. NATIONSTAR MORTGAGE LLC; Federal National Mortgage Association ; Nenita Jose Westberg; Central Pacific Homeloans, Inc. ; Mortgage Electronic Registration Systems, Inc., Defendants-Appellees,andDoe Defendants 1-50, Defendants

NO. CAAP-18-0000103

Intermediate Court of Appeals of Hawai‘i.

June 28, 2022

On the briefs:

James J. Bickerton, Stanley H. Roehrig (Of Counsel), Bridget G. Morgan, (Bickerton Dang, LLLP), and John F. Perkin, (Perkin & Faria LLLC), and Van-Alan H. Shima, (Affinity Law Group), for Plaintiff-Appellant.

Charles A. Price, (Koshiba Price & Gruebner), for Defendants-Appellees NENITA JOSE WESTBERG and CENTRAL PACIFIC HOMELOANS, INC.

Andrew J. Lautenbach, Kukui Claydon, (Starn O'Toole Marcus & Fisher), for Defendants-Appellees NATIONSTAR MORTGAGE LLC and FEDERAL NATIONAL MORTGAGE ASSOCIATION.

(By: Ginoza, Chief Judge, Leonard and McCullen, JJ.)

MEMORANDUM OPINION

Plaintiff-Appellant Laura Schick (Schick ), personal representative of the Estate of Robert A. Schick (Decedent ), appeals from the Amended Final Judgment entered against her by the Circuit Court of the Second Circuit (Circuit Court )¹ on December 24, 2018 (Amended Judgment ), which entered judgment against Schick and in favor of Defendants-Appellees Nationstar Mortgage, LLC (Nationstar ), Federal National Mortgage Association (Fannie Mae ) (collectively, Nationstar Defendants ), and Nenita Jose Westberg (Westberg ), Central Pacific Homeloans, Inc. (Central Pacific ) (collectively, Westberg Defendants ).² In addition, Schick challenges the Circuit Court's December 12, 2017 Order Granting [Nationstar Defendants’] Motion for Judgment on the Pleadings (Order Granting Nationstar Motion ) and December 14, 2017 Order Granting [Westberg Defendants] Motion for Judgment on the Pleadings or, Alternatively, Summary Judgment (Order Granting Westberg Motion ).

I. RELEVANT BACKGROUND

A. The Property

It appears to be undisputed that on March 14, 2008, Decedent executed a promissory note (Note ) secured by a mortgage (Mortgage ) on certain real property located on Kuukama Street in Kahului, Hawai‘i (Property ). The Mortgage identified the Decedent as the borrower, Herman-Morris Enterprises Inc. (HMEI ) as the lender, and MERS as the beneficiary, solely as nominee for HMEI and its successors and assigns. The Mortgage's power of sale clause granted MERS the right to, inter alia , "foreclose and sell the Property; and to take any action required of [HMEI] including, but not limited to, releasing and canceling this Security Instrument."

On October 26, 2010, an Assignment of Mortgage was recorded in the State of Hawai‘i Bureau of Conveyances (Bureau ). The assignment reflected MERS's transfer of right, title, and interest in the Property to Nationstar. It appears that Decedent subsequently defaulted, and on November 8, 2010, Nationstar filed a Notice of Mortgagee's Intention to Foreclose Under Power of Sale (Notice of Sale ) with the Bureau. The Notice of Sale was posted at the Property on November 11, 2010, and published in the Honolulu Star-Advertiser on November 16, November 22, and November 29, 2010. The Notice of Sale stated that the Property would be sold at public auction on January 10, 2011.

On February 10, 2011, Nationstar recorded Mortgagee's Affidavit of Foreclosure Under Power of Sale executed by Nationstar attorney Peter Stone (Affidavit of Foreclosure ). The Affidavit of Foreclosure stated that the Property was sold at auction on January 31, 2011, rather than January 10, 2011, to Nationstar, or its nominee.

On March 29, 2011, Nationstar conveyed the property to Fannie Mae. Nationstar recorded a quitclaim deed at the Bureau on April 4, 2011. On September 7, 2011, Fannie Mae conveyed the Property to Westberg and recorded a limited warranty deed with the Bureau on September 9, 2011. On August 25, 2011, Westberg apparently executed a promissory note in favor of MERS, as nominee for Central Pacific, secured by a mortgage on the Property (Westberg Mortgage ), which was recorded on September 9, 2011.

B. Circuit Court Proceedings

On January 31, 2017, Schick filed a Complaint (Complaint ), asserting claims of (1) quiet title, ejectment, and for declaratory relief and/or damages against all defendants; and (2) wrongful foreclosure against the Nationstar Defendants.

In Count I, Schick alleged, inter alia , that the Nationstar Defendants failed to comply with Part I of Hawaii Revised Statutes (HRS ) Chapter 667 (Supp. 2008), that the deed from Nationstar to Fannie Mae was "void, or at the very least voidable," and thus, "the deed from Fannie Mae to Westberg was likewise void or at the very least voidable." Schick requested that the Circuit Court award her title and possession of the Property and quiet any claim of title by the defendants, or in the alternative, that the Circuit Court "fashion a remedy in money damages against Nationstar and Fannie Mae that would be equivalent to having title and possession restored."

In Count II, Schick alleged, inter alia , that the Nationstar Defendants’ conduct constituted wrongful foreclosure, and that as a result of the wrongful foreclosure, Decedent lost possession of and title to the Property, including a loss of the market value of the Property, as well as a loss of the use and/or rental value of the Property. As remedy for the alleged wrongful foreclosure, Schick requested that the Circuit Court award actual and punitive damages.

The Complaint also asserted that the twenty-year statute of limitations under HRS § 657-31 (2016)³ applies to the action, or in the alternative, that the six-year statute of limitations under HRS § 657-1(4) (2016)⁴ applied.

On August 23, 2017, the Nationstar Defendants filed an Answer to Complaint, asserting, inter alia , various affirmative defenses, including laches, and requested that the Circuit Court enter judgment in their favor.

On September 27, 2017, the Westberg Defendants filed an Answer to Complaint (Westberg Answer ), as well as a Cross-Claim against the Nationstar Defendants (Westberg Cross-Claim ). The Westberg Answer asserted several affirmative defenses, including that the Complaint was barred by the statute of limitations, undue delay, waiver, laches, estoppel, and unclean hands. The Westberg Cross-Claim was later dismissed without prejudice, by stipulation.

On September 28, 2017, the Nationstar Defendants filed [Nationstar Defendants’] Motion for Judgment on the Pleadings (Nationstar Motion for JOP ), which was supported by a declaration of counsel and exhibits. Movants argued that the Complaint was untimely and that a two-, or at most six-, year statute of limitations applies to bar Schick's claims. The Nationstar Defendants also asserted that, should the Circuit Court find the Complaint timely, the doctrine of laches applies as a bar to Schick's claims because Schick had not been vigilant in safeguarding her rights, and her unreasonable delay resulted in significant prejudice to the Nationstar Defendants.

On October 11, 2017, the Westberg Defendants filed [Westberg Defendants’] Motion for Judgment on the Pleadings or, Alternatively, Summary Judgment (Westberg Motion ), which was support by a declaration of counsel and exhibits. The Westberg Defendants argued that they were innocent purchasers for value, and that even if the Property was wrongfully foreclosed, the title was voidable, not void. They further argued that they did not have constructive notice of any alleged defects in the Property's title, and that Schick's argument was inconsistent with Hawai‘i Supreme Court precedent in Santiago v. Tanaka, 137 Hawai‘i 137, 366 P.3d 612 (2016), and Mount v. Apao, 139 Hawai‘i 167, 384 P.3d 1268 (2016).

On November 6, 2017, Schick filed oppositions to the defendants’ motions, which were supported by declarations of counsel and exhibits. In response to the Westberg Motion, Schick argued, inter alia , that the Westberg Defendants’ reliance on Santiago was misplaced because, in that case, the property sale did not take place until the nonjudicial sale had been approved by a circuit court judge, and because the new buyer had not been made a party in Santiago. Schick also relied on Pelosi v. Wailea Ranch Estates, 91 Hawai‘i 478, 985 P.2d 1045 (1999), arguing that the Westberg Defendants were not bona fide purchasers because they had constructive notice of Nationstar's wrongful foreclosure of the Property.

In response to the Nationstar Motion for JOP, Schick argued that at least a six-year statute of limitations should apply to the Complaint, and that her cause of action did not accrue at least until the injury occurred – i.e. , the recording of the Affidavit of Foreclosure on February 10, 2011 -- and was discoverable by Schick. Schick argued that Silva v. Lopez, 5 Haw. 262, 271 (1884), should be considered in analyzing whether the deed was void or merely voidable. Schick also argued that the equitable defense of laches should not be applied to this case.

On November 8, 2017, the Nationstar Defendants filed a reply memorandum, arguing that Schick's claims accrued on November 8, 2010 - the date the Notice of Sale was received and recorded. The Nationstar Defendants argued that Schick's claims were barred by either the two-year or six-year statute of limitations, and that the 20-year statute of limitations did not apply because this was not an adverse possession case. The Nationstar Defendants reiterated that even if the nonjudicial foreclosure did not comply with statutory requirements, the deed was merely voidable, rather than void, under Santiago. Lastly, the Nationstar Defendants responded to Schick's claim that laches was not a viable defense.

On November 8, 2017, the Westberg Defendants filed a reply memorandum, arguing that they did not have constructive notice of any alleged defects in the title to the Property, thus they were innocent good faith purchasers, and...