HSBC Bank USA v. Corba

538 P.3d 790, 153 Haw. 378

• Court: Hawaii Intermediate Court of Appeals
• Decided: November 16, 2023
• Docket: CAAP-20-0000696
• Status: Published

Opinion

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 16-NOV-2023 09:06 AM Dkt. 70 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

HSBC BANK USA, NATIONAL ASSOCIATION FOR THE BENEFIT OF ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2006-NC3, ASSET BACKED PASS-THROUGH CERTIFICATES, Plaintiff-Appellee, v. MARK CORBA also known as MARK ALAN CORBA also known as MARK-ALLAN: CORBA also known as MARK-ALLAN: CORBA; MARK-ALLAN: CORBA, AS TRUSTEE OF THE MARK CORBA TRUST, A PRIVATE CONSTRUCTIVE IRREVOCABLE TRUST DATED OCTOBER 14, 2010; Defendant-Appellant, USAA FEDERAL SAVINGS BANK; DESIGN & BUILD SERVICES, INC.; CHUTIPA SRIJAN; Defendants-Appellees, and JOHN AND MARY DOES 1-20; DOE PARTNERSHIPS, CORPORATIONS OR ENTITIES 1-20, Defendants.

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT (CASE NO. 2CC171000508(1))

SUMMARY DISPOSITION ORDER (By: Ginoza, Chief Judge, Wadsworth and McCullen, JJ.)

Defendant-Appellant Mark Corba 1 appeals from the

Circuit Court of the Second Circuit's October 6, 2020 Judgment

1 The caption reads: "Mark Corba a.k.a Mark Alan Corba a.k.a Mark- Allan: Corba a.k.a. Mark-Allan: Corba; Mark-Allan: Corba, as Trustee of the Mark Corba Trust, a private constructive Irrevocable Trust dated October 14, 2010[.]" (Formatting altered.) NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

and "Findings of Fact; Conclusions of Law; Order Granting

Plaintiff's Motion for Summary Judgment, and for Interlocutory

Decree of Foreclosure Against All Parties Filed January 14,

2020." 2

On appeal, Corba asserts that the circuit court erred

by granting Plaintiff-Appellee HSBC Bank USA, National

Association for the Benefit of Ace Securities Corp. Home Equity

Loan Trust, Series 2006-NC3, Asset Backed Pass-Through

Certificates' (HSBC) January 14, 2020 Motion for Summary

Judgment, and for Interlocutory Decree of Foreclosure Against

All Parties. 3

Specifically, Corba contends that HSBC failed to

establish standing, admissibility of its business

records, adequate cancellation notice, and Select Portfolio

Servicing's (SPS) Document Control Officer Mark Syphus (Syphus)

as a qualified witness. Corba also contends the circuit court

erred in declining to allow him to withdraw his automatic

admissions.

2 The Honorable Rhonda I.L. Loo presided. 3 Corba did not preserve for appeal his arguments concerning New Century's bankruptcy, when Select Portfolio Servicing (SPS) obtained possession of the loan records, and the date the Note was indorsed. See Cnty. of Hawaiʻi v. C & J Coupe Fam. Ltd. P'ship, 119 Hawaiʻi 352, 373, 198 P.3d 615, 636 (2008) (explaining that "if a party does not raise an argument at trial, that argument will be deemed to have been waived on appeal").

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Upon careful review of the record and the briefs

submitted by the parties, and having given due consideration to

the issues raised and the arguments advanced by the parties, we

resolve Corba's contentions as follows, and vacate and remand.

Regarding his challenge to HSBC's standing to

foreclose, Corba argues that the entity that allegedly had

physical possession of the Note at the time the complaint was

filed, Deutsche Bank, was unrelated to HSBC, and HSBC provides

no proof of a custodial-agency relationship between HSBC and

Deutsche Bank.

At the outset, we emphasize that "[i]n order to prove

entitlement to foreclose, the foreclosing party must demonstrate

that all conditions precedent to foreclose under the note and

mortgage are satisfied and that all steps required by statute

have been strictly complied with." Bank of Am., N.A. v. Reyes-

Toledo, 139 Hawaiʻi 361, 367, 390 P.3d 1248, 1254 (2017). Thus,

the foreclosing party must "prove the existence of an agreement,

the terms of the agreement, a default by the mortgagor under the

terms of the agreement, and giving of the cancellation notice."

Id.

To establish standing to foreclose, a "plaintiff must

necessarily prove its entitlement to enforce the note[.]"

Reyes-Toledo, 139 Hawai‘i at 368, 390 P.3d at 1255. When a note

is indorsed in blank, it becomes payable to the bearer and may

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be negotiated by transfer or possession alone. Id. at 370, 390

P.3d at 1257. Thus, when a lender forecloses on a mortgage

secured by a blank-indorsed note, the lender must establish that

it held the note at the time it filed the complaint. See id.

A foreclosing party may establish it is the holder of

a note by showing that its agent physically possesses it. See

e.g., U.S. Bank Tr., N.A. as Tr. for LSF9 Master Participation

Tr. v. Verhagen, 149 Hawai‘i 315, 327-28, 489 P.3d 419, 431-32

(2021). There must be evidence connecting the custodial agent

with the principal. Cf., e.g., Bank of New York Mellon as Tr.

for Certificate-Holders CWABS Asset-Backed Notes Tr. 2006-SD4 v.

Bautista, 153 Hawai‘i 280, 534 P.3d 544, No. CAAP-XX-XXXXXXX,

2023 WL 4546454 at *8 (App. July 14, 2023) (am. mem. op.)

(concluding that bailee letter from law office to third-party

was insufficient to establish possession of note by the lender's

agent in absence of any supporting evidence connecting the

bailee or third-party to the lender, servicer, or lender's

counsel).

In his declaration, Syphus stated that he is an

officer of SPS, HSBC's servicer for the subject loan. Syphus

further stated, "According to SPS's business records, [HSBC],

through its custodian Deutsche Bank, has possession of the note

in this instant action . . . and was in possession of the Note

at the time of the filing of the complaint."

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Syphus then stated, "A true and correct copy of the

documentation supporting note possession at the time of the

filing of the complaint is attached as Exhibit '4' . . . ."

Exhibit 4 appears to contain an entry prepared by "Jaren French,

[SPS]" indicating that Deutsche Bank "[i]s the custodian in

possession of the [N]ote" and that the Note was physically

located in Santa Ana, California.

However, there is nothing in Exhibit 4 to show that

Deutsche Bank possessed the Note as the custodial agent for HSBC

or to otherwise show a connection between HSBC, Deutsche Bank,

and the Note. And HSBC does not point to any other evidence in

the record to support Syphus' assertion.

The two words - "its custodian" - in Syphus'

declaration, "standing alone and uncorroborated by documentary

evidence," were insufficient to show there was no genuine issue

as to whether Deutsche Bank was HSBC's custodial agent and that

HSBC was entitled to a judgment as a matter of law. See

Verhagen, 149 Hawai‘i at 327, 489 P.3d at 431 (explaining that

the declarant testified "U.S. Bank had actual or constructive

possession of the Note at the time it filed the complaint," and

that "[s]uch testimony, standing alone and uncorroborated by

documentary evidence, would be insufficient to establish U.S.

Bank possessed the Note when it filed the complaint"). Thus,

the circuit court erred in granting HSBC's motion for summary

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judgment. U.S. Bank N.A. v. Mattos, 140 Hawaiʻi 26, 30, 398 P.3d

615, 619 (2017) (reviewing the granting of summary judgment de

novo).

Based on the foregoing, this court need not reach

Corba's remaining contentions. We vacate the circuit court's

October 6, 2020 Judgment, and remand for further proceedings

consistent with this summary disposition order.

DATED: Honolulu, Hawaiʻi, November 16, 2023.

On the briefs: /s/ Lisa M. Ginoza Chief Judge Keith M. Kiuchi, for Defendant-Appellant. /s/ Clyde J. Wadsworth Associate Judge Patricia J. McHenry, Lisa K. Swartzfager, /s/ Sonja M.P. McCullen (Cades Schutte), Associate Judge for Plaintiff-Appellee.