NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 22-MAY-2026 08:30 AM Dkt. 80 MO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAIʻI
GERALD K. MOUNT, JR. and JANE R. MOUNT, Plaintiffs/Counterclaim Defendants/Cross-claimants-Appellees, v. MARGARET APAO, Defendant-Appellant, and DIRK APAO, AS PERSONAL REPRESENTATIVE OF THE ESTATE OF ROSE MARIE ALVARO, DECEASED, Defendant/Counterclaimant/ Third-Party Plaintiff-Appellant, and SESHA LOVELACE, AS CO-PERSONAL REPRESENTATIVE OF THE ESTATE OF ROSE MARIE ALVARO, DECEASED, Defendant/Cross-claim Defendant- Appellee, and U.S. BANK NATIONAL ASSOCIATION, A NATIONAL ASSOCIATION AS TRUSTEE FOR THE STRUCTURED ASSET SECURITIES CORPORATION MORTGAGE PASS-THROUGH CERTIFICATES, 2005-SC1, Third-Party Defendant/Cross-claimant-Appellee, and JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS 1-10; DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; ALL PERSONS RESIDING WITH AND ANY PERSONS CLAIMING BY AND THROUGH OR UNDER THEM, Defendants, and DOES 1-50, Third-Party Defendants.
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 1CC111002005)
MEMORANDUM OPINION (By: McCullen, Presiding Judge, Guidry, J., and Circuit Court Judge Costa in place of Nakasone, C.J., Leonard, Hiraoka, and Wadsworth, JJ., recused) NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Defendant-Appellant Margaret Apao (Margaret) and
Defendant/Counterclaimant/Third-Party Plaintiff-Appellant Dirk
Apao (Dirk), as the Personal Representative of the Estate of Rose
Marie Alvaro (the Estate), appeal from the October 17, 2023
Final Judgment and eight orders entered by the Circuit Court of
the First Circuit. 1
The proceedings in this case span over 15 years, and
this is the third appeal. We vacate in part.
I. BACKGROUND
In 2011, Plaintiffs-Appellees Gerald K. Mount, Jr. and
Jane R. Mount (Mounts) filed a complaint against Margaret, and
Dirk and Sesha Lovelace (Sesha), as co-personal representatives
of the Estate. 2 The Mounts alleged that they purchased the real
property located at 2979 Mākālei Place, Honolulu, Hawai‘i 96815
(the Property) at a nonjudicial foreclosure sale, that Margaret
was living at the Property with permission from the Estate, and
that the Mounts were entitled to possession of the Property. The
Mounts asserted claims for ejectment and quiet title.
1 The Honorable John M. Tonaki entered the Final Judgment, and six of the eight orders challenged on appeal. The Honorable Keith K. Hiraoka entered two of the eight orders - the July 7, 2017, and October 23, 2017 orders in favor of the Mounts. 2 According to Dirk, in 2003, the circuit court appointed him and his mother, Margaret, as co-personal representatives of the Estate. In 2010, Sesha replaced Margaret as a co-personal representative and later resigned, leaving Dirk as the sole personal representative of the Estate.
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Margaret and Dirk filed an answer, and Dirk, in his
capacity as personal representative of the Estate, filed a
Counterclaim against the Mounts and a Third-Party Complaint
against U.S. Bank National Association, a National Association
as Trustee for the Structured Asset Securities Corporation
Mortgage Pass-Through Certificates, 2005-SC1 (U.S. Bank).
Dirk asserted that decedent Rose Marie Alvaro (Alvaro)
obtained a $500,000.00 loan in 1999 from Fremont Investment &
Loan, which was secured by a mortgage on the Property. Dirk
asserted that the nonjudicial foreclosure U.S. Bank conducted,
which resulted in the Mounts claiming ownership of the Property,
violated the probate code, the nonjudicial foreclosure statute,
and the mortgage, and that there had been a defective and
fraudulent transfer of the mortgage. Dirk requested a
declaratory judgment that the nonjudicial foreclosure and
transfer of the Property were null and void, a judgment quieting
title in favor of the Estate, and damages.
In 2013, a stipulation for partial dismissal dismissed
the Mounts's claims against Sesha without prejudice. Another
stipulation dismissed Claim 4 of Dirk's Counterclaim and Third-
Party Complaint, the claim for defective and fraudulent transfer
of the mortgage.
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Also in 2013, the circuit court granted summary
judgment in favor of the Mounts on their claim for ejectment and
issued a writ of possession. Margaret and Dirk appealed.
In Mount v. Apao (Mount I), 139 Hawaiʻi 167, 179-80,
384 P.3d 1268, 1280-81 (2016), the Hawaiʻi Supreme Court
determined that the nonjudicial foreclosure sale conducted by
U.S. Bank violated Hawaiʻi Revised Statutes (HRS) § 667-5
(Supp. 2008), repealed by H.B. 1875, 26th Leg., Reg. Sess.
(2012), and that further proceedings were necessary to determine
if the Mounts were innocent purchasers for value.
In 2017, the circuit court granted a renewed motion for
summary judgment, which determined the Mounts were innocent or
bona fide purchasers for value. The circuit court entered a
Hawaiʻi Rules of Civil Procedure (HRCP) Rule 54(b) judgment, from
which the Estate appealed.
In the meantime, the Mounts filed a Motion for Award of
Attorneys' Fees and Costs, and Damages (Mounts's 1st motion for
damages). The circuit court granted in part and denied in part
the Mounts's 1st motion for damages, which denied them
attorneys' fees, granted costs, and denied without prejudice the
Mounts's request for damages for trespass and wrongful possession
of the Property.
The Mounts also filed a Motion for Award of Damages for
Ejectment, Pre-Judgment Interest, and for Entry of Final Judgment
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(Mounts's 2nd motion for damages). The circuit court granted in
part and denied in part the Mounts's 2nd motion for damages,
which awarded the Mounts damages and prejudgment interest but
denied their request for HRCP Rule 54(b) certification.
The circuit court issued a minute order, staying
further proceedings pending termination of the Estate's appeal
from the determination that the Mounts were innocent or bona fide
purchasers for value.
In March 2021, this court affirmed the circuit court's
determination that the Mounts were innocent or bona fide
purchasers for value. Mount v. Apao (Mount II), 149 Hawaiʻi 104,
482 P.3d 567, CAAP-XX-XXXXXXX, 2021 WL 944203 (App. Mar. 12,
2021) (mem. op.).
In 2022, Dirk moved for leave to amend his Third-Party
Complaint, which the circuit court denied.
In January 2023, U.S. Bank filed a Motion for Partial
Summary Judgment on Third-Party Plaintiff's Alleged Damages (MPSJ
regarding damages), which the circuit court granted in part.
The circuit court determined that the Estate could not recover
for certain personal damages claimed by Dirk and Margaret or for
tax obligations the Estate incurred in the sale of other Estate
real properties.
In June 2023, U.S. Bank filed a Motion for Summary
Judgment on Third-Party Plaintiff's Wrongful Foreclosure Claim
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(MSJ regarding wrongful foreclosure). U.S. Bank asserted that
the Estate had no damages caused by the wrongful foreclosure once
the outstanding mortgage debt was taken into account, and that
the Estate lacked the ability to reinstate the loan. The circuit
court granted the MSJ regarding wrongful foreclosure.
U.S. Bank filed an Amended Motion for Partial Summary
Judgment on Third-Party Plaintiff's Violation of Probate Code
Claim (MPSJ regarding Probate Code Claim). The Estate had
claimed that U.S. Bank violated HRS § 560:3-803 (2018) by
failing to timely present its claim to the Estate and that the
nonjudicial foreclosure and subsequent sale of the Property were
void (Probate Code Claim). However, according to U.S. Bank, the
Estate failed to notify U.S. Bank of the deadline for
presentation of claims against the Estate, and notwithstanding
the lack of notice, U.S. Bank provided the Estate with notice of
its claim on numerous occasions. The circuit court granted U.S.
Bank's MPSJ regarding Probate Code Claim.
In July 2023, U.S. Bank filed a Motion for Entry of
Judgment Pursuant to HRCP Rule 54(b) (Motion for Rule 54(b)
Judgment regarding Mounts's claims). U.S. Bank asserted that it
had been assigned the Mounts's claims against Margaret and the
Estate, all claims involving the Mounts were finally decided, and
it sought entry of a Final Judgment in its favor for the Mounts's
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claims. The circuit court granted the Motion for Rule 54(b)
Judgment regarding Mounts's claims.
Dirk filed a Renewal of his Motion for Partial Summary
Judgment as to Liability on his Third-Party Complaint (Dirk's
Renewed MPSJ regarding liability). The circuit court denied
Dirk's Renewed MPSJ regarding liability.
At the September 2023 hearing on U.S. Bank's Motion for
Rule 54(b) Judgment regarding Mounts's claims and Dirk's Renewed
MPSJ regarding liability, the parties agreed that although U.S.
Bank had requested entry of final judgment only as to the claims
involving the Mounts, all claims had been disposed of and entry
of a final judgment on all claims was appropriate.
On October 17, 2023, the circuit court entered a Final
Judgment with respect to all claims. Judgment was entered
(1) in favor of U.S. Bank, as assignee of the Mounts's claims
against Margaret and the Estate in the amount of $406,452.62 as
of May 31, 2023, with per diem interest of $53.43 continuing to
accrue thereafter, and (2) in favor of U.S. Bank on the Estate's
Counterclaims against the Mounts and the Third-Party Complaint
against U.S. Bank.
Margaret and Dirk appeal from the October 17, 2023
Final Judgment, and the (1) July 7, 2017 order granting in part
and denying in part Mounts's 1st motion for damages;
(2) October 23, 2017 order granting in part and denying in part
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Mounts's 2nd motion for damages; (3) April 11, 2022 order denying
Dirk's motion for leave to amend his Third-Party Complaint;
(4) April 12, 2023 order granting in part and denying in part
U.S. Bank's MPSJ regarding damages; (5) August 14, 2023 order
granting U.S. Bank's MPSJ regarding Probate Code Claim;
(6) August 29, 2023 order granting U.S. Bank's MSJ regarding
wrongful foreclosure; (7) September 18, 2023 order denying
Dirk's Renewed MPSJ regarding liability; and (8) September 18,
2023 order granting U.S. Bank's Motion for Rule 54(b) Judgment
regarding Mounts's claims.
II. DISCUSSION
On appeal, Dirk (and Margaret) raise the following
five points of error (POE), contending the circuit court:
(1) erred by granting U.S. Bank's motion for summary judgment on
the Estate's wrongful foreclosure claim; (2) erred by granting
U.S. Bank's motion for partial summary judgment on the Estate's
violation of the Probate Code Claim; (3) erred by entering
judgment in favor of U.S. Bank and against the Estate and
Margaret in the amount of $406,452.62; (4) erred by denying the
Estate's motion for summary judgment as to liability; and
(5) abused its discretion by denying the Estate's motion for
leave to amend the third-party complaint.
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We hold the circuit court erred by granting summary
judgment in favor of U.S. Bank on the Estate's claim for
wrongful foreclosure (POE 1). We otherwise affirm.
A. The Circuit Court Erred by Granting Summary Judgment in Favor of U.S. Bank on the Estate's Claim for Wrongful Foreclosure (POE 1)
Dirk asserts that the circuit court erred by granting
summary judgment on the Estate's wrongful foreclosure claim
because the Estate was entitled to recover for the equity in the
Property at the time of U.S. Bank's wrongful foreclosure, but the
circuit court accepted U.S. Bank's arguments that the Estate is
limited to recovering its out-of-pocket expenses minus the
outstanding mortgage debt, and the Estate would not have been
able to reinstate the loan.
We review the grant or denial of summary judgment de
novo. Nationstar Mortg. LLC v. Kanahele, 144 Hawaiʻi 394, 401,
443 P.3d 86, 93 (2019).
To prevail on a wrongful foreclosure claim, a borrower
must establish: "(1) a legal duty owed to the mortgagor by the
foreclosing party; (2) a breach of that duty; (3) a causal
connection between the breach of that duty and the injury
sustained; and (4) damages." Bank of Am., N.A. v. Reyes-Toledo,
143 Hawaiʻi 249, 264 n.12, 428 P.3d 761, 776 n.12 (2018),
overruled on other grounds by Wilmington Sav. Fund Soc'y, FSB v.
Domingo, 155 Hawaiʻi 1, 556 P.3d 347 (2024).
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Because the Hawaiʻi Supreme Court determined in Mount I
that it was wrong for U.S. Bank not to provide reinstatement
figures, the Estate may be able to recover the positive equity.
The Estate presented sufficient evidence to raise a genuine
issue of material fact regarding its ability to reinstate the
loan and, therefore, it was error to grant summary judgment in
favor of U.S. Bank on the Estate's wrongful foreclosure claim.
1. Positive equity
The damages recoverable by a borrower for wrongful
foreclosure differ depending on whether the unlawful foreclosure
was "merely procedurally defective" or undertaken "without
foreclosure authority" at all. Llanes v. Bank of Am., N.A., 154
Hawaiʻi 423, 431, 555 P.3d 110, 118 (2024) (citing Wong v. Ass'n
of Apartment Owners of Harbor Square, 154 Hawaiʻi 58, 63, 67, 545
P.3d 547, 552, 556 (2024)). In Llanes, the plaintiff borrowers
pursuing wrongful foreclosure claims were not current on their
mortgages, and the lender had the right to foreclose upon their
properties under powers of sale. Id. The borrowers claimed that
the nonjudicial foreclosures did not comply with the requirements
of HRS § 667-5 because the lender continued the auction but did
not republish notice of the actual auction dates. Id. at 426-27,
555 P.3d at 113-14. Borrowers sought restitution and damages,
including the foreclosed properties' market values plus
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interest, lost rent, and acquisition and improvement costs. Id.
at 427, 555 P.3d at 114.
The supreme court held that, in computing damages for
the wrongful foreclosures, the Llanes borrowers were entitled to
recover their out-of-pocket expenses less the amount of the
forgiven mortgage debts. Id. at 431-32, 555 P.3d at 118-19.
They also were permitted to recover for loss-of-use damages,
which the Llanes borrowers claimed for the period beginning from
when they were ousted from their properties and continuing until
six months after the properties were sold to third parties. Id.
at 427, 433, 545 P.3d at 114, 120. The supreme court agreed with
the circuit court's determination that the Llanes borrowers were
not entitled to recover for the value of the properties at the
time of the loan because it would put them "in a much better
position than they were in pre-foreclosure where the property was
a distressed asset in a depressed housing market." Id. at 427,
432, 545 P.3d at 114, 119.
In Wong, the Hawaiʻi Supreme Court held that the
plaintiff was entitled to recover positive equity in the property
as an element of damages for wrongful foreclosure where a
condominium association conducted a nonjudicial foreclosure
without authority to do so. 154 Hawaiʻi at 61, 545 P.3d at 550.
The condominium association in Wong did not have a power of sale
that permitted it to conduct nonjudicial foreclosures. Id. The
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supreme court stated that the damages should be calculated by
taking the positive equity in the property when wrongfully
foreclosed (property's market value minus outstanding mortgage
debt), adding lost rents or use from the time between the
wrongful foreclosure and a valid foreclosure, minus unpaid
association fees and assessments up until the valid foreclosure.
Id. at 61, 67, 545 P.3d at 550, 556. The supreme court stated
that computing damages in this manner "places the plaintiff in
their pre-tort position with a remedy tethered to the wrong."
Id. at 61, 545 P.3d at 550. As relevant here, the supreme court
stated:
A plaintiff's pre-tort position also includes their equitable right to redeem the property before a final foreclosure judgment. See Fed. Home Loan Mortg. Corp. v. Transamerica Ins. Co., 89 Hawaiʻi 157, 164, 969 P.2d 1275, 1282 (1998) (recognizing equitable redemption). If a plaintiff can clearly show that they would have redeemed their property absent the AOAO's wrongful foreclosure, they may assert damages from losing their equitable right.
Id. at 66-67, 545 P.3d at 555-56.
In Mount I, the supreme court determined that U.S.
Bank's nonjudicial foreclosure on the Estate's Property was
wrongful because Sesha made repeated requests for reinstatement
figures from February 2011, until the foreclosure sale on
April 4, 2011, and U.S. Bank failed to provide it. 139 Hawaiʻi
at 178-79, 384 P.3d at 1279-80. The supreme court noted that "a
right to cure a default and stop the foreclosure continues up to
the day of the confirmation of the sale", and "equity abhors
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forfeitures." Id. at 178, 384 P.3d at 1279 (quoting Santiago v.
Tanaka, 137 Hawaiʻi 137, 157, 366 P.3d 612, 632 (2016)).
Based on Wong and the Mount I determination that the
foreclosure was wrongful, unless it was undisputed that the
Estate would have been incapable of reinstating the loan, the
Estate should be entitled to recover the positive equity in the
Property as of the date of the foreclosure sale. See Wong, 154
Hawaiʻi at 66-67, 545 P.3d at 555-56.
In moving for summary judgment, U.S. Bank asserted that
consistent with Lima v. Deutsche Bank Nat'l Tr. Co., 149 Hawaiʻi
457, 467, 494 P.3d 1190, 1200 (2021), which held that a
borrower's mortgage debt must be taken into account in computing
damages, the Estate would not be able to prove out-of-pocket
damages. With respect to the first mortgage, the payments made
by Alvaro and her Estate prior to the foreclosure totaled
$531,538.90. However, the balance of the first mortgage paid by
the nonjudicial foreclosure sale was $574,918.19. With respect
to the second mortgage, payments made by Alvaro and her Estate
totaled $270,024.04. The second mortgage holder received
payment of $600,084.48 from the nonjudicial foreclosure sale
proceeds. 3 Because the amounts paid on the first and second
3 In the argument section of U.S. Bank's memorandum in support of the MPSJ regarding Wrongful Foreclosure Claim, there is a typographical error that the amount paid on the second mortgage was $600,084.14, but its exhibit showed the payment as being for $600,084.48. The facts section of the memorandum states the amount paid on the second mortgage as being $600,084.48, consistent with its Exhibit 21.
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mortgages upon closing of the nonjudicial foreclosure sale
($574,918.19 + $600,084.48 = $1,175,002.67) exceeded the payments
made by Alvaro and the Estate on those mortgages ($531,538.90 +
$270,024.04 = $801,562.94), U.S. Bank argued that the Estate
would be unable to prove any out-of-pocket damages. 4
U.S. Bank continues to maintain that the Estate was
limited to out-of-pocket damages because in Mount I the supreme
court instructed the circuit court to apply Santiago to
determine an appropriate remedy, and in Santiago the plaintiff
was awarded out of pocket losses. However, the supreme court
noted that, similar to Santiago, the Mounts had possession of
the Property for some time, which may render voiding the
foreclosure sale impracticable. 139 Hawaiʻi at 180, 384 P.3d at
1281.
U.S. Bank asserts that even under Wong, the Estate
would not be able to prove damages because this court determined
in Mount II that the Mounts had paid adequate consideration for
the property. However, adequate consideration to qualify as a
bona fide purchaser is not the same as fair market value because
4 If the Estate is entitled to indemnification from U.S. Bank for its liability to the Mounts, the Estate still would not be able to demonstrate damages under the out-of-pocket-expenses method. The October 17, 2023 Final Judgment awarded U.S. Bank, as assignee of the Mounts's claims, a judgment of $406,452.62, plus per diem interest of $53.43 for each day after May 31, 2023, until the judgment was satisfied. The payments made by Alvaro and the Estate on the mortgages and the amount owed to the Mounts total $1,208,015.56 ($801,562.94 + $406,452.62), which exceeds the $1,175,002.67 debt paid off through the nonjudicial foreclosure by $33,012.89. The Estate received $33,926.96 in surplus proceeds from U.S. Bank's nonjudicial foreclosure.
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a bona fide purchaser is not required to pay fair market value.
See McCullough v. Bank of Am. N.A., 156 Hawaiʻi 446, 456, 575
P.3d 536, 546 (2025) (explaining that "a bona fide purchaser is
one who acquires an interest in a property for valuable
consideration, in good faith, and without notice of another
party's adverse interests in the property") (citation modified);
HawaiiUSA Fed. Credit Union v. Monalim, 147 Hawaiʻi 33, 45, 464
P.3d 821, 833 (2020) (recognizing that "the price obtained at a
foreclosure sale is often far below the fair market value").
The Estate presented an appraisal report prepared by
Matthew Yong and Harlin Young, licensed appraisers, that
determined the fair market value of the Property to be
approximately $3,500,000.00 on July 22, 2011, the date U.S. Bank
conveyed the Property to the Mounts. 5 Rather than receive the
$2,324,997.33 of equity ($3,500,000.00 (fair market value) -
$574,918.19 (1st mortgage balance) - $600,084.48 (2nd mortgage
balance)) in the Property at the time of transfer to the Mounts,
the Estate only received $33,926.96 in surplus proceeds from the
wrongful foreclosure. Considering the lost equity alone, it
appears that the circuit court erred in granting summary
judgment on the wrongful foreclosure claim on the basis that the
5 A copy of the deed recorded on July 22, 2011, conveying the Property to the Mounts is attached to the Mounts's Complaint.
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Estate was limited to out-of-pocket expenses and could prove no
damages. 6
2. Genuine issue of material fact
Construed in the light most favorable to the Estate,
Dirk's submissions raise a genuine issue of material fact
regarding the Estate's ability to reinstate the loan and whether
the wrongful foreclosure caused the Estate damages.
Dirk submitted his declaration, which included a list
he prepared identifying five real properties the Estate owned, in
addition to the subject Property, and his estimates of the equity
in each of the real properties totaling approximately
$5,865,000.00. Dirk asserted that if U.S. Bank had litigated a
claim in the formal probate proceeding or a judicial foreclosure
action, it would have been required to provide reinstatement
information, which would have allowed the Estate to avoid
foreclosure through mortgage financing, private lending, or
selling the Estate's other assets. The Estate also could have
sold the subject Property. The appraisal obtained by the Estate
showed there was $2,324,997.33 of equity in the Property at the
time of the transfer to the Mounts.
6 The Estate also claimed it should be awarded prejudgment interest, storage costs incurred for storing the Estate's personal property after being evicted, attorneys' fees and costs, and indemnification for the amounts owed to the Mounts. The Estate presented storage rental contracts and credit card statements to substantiate its claimed storage expenses but did not present any theory as to why the Estate would be entitled to an attorneys' fees award.
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U.S. Bank asserts that the Estate failed to raise a
genuine issue of material fact that the failure to provide the
reinstatement quote caused the Estate damages because the Estate
did not have enough cash to bring the loan current and had no
evidence of any timely steps taken to reinstate the loan.
U.S. Bank submitted copies of the Estate's bank
statements showing the Estate lacked cash. U.S. Bank also
submitted a declaration from Gary Dubin, attorney for Dirk, in
which Dubin stated that the Estate's cash flow was insufficient
to pay the existing mortgages and maintain the Estate
properties, and that Dirk, Margaret, and another family member
loaned the Estate over $300,000.00. U.S. Bank also submitted
Dirk's deposition testimony acknowledging the Estate had only
approximately $10,000.00 in cash, although he claimed he would
have been able to obtain funds to reinstate the loan within
thirty days through borrowing from a friend or his brother. An
April 1, 2011 reinstatement quote prepared by the loan servicer
but not sent to the co-personal representatives stated
$144,586.95 was necessary to reinstate the loan.
In addition, U.S. Bank argued that although Dirk
claimed the Estate could sell assets to reinstate the loan, it
did not list any real properties for sale until February 2011,
when it listed a Kapiʻolani Boulevard property for sale, and the
sale did not close until July 31, 2013, more than two years after
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the nonjudicial foreclosure sale. Dirk testified that the
Kapiʻolani Boulevard property sale proceeds were applied to tax
liens. The Estate was aware the subject mortgage loan had been
in default since 2010 because Margaret received a February 25,
2010 reinstatement quote addressed to Alvaro and shared it with
Dirk.
However, the fact that the Estate only listed the
Kapiʻolani Property for sale and the sale did not close by the
time of the Mounts's purchase does not establish that the Estate
would not - or could not - have raised the cash necessary to
reinstate the loan if given a reinstatement quote. The auction
appears to have generated significant interest in the Property,
with Gerald Mount stating that three to five parties other than
himself participated in the bidding, and approximately fifteen to
twenty bids were submitted. Dirk states the co-personal
representatives "could have then made arrangements" to reinstate
the loan "through obtaining mortgage financing, private lending,
or selling other assets of the Estate" or selling the Property
itself. See Mount I, 139 Hawaiʻi at 177, 384 P.3d at 1278
(citing HRS § 560:3-703(a) (Supp. 1997)) ("A personal
representative is a fiduciary acting on behalf of an estate.").
the declaration and the appraisal suggesting that there was
$2,324,997.33 of equity in the Property appear to raise a
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disputed issue of material fact of whether the Estate was capable
of, and would have reinstated the first mortgage loan or sold
the Property, if presented with a formal reinstatement quote.
B. The Circuit Court Did Not Err by Denying Dirk's Renewed MPSJ Regarding Liability (POE 4)
We next address POE 4 as it relates to the Estate's
wrongful foreclosure claim. In POE 4, Dirk asserts the circuit
court erred by denying his Renewed MPSJ regarding liability on
the wrongful foreclosure claim. Dirk contends Mount I determined
that U.S. Bank's nonjudicial foreclosure was wrongful and was
law of the case. Therefore, Dirk asserts, the circuit court
should have determined liability in favor of the Estate and
ordered a trial on damages.
A determination of a question of law made by an
appellate court becomes law of the case and may not be reopened
at a later stage of the litigation. Weinberg v. Mauch, 78
Hawaiʻi 40, 47, 890 P.2d 277, 284 (1995). Although Mount I
determined that U.S. Bank violated HRS § 667-5(c) by not
providing Sesha with reinstatement figures, the Estate would
still need to prove causation before liability on the wrongful
foreclosure claim could be established. See Reyes-Toledo, 143
Hawaiʻi at 264 n.12, 428 P.3d at 776 n.12.
For the reasons discussed above regarding POE 1, the
law of the case does not mandate liability in favor of the Estate
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because the issues of causation and damages were disputed issues
of fact.
C. The Circuit Court Did Not Err by Granting Summary Judgment on the Violation of Probate Code Claim (POE 2)
Dirk asserts that by proceeding with the nonjudicial
foreclosure auction, U.S. Bank violated HRS § 560:3-803(c)(2) of
the Hawaiʻi probate code, which bars claims arising after the
death of the decedent, if not presented to the Estate within
eighteen months of the decedent's death or within four months
after the claim arises, whichever is later. 7
In moving for summary judgment on the violation of
probate code claim, U.S. Bank asserted that it did not violate
HRS § 560:3-803 because: (1) the co-personal representatives
failed to notify U.S. Bank of the deadline to present claims
against the Estate; and (2) notices sent to the Property,
addressed to Alvaro, constitute a timely presentation of the
claim to the Estate.
HRS § 560:3-803, "Limitations on presentation of
claims," states in part:
(a) All claims against either a decedent or a decedent's estate that arose before the death of the decedent, including claims of the State and any subdivision thereof, whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other legal basis, if not barred earlier by another statute of limitations or non-claim statute, are barred against the estate, the personal representative, the
7 U.S. Bank agrees that its claim arose after Alvaro's death because Alvaro died in 2002, but the loan default occurred in March 2009.
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decedent's trustee and the heirs and devisees of the decedent, unless presented within the earlier of the following:
(1) No later than:
(A) Four months after the date of the first publication of notice to creditors if notice is given in compliance with section 560:3-801(a); or
(B) Sixty days after the mailing or other delivery of a written notice, as provided in section 560:3-801(b); whichever period (A) or (B) expires later; or
(2) Within eighteen months after the decedent's death, if notice to creditors has not been published as provided in section 560:3-801(a) or delivered as provided in section 560:3- 801(b).
. . . .
(c) All claims against a decedent's estate which arise at or after the death of the decedent, including claims of the State and any subdivision thereof, whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort, or other legal basis, are barred against the estate, the personal representative, the decedent's trustee, and the heirs and devisees of the decedent, unless presented as follows:
(1) A claim based on a contract with the personal representative or trustee, within four months after performance by the personal representative or trustee is due; or
(2) Any other claim, within the later of four months after it arises, or the time specified in subsection (a)(2).
(d) Nothing in this section affects or prevents:
(1) Any proceeding to enforce any mortgage, pledge, or other lien upon property of the estate[.]
(Emphases added.)
At the hearing, the circuit court stated:
THE COURT: Okay. The -- the Court will grant Third Party Defendant U.S. Bank's motion for partial summary judgment on the Third Party Plaintiff's violation of probate code claim. The Court will find that there's no genuine issue of material fact that U.S. Bank timely made a
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claim within four months of the claim arising. U.S. Bank presented their claim in compliance with HRS 560:3- 803(c)(2) within four months after it arose.
Specifically, the April 16th, 2009 default notice was mailed to the property where Ms. Apao, the personal representative at the time, resided. Also, the fax that Ms. Apao sent to her son on March 31st, 2010 indicates that Ms. Apao had notice that the mortgage was in default and that the reinstatement amount was $72,645.42. And the fact that the communications came through [American Home Mortgage Servicing, Inc. (AHMSI)], the Court is not convinced that the parties did not have notice that AHMSI was the agent for the bank, when clearly it was the mortgage through U.S. Bank that was being discussed in these communications.
In Lawelawe v. Kahalepuna, 26 Haw. 615 (Haw. Terr.
1922), the Territorial Court held that no particular form is
required to present a claim against an estate, and explained:
The purposes of a claim are to advise the legal representative of the estate of the deceased debtor of the nature and amount of the alleged indebtedness so that he may intelligently determine whether the same is just and should be paid and if paid would be available as a bar to any future action that might be prosecuted by the creditor upon the same claim. When presented the administrator or executor, as trustee for all creditors and beneficiaries ultimately entitled, is bound to investigate the claim and if found to be just, make provision for its payment. These requirements are simple and due to the liberality of interpretation accorded to statutes of this character in respect to the remedy provided no formality is required. The sufficiency of a claim is not measured by its ability to withstand a general or special demurrer. A cause of action, as that term is understood in pleading, need not be stated. The rules of pleading do not apply.
26 Haw. at 617-18.
Given that no particular form is required for the
presentation of a claim, the circuit court did not err in
determining there was no genuine issue of material fact that
U.S. Bank timely presented a claim through its April 16, 2009
default notice.
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The April 16, 2009 default notice was addressed to the
Borrower, Alvaro, at the Property, rather than to Margaret or
Dirk as co-personal representatives. A declaration from James
Brantley (Brantley), vice president of Homeward Residential,
Inc., formerly known as AHMSI, states that neither Homeward nor
the prior servicer, Option One Mortgage, was ever provided
documentation evidencing the death of the Borrower or given an
address other than the Property address for giving of notices to
the Borrower. As a result, all communications regarding the
loan were addressed to the Borrower and sent to the Property.
The April 16, 2009 default notice identified the debt
as the original mortgage in the amount of $500,000.00, with the
first payment made on December 1, 1999, and the Borrower as Rose
Marie Alvaro. It identified the Property as securing the debt,
stated the loan was in default due to non-payment of the March 1,
2009 payment and subsequent payments, and that $11,606.14 was
necessary to cure the default. It advised that if AHMSI did not
receive the amount necessary to cure the default within thirty
days, AHMSI would accelerate the loan balance and proceed with
foreclosure.
Margaret testified at deposition that she began
residing at the Property around 2006 or 2007 and collected the
mail. She also acknowledged that she did not notify the
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Estate's creditors of Alvaro's death, although she made payments
on the mortgage using checks drawn on the Estate's account.
In arguing that the April 16, 2009 default notice was
not a valid presentation of claim, Dirk argued there was no proof
of mailing to or receipt by the co-personal representatives.
Dirk also asserted the April 16, 2009 default notice was
improperly addressed to the decedent, and not the personal
representative and did not properly identify U.S. Bank as the
claimant or explain AHMSI's relationship to U.S. Bank. Dirk
continues to assert these arguments on appeal.
However, the Brantley declaration states that AHMSI
sent the April 16, 2009 default notice to the Borrower on or
about the same date to notify the Borrower the loan was in
default. Brantley states that he has personal knowledge of the
matters in his declaration based upon his review of business
records on file for the loan. Margaret presented no evidence to
dispute that she was still living at or collecting mail at the
Property at the time of the April 16, 2009 default notice.
Dirk asserts that U.S. Bank incorrectly argued that the
co-personal representatives were required to and failed to notify
creditors of the deadline to present claims against the Estate.
The Estate was not required to provide notice to creditors,
although providing notice to creditors would shorten the time for
presentation of claims. See HRS §§ 560:3-801(a) (providing that
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a person petitioning for appointment of a personal representative
or probate of a will may publish notice to creditors), -803(a)
(barring claims four months after first publication of notice of
creditors or sixty days after delivery of notice but allowing
until eighteen months after a decedent's death if notice has not
been published or given to creditors).
On this record, the circuit court was not wrong in
U.S. Bank satisfied the requirements of HRS § 560:3-803(c)(2) of
the Hawaiʻi probate code through the April 16, 2009 default
notice mailed to the Property.
D. The Circuit Court Did Not Err or Abuse Its Discretion by Entering Judgment in Favor of U.S. Bank as Assignee of the Mounts's Claims (POE 3)
Dirk asserts that the circuit court erred by entering
judgment in favor of U.S. Bank as assignee of the Mounts's claims
because (1) U.S. Bank was not substituted in as a party in place
of the Mounts and (2) it was unjust given that the nonjudicial
foreclosure that U.S. Bank conducted was wrongful and caused the
Estate to incur liability to the Mounts.
1. A separate motion was not required
Dirk cites HRCP Rule 25 to support his contention that
U.S. Bank was required to file a motion for substitution to
obtain judgment in its favor as assignee of the Mounts's claims.
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HRCP Rule 25(c) states:
Transfer of interest. In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party. Service of the motion shall be made as provided in subdivision (a) of this rule.
Dirk also argues that, in Sandstrom v. Larsen, 59 Haw. 491, 501,
583 P.2d 971, 979 (1978), the supreme court explained that in
order for a transferee of an interest to be substituted as a
party, a motion for substitution must first be made. Because
U.S. Bank did not file a motion to be substituted in place of
the Mounts, Dirk contends that the circuit court erred in
entering judgment in favor of U.S. Bank as assignee of the
Mounts's claims.
Sandstrom is distinguishable and involved a mandatory
injunction requiring Appellants to comply with a restrictive
height covenant. Id. at 492, 583 P.2d at 974. The supreme
court commented that a motion for substitution of parties would
be necessary to enforce the mandatory injunction if the downslope
property owner had sold their property. Id. at 501, 583 P.2d at
979.
In this case, U.S. Bank did not need to be substituted
in as a party because it was already a party to the suit.
HRCP Rule 8(e)(1) states that "[e]ach averment of a
pleading shall be simple, concise, and direct. No technical
forms of pleading or motions are required." HRCP Rule 8(f)
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states that "[a]ll pleadings shall be so construed as to do
substantial justice." "If a claim for relief is otherwise
alleged, substance controls over form." Gelsey v. Ka Ono Ulu
Est. Cmty. Ass'n, Inc., 143 Hawaiʻi 523, 432 P.3d 2, CAAP-15-
0000510, 2018 WL 6735172, at *2 (App. Dec. 24, 2018) (mem. op.)
(citing In re Eric G., 65 Haw. 219, 224, 649 P.2d 1140, 1144
(1982)).
In its Motion for Rule 54(b) Judgment regarding
Mounts's claims, U.S. Bank asked for judgment in its favor on the
Mounts's claims and attached a copy of an Assignment of Judgment
and Claims signed by the Mounts. Even if a motion for
substitution was necessary, there was no error in granting the
Motion for Rule 54(b) Judgment regarding Mounts's claims because
the substance of the motion may be construed as requesting both
substitution and entry of final judgment.
2. No abuse of discretion in granting U.S. Bank's request for entry of final judgment on the Mounts's claims
Dirk asserts that it was unjust for the circuit court
to enter a monetary judgment in favor of U.S. Bank against the
Estate given that U.S. Bank conducted a wrongful foreclosure, and
the Estate incurred liability to the Mounts as a result. Before
entering a monetary judgment in favor of U.S. Bank, Dirk
asserts, the Estate should recover damages for the wrongful
foreclosure and reimbursement for its liability to the Mounts.
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HRCP Rule 54(b) permits certification of finality for
an immediate appeal where "(1) more than one claim for relief is
presented or multiple parties [three or more] are involved, and
(2) the judgment entered completely disposes of at least one
claim or all of the claims by or against at least one party."
Elliot Megdal & Assocs. v. Daio USA Corp., 87 Hawaiʻi 129, 133,
952 P.2d 886, 890 (App. 1998) (citations omitted).
A lower court's decision to enter an HRCP Rule 54(b) certification is reviewed on appeal under a dual standard. The extent of a lower court's power to enter an HRCP Rule 54(b) certification of finality is a question of law, reviewed de novo. However, a lower court's decision to utilize its power under HRCP Rule 54(b) is reviewed under the abuse of discretion standard.
Id. at 132, 952 P.2d at 889 (citations omitted).
The Mounts asserted claims against Margaret and the
Estate, and the Estate asserted claims against the Mounts. When
U.S. Bank answered the Estate's Third-Party Complaint, U.S. Bank
did not file any claims. Thus, once it was determined that the
Mounts were good faith purchasers for value and entitled to
monetary damages against Margaret and the Estate for their
continued possession of the Property, the circuit court had the
power to authorize a final judgment on the Mounts's claims. See
FFG, Inc. v. Jones, 6 Haw. App. 35, 45, 708 P.2d 836, 844
(App. 1985) ("[A]t least one 'claim' or all rights and
liabilities of at least one party must be decided before the
lower court can apply Rule 54(b)."). It was within the
discretion of the circuit court to enter a final judgment on the
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Mounts's claims, and Dirk does not demonstrate that the circuit
court abused its discretion.
The presence of a counterclaim seeking setoff is a
factor weighing against the grant of an HRCP Rule 54(b)
certification but is not controlling. Arimizu v. Fin. Sec. Ins.
Co., 5 Haw. App. 106, 113, 679 P.2d 627, 633-34 (App. 1984)
(citing Curtiss-Wright Corp. v. Gen. Elec. Co., 446 U.S. 1, 9
(1980)) (noting that federal counterpart to HRCP Rule 54(b)
"would lose much of its utility" if the presence of a
counterclaim renders certification inappropriate).
Here, allowing for entry of an HRCP Rule 54(b)
judgment on the Mounts's claims would expedite reaching a final
decision on those claims in a case with a lengthy litigation
history. Also, the Estate admittedly had cash flow problems and
had been liquidating assets to pay claims, such as the Kapiʻolani
Boulevard property it sold to satisfy tax liens.
In contrast, nothing appears to suggest that the
Estate would be unable to collect from U.S. Bank if it
ultimately obtains a judgment against U.S. Bank. Accordingly,
there was no abuse of discretion by the circuit court in granting
the HRCP Rule 54(b) certification.
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E. The Circuit Court Did Not Abuse Its Discretion by Denying Dirk Leave to Amend the Estate's Third-Party Complaint (POE 5)
Finally, Dirk contends that the circuit court abused
its discretion by denying him leave to amend his Third-Party
Complaint. Dirk sought to amend the Third-Party Complaint to add
a claim against U.S. Bank for unfair and deceptive acts and
practices (UDAP) and remove the claims seeking recovery of
possession and title to the Property, leaving two claims against
U.S. Bank - the wrongful foreclosure/declaratory judgment claim
and the UDAP claim.
U.S. Bank argues, among other things, that Dirk's
inexcusable delay in moving to amend was egregious because it
was based on facts known to him and arising out of the
foreclosure conducted in 2011. U.S. Bank also raised prejudice
because witnesses involved in the nonjudicial foreclosure were no
longer available or had faded memories, those still available may
need to be re-deposed, and records may no longer be available.
The denial of leave to amend a complaint under HRCP
Rule 15(a) or (b) is reviewed under the abuse of discretion
standard. Carvalho v. AIG Hawaiʻi Ins. Co., 150 Hawaiʻi 381, 384,
502 P.3d 482, 485 (2022) (citing Kamaka v. Goodsill Anderson
Quinn & Stifel, 117 Hawaiʻi 92, 104, 176 P.3d 91, 103 (2008)).
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Counsel for U.S. Bank told the circuit court that
Fremont Investment & Loan, Inc., the original mortgagee, was
liquidated, and the prior servicer, Option One, was out of
business. The foreclosing law firm, RCO Hawaii, is also out of
business. Derek Wong, the attorney identified in the notice of
auction, was deposed in October 2012. Also, one of U.S. Bank's
expert witnesses had passed away.
The circuit court acknowledged that the supreme court
held in Carvalho that undue delay alone is not a sufficient basis
to deny leave to amend. 150 Hawaiʻi at 386, 502 P.3d at 487.
However, the circuit court denied leave to amend based on
prejudice, stating that adding a new UDAP claim "would
potentially have the effect of -- prejudicing the Defendants,"
and that Plaintiffs still had their cause of action for damages.
Given that the facts that formed the basis for the
proposed new UDAP claim had been known to the Estate and some
businesses involved in the loan and the nonjudicial foreclosure
were no longer in business, there was no abuse of discretion by
the circuit court in denying leave to amend.
III. CONCLUSION
For the foregoing reasons, we vacate in part the
circuit court's October 17, 2023 Final Judgment as to the
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wrongful foreclosure claim but otherwise affirm. We remand this
case to the circuit court for further proceedings consistent
with this memorandum opinion.
DATED: Honolulu, Hawaiʻi, May 22, 2026.
On the briefs: /s/ Sonja M.P. McCullen Presiding Judge Frederick J. Arensmeyer, for Defendant-Appellant /s/ Kimberly T. Guidry Margaret Apao and Defendant/ Associate Judge Counterclaimant/Third-Party Plaintiff-Appellant Dirk /s/ Brian A. Costa Apao, as Personal Circuit Court Judge Representative of the Estate of Rose Marie Alvaro, Deceased.
David A. Nakashima, Michelle N. Comeau, (Nakashima Ching), and Meagan S. Tom, for Third-Party Defendant/ Cross-claimant-Appellee.