NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 22-JUN-2023 08:29 AM Dkt. 63 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI‘I
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK AS TRUSTEE FOR THE CERTIFICATEHOLDERS CWALT, INC., ALTERNATIVE LOAN TRUST 2004-28CB, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-28CB, Plaintiff-Appellee, v. STEPHEN LAUDIG, Defendant-Appellant, and ASSOCIATION OF APARTMENT OWNERS OF UNIVERSITY COURT, Defendant-Appellee; JOHN DOES 1-20; JANE DOES 1-20; DOE CORPORATIONS 1-20; DOE ENTITIES 1-20; AND DOE GOVERNMENTAL UNITS 1-20, Defendants-Appellees.
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 1CC151001533)
SUMMARY DISPOSITION ORDER (By: Hiraoka, Presiding Judge, Wadsworth and McCullen, JJ.)
Defendant-Appellant Stephen Laudig (Laudig) appeals
from the Circuit Court of the First Circuit's (1) July 8, 2019
"Findings of Fact, Conclusions of Law and Order Granting
Plaintiff's Motion for Summary Judgment Against All Defendants
and for Interlocutory Decree of Foreclosure" (Foreclosure NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Order), (2) July 8, 2019 Judgment, and (3) October 1, 2019
"Order Denying Defendant Stephen Laudig's Nonhearing Motion for
Reconsideration of the [Foreclosure Order and Judgment]" (Order
Denying Reconsideration). 1
On appeal, Laudig contends the circuit court erred in
granting Plaintiff-Appellee Bank of New York's 2 Motion for
Summary Judgment Against All Defendants and for Interlocutory
Decree of Foreclosure, arguing that (1) Mhari Holtzclaw
(Holtzclaw) was not a qualified witness, (2) Bank of New York
failed to show delivery of the "Notice of Intent to Accelerate
Indebtedness and Foreclose" (Default Notice), and (3) Bank of
New York failed to show it possessed the note at the time the
complaint was filed. 3
Upon careful review of the record and briefs submitted
by the parties, and having given due consideration to the issues
1 The Honorable James C. McWhinnie presided.
2 The Bank of New York's full name in this litigation is "Bank of New York Mellon FKA the Bank of New York as Trustee for the Certificateholders CWALT, Inc., Alternative Loan Trust 2004-28CB, Mortgage Pass-Through Certificates, Series 2004-28CB."
3 Laudig raises a fourth point of error, arguing that the circuit court erred by failing to consider the declaration of James M. Kelley. Based on our decision today, we decline to address this point.
We also note that, within his points of error, Laudig raises additional arguments that were not raised before the circuit court, which we also decline to address. See Cnty. of Hawai‘i v. UNIDEV, LLC, 129 Hawai‘i 378, 387, 301 P.3d 588, 597 (2013) ("It is axiomatic that where a party fails to raise an argument before the courts below, that argument may be deemed waived for purposes of appeal.").
2 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
raised and arguments advanced, we resolve Laudig's points of
error as follows, and vacate and remand.
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 Hawai‘i 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. "A foreclosing plaintiff must also prove its entitlement to
enforce the note and mortgage." Id.
We review the granting of summary judgment de novo.
U.S. Bank N.A. v. Mattos, 140 Hawai‘i 26, 30, 398 P.3d 615, 619
(2017).
(1) Laudig first contends that Holtzclaw was not a
qualified witness to introduce and authenticate records that
loan servicer New Penn Financial, LLC d/b/a Shellpoint Mortgage
Servicing (Shellpoint), received from prior loan servicers Bank
of America, N.A. and Resurgent Mortgage Servicing (Resurgent)
because she failed to establish personal knowledge with respect
to the business records at issue. Laudig argues that the
3 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Holtzclaw Declaration "is contradictory" as to whether the
"prior servicer" is Resurgent, Bank of America, or both. Bank
of New York counters that, because Shellpoint acquired
Resurgent, "the records of Resurgent should be considered those
of Shellpoint rather than those of a prior servicer."
Under the incorporation doctrine "[r]ecords received
from another business and incorporated into the receiving
business' records may in some circumstances be regarded as
'created' by the receiving business." Wells Fargo Bank, N.A. v.
Behrendt, 142 Hawai‘i 37, 45, 414 P.3d 89, 97 (2018) (citing
Mattos, 140 Hawai‘i at 32, 398 P.3d at 621). Thus, incorporated
records are admissible under Hawai‘i Rules of Evidence (HRE)
Rule 803(b)(6) "when a custodian or qualified witness testifies
that the documents were incorporated and kept in the normal
course of business, that the incorporating business typically
relies upon the accuracy of the contents of the documents, and
the circumstances otherwise indicate the trustworthiness of the
document." Id. (citing Mattos, 140 Hawai‘i at 32, 398 P.3d at
621; State v. Fitzwater, 122 Hawai‘i 354, 367-68, 227 P.3d 520,
533-34 (2010)).
Further, "evidence that a business has incorporated
and relied on a record created by another organization speaks
directly to that record's reliability. When accompanied by
4 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
testimony about other circumstances that also indicate the
record's trustworthiness, such evidence is an acceptable
substitute for testimony concerning a record's actual creation."
U.S. Bank Tr., N.A. as Tr. for LSF9 Master Participation Tr. v.
Verhagen, 149 Hawai‘i 315, 326, 489 P.3d 419, 430 (2021)
(emphasis omitted).
As to Resurgent's records, although Holtzclaw's
Declaration asserts that Resurgent's records became part of
Shellpoint's records due to the acquisition, there was no
testimony that Shellpoint kept Resurgent's documents in the
normal course of business, relied on them, or otherwise
described their trustworthiness. See generally, Behrendt, 142
Hawai‘i at 45, 414 P.3d at 97. Therefore, Bank of New York
failed to establish the admissibility of these records under HRE
Rule 803(b)(6).
As to Bank of America's records, although Holtzclaw's
Free access — add to your briefcase to read the full text and ask questions with AI
NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 22-JUN-2023 08:29 AM Dkt. 63 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI‘I
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK AS TRUSTEE FOR THE CERTIFICATEHOLDERS CWALT, INC., ALTERNATIVE LOAN TRUST 2004-28CB, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-28CB, Plaintiff-Appellee, v. STEPHEN LAUDIG, Defendant-Appellant, and ASSOCIATION OF APARTMENT OWNERS OF UNIVERSITY COURT, Defendant-Appellee; JOHN DOES 1-20; JANE DOES 1-20; DOE CORPORATIONS 1-20; DOE ENTITIES 1-20; AND DOE GOVERNMENTAL UNITS 1-20, Defendants-Appellees.
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 1CC151001533)
SUMMARY DISPOSITION ORDER (By: Hiraoka, Presiding Judge, Wadsworth and McCullen, JJ.)
Defendant-Appellant Stephen Laudig (Laudig) appeals
from the Circuit Court of the First Circuit's (1) July 8, 2019
"Findings of Fact, Conclusions of Law and Order Granting
Plaintiff's Motion for Summary Judgment Against All Defendants
and for Interlocutory Decree of Foreclosure" (Foreclosure NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Order), (2) July 8, 2019 Judgment, and (3) October 1, 2019
"Order Denying Defendant Stephen Laudig's Nonhearing Motion for
Reconsideration of the [Foreclosure Order and Judgment]" (Order
Denying Reconsideration). 1
On appeal, Laudig contends the circuit court erred in
granting Plaintiff-Appellee Bank of New York's 2 Motion for
Summary Judgment Against All Defendants and for Interlocutory
Decree of Foreclosure, arguing that (1) Mhari Holtzclaw
(Holtzclaw) was not a qualified witness, (2) Bank of New York
failed to show delivery of the "Notice of Intent to Accelerate
Indebtedness and Foreclose" (Default Notice), and (3) Bank of
New York failed to show it possessed the note at the time the
complaint was filed. 3
Upon careful review of the record and briefs submitted
by the parties, and having given due consideration to the issues
1 The Honorable James C. McWhinnie presided.
2 The Bank of New York's full name in this litigation is "Bank of New York Mellon FKA the Bank of New York as Trustee for the Certificateholders CWALT, Inc., Alternative Loan Trust 2004-28CB, Mortgage Pass-Through Certificates, Series 2004-28CB."
3 Laudig raises a fourth point of error, arguing that the circuit court erred by failing to consider the declaration of James M. Kelley. Based on our decision today, we decline to address this point.
We also note that, within his points of error, Laudig raises additional arguments that were not raised before the circuit court, which we also decline to address. See Cnty. of Hawai‘i v. UNIDEV, LLC, 129 Hawai‘i 378, 387, 301 P.3d 588, 597 (2013) ("It is axiomatic that where a party fails to raise an argument before the courts below, that argument may be deemed waived for purposes of appeal.").
2 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
raised and arguments advanced, we resolve Laudig's points of
error as follows, and vacate and remand.
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 Hawai‘i 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. "A foreclosing plaintiff must also prove its entitlement to
enforce the note and mortgage." Id.
We review the granting of summary judgment de novo.
U.S. Bank N.A. v. Mattos, 140 Hawai‘i 26, 30, 398 P.3d 615, 619
(2017).
(1) Laudig first contends that Holtzclaw was not a
qualified witness to introduce and authenticate records that
loan servicer New Penn Financial, LLC d/b/a Shellpoint Mortgage
Servicing (Shellpoint), received from prior loan servicers Bank
of America, N.A. and Resurgent Mortgage Servicing (Resurgent)
because she failed to establish personal knowledge with respect
to the business records at issue. Laudig argues that the
3 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
Holtzclaw Declaration "is contradictory" as to whether the
"prior servicer" is Resurgent, Bank of America, or both. Bank
of New York counters that, because Shellpoint acquired
Resurgent, "the records of Resurgent should be considered those
of Shellpoint rather than those of a prior servicer."
Under the incorporation doctrine "[r]ecords received
from another business and incorporated into the receiving
business' records may in some circumstances be regarded as
'created' by the receiving business." Wells Fargo Bank, N.A. v.
Behrendt, 142 Hawai‘i 37, 45, 414 P.3d 89, 97 (2018) (citing
Mattos, 140 Hawai‘i at 32, 398 P.3d at 621). Thus, incorporated
records are admissible under Hawai‘i Rules of Evidence (HRE)
Rule 803(b)(6) "when a custodian or qualified witness testifies
that the documents were incorporated and kept in the normal
course of business, that the incorporating business typically
relies upon the accuracy of the contents of the documents, and
the circumstances otherwise indicate the trustworthiness of the
document." Id. (citing Mattos, 140 Hawai‘i at 32, 398 P.3d at
621; State v. Fitzwater, 122 Hawai‘i 354, 367-68, 227 P.3d 520,
533-34 (2010)).
Further, "evidence that a business has incorporated
and relied on a record created by another organization speaks
directly to that record's reliability. When accompanied by
4 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
testimony about other circumstances that also indicate the
record's trustworthiness, such evidence is an acceptable
substitute for testimony concerning a record's actual creation."
U.S. Bank Tr., N.A. as Tr. for LSF9 Master Participation Tr. v.
Verhagen, 149 Hawai‘i 315, 326, 489 P.3d 419, 430 (2021)
(emphasis omitted).
As to Resurgent's records, although Holtzclaw's
Declaration asserts that Resurgent's records became part of
Shellpoint's records due to the acquisition, there was no
testimony that Shellpoint kept Resurgent's documents in the
normal course of business, relied on them, or otherwise
described their trustworthiness. See generally, Behrendt, 142
Hawai‘i at 45, 414 P.3d at 97. Therefore, Bank of New York
failed to establish the admissibility of these records under HRE
Rule 803(b)(6).
As to Bank of America's records, although Holtzclaw's
declaration describing their incorporation may have otherwise
satisfied the factors of the incorporation doctrine under
Behrendt and Verhagen, Holtzclaw's declaration appears to
incorrectly state that Bank of America's records were
incorporated by Shellpoint rather than by Resurgent, despite
indicating that Resurgent became the servicer prior to
Shellpoint acquiring Resurgent. Cf. Wilmington Sav. Fund Soc'y,
5 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
FSB v. Akehi, 144 Hawai‘i 430, 443 P.3d 122, No. CAAP-XX-XXXXXXX,
2019 WL 2559486 at *7 (App. June 21, 2019) (SDO) ("In order for
Pope to establish the admissibility of a document attached to
her declaration, Pope must, at a minimum, accurately describe
the contents of the document, particularly with the respect to
which entity is responsible for having provided the requisite
notice . . .") (emphases added). Holtzclaw's declaration must
be accurate in its factual description of which entity actually
incorporated Bank of America's documents to establish the
admissibility of these records under HRE Rule 803(b)(6).
(2) Laudig next contends that Bank of New York failed
to show that a notice of default was given to him.
To establish that notice was given to Laudig, Bank of
New York provided (1) a copy of two Default Notices addressed to
Laudig and dated July 11, 2013, and (2) Holtzclaw's declaration
stating that "[w]ritten notice ('Notice') was given to Borrower
of the default and of mortgagee's intention to accelerate the
loan if the default was not cured."
The Default Notices provided appear to be records from
Resurgent as they were on Resurgent letterhead, required payment
to be sent to Resurgent, and were signed by a Resurgent
representative. But, as discussed above, Bank of New York
failed to establish the admissibility of Resurgent's records
under HRE Rule 803(b)(6).
6 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
(3) Finally, Laudig contends that Bank of New York
failed to prove it possessed the note when the complaint was
filed.
When a note is indorsed in blank, it becomes payable
to the bearer and may be negotiated by transfer or possession
alone. See Reyes-Toledo, 139 Hawai‘i at 370, 390 P.3d at 1257.
Thus, when a lender forecloses on a mortgage secured by a note
indorsed in blank, the lender must establish, inter alia, that
it held the original indorsed note at the time it filed the
complaint. 139 Hawai‘i at 368, 390 P.3d at 1255.
To prove that it was in possession of the note at the
time the complaint was filed, Bank of New York provided the
following: (1) the note indorsed in blank; (2) the February 25,
2015 Bailee Letter; (3) Holtzclaw's declaration; and (4) Gina
Santellan's (Santellan) declaration.
The Bailee Letter, establishing that the note was
received by Bank of New York's representative, was dated
February 25, 2015. Santellan's declaration, stating that the
Note "is currently in our custody as custodian for Plaintiff and
Plaintiff's counsel[,]" was dated December 31, 2018. With the
Bailee Letter and Santellan's declaration, Bank of New York
established that it received the note on February 25, 2015 and
was still in possession of the note on December 31, 2018, which
7 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER
would show that it possessed the note when the complaint was
filed on August 4, 2015.
The burden then shifted to Laudig to set "forth
specific facts showing that there is a genuine issue for trial."
Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai‘i 227, 240-41, 361
P.3d 454, 467-68 (2015) (cleaned up). Laudig, however,
presented no evidence showing that there was a genuine issue as
to whether Bank of New York continuously held the note between
February 25, 2015 and December 31, 2018.
In conclusion, because Bank of New York failed to
establish that Resurgent's and Bank of America's records were
admissible, the circuit court erred in granting Bank of New
York's motion for summary judgment. We vacate the circuit
court's Foreclosure Order, Judgment, and Order Denying
Reconsideration, and remand this case for further proceedings
consistent with this order.
DATED: Honolulu, Hawai‘i, June 22, 2023.
On the briefs: /s/ Keith K. Hiraoka Presiding Judge Keith M. Kiuchi, for Defendant-Appellant. /s/ Clyde J. Wadsworth Associate Judge Charles R. Prather, Peter T. Stone, /s/ Sonja M.P. McCullen for Plaintiff-Appellee. Associate Judge