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Electronically Filed Supreme Court SCCQ-XX-XXXXXXX 08-MAR-2023 09:03 AM Dkt. 65 OP IN THE SUPREME COURT OF THE STATE OF HAWAI‘I
---oOo--- ________________________________________________________________
IN RE: JASPER CESAR MANUEL, Debtor, Plaintiff-Appellee. (Case No. 11-02712 (RJF)) (Chapter 7) ------------------------------------------------------- RICHARD A. YANAGI, Chapter 7 Trustee,
vs.
BANK OF AMERICA, N.A., Defendant-Appellant. (Adv. No. 21-90001) ________________________________________________________________
SCCQ-XX-XXXXXXX
CERTIFIED QUESTION FROM THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF HAWAIʻI (Case No. 11-0712 (RJF) (Chapter 7); Adv. No. 21-90001)
MARCH 8, 2023
RECKTENWALD, C.J., McKENNA, WILSON, AND EDDINS, JJ., AND CIRCUIT JUDGE OCHIAI, IN PLACE OF NAKAYAMA, J., RECUSED
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
The United States Bankruptcy Court for the District of
Hawaiʻi (“bankruptcy court”) certified two questions to this *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***
court, which we have determined are amenable to answer. Those
questions are
1. Whether an action alleging a wrongful nonjudicial foreclosure of Land Court property that seeks only money damages against the foreclosing lender, and does not seek to avoid the foreclosure sale or affect title to the property, is an action that “directly impeach[es] . . . any foreclosure proceedings affecting registered land” within the meaning of Haw. Rev. Stat. section 501-118(c), and is time barred if filed after the issuance of a certificate of title to the buyer at a foreclosure sale.
2. Whether a putative class action asserting wrongful foreclosure claims extends the time during which a class member may commence an individual action under Haw. Rev. Stat. section 501-118(c), where the putative class action was commenced before the issuance of a certificate of title to the buyer at the foreclosure sale; and, if there is such an extension, how long does it last?
The bankruptcy court explains that if we “answer[] the [first]
question in the affirmative, the second question will become
relevant.” We answer the first question in the negative.
Although the bankruptcy court would then consider the second
question irrelevant, we provide a brief answer to that question,
to the extent the answer continues to bear on the timeliness of
Plaintiff-Appellee1 Jasper Cesar Manuel’s (“Manuel”) wrongful
foreclosure claims.
First, an action alleging a wrongful nonjudicial
foreclosure of Land Court property that seeks only damages
against the foreclosing lender is not an action that “directly
impeaches” any foreclosure proceedings affecting registered land
1 Initially, Manuel’s bankruptcy trustee, Richard A. Yanagi, was the plaintiff-appellee in these proceedings. By order dated August 8, 2022, this court granted the trustee’s motion to substitute Manuel as the plaintiff- appellee.
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within the meaning of Hawaiʻi Revised Statutes (“HRS”) § 501-118
(2018); therefore, the action is not barred by the entry of a
transfer certificate of title (“TCT”) to the buyer at a
foreclosure sale. Second, our cases hold generally that the
pendency of a putative class action tolls the time during which
a class member may commence an individual action. The time for
commencing an individual action is tolled until a clear denial
of class certification.
II. Background
The following factual and procedural background is not
reasonably undisputed. Manuel owned a condominium unit
registered in the Land Court of the State of Hawaiʻi. The
property was encumbered by a mortgage through BAC Home Loans
Servicing, the predecessor-in-interest to Defendant-Appellant
Bank of America, N.A. (“BANA”). Manuel defaulted on his
mortgage.
On June 14, 2010, BAC Home Loans Servicing conducted a
public foreclosure auction of the property and acquired the
property itself. It then conveyed the property to Federal
National Mortgage Association (“Fannie Mae”) by Mortgagee’s
Quitclaim Deed recorded in Land Court on July 28, 2010. Fannie
Mae then sold the property to Christopher Yukio Ichiki by a
Limited Warranty Apartment Deed recorded in Land Court on April
1, 2011. The Land Court certified the new TCTs on November 10,
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2015 (certifying the TCT for the transfer from BAC Home Loans
Servicing to Fannie Mae) and November 29, 2016 (certifying the
TCT from Fannie Mae to Ichiki).
Manuel filed a chapter 7 bankruptcy petition on October 12,
2011. Neither the property nor his wrongful foreclosure claim
against BANA were listed in his original bankruptcy schedules.
Manuel was discharged in bankruptcy in January 2012 and his case
closed.
In September 2012, a putative wrongful foreclosure class
action, Degamo v. Bank of America, N.A., was filed in state
court and removed to the United States District Court for the
District of Hawaiʻi (“district court”). Manuel was a member of
the plaintiff class. On March 19, 2019, the district court
dismissed the case on the basis that the class representatives
lacked standing because their prior bankruptcy cases made their
wrongful foreclosure claims property of their bankruptcy
estates, not property of the class representatives themselves.
On appeal to the United States Court of Appeals for the Ninth
Circuit (“Ninth Circuit”), the district court’s order was
affirmed in all respects but one: it was vacated and remanded
for the district court to consider a motion to intervene filed
by the trustees of the bankruptcy estates of the putative class
representatives. On remand, the district court denied the
motion as moot on September 29, 2021. Degamo v. Bank of
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America, N.A., Civil No. 13-00141 (D. Haw. Sept. 29, 2021).
This is because “the proposed intervenors’ counsel represented
[to the district court at a status conference] that the
intervenors are no longer inclined to intervene. . . .” Degamo,
Civil No. 13-00141 at 2. Plaintiffs did not appeal.
In the meantime, in December 2020, Manuel reopened his
bankruptcy case to amend his schedules to include the wrongful
foreclosure claims against BANA. The trustee of Manuel’s
bankruptcy estate filed a complaint against BANA on January 14,
2021 alleging wrongful foreclosure in violation of HRS § 667-5
(Supp. 2008) (Hawaiʻi’s former nonjudicial foreclosure statute)
and HRS Chapter 480 (2008) (specifically, Hawaiʻi’s unfair and
deceptive acts and practices and unfair methods of competition
statutes). For example, one of the specific allegations was
that the mortgagee postponed the foreclosure auction without
publishing the change of date, as required under the power of
sale and the nonjudicial foreclosure statute in effect at the
time. The complaint sought only money damages against BANA. It
did not seek return of title and possession of the property to
Manuel.
III. Certified Questions
Under HRS § 602-5(2) (2016), this court “shall have the
jurisdiction and power[]” to “answer, in its discretion, . . .
any question or proposition of law certified to it by a federal
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district[2] or appellate court if the supreme court shall so
provide by rule. . . .” Hawaiʻi Rules of Appellate Procedure
(“HRAP”) Rule 13(a) (2000) provides the following:
When a federal district or appellate court certifies to the Hawaiʻi Supreme Court that there is involved in any proceeding before it a question concerning the law of Hawaiʻi that is determinative of the cause and that there is no clear controlling precedent in the Hawaiʻi judicial decisions, the Hawaiʻi Supreme Court may answer the certified question by written opinion.
Questions of law certified by the federal courts are reviewable
de novo under the right/wrong standard of review. Hancock v.
Kulana Partners, LLC, 145 Hawaiʻi 374, 380, 452 P.3d 371, 377
(2019) (citation omitted).
IV. Discussion
The first certified question centers upon the
interpretation of HRS § 501-118 (the “Foreclosure” section of
our Land Court statutes found in HRS chapter 501). HRS § 501-
118 states the following:
In case of foreclosure by exercising the power of sale without a previous judgment, the affidavit required by chapter 667 shall be recorded with the assistant registrar. The purchaser or the purchaser’s assigns at the foreclosure sale may thereupon at any time present the deed under the power of sale to the assistant registrar for recording and obtain a new certificate. Nothing in this chapter shall be construed to prevent the mortgagor or other person in interest from directly impeaching by action or otherwise, any foreclosure proceedings affecting registered land, prior to the entry of a new certificate of title.
2 The bankruptcy court “constitute[s] a unit of the district court” under 28 U.S.C. § 151 (1984) (“In each judicial district, the bankruptcy judges in regular active service shall constitute a unit of the district court to be known as the bankruptcy court for that district.”).
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HRS § 501-118(c) (emphasis added). The question is whether a
wrongful nonjudicial foreclosure claim seeking only money
damages from the foreclosing lender is an action “directly
impeaching . . . any foreclosure proceedings affecting
registered land,” and, if so, whether such a proceeding must be
initiated “prior to the entry of a new certificate of title.”
A. The parties’ arguments
1. BANA’s opening brief
In its opening brief, BANA first argues that the
overarching purpose of the Land Court system in Hawaiʻi is to
“conclusively establish title to land through the issuance of a
certificate of title,” citing Wells Fargo v. Omiya, 142 Hawaiʻi
439, 446, 420 P.3d 370, 377 (2018). BANA states that the TCT
notes any encumbrances or claims adverse to the title of the
registered owner and that the holder of the TCT holds it free
from all encumbrances except those noted on the TCT. BANA
asserts HRS § 501-118 bars wrongful foreclosure claims after the
Land Court certifies a new TCT, pointing to the plain language
of the statute.
BANA next explains that two Hawaiʻi appellate cases, Aames
Funding Corp. v. Mores, 107 Hawaiʻi 95, 110 P.3d 1042 (2005), and
Omiya, 142 Hawaiʻi 439, 420 P.3d 370, both held that HRS § 501-
118(c) bars a challenge to a foreclosure proceeding after the
Land Court certifies a new TCT. BANA states that Aames barred a
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challenge to a foreclosure (based on alleged violation of the
federal Truth in Lending Act) because the Land Court had already
certified a new TCT. BANA states that Omiya affirmed that “HRS
§ 501-118 specifies ‘entry of a new certificate of title’ as the
determinative point when foreclosure proceedings may no longer
be impeached.”
BANA argues that the remedy Manuel seeks (money damages
against the foreclosing lender) does not change the result
because claims for money damages still “directly impeach the
foreclosure” under HRS § 501-118(c). To support its argument,
BANA cites to cases from the Hawaiʻi district court and the Ninth
Circuit: Fergerstrom v. PNC Bank, N.A., 342 F. Supp. 3d 1029
(D. Haw. 2018), aff’d, 802 F. App’x. 268 (9th Cir. 2020); and
Seegers v. CIT Bank N.A., Civil 17-00399 LEK-KSC, 2018 WL
1558550 (D. Haw. Feb. 28, 2018), which barred similar claims for
money damages from the foreclosing lenders in wrongful
nonjudicial foreclosure and Hawaiʻi UDAP/UMOC actions brought
after the entry of new TCTs for the properties. BANA quotes the
Fergerstrom court as holding that “because the action attacks
(i.e., impeaches) the foreclosure proceeding, the particular
form of remedy . . . does not remove these claims impeaching
title from the proscription imposed by HRS § 501-118 and Aames.”
Fergerstrom, 342 F. Supp. 3d at 1045. The Fergerstrom court
continued, “[I]t is the action itself that impeaches the prior
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foreclosure proceeding, not the measure or type of damages
sought.” Id.
BANA then notes that the Fergerstrom court rejected the
plaintiffs’ assertion that tort claims are preserved under
another section of the Land Court chapter, HRS § 501-212 (2018),
notwithstanding HRS § 501-118. HRS § 501-212 is titled “Actions
for compensation for fraud, mistake, etc.,” and it provides the
following:
Any person who, without negligence on the person’s part, sustains loss or damage, or is deprived of land or of any estate or interest therein, after the original registration of land under this chapter, by the registration of any other person as owner of such land, or of any estate or interest therein, through fraud, or in consequence of any error, omission, mistake, or misdescription in any certificate of title or in any entry of memorandum in the registration book, may prosecute a contract claim in the circuit court for the recovery of compensation for such a loss or damage or for such land or estate, or interest therein; provided that when the person deprived of land or of any estate, or interest therein, in the manner above stated has a remedy for the recovery of the land or of the estate, or interest therein, the person shall exhaust this remedy before resorting to the contract claim herein provided. Nothing in this chapter shall be construed to deprive the plaintiff of any tort claim which the plaintiff may have against any person for loss or damage, or deprivation of land, or of any estate or interest therein.
BANA quotes the Fergerstrom court as stating that HRS § 501-212
“on its face, does not touch HRS § 501-118.” Fergerstrom, 342
F. Supp. 3d at 1044. The Fergerstrom court reasoned, “Whereas
[section 501-212] preserves pre-existing tort claims, [section
501-118] does not deprive a plaintiff of any tort claim – it
simply reinforces the conclusive and unimpeachable nature of
Land Court certificates of title after entry.” Id.
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BANA notes that the Ninth Circuit affirmed the Fergerstrom
court’s order as follows: “The district court correctly
determined that section 501-118’s time bar applied to
[plaintiffs’] tort claim for money damages. [Plaintiffs’]
claims were based on defects in the non-judicial foreclosure
sales of their properties and ‘directly impeach[ed] . . . the
foreclosure proceedings.” Fergerstrom, 802 F. App’x at 270.
BANA also quotes the district court’s observation in
Seegers that “[the] legislative intent [of HRS § 501-118] would
be thwarted if the conclusive and unimpeachable character of
certificates of title could be easily ‘sidestepped’ by suing the
seller of registered land for money damages as a substitute for
suing the current owner of registered land for title and
possession.” Seegers, Civil 17-0399 LEK-KSC, 2018 WL 1558550 at
*5. BANA ends its opening brief by asking this court to answer
the first certified question in the affirmative to hold that HRS
§ 501-118 bars wrongful nonjudicial foreclosure claims that seek
only money damages against the foreclosing lender after the
entry of a new TCT.
2. Manuel’s answering brief
In his answering brief, Manuel first points out that that
Land Court chapter, HRS chapter 501, permits him to bring a
wrongful foreclosure claim, which sounds in tort. Specifically,
HRS § 501-212 states, in relevant part, “Nothing in this chapter
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shall be construed to deprive the plaintiff of any tort claim
which the plaintiff may have against any person for loss or
damage, or deprivation of land, or of any estate or interest
therein.”
He then argues that HRS § 501-118 itself contains no
express time limitation to bringing a wrongful foreclosure
claim. Rather, he states that the “bar to ‘impeaching’ a
foreclosure proceeding emanates from HRS § 501-88.” That
statute is titled “Certificate as evidence,” and it provides the
The original certificate in the registration book, and any copy thereof duly certified under the signature of the registrar or assistant registrar, and the seal of the court, shall be received as evidence in all the courts of the State and shall be conclusive as to all matters contained therein, except as otherwise provided in this chapter.
HRS § 501-88 (2018). Manuel contends that the Aames court read
HRS §§ 501-118 and 501-88 together to conclude that a
mortgagor’s claim directly impeaching a foreclosure proceeding
must be brought before the TCT is given conclusive effect to all
matters contained therein, which is upon the entry of a new TCT
following the foreclosure sale. To Manuel, this means that a
claim challenging the contents of the new TCT (specifically, the
identification of the registered owner) is barred by the entry
of the new TCT.
Manuel reads Aames and Omiya as supporting his
interpretation of HRS § 501-118 because the former mortgagors in 11 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***
both cases challenged foreclosures and claimed title to their
respective properties. As such, Manuel continues, the former
mortgagors in both Aames and Omiya raised claims “directly
impeaching” the ownership interests listed on the new TCTs. In
Aames and Omiya, this court concluded that HRS § 501-118 barred
challenges to title after the entry of the new TCT. By
contrast, Manuel argues that his wrongful foreclosure claim does
not call into question the new owner’s title. Specifically,
Manuel points out that the new owner’s TCT will not reflect “how
a foreclosure sale was performed or whether the foreclosure was
wrongful”; therefore, his wrongful foreclosure claim does not
“directly impeach” the TCT to the property. Further, Manual
emphasizes that the remedy he seeks is tort damages for the
wrongful foreclosure, not return of title and possession.
Manuel supports his position with the plain language of the
statute. He asserts that the plain meaning of “directly
impeach” in HRS § 501-118 is to “exactly; completely,”
“absolute[ly],” “or “unconditional[ly]” “dispute, disparage,
deny, or contract” another’s title and right of possession of
property lost in foreclosure, citing WEBSTER’S NEW WORLD DICTIONARY
389 (3d college ed. 1988), and BLACK’S LAW DICTIONARY, 459, 753 (6th
ed. 1990), respectively. Looking to the rest of the Land Court
chapter, Manuel notes that the legislature has included the term
“impeach” without the modifier “directly,” for example, in HRS §
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501-144 (2018), which is titled “New certificate after
enforcement of lien; tax sale,” and which states, in relevant
part, “At any time prior to the entry of a new certificate the
registered owner may pursue all the registered owner’s remedies
to impeach or annul proceedings under executions or to enforce
liens of any description.” (Emphasis added.) Therefore, Manuel
argues, the term “directly” must carry independent significance
when it modifies the word “impeach.” He interprets “directly
impeaching” a TCT to mean “an unqualified attack on or challenge
to the title and right of possession lost to foreclosure.”
Manuel notes that the bankruptcy court questioned whether
the last sentence of HRS § 501-118 would bar a claim for money
damages against a foreclosing lender. That sentence states,
“After a new certificate of title has been entered, no judgment
recovered on the mortgage note for any balance due thereon shall
operate to open the foreclosure or affect the title to
registered land.” The bankruptcy court reasoned that the
phrases “directly impeaching . . . any foreclosure proceedings”
and “open the foreclosure or affect the title to registered”
land could not mean the same thing, otherwise the legislature
would have used the same phrasing. Manuel, however, argues that
differently phrased portions of a statute could nevertheless
mean the same thing. Further, if the last sentence does mean
something different from “directly impeaching any foreclosure
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proceeding,” Manuel reads it as pertaining to an action for a
deficiency judgment following a foreclosure sale, where the
mortgagor raises foreclosure defects as a defense to deficiency
liability; in such an instance, raising the defense does not re-
open the foreclosure or affect title, citing HawaiiUSA Fed.
Credit Union v. Monalim, 147 Hawaiʻi 33, 464 P.3d 821 (2020).
Manuel next posits that the federal courts in Fergerstrom
and Seegers interpreted the term “directly impeach” to prohibit
wrongful foreclosure claims seeking only money damages unless
the plaintiff would also have been entitled to return of title
and possession of the property. Manuel argues this reading is
contrary to our case law recognizing that a remedy for wrongful
foreclosure could be damages alone, where the foreclosed-upon
property has passed into the hands of an innocent purchaser for
value, citing Delapinia v. Nationstar Mortg. LLC, 150 Hawaiʻi 91,
497 P.3d 106 (2021); Mount v. Apao, 139 Hawaiʻi 167, 384 P.3d
1268 (2016); and Santiago v. Tanaka, 137 Hawaiʻi 137, 366 P.3d
612 (2016).
Manuel next opines that an in pari materia reading of HRS §
501-118 and other Land Court statutes also supports his position
that HRS § 501-118 does not bar money damage claims against a
foreclosing lender. Manuel reiterates that Land Court property
owners may sue in tort pursuant to HRS § 501-212. Manuel then
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points to HRS § 501-81 (2018), which is titled “Legal incidents
of registered land” and states, in relevant part
Registered land, and ownership therein, shall in all respects be subject to the same burdens and incidents which attach by law to unregistered land. Nothing in this chapter shall in any way be construed to . . . change or affect in any way any other rights or liabilities created by law and applicable to unregistered land; except as otherwise expressly provided in this chapter.
Manuel argues that nothing in HRS § 501-118 expressly provides
that Land Court property owners cannot recover money damages
from foreclosing lenders, when that remedy is available to non-
Land Court property owners.
Next, Manuel contends that BANA’s reading of HRS § 501-118
to preclude money damages claims after the entry of a new TCT
improperly abrogates a wrongful foreclosure plaintiff’s common
law right to sue for damages, where no express legislative
intent to do so appears. Manuel notes that the common law right
to sue for wrongful foreclosure damages originated in Johnson v.
Tisdale, 4 Haw. 605 (Haw. Kingdom 1883), and continues to be
recognized in our recent cases, such as Delapinia, 150 Hawaiʻi
91, 497 P.3d 106; Mount, 139 Hawaiʻi 167, 384 P.3d 1268; and
Santiago, 137 Hawaiʻi 137, 366 P.3d 612.
Manuel asserts that the legislative history of HRS § 501-
118 validates his reading of the statute. He notes that when
the Land Court statute was enacted in 1903, HRS § 501-118’s
predecessor stated the following: “Nothing contained in this
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Act shall be construed to prevent the mortgagor or other person
in interest from directly impeaching, by bill in equity or
otherwise, any foreclosure proceedings affecting registered
land, prior to the entry of a new certificate of title.” 1903
Haw. Sess. Laws Act 56, § 63 at 307. Manuel explains that, at
the time, a bill in equity was the vehicle by which a wrongful
foreclosure plaintiff would seek to set aside a sale and,
therefore, “directly impeach” the foreclosure proceedings. By
contrast, at the time, money damages were a form of legal
relief. With the promulgation of the Hawaiʻi Rules of Civil
Procedure, and the merger of law and equity in Hawaiʻi courts,
the “bill in equity” language in HRS § 501-118 was replaced with
“action.” Manuel asserts that HRS § 501-118 may reasonably be
read today to time-bar those claims that would have been
originally filed as bills in equity.
Manuel then argues that structural issues arise under
BANA’s reading of HRS § 501-118 as setting a time bar as “the
entry of the new TCT.” Under BANA’s interpretation of the
statute, the time a plaintiff has for bringing a wrongful
foreclosure damages claim depends upon how quickly the Land
Court can certify and enter a new TCT. Manuel points out that
the Land Court was once able to certify TCTs on the same day
they were presented, Hon. Gary W.B. Chang, Land Court:
Demystifying an Enigma, HAWAII BAR JOURNAL 4, 10 (2017); within
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months, see Aames, 107 Hawaiʻi at 96 n.2, 97, 110 P.3d at 1043
n.2, 1044; and currently, after years, see Omiya, 142 Hawaiʻi at
452, 420 P.3d at 383 (discussing the Land Court’s backlog). In
any event, Manuel argues that “foreclosed Land Court homeowners
risk having their damages remedies further curtailed by the
speed with which the Land Court enters new TCTs,” which could
lead to severe and unjust results.
Lastly, Manuel asserts that the fraud exception to HRS §
501-118 applies to his case. See HRS § 501-106 (2018) (“[I]n
all cases of registration procured by fraud the owner may pursue
all the owner’s remedies against the parties to the fraud,
without prejudice however to the rights of any innocent holder
for value of a certificate of title.”). He argues that BANA
committed constructive fraud upon Manuel due to the
confidential relationship between a self-dealing mortgagee bank,
who occupies a superior position in a nonjudicial foreclosure,
and the mortgagor, citing Hungate v. Law Off. of David B. Rosen,
139 Hawaiʻi 394, 409, 391 P.3d 1, 16 (2017).
Manuel urges this court to answer the first certified
question in the negative to hold that an action alleging
wrongful nonjudicial foreclosure of Land Court property that
seeks only money damages is not time-barred by the entry of a
new TCT because such an action does not “directly impeach”
foreclosure proceedings under HRS § 501-118.
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3. BANA’s reply brief
In its reply, BANA emphasizes that the plain language of
HRS § 501-118 precludes a mortgagor from bringing a wrongful
foreclosure claim, regardless of the remedy sought, after entry
of a new TCT. With respect to the Manuel’s argument that BANA’s
reading of HRS § 501-118 abrogates the common law right to sue
for wrongful foreclosure, BANA counter-argues that HRS § 501-118
merely sets a time limit for bringing the claim. With respect
to Manuel’s reading of the legislative history of HRS § 501-118,
BANA counter-argues that the statute’s prohibition on bringing,
past the entry of a new TCT, proceedings directly impeaching a
foreclosure “by bill of equity or otherwise” encompasses the
money damages claim Manuel asserts, as that statute is phrased
now (“any action or otherwise”) and when the statute was
originally enacted (“by bill of equity or otherwise.”). In any
event, BANA states that resort to legislative history is
unnecessary where the plain language of the statute is clear.
As to Manuel’s allegation that BANA committed constructive
fraud, BANA counter-argues (1) that the argument is irrelevant
to the certified question presented to this court; and (2)
mortgagor and mortgagee are generally not in a confidential
relationship that would give rise to a constructive fraud claim.
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B. Analysis
The first certified question asks this court to engage in
statutory interpretation of the word “directly” in HRS § 501-
118’s phrase “directly impeaching by action or otherwise, any
foreclosure proceedings affecting registered land.” Statutory
interpretation is guided by established rules:
First, the fundamental starting point for statutory interpretation is the language of the statute itself. Second, where the statutory language is plain and unambiguous, our sole duty is to give effect to its plain and obvious meaning. Third, implicit in the task of statutory construction is our foremost obligation to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. Fourth, when there is doubt, doubleness of meaning, or indistinctiveness or uncertainty of an expression used in a statute, an ambiguity exists.
Rees v. Carlisle, 113 Hawaiʻi 446, 452, 153 P.3d 1131, 1137
(2007) (citations omitted).
In construing an ambiguous statute, “the meaning of the ambiguous words may be sought by examining the context, with which the ambiguous words, phrases, and sentences may be compared, in order to ascertain their true meaning.” HRS § 1–15(1) (1993). Moreover, the courts may resort to extrinsic aids in determining legislative intent. One avenue is the use of legislative history as an interpretive tool.
Gray v. Admin. Dir. of the Court, 84 Hawaiʻi 138, 148, 931 P.2d
580, 590 (1997) (cleaned up).
1. HRS § 501-118’s phrase “directly impeaching . . . any foreclosure proceedings” contains an ambiguity.
The plain meaning of “directly” in HRS § 501-118 is not
obvious. We look to the rest of the Land Court chapter for
guidance in construing the word. We agree with Manuel that the
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term “directly” must have independent significance in modifying
the word “impeach” because the only statute within Chapter 501
concerning “impeaching” a TCT is HRS § 501-144. That statute is
titled “New certificate after enforcement of lien; tax sale,”
and it states, in relevant part, “At any time prior to the entry
of a new certificate the registered owner may pursue all the
registered owner’s remedies to impeach or annul proceedings
under executions or to enforce liens of any description.” The
phrase “directly impeach” in HRS § 501-118 must have a meaning
different from “impeach” in HRS § 501-144. We have held that
where the legislature “uses different terms in different parts
of a statute, we must presume this was intentional, and that the
legislature means two different things.” Peer News LLC v. City
& Cnty. of Honolulu, 138 Hawaiʻi 53, 67-68, 376 P.3d 1, 15-16
(2016) (citing Agustin v. Dan Ostrow Constr. Co., 64 Haw. 80,
83, 636 P.2d 1348, 1351 (1981).
2. Legislative history provides no guidance on interpreting the phrase “directly impeaching . . . any foreclosure proceedings.”
The legislative history of both HRS §§ 501-118 and -144 is
silent as to the difference in meaning, however. Further, the
legislative history of HRS § 501-118 itself provides no insight
into the meaning of “directly impeach.” We disagree with Manuel
that there is meaning to be found in the evolution of the
statutory language from 1903’s verbiage, “directly impeaching,
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by bill in equity or otherwise, any foreclosure proceedings
affecting registered land” to the current verbiage, “directly
impeaching, by action or otherwise, any foreclosure proceedings
affecting registered land.” Manuel argues that the 1903
predecessor to HRS § 501-118 barred only actions in equity
(i.e., those seeking to void title and return possession of the
property) after the entry of a new TCT; therefore, the statute
did not bar actions at law for money damages after the entry of
a new TCT. We agree with BANA that the phrase “or otherwise”
could have referred to actions at law.
3. Our precedent interpreting HRS § 501-118 has not yet examined wrongful foreclosure complaints seeking only money damages against foreclosing lenders.
Our state appellate court precedent interpreting HRS § 501-
118 has also never dealt with the issue of whether the entry of
a new TCT would bar a wrongful foreclosure claim seeking only
money damages. Our key cases, Aames, 107 Hawaiʻi 95, 110 P.3d
1042; Bank of New York Mellon v. Onaga, Inc., 140 Hawaiʻi 358,
400 P.3d 559 (2017); and Omiya, 142 Hawaiʻi 439, 420 P.3d 370;
have all held that HRS § 501-118 bars wrongful foreclosure
claims seeking to affect title to property after the entry of a
new TCT.
In Aames, a mortgagee bank foreclosed upon mortgagors, the
Moreses. Aames, 107 Hawaiʻi at 97, 110 P.3d at 1044. After the
Land Court issued the mortgagee a TCT to the property, the
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Moreses refused to surrender possession, and the mortgagee filed
an action for ejectment against them. Id. The district court
granted judgment for possession and writ of possession in favor
of the mortgagee and against the Moreses. Id.
On appeal, the Moreses argued that the district court did
not have jurisdiction over the case because their case involved
a dispute over title to real property, which, pursuant to HRS §
604-5(d), the district courts do not hear. Aames, 107 Hawaiʻi
98, 110 P.3d 1045. In addition to holding that the Moreses did
not sufficiently assert the source, nature, and extent of their
title claims, this court applied HRS § 501-118 to hold that
“defenses to mortgages foreclosed upon by exercise of the
mortgagee’s power of sale must be raised ‘prior to the entry of
a new certificate of title.’” Aames, 107 Hawaiʻi at 102, 110
P.3d at 1049.
In reaching this holding, we first explored the “sparse”
legislative history of Chapter 501, noting that the Land Court
system was intended to “provide[] an economic and convenient
manner of recording land titles, which . . . will do away with
the present cumbersome plan of records and largely reduce the
expense of land transfers.” Aames, 107 Hawaiʻi at 101, 110 P.3d
at 1048. The purpose of the Land Court system, we stated, was
to “conclusively establish title to land through the issuance of
a certificate of title.” Id. (citation omitted). We then held
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that HRS § 501-118 directs that [a mortgagor’s right to
challenge a foreclosure proceeding] is to be exercised ‘prior to
the entry of a new certificate of title.’” Id. We “buttressed”
this holding with HRS § 501-88, which “provides that the matters
stated in the certificate are to be given conclusive effect in
the courts.” Id. As the Moreses brought their title defense to
the ejectment proceeding after the entry of the TCT listing the
mortgagee as title holder, we held that the mortgagee’s title to
the subject property became “conclusive and unimpeachable.”
Aames, 107 Hawaiʻi at 102-03, 110 P.3d 1049-50. Thus, Aames
interpreted the “entry of a new TCT” limit in HRS § 501-118 to
protect a TCT’s conclusivity of title.
Similarly, in Onaga, we did not allow a junior creditor to
“undo” a judicial foreclosure once good faith purchasers had
entered their TCT with the Land Court. Onaga, 140 Hawaiʻi at
368, 400 P.3d at 569. In that case, the junior creditor
appealed a judicial foreclosure proceeding but did not post a
supersedeas bond. Onaga, 140 Hawaiʻi at 362, 400 P.3d at 563.
While the case was on appeal, the foreclosed upon property was
sold to good faith purchasers, who moved to intervene in the
appeal and dismiss it as moot, presenting as evidence the new
TCT issued to them. Onaga, 140 Hawaiʻi at 363, 400 P.3d at 564.
We noted that “title to the Property has already passed to the
[good faith purchasers]”; therefore, “[a]llowing [the junior
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creditor] to undo or otherwise hinder the sale of the Property
to the [good faith purchasers] would be inconsistent with the
purposes underlying our Land Court statute.” Onaga, 140 Hawaiʻi
at 368, 400 P.3d at 569. In so ruling, we cited both HRS § 501-
88 and the policy reasons explored in Aames, further
underscoring that the time limit to bring claims under HRS §
501-118 is intended to protect the conclusivity of the new TCT.
Onaga, 140 Hawaiʻi at 368-69, 400 P.3d at 569-70.
Lastly, in Omiya, this court held that a mortgagee was
entitled to bring an action seeking to “restore title” to it,
including “cancellation of a Transfer Certificate of Title,”
where the action was brought prior to the entry of a TCT to a
third-party purchaser. Omiya, 142 Hawaiʻi at 443, 456, 420 P.3d
374, 387. In Omiya, Wells Fargo foreclosed on its mortgage lien
in a nonjudicial foreclosure, then the Association of Apartment
Owners of the Ilikai Apartment Building foreclosed on the
property for nonpayment of maintenance fees. Omiya, 142 Hawaiʻi
at 443, 420 P.3d at 374. The property was then sold to a third
party. Id. The Land Court had recorded the quitclaim deed for
the conveyance to the third party, but it had not yet certified
a new TCT for the third party. Id. We held that Wells Fargo’s
action was not barred by HRS § 501-118, as its challenge to
title was brought prior to the entry (which we defined as
“certification”) of the new TCT to the third party. Omiya, 142
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Hawaiʻi at 455, 420 P.3d at 386. Thus, Wells Fargo could
directly impeach and seek to undo the foreclosure proceedings
because the certification of the new TCT had not occurred at the
time suit was brought.
In sum, the parties challenging foreclosures in Aames,
Onaga, and Omiya each sought to undo foreclosures, which does
affect the conclusivity of the matters stated within an entered
TCT (namely, the identification of the title owner). Aames, 107
Hawaiʻi 95, 110 P.3d 1042; Onaga, 140 Hawaiʻi 358, 400 P.3d 559;
Omiya, 142 Hawaiʻi 439, 420 P.3d 370. These parties did not seek
money damages against a foreclosing mortgagee, which does not
affect the conclusivity of matters stated within an entered TCT.
Aames, 107 Hawaiʻi 95, 110 P.3d 1042; Onaga, 140 Hawaiʻi 358, 400
P.3d 559; Omiya, 142 Hawaiʻi 439, 420 P.3d 370. These cases tend
to support Manuel’s contention that to “directly impeach”
foreclosure proceedings, an action must threaten the
conclusivity of a new TCT, entered after the foreclosure sale.
4. The federal cases interpreting HRS § 501-118 are not persuasive.
BANA urges us to look to the district court and Ninth
Circuit cases holding that HRS § 501-118 bars wrongful
foreclosure claims, seeking only money damages, brought after
the entry of a new TCT. See Seegers, Civil 17-00399 LEK-KSC,
2018 WL 1558550; Fergerstrom, 342 F. Supp. 3d 1029; and
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Fergerstrom, 802 F. App’x. 268. We are not bound by these
courts’ interpretations of Hawaiʻi law, and we in fact disagree
with them. Each of these cases seem to read “directly” out of
the phrase “directly impeach” in HRS § 501-118 and is,
therefore, not useful to us in answering the first certified
question.
First, in Seegers, the district court dismissed the
Plaintiff’s quiet title and wrongful foreclosure damages claims
by applying Aames to hold that the claims were barred by the
entry of new TCTs following the foreclosure sale. Seegers, 2018
Civil 17-00399 LEK-KSC, WL 1558550 at *2. As to the wrongful
foreclosure money damages claim in particular, the district
court stated, “Plaintiff’s claimed entitlement to money damages
for loss of title and possession impeaches the foreclosure
proceeding and contradicts the Land Court’s issuance of new
certificates of title.” Seegers, Civil 17-00399 LEK-KSC, 2018
WL 1558550 at *4 (emphasis added). This statement, however,
does not interpret the word “directly,” modifying the word
“impeach” in HRS § 501-118. The district court went on to state
that the plaintiff would be entitled to money damages for loss
of title and possession “only if he was legally entitled to
title and possession of the Property,” but because new TCTs had
already been entered, he was not. Id. Finally, the district
court stated that the legislative intent behind the Land Court
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chapter “would be thwarted if the conclusive and unimpeachable
character of certificates of title would be easily ‘sidestepped’
by suing the seller of registered land for money damages as a
substitute for suing the current owner of registered land for
title and possession.” Seegers, Civil 17-00399 LEK-KSC, 2018 WL
1558550 at *5.
The Fergerstrom court borrowed heavily from Seegers in
holding, “As a matter of Hawaiʻi law, the Land Court’s entry of
Certificates of Title is conclusive and unimpeachable evidence
of the subsequent owners’ title to the properties, and
Plaintiff’s [wrongful foreclosure] claims, which seek to impeach
the foreclosure proceedings, and demand damages to compensate
for the loss of title and possession, are statutorily precluded”
Fergerstrom, 342 F. Supp. 3d at 1032 (citing Aames, 107 Hawaiʻi
at 101, 110 P.3d at 1048; HRS § 501-118) (emphasis added). Like
the Seegers court, the Fergerstrom court did not interpret the
word “directly,” modifying the word “impeach” in HRS § 501-118.
To the Fergerstrom court, the plaintiffs’ wrongful foreclosure
action “attacks (i.e., impeaches) the foreclosure proceeding”
“regardless of how the remedy is styled.” 342 F. Supp. 3d at
1045 (omitting the modifier “directly” in interpreting HRS §
501-118). Moreover, the Fergerstrom court viewed a wrongful
foreclosure claim praying only for money damages as an attempt
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to “plead around Aames by requesting equitable damages
equivalent to restoring title.” 342 F. Supp. 3d at 1042-43.
The Ninth Circuit affirmed the district court’s Fergerstrom
order in a two-page memorandum opinion that stated only, “The
district court correctly determined that section 501-118’s time
bar applied to Appellants’ tort claims for money damages.
Appellants’ claims were based on defects in the non-judicial
foreclosure sales of their properties and ‘directly impeach[ed]
. . . the foreclosure proceedings.” Fergerstrom, 802 F. App’x.
at 270 (citing Aames, 107 Hawaiʻi 95, 110 P.3d 1042). No further
reasoning is given.
None of the federal cases interpreted the term “directly”
in HRS § 501-118’s phrasing “directly impeaches any foreclosure
proceeding.” Further, the district court in both Seegers and
Fergerstrom viewed wrongful foreclosure money damages claims as
“equivalent” to claims for the return of title and possession,
when our precedent has not explicitly stated that.
5. Our recent precedent on the remedies available following wrongful foreclosure do not foreclose the possibility that a money damages claim could be brought following the entry of a new TCT to a third- party purchaser.
In fact, our precedent contemplates wrongful foreclosure
actions seeking only money damages where return of title is not
practicable (or, in this case, requested) and has not
necessarily framed the remedies as equivalents. First, in
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Santiago, we held that a mortgagee’s nonjudicial foreclosure
upon mortgagors’ property was unlawful because it did not
proceed pursuant to a power of sale (the mortgage document had
omitted a power of sale clause, which was required by law). 137
Hawaiʻi at 156, 366 P.3d at 631. Return of title and possession
of the property was not practicable, as the property had already
been resold to an innocent purchaser for value after the
foreclosure. 137 Hawaiʻi at 158, 366 P.3d at 633. Therefore, we
ruled that the mortgagors were “entitled to restitution of their
proven out-of-pocket losses from [the mortgagee’s] wrongful
foreclosure of the Mortgage and subsequent sale of the
[property].” Id. We did not measure damages as the equivalent
of title and possession.
Next, in Mount, we held that a mortgagor wrongfully
foreclosed upon mortgagees’ property by failing to provide
information on reinstating the mortgage loan within five days of
a request. 139 Hawaiʻi at 169, 384 P.3d at 1270. The property
had already been sold to a third party, whose status as an
innocent purchaser for value was not determined at the time of
appeal and certiorari. 139 Hawaiʻi at 180, 384 P.3d at 1281.
Therefore, the case was remanded to the circuit court to
determine whether the third party was an innocent purchaser for
value, in order to determine which remedy under Santiago
applied: rendering the foreclosure sale voidable and returning
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title and possession to the mortgagors (where the third party
was found not to be an innocent purchaser for value) or damages
only (where the third party was found to be an innocent
purchaser for value). Id.
In Hungate, we held that a mortgagee wrongfully foreclosed
upon a mortgagee by failing to give proper notice of a
foreclosure auction date and postponements of that date pursuant
to the mortgage’s power of sale and the non-judicial foreclosure
statute in effect at the time. 139 Hawaiʻi at 402, 391 P.3d at
9. We noted that “the mortgagor can protect its interests
through filing a claim against the mortgagee for wrongful
foreclosure,” and reiterated that, “[w]hen voiding the
foreclosure is not possible, the mortgagor is entitled to
‘restitution of their proven out-of-pocket losses’ through a
wrongful foreclosure claim.” 139 Hawaiʻi at 407, 391 P.3d at 14
(quoting Santiago, 137 Hawaiʻi at 158-59, 366 P.3d at 633-34).
Lastly, in Delapinia, we summarized the state of our
jurisprudence on remedies for wrongful foreclosure as follows:
Hawaiʻi law has moved unmistakably towards the conclusion that sales pursuant to a wrongful foreclosure are voidable, regardless of whether the violation of statutory of contractual, substantial or a mere irregularity. This policy protects the interests accrued by innocent purchasers and avoids forfeiture if possible, while deterring the conduct of the party that wrongfully foreclosed through a damage remedy.
150 Hawaiʻi at 104, 497 P.3d at 119. Thus, Delapinia noted that
Hawaiʻi’s wrongful foreclosure remedies are twofold and
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alternative (and not necessarily equivalent) to each other: (1)
return of title and possession; or (2) money damages. Id.
We acknowledge that these rules developed in the context of
nonjudicial foreclosures of properties registered in the Bureau
of Conveyances. See Santiago, CAAP-XX-XXXXXXX, ICA Dkt. 28:38;
Mount, 139 Hawaiʻi at 170, 384 P.3d at 1271; Hungate, 139 Hawaiʻi
at 399, 391 P.3d at 6; Delapinia, CAAP-XX-XXXXXXX, ICA Dkt.
16:32.3 Although Santiago, Mount, Hungate, and Delapinia all
involved regular system property, Land Court property is
“subject to the same burdens and incidents which attach by law
to unregistered land.” HRS § 501-81.
We next consider whether HRS 501-118’s “entry of a new TCT”
limitation bars each type of remedy in the specific context of
foreclosures upon Land Court property. A complaint, filed after
the entry of a new TCT and seeking the first remedy (return of
title and possession), does “directly impeach” foreclosure
proceedings because it challenges the matters contained within a
new TCT (i.e., the identification of the owner of the property).
A complaint, filed after the entry of a new TCT and seeking the
second remedy (money damages against a wrongfully foreclosing
mortgagee), does not “directly impeach” foreclosure proceedings
3 We take judicial notice of the records filed in our appellate docket that the foreclosed properties at issue in Santiago and Delapinia were registered in the regular system. Hawaiʻi Rules of Evidence Rule 201.
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because it does not challenge the matters contained within the
new TCT (i.e., the identification of the owner of the property).
6. HRS § 501-118 does not bar a wrongful foreclosure complaint seeking only money damages from the foreclosing mortgagee, even when the complaint is brought after the entry of a TCT to a third-party purchaser.
In short, reading HRS § 501-118 in harmony with (1) our
precedent and (2) the purpose and policy behind the Land Court
chapter to protect the conclusivity of the matters contained
within a TCT, we hold that a wrongful foreclosure claim, seeking
only money damages against the foreclosing lender, where the
property has passed on to a third party, does not “directly
impeach” a foreclosure proceeding because it does not affect the
matters contained within the new TCT. Manuel’s case illustrates
that point: his wrongful foreclosure claim is based upon
alleged irregularities committed by the mortgagee in auctioning
his property. He seeks money damages caused by those
irregularities. He does not seek to affect any matter contained
within the new TCT (namely, the identification of the third
party owner of the property).
B. The Degamo putative class action tolled the limitations periods for bringing a wrongful foreclosure claim.
As the entry of the new TCTs in this case did not bar
Manuel’s January 14, 2021 complaint for wrongful foreclosure
money damages, the next question is whether the complaint was
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timely. Manuel states that his Complaint was timely filed4 only
if the time for bringing it was tolled by the Degamo putative
class action. Manuel was a putative member of the plaintiff
class.
In Levi v. Univ. of Hawaiʻi, we adopted the United States
Supreme Court’s holdings on “class-action tolling.” 67 Haw. 90,
93, 679 P.2d 129, 132 (1984). The United States Supreme Court
held first that “the commencement of a class action suspends the
applicable statute of limitations as to all asserted members of
the class who would have been parties had the suit been
permitted to continue as a class action.” Am. Pipe & Constr.
Co. v. Utah, 414 U.S. 538, 554 (1974). The Court next clarified
that, “[o]nce the statute of limitations has been tolled, it
remains tolled for all members of the putative class until class
certification is denied. At that point, class members may
choose to file their own suits or to intervene as plaintiffs in
the pending action.” Crown, Cork & Seal Co. v. Parker, 462 U.S.
345, 354 (1983). We have also held that class action tolling
ends upon entry of (1) “an order expressly denying a motion for
class certification (or expressly denying the last such motion,
if there is more than one motion)”; (2) where there is no such
express order, upon entry of final judgment dismissing the class
4 We express no opinion as to whether this statement is true.
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action, or (3) upon a putative class member’s decision to opt
out of the class. Patrickson v. Dole Food Co., 137 Hawaiʻi 217,
230, 368 P.3d 959, 972 (2015) (ruling specifically on cross-
jurisdictional class action tolling).
In its opening brief, BANA argues that the Degamo class
action did not toll Manuel’s claims for two reasons. First,
BANA argues the plain language of HRS § 501-118 does not extend
the time to directly impeach foreclosure proceedings beyond the
entry of a new TCT. Second, BANA argues that HRS § 501-118 is a
statute of repose, whose outer time limit is the entry of a new
TCT. BANA states that, unlike statutes of limitations, statutes
of repose are not subject to class-action tolling, citing Cal.
Pub. Emps’. Ret. Sys. v. ANZ Secs. Inc., 137 S.Ct. 2042, 2051-52
(2017).
Manuel argues that HRS § 501-118 is not a statute of
repose, pointing out that Hawaiʻi appellate courts have held so
far that only the following statutes are statutes of repose:
HRS §§ 657-5, 657-8, 657-7.3(a), and 514B-94(b). Further,
Manuel points out that Hawaiʻi appellate courts have allowed
challenges to title in cases of fraud even after a new TCT has
been entered, citing Aames, 107 Hawaiʻi at 103, 110 P.3d at 1050,
and Fukunaga v. Fukunaga, 8 Haw. App. 273, 280-81, 800 P.2d 618,
622 (1990).
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BANA replies that if putative class actions are allowed to
toll challenges to title beyond the entry date of the TCT, the
purpose of the Land Court system, in general, and of HRS § 501-
118, in particular, would be defeated.
In answering the first certified question, we held that HRS
§ 501-118 did not preclude Manuel from filing his wrongful
foreclosure complaint after the entry of the new TCT to the
third party. Therefore, HRS § 501-118 is not the statute under
which the complaint’s timeliness is measured. Hence, whether
HRS § 501-118 is a statute of limitation or repose is not
necessary to decide. Rather, the statutes of limitations for
wrongful foreclosure and Chapter 480 claims apply.
In this case, the pendency of the Degamo putative class
action tolled the time for Manuel to file an individual action.
Class action tolling began on September 12, 2007, with the
filing of the Degamo putative class action complaint. It
clearly ended on September 29, 2021. Although the district
court had dismissed the putative class action on March 14, 2019,
the dismissal was appealed to the Ninth Circuit. Therefore,
March 14, 2019 does not mark the date that denial of class
certification became clear. The Ninth Circuit remanded the case
to the district court to consider the motion to intervene filed
by the class representatives’ bankruptcy trustees. At a status
conference, the trustees informed the district court that they
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no longer sought to intervene. Degamo, Civil No. 13-00141 at 2.
Therefore, on September 29, 2021, the district court filed its
order denying the motion to intervene as moot. Id. On that
date, the denial of class certification became clear.
V. Conclusion
against the foreclosing lender is not an action that “directly
impeaches” any foreclosure proceedings affecting registered land
within the meaning of HRS § 501-118(c); therefore, the action is
not barred by the entry of a TCT to the buyer at a foreclosure
sale. Second, the pendency of a putative class action asserting
wrongful foreclosure claims tolls the time during which a class
member may commence an individual action. The time for
commencing an individual action is tolled until a clear denial
of class certification. In this case, the filing of the
putative class action on September 7, 2012 tolled the time for
filing an individual wrongful foreclosure claim until September
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29, 2021, when the district court’s denial of class
certification became clear.
Patricia J. McHenry and /s/ Mark E. Recktenwald Allizon Mizuo Lee for defendant-appellant /s/ Sabrina S. McKenna
Van-Alan H. Shima, /s/ Michael D. Wilson James J. Bickerton, and Bridget G. Morgan-Bickerton /s/ Todd W. Eddins for plaintiff-appellee /s/ Dean E. Ochiai