Bank of America, N.A. v. Reyes-Toledo.

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
09-OCT-2018
07:59 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---
________________________________________________________________

BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS
SERVICING, LP FKA COUNTRYWIDE HOME LOANS SERVICING LP,
Respondent/Plaintiff-Appellee,
vs.
GRISEL REYES-TOLEDO, Petitioner/Defendant-Appellant,
and
WAI KALOI AT MAKAKILO COMMUNITY ASSOCIATION;
MAKAKILO COMMUNITY ASSOCIATION; and
PALEHUA COMMUNITY ASSOCIATION,
Respondents/Defendants-Appellees.
________________________________________________________________

SCWC-XX-XXXXXXX

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 12-1-0668)

OCTOBER 9, 2018

NAKAYAMA, ACTING C.J., MCKENNA, POLLACK, AND WILSON, JJ.,
AND CIRCUIT COURT JUDGE GARIBALDI,
IN PLACE OF RECKTENWALD, C.J., RECUSED

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

This case returns to us after it was remanded to the

Intermediate Court of Appeals (“ICA”) by our February 28, 2017

opinion Bank of America, N.A. v. Reyes-Toledo, 139 Hawaiʻi 361,
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390 P.3d 1248 (2017) (“Reyes-Toledo I”). In Reyes-Toledo I, we

vacated a foreclosure decree based on issues of fact regarding

whether Bank of America, N.A., a National Association, as

successor by merger to BAC Home Loans Servicing, LP FKA

Countrywide Home Loans Servicing LP (“Bank of America”) held the

note at the time the foreclosure lawsuit was filed. See 139

Hawaiʻi at 373, 390 P.3d at 1260.

Relevant to this certiorari proceeding, Reyes-Toledo I

remanded the case to the ICA for a determination of whether the

Circuit Court of the First Circuit (“circuit court”)1 erred by

dismissing Grisel Reyes-Toledo’s (“Homeowner[’s]”) four-count

counterclaim before granting summary judgment for foreclosure in

favor of Bank of America. See 139 Hawaiʻi at 373, 390 P.3d at

1260. On remand, the ICA ruled the circuit court properly

dismissed the wrongful foreclosure, declaratory relief, and

quiet title counts in Homeowner’s counterclaim, but that it

erred in dismissing the unfair and deceptive trade practices

count. See Bank of America, N.A., Successor v. Reyes-Toledo,

No. CAAP-XX-XXXXXXX (App. July 21, 2017) (SDO).

In sum, the ICA concluded the three counts were

appropriately dismissed pursuant to Hawaiʻi Rules of Civil

Procedure (“HRCP”) Rule 12(b)(6) because: (1) as Homeowner did

1
The Honorable Bert I. Ayabe presided.

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not provide any authority to support “the proposition that a

wrongful foreclosure claim can be raised prior to foreclosure or

the sale of the property in judicial foreclosure,” no set of

facts would entitle Homeowner to relief, Reyes-Toledo, SDO at 6;

(2) the face of the Mortgage listed MERS as “mortgagee” and

“nominee,” and as such, Homeowner’s arguments in support of her

allegations that “MERS was nothing more than a strawman and a

conduit for fraud being practiced upon the Defendant and others”

lacked merit, Reyes-Toledo, SDO at 7; and (3) Homeowner’s quiet

title count does not allege that she paid, or was able to pay,

the outstanding debt on the Property “so as to demonstrate the

superiority of her claim,” Reyes-Toledo, SDO at 9. In so

concluding, the ICA applied the “plausibility” pleading standard

set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544

(2007), which it had previously adopted in Pavsek v. Sandvold,

127 Hawaiʻi 390, 279 P.3d 55 (App. 2012). See Reyes-Toledo, SDO

at 2–4; see also Ashcroft v. Iqbal, 556 U.S. 662, 677–80 (2009)

(clarifying Twombly).

Homeowner timely filed an application for writ of

certiorari (“Application”), asserting the ICA erred in upholding

the dismissal of the other three counts as it applied the wrong

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pleading standard.2 According to Homeowner, these three counts

should have survived dismissal because when a party moves to

dismiss a complaint pursuant to Hawaiʻi Rules of Civil Procedure

(“HRCP”) Rule 12(b)(6), the party admits the well-pleaded

allegations of fact.

This appeal raises two issues: (1) the standard a pleading3

must meet to overcome a HRCP Rule 12(b)(6) motion to dismiss;

and (2) whether a claim for wrongful foreclosure exists under

Hawaiʻi law.

As to the first issue, this court has never adopted the

Twombly/Iqbal “plausibility” pleading standard, and we now

expressly reject it. We reaffirm that in Hawaiʻi state courts,

the traditional “notice” pleading standard governs. This

provides citizen access to the courts and to justice.

As to the second issue, we hold that a party may bring a

claim for wrongful foreclosure before the foreclosure actually

occurs.

We therefore vacate the ICA’s judgment on appeal affirming

the circuit court’s dismissal of three counts of Homeowner’s

2
Bank of America did not apply for certiorari with respect to the ICA’s
reinstatement of the unfair and deceptive trade acts and practices count, so
that issue is not before us.
3
Pursuant to HRCP Rule 8(a), a “pleading” “sets forth a claim for
relief, whether an original claim, counterclaim, cross-claim, or third-party
claim[.]”

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counterclaim, and remand the case to the circuit court for

further proceedings consistent with this opinion as well as our

opinion in Reyes-Toledo I.

II. Background

Only the factual and procedural backgrounds relevant to the

issues on certiorari are discussed below.4

A. Homeowner’s Answer and Counterclaim

In response to Bank of America’s complaint seeking

foreclosure (“Complaint”) of Homeowner’s property (“Property”),

Homeowner filed her Answer and Counterclaim on September 28,

2012, denying all of the allegations in the Complaint, except

those pertaining to her personal background, her September 24,

2007 execution of a promissory note made payable to Countrywide

Bank, FSB (“Note”), and the recordation of a mortgage on the

Property that secured the Note (“Mortgage”). She also asserted

the following defenses in her Answer: (1) failure to state a

claim upon which relief can be granted, (2) assumption of risk

and contributory negligence, (3) fraud, based on Homeowner’s

reasonable belief that Bank of America was not the real party-

in-interest and owner of the Note and Mortgage through any

claimed assignment by Mortgage Electronic Registration Systems,

Inc. (“MERS”), and (4) illegality, insofar as Bank of America

4
See Reyes-Toledo I for further details not relevant to the issues on
certiorari.

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was not the owner and holder of the Note and Mortgage and

therefore not entitled to foreclose on the Mortgage. She also

contended that there was no valid interim assignment of the

Mortgage to Bank of America and no valid negotiation for value

of the Note to Bank of America. She further asserted MERS could

not be a lawful beneficiary of the Mortgage if it lacked

possession of the Note.

Homeowner also asserted the following defenses in the event

the Note and Mortgage had been transferred into a trust and

securitized: (1) the claimed assignment of the Note and Mortgage

into the trust may have violated the ninety-day closing date;

(2) the claimed Mortgage assignment to Bank of America in

October 2011 would be void as a violation of the express terms

of the trust; (3) the purported assignment by which Bank of

America claimed ownership of the Note and Mortgage may violate

the trust provisions for the closing-date rule; (4) the

purported transfers or assignments of the Mortgage after the

closing date of the trust would be void in violation of the

express terms of the trust and 26 U.S.C. § 860 et seq.; (5) the

purported transfers may violate New York trust law and would

therefore be void; (6) the Note may never have been transferred

into the trust; (7) MERS was not a lender, banker, or servicer

and therefore any transfers by MERS were void; (8) the purported

transfers into and out of the trust violated the Internal

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Revenue Code, 26 U.S.C. § 860; (9) the claimed assignments into

and out of the trust may have violated the Pooling and Service

Agreement (“PSA”), together with the Underwriting Agreement for

the trust; (10) if there were transfers into a trust under the

PSA, the transfers were not performed according to the terms of

the trust and were therefore void; (11) the Note and Mortgage

may never have been deposited or transferred into the trust; and

(12) if the transfers were made into and out of a securitized

trust, the signatures may have been by unauthorized persons and

therefore void as forgeries, which would render the purported

transfers fraudulent and void.

Homeowner asserted four counts in the counterclaim filed

along with her Answer: (1) wrongful foreclosure; (2) declaratory

relief; (3) quiet title; and (4) unfair and deceptive trade acts

and practices (sometimes “UDAP”) under HRS § 480-1 et seq.

In the first count of her counterclaim, alleging wrongful

foreclosure, Homeowner incorporated by reference the defenses in

her Answer, and alleged that Bank of America’s conduct in

commencing the foreclosure action was willful, malicious, and

without just cause.

In the second count of her counterclaim, seeking

declaratory relief, Homeowner incorporated by reference the

allegations in the wrongful foreclosure count. She asserted she

was entitled to declaratory relief pursuant to HRS § 632-1 that

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(1) Bank of America was not the owner of the Mortgage and Note;

(2) Bank of America was not entitled to foreclose on the

Mortgage and Note; and (3) MERS was not the mortgagee on the

Mortgage but rather was a “sham and fraud” that “acted only as a

strawman.” She also requested that the court determine the

identity of the mortgagee and award her costs and attorney’s

fees pursuant to HRS § 607-14.

In the third count of her counterclaim, requesting the

quieting of her title, Homeowner again incorporated by reference

the allegations in the wrongful foreclosure count. She asserted

she was entitled to have her legal title to the Property quieted

against Bank of America’s claims pursuant to HRS § 669-1 et

seq., and that she was entitled to recover her costs and

attorney’s fees pursuant to HRS § 607-14.

Finally, in the fourth count of her counterclaim, alleging

unfair and deceptive trade acts and practices, Homeowner again

incorporated by reference the allegations in the wrongful

foreclosure count. She alleged she was a consumer with respect

to the Mortgage and Note, and she asserted the acts and conduct

of Bank of America, its agents and predecessors, and MERS

constituted an unfair and deceptive trade practice by “either or

both mortgage lenders, mortgage servicers, mortgage holders,

claimants, debt collectors, and/or finance companies.”

Homeowner claimed she paid about $55,593 to Bank of America

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based on erroneous information and billings, and on the

assumption that Bank of America was the rightful owner of the

Mortgage. She maintained Bank of America and MERS were

therefore subject to liability under HRS §§ 480-2 and 480-13 for

injuries and damages of not less than $1,000, or for treble

damages, plus attorney’s fees and costs. Additionally,

Homeowner asserted she was entitled to injunctive relief to

enjoin the unlawful practices of Bank of America, its agents and

predecessors, and MERS.

B. Motion to Dismiss Counterclaim

On October 22, 2012, Bank of America filed a Motion to

Dismiss Defendant Grisel Reyes-Toledo’s Counterclaim (“Motion to

Dismiss Counterclaim”). As to the wrongful foreclosure count,

Bank of America asserted Homeowner did not describe any

foreclosure that had actually occurred or what was wrongful

about the alleged foreclosure, and that therefore the count

should be dismissed. As to the declaratory judgment count, Bank

of America alleged the involvement of MERS in loan transactions

has been repeatedly approved by this court and that there was no

allegation that MERS exceeded its traditionally approved role in

Homeowner’s case.

As to the quiet title count, Bank of America alleged that

Homeowner failed to state a claim because she did not assert she

had fully paid off the underlying obligation or is able to

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tender the full amount before seeking relief. Finally, Bank of

America asserted that although the unfair and deceptive trade

acts and practices count incorporated by reference the

allegations in the wrongful foreclosure count, Homeowner did not

describe the alleged unfair or deceptive acts or practices in

any detail.

In her Memorandum in Opposition to Bank of America’s Motion

to Dismiss Counterclaim, Homeowner argued that all counts of her

counterclaim, including the wrongful foreclosure count, were

sufficient to survive a HRCP Rule 12(b)(6) motion to dismiss.

She argued if she were to prove the facts alleged in her

counterclaim, which incorporated the allegations in her Answer,

she would be entitled to relief against Bank of America.

Homeowner also asserted that Bain v. Metro Mortgage Group, Inc.,

285 P.3d 34 (Wash. 2012) supports her claim that MERS is merely

a registration system and not a holder of the Note.

Additionally, Homeowner maintained sufficient facts were pled

for both the declaratory judgment and quiet title counts

pursuant to Amina v. Bank of New York Mellon, Civil No. 11–00714

JMS/BMK, 2012 WL 3283513 (D. Haw. 2012), in which the court held

that a borrower need not tender payment or allege that a note

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and mortgage were satisfied to quiet title against a party who

is not a mortgagee.5

In its Reply Memorandum, Bank of America asserted that if

Homeowner believed Bank of America lacked authority to

foreclose, then her arguments were defenses, not affirmative

claims for relief. Bank of America also asserted that a claim

for wrongful foreclosure cannot arise before a foreclosure

occurs. Bank of America alleged that to the extent Homeowner’s

other counts relied upon allegations set forth in the wrongful

foreclosure count, they should also be dismissed.

On February 12, 2013, the circuit court entered an order

granting Bank of America’s Motion to Dismiss Counterclaim

(“Order Dismissing Counterclaim”). Homeowner filed a motion for

reconsideration contending she had sufficiently pled her

“compulsory” counterclaim as Bank of America was not the

mortgagee, had no right to bring a foreclosure action, and was

liable to her for over $160,000 based on her UDAP counterclaim.

In the alternative, she moved for entry of final judgment and a

HRCP Rule 54(b) certification allowing immediate appeal of the

order Dismissing Counterclaim. She also requested a stay

pending appeal pursuant to HRCP Rule 62(d) and (h).

After Bank of America filed its opposition,

5
The UDAP count was reinstated by the ICA and is not before us on
certiorari.

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on December 31, 2013, the circuit court denied Homeowner’s

Motion for Reconsideration and Rule 54(b) Certification (“Order

Denying Defendant Grisel Reyes-Toledo’s Motion for (1)

Reconsideration of the February 12, 2013 Order Dismissing

Counterclaim; (2) HRCP Rule 54(b) Certification; and (3) HRCP

Rule 62(d) and (h) Stay Pending Appeal Filed on February 22,

2013”) (“Order Denying Motion for Reconsideration”).6

C. ICA’s Decision on Remand

Addressing the propriety of the dismissal of Homeowner’s

counterclaim for the first time on remand from Reyes-Toledo I,

the ICA affirmed in part and vacated in part the circuit court’s

Order Dismissing Counterclaim, entering its summary disposition

order (“SDO”) on July 21, 2017. See Reyes-Toledo, SDO at 12.

The ICA applied the following standard to evaluate Bank of

America’s HRCP Rule 12(b)(6) motion to dismiss:

6
The circuit court subsequently granted Bank of America’s motion for
summary judgment through its December 9, 2014 “Findings of Fact, Conclusions
of Law, Order Granting Plaintiff’s Motion for Summary Judgment Against All
Parties and Interlocutory Decree of Foreclosure Filed April 4, 2014”
(“Foreclosure Decree”), and entered a separate foreclosure judgment. In the
first appeal, Homeowner appealed this judgment. In a summary disposition
order, the ICA affirmed. As noted, on certiorari in Reyes-Toledo I, we held:
(1) genuine issues of material fact existed as to whether Bank of America was
entitled to enforce the Note at the time it commenced the foreclosure
proceedings, precluding summary judgment as to Bank of America’s standing to
institute the proceedings; (2) the assignment of the Mortgage was
insufficient to establish Bank of America’s standing to institute foreclosure
proceedings; and (3) the foreclosure judgment was a final appealable
judgment, and thus the ICA had appellate jurisdiction over the Order
Dismissing Counterclaim. We vacated the ICA’s April 13, 2016 Judgment on
Appeal and the Foreclosure Decree to the extent it granted summary judgment
in favor of Bank of America. We also remanded the case to the ICA to
determine whether the circuit court erred in dismissing Homeowner’s
counterclaim.

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A complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his or her claim that
would entitle him or her to relief. We must therefore view
a plaintiff’s complaint in a light most favorable to him or
her in order to determine whether the allegations contained
therein could warrant relief under any alternative theory.
For this reason, in reviewing a circuit court’s order
dismissing a complaint our consideration is strictly
limited to the allegations of the complaint, and we must
deem those allegations to be true.

Reyes-Toledo, SDO at 3 (quoting In Re Estate of Rogers, 103

Hawaiʻi 275, 280–81, 81 P.3d 1190, 1195–96 (2003)). The ICA went

on, however, to quote an excerpt from Twombly, 550 U.S. at 555,

which the ICA previously quoted in Pavsek, 127 Hawaiʻi 390, 279

P.3d 55 (App. 2012):

While a complaint attacked by [a HRCP] Rule 12(b)(6) motion
to dismiss does not need detailed factual allegations, a
plaintiff’s obligation to provide the “grounds” of his
“entitlement to relief” requires more than labels and
conclusions, and a formulaic recitation of the elements of
a cause of action will not do. Factual allegations must be
enough to raise a right to relief above the speculative
level on the assumption that all of the complaint’s
allegations are true (even if doubtful in fact).

Reyes-Toledo, SDO at 4 (quoting Pavsek, 127 Hawaiʻi at 403, 279

P.3d at 68).

Based on these standards, the ICA concluded the circuit

court did not err in dismissing three of the four counts of

Homeowner’s counterclaim.

First, with respect to the wrongful foreclosure count, the

ICA noted that although Homeowner alleged Bank of America’s

conduct in commencing the foreclosure was “willful, malicious,

and without just cause,” she failed to identify any other

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specific acts that would make the foreclosure wrongful. Reyes-

Toledo, SDO at 4. Further, the ICA opined that Homeowner failed

to provide any authority to support her proposition that a

wrongful foreclosure claim can be asserted before the

foreclosure or sale of the property in a judicial foreclosure.

See Reyes-Toledo, SDO at 6. According to the ICA’s analysis,

only non-judicial wrongful foreclosure has been recognized in

Hawaiʻi, and other jurisdictions have held a wrongful foreclosure

claim does not arise until after the foreclosure occurs. See

Reyes-Toledo, SDO at 4–5 (citing Santiago v. Tanaka, 137 Hawaiʻi

137, 366 P.3d 612 (2016); Cervantes v. Countrywide Home Loans,

Inc., 656 F.3d 1034 (9th Cir. 2011)). As this case involved a

pending judicial foreclosure and Homeowner asserted her wrongful

foreclosure claim before any foreclosure or sale occurred, the

ICA concluded Homeowner could not prove a set of facts that

would entitle her to relief on the wrongful foreclosure count.

See Reyes-Toledo, SDO at 6.

Second, the ICA also concluded the circuit court did not

err in dismissing the declaratory judgment count. See Reyes-

Toledo, SDO at 7–8. The ICA disagreed with Homeowner’s argument

that pursuant to Bain, 285 P.3d 34, she was entitled to

declaratory relief under HRS § 632-1, ruling that Bain was

distinguishable as explained in its prior decision in Bank of

America, N.A. v. Hermano, No. CAAP XX-XXXXXXX, at 6-7 (App. June

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22, 2016) (SDO), cert. denied, No. SCWC-XX-XXXXXXX (Sept. 22,

2016):

Bain was decided in the context of a non-judicial deed-of-
trust foreclosure, whereas the instant case is a judicial
foreclosure of a mortgage. Thus, the procedures and law in
Bain appear to be inapplicable here. The Bain decision was
limited to whether MERS is a “beneficiary” under the
language of Washington’s Deed of Trust Act, thus the
analysis is different. In addition, Bain is a Washington
State case; upon review, we are not inclined to depart from
the Hawaiʻi cases that have consistently recognized the
validity of assignments of mortgages by MERS where lenders
granted to MERS, as nominee for lenders and lenders’
successors and assigns, the right to exercise all of those
interests granted by a borrower, including the right to
foreclose and sell a property and to take any action
required of a lender.

Reyes-Toledo, SDO at 7 (quoting Hermano, SDO at 6–7) (citations

omitted). Here, MERS was listed in the Mortgage as “mortgagee”

and “nominee,” and the Mortgage’s terms granted MERS the right

to “exercise any or all of those interests, including, but not

limited to, the right to foreclose and sell the Property; and to

take any action required of Lender including, but not limited

to, releasing and canceling this Security Instrument.” Id.

Thus, the ICA concluded Homeowner’s argument was without merit

and the circuit court did not err in dismissing this count. See

Reyes-Toledo, SDO at 7–8.

Third, the ICA concluded the circuit court did not err in

dismissing Homeowner’s quiet title count. See Reyes-Toledo, SDO

at 9. The ICA reasoned that as with the counterclaimant in

Hermano, Homeowner’s reliance on Amina, Civil No. 11–00714

JMS/BMK, 2012 WL 3283513, to support her argument that a

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“borrower does not need to tender payment to allege that the

promissory note and the mortgage were paid where the borrower

brings a quiet title action against a party, who, according to

the complaint, is not a mortgagee,” was misplaced. Id. To the

ICA, Amina provided a significant clarification:

To be clear . . . this is not a case where Plaintiffs
assert that Defendant’s mortgagee status is invalid (for
example, because the mortgage loan was securitized or
because Defendant does not hold the note). On their own,
such allegations would be insufficient to assert a quiet
title claim-they admit that a defendant is a mortgagee and
attack the weakness of the mortgagee’s claim to the
property without establishing the strength and superiority
of the borrower’s claim (by asserting an ability to
tender).

Id. (quoting Amina, 2012 WL 3283513, at *5).

The ICA concluded each of Homeowner’s arguments — that Bank

of America’s mortgagee status was invalid, the mortgage loan was

securitized, and Bank of America did not possess the Note — were

“specifically distinguished” in Amina. See id. The ICA

concluded the quiet title count therefore failed because

Homeowner did not “demonstrate the superiority of her claim” as

she did not allege she paid, or was able to pay, the outstanding

debt on the Property. Id.

As to Homeowner’s UDAP claim raised in the fourth and final

count of her counterclaim, however, the ICA concluded that

because of this court’s decisions in Santiago, 137 Hawaiʻi 137,

366 P.3d 612, Hungate v. Law Office of David B. Rosen, 139

Hawaiʻi 394, 391 P.3d 1 (2017), and Reyes-Toledo I, the circuit

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court erred in dismissing the UDAP counterclaim. See Reyes-

Toledo, SDO at 10–11.

Finally, the ICA also concluded Homeowner was not entitled

to any further relief based on her request for reconsideration

of the circuit court’s dismissal of her counterclaim. See

Reyes-Toledo, SDO at 11–12. The ICA reasoned she failed to

present any new evidence or arguments in conjunction with her

motion for reconsideration that could not have been presented

during the earlier adjudicated motion to dismiss. See id.

The ICA thus affirmed in part and vacated in part the

circuit court’s Order Dismissing Counterclaim, and remanded to

the circuit court for further proceedings. See Reyes-Toledo,

SDO at 12. The ICA entered its Judgment on Appeal on October 5,

2017.

D. Application for Writ of Certiorari

Homeowner timely applied for a writ of certiorari

(“Application”) from the October 5, 2017 Judgment entered by the

ICA pursuant to its July 21, 2017 SDO, essentially arguing the

three remaining counts of her counterclaim should not have been

dismissed pursuant to HRCP Rule 12(b)(6). Bank of America filed

a response on November 2, 2017.

III. Standard of Review

A circuit court’s ruling on a motion to dismiss is reviewed

de novo. See Hungate, 139 Hawaiʻi at 401, 391 P.3d at 8 (quoting

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Kamaka v. Goodsill Anderson Quinn & Stifel, 117 Hawaiʻi 92, 104,

176 P.3d 91, 103 (2008), as amended (Jan. 25, 2008 & Feb. 14,

2008)). Moreover, “[w]hen interpreting rules promulgated by the

court, principles of statutory construction apply.

Interpretation of a statute is a question of law which we review

de novo.” Ranger Ins. Co. v. Hinshaw, 103 Hawaiʻi 26, 30, 79

P.3d 119, 123 (2003) (quoting Molinar v. Schweizer, 95 Hawaiʻi

331, 334-35, 22 P.3d 978, 981-82 (2001) (citations and quotation

marks omitted)). Therefore, we also interpret the HRCP de novo.

See Sierra Club v. Dep’t of Transp. of State of Hawaiʻi, 120

Hawaiʻi 181, 197, 202 P.3d 1226, 1242 (2009) (citing Molinar, 95

Hawaiʻi at 335, 22 P.3d at 982).

It is further well established that:

a complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can
prove no set of facts in support of his or her claim that
would entitle him or her to relief. The appellate court
must therefore view a plaintiff’s complaint in a light most
favorable to him or her in order to determine whether the
allegations contained therein could warrant relief under
any alternative theory. For this reason, in reviewing a
circuit court’s order dismissing a complaint . . . the
appellate court’s consideration is strictly limited to the
allegations of the complaint, and the appellate court must
deem those allegations to be true.

Kealoha v. Machado, 131 Hawaiʻi 62, 74, 315 P.3d 213, 225 (2013)

(citations and brackets omitted).

IV. Discussion

We accepted certiorari to address two issues: (1) the

clarification of the proper standard for a HRCP Rule 12(b)(6)

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motion to dismiss, and (2) whether a wrongful foreclosure claim

exists in Hawaiʻi. We discuss them in turn.

A. HRCP Rule 12(b)(6) Standard

The first issue requires us to review the “plausibility”

pleading standard the ICA applied in affirming the dismissal of

three counts of Homeowner’s counterclaim pursuant to HRCP Rule

12(b)(6), which mirrors Federal Rules of Civil Procedure

(“FRCP”) Rule 12(b)(6). See Reyes-Toledo, SDO at 4. The ICA

adopted this standard in Pavsek v. Sandvold, 127 Hawaiʻi 390, 279

P.3d 55 (App. 2012), citing to the United States Supreme Court’s

adoption of the standard in Twombly, 550 U.S. 544, and Iqbal,

556 U.S. 662:

While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a
plaintiff’s obligation to provide the “grounds” of his
“entitlement to relief” requires more than labels and
conclusions, and a formulaic recitation of the elements of
a cause of action will not do. Factual allegations must be
enough to raise a right to relief above the speculative
level on the assumption that all of the complaint’s
allegations are true (even if doubtful in fact).

Pavsek, 127 Hawaiʻi at 403, 279 P.3d at 68 (quoting Twombly, 550

U.S. at 555).

Prior to Twombly and Iqbal, the “notice pleading” standard

was applied in federal courts to determine whether a pleading

can be dismissed for “failure to state a claim upon which relief

can be granted” under FRCP Rule 12(b)(6). It is also the

standard this court has expressly adopted.

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Although the “plausibility” pleading standard has not been

adopted by this court,7 the ICA has nevertheless relied on it in

evaluating HRCP Rule 12(b)(6) motions to dismiss filed in

unpublished cases subsequent to Pavsek. See, e.g., Bank of New

York Mellon v. Mazerik, No. CAAP-XX-XXXXXXX, at 5 (App. Nov. 16,

2016) (SDO), cert. denied, No. SCWC-XX-XXXXXXX (Feb 24, 2017);

Abordo v. Dep’t of Pub. Safety, No. CAAP-XX-XXXXXXX, at 4 (SDO)

(App. Feb 26, 2016); Klausmeyer-Among v. Honolulu City Council,

No. CAAP-13-00001184, at 3 (App. Nov. 29, 2013) (mem.), cert.

denied, No. SCWC-XX-XXXXXXX (Apr. 9, 2014); Hermano, SDO at 3.

Thus, to answer whether the ICA erred in affirming the circuit

court’s dismissal of three counts of Homeowner’s counterclaim

pursuant to HRCP Rule 12(b)(6), we must determine whether our

traditional “notice pleading” standard or the “plausibility”

standard cited in Pavsek governs. The answer turns on the

proper interpretation of HRCP Rule 8(a).

We begin with the plain language of HRCP Rule 8(a). HRCP

Rule 8(a) states, in relevant part, that “a pleading which sets

forth a claim for relief, whether an original claim,

7
We cited to Pavsek in Hungate v. Rosen, 139 Hawaiʻi 394, 401, 391 P.3d
1, 8 (2017), and Kealoha v. Machado, 131 Hawaiʻi 62, 74, 315 P.3d 213, 225
(2013), not with respect to the “plausibility” pleading standard, but with
respect to the proposition that “in weighing the allegations of [a pleading]
as against a motion to dismiss, the court is not required to accept
conclusory allegations on the legal effect of the events alleged.” Pavsek
cited to Marsland v. Pang, 5 Haw. App. 463, 474, 701 P.2d 175, 186 (1985),
for that proposition, which, in turn, cited to 5 Charles Alan Wright & Arthur
R. Miller, Federal Practice & Procedure: Civil § 1357 (1969). This legal
proposition is not at issue in this case.

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counterclaim, cross-claim, or third-party claim, shall contain

(1) a short and plain statement of the claim showing that the

pleader is entitled to relief, and (2) a demand for judgment for

the relief the pleader seeks.” Since being promulgated and

adopted in 1953,8 we have amended HRCP Rule 8(a) only once, which

was to change gendered terms. See Order Amending the Hawaiʻi

Rules of Civil Procedure (Dec. 7, 1999) (eff. Jan. 1, 2000).

Noticeably absent from Rule 8(a) is any mention of requiring

“plausibility” of factual allegations, or that such allegations

be “enough,” or some variation of those terms.

We first interpreted HRCP Rule 8(a) in Hall v. Kim, 53 Haw.

215, 491 P.2d 541 (1971), where we explained the principles

underlying the rule and motions to dismiss:

H.R.C.P., Rule 8(a)(1) provides that a pleading for
claim of relief shall contain ‘a short and plain statement
of the claim showing that the pleader is entitled to
relief.’ It is also to be noted that Rule 8(f) reads: ‘All
pleadings shall be so construed as to do substantial
justice.’

. . . .

We believe that the mandate of H.R.C.P. Rule 8(f)
that ‘all pleadings shall be so construed as to do
substantial justice’ epitomizes the general principle
underlying all rules of H.R.C.P. governing pleadings, and
by the adoption of H.R.C.P. we have rejected ‘the approach
that pleading is a game of skill in which one misstep by
counsel may be decisive to the outcome’ and in turn
accepted ‘the principle that the purpose of pleading is to
facilitate a proper decision on the merits.’

Accordingly, under Rule 8(a)(1) ‘a complaint is
sufficient if it sets forth ‘a short and plain statement of

8
See Hawaiʻi Rules of Civil Procedure (adopted & promulgated by the
Supreme Court of the Territory of Hawaiʻi, Dec. 7, 1953) (eff. June 14, 1954).

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the claim showing that the pleader is entitled to relief.’
. . . The rule is satisfied if the statement gives the
defendant fair notice of the claim and the ground upon
which it rests. . . . It is not necessary to plead under
what particular law the recovery is sought.’ . . .

. . . .

‘In appraising the sufficiency of the complaint we
follow, of course, the accepted rule that a complaint
should not be dismissed for failure to state a claim unless
it appears beyond doubt that the plaintiff can prove no set
of facts in support of his claim which would entitle him to
relief.’ . . . Though it may be improbable for the
plaintiffs to prove their claims, they are entitled to an
opportunity to make that attempt. It is not for a court to
circumvent a determination of an action upon the merits of
the case by accepting an assertion that the claim asserted
in the complaint is groundless.

Hall, 53 Haw. at 219-22, 491 P.2d at 544-46 (citations omitted).

In other words, “[HRCP] Rule 8(a)(1) does not require the

pleading of facts; it requires a complaint to set forth ‘a short

and plain statement of the claim showing that the pleader is

entitled to relief.’” Hall, 53 Haw. at 220, 491 P.2d at 545

(citations omitted)). Thus, we held whether a pleading states

evidence, facts, or conclusions of law was not dispositive. See

id.

We held to these principles in subsequent cases. See,

e.g., Au v. Au, 63 Haw. 210, 221, 626 P.2d 173, 181 (per

curiam), recon. denied, 63 Haw. 263, 626 P.2d 173 (1981) (“Thus,

Rule 8(a) H.R.C.P., requires a complaint to set forth a ‘short

and plain statement of the claim. . . .’ This requirement under

our pleading system provides defendant with fair notice of what

the plaintiff’s claim is and the grounds upon which the claim

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rests.” (citing Conley v. Gibson, 355 U.S. 41, 47 (1957); Hall,

53 Haw. 215, 491 P.2d 541)). It is well established that Hawai‘i

is a notice-pleading jurisdiction. See, e.g., In re Genesys

Data Techs., Inc., 95 Hawai‘i 33, 41, 18 P.3d 895, 903 (2001)

(“Hawaii’s rules of notice pleading require that a complaint set

forth a short and plain statement of the claim that provides

defendant with fair notice of what the plaintiff’s claim is and

the grounds upon which the claim rests.” (citations omitted)).

Under Hawaii’s notice pleading approach, it is “[not] necessary

to plead legal theories with . . . precision.” Leslie v. Estate

of Tavares, 93 Hawaiʻi 1, 4, 994 P.2d 1047, 1050 (2000); see also

Perry v. Planning Comm’n, 62 Haw. 666, 685, 619 P.2d 95, 108

(1980) (“Modern judicial pleading has been characterized as

‘simplified notice pleading.’ Its function is to give opposing

parties ‘fair notice of what the . . . claim is and the grounds

upon which it rests.’” (citing Gibson, 355 U.S. at 47)).

Next, we examine the purpose and history of HRCP Rule 8(a).

The purpose of HRCP Rule 8(a)(1) is to “give[] the defendant

fair notice of the claim and the ground upon which it rests.”

Hall, 53 Haw. at 221, 491 P.2d at 545 (citation omitted).

Further, we have stated that “[w]e believe that the mandate of

H.R.C.P. Rule 8(f) that ‘all pleadings shall be so construed as

to do substantial justice’ epitomizes the general principle

underlying all rules of H.R.C.P. governing pleadings, and by the

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adoption of H.R.C.P. we have rejected ‘the approach that

pleading is a game of skill in which one misstep by counsel may

be decisive to the outcome’ and in turn accepted ‘the principle

that the purpose of pleading is to facilitate a proper decision

on the merits.’” Id. (quoting Gibson, 355 U.S. at 48).

Finally, we turn to the context of HRCP Rule 8(a). See

Moana v. Wong, 141 Hawai‘i 100, 109, 405 P.3d 536, 545 (2017)

(“It is well established that the interpretation of rules

promulgated by the supreme court involves principles of

statutory construction.” (quoting State v. Bohannon, 102 Hawai‘i

228, 240, 74 P.3d 980, 992 (2003)); Cty. of Kaua‘i v. Hanalei

River Holdings Ltd., 139 Hawai‘i 511, 519, 394 P.3d 741, 749

(2017) (“When construing a statute, our foremost obligation is

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. And we must read statutory

language in the context of the entire statute and construe it in

a manner consistent with its purpose.” (citation omitted)). As

previously discussed, HRCP Rule 8(a) is devoid of any mention of

facts, specificity, or plausibility. Moreover, when the HRCP

require a pleading to have specificity, they expressly state so.

For example, HRCP Rule 9, titled “Pleading Special Matters,”

offers examples of when specificity is required; HRCP Rule 9(b),

titled “Fraud, mistake, condition of the mind,” requires that

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“[i]n all averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with

particularity. Malice, intent, knowledge, and other condition

of mind of a person may be averred generally.” Similarly, HRCP

Rule 9(c)9 and HRCP Rule 9(g)10 require specificity. In

contrast, HRCP Rule 8(a), as well as HRCP Rule 13 (governing

counterclaims and cross-claims), are devoid of any mention of

specificity or particularity.

In addition, the HRCP also provides a mechanism for dealing

with any lack of clarity resulting from our preference for

notice pleading under HRCP Rule 8. HRCP Rule 12(e), titled

“Motion for more definite statement,” states that “[a] party may

move for a more definite statement” if a pleading is “so vague

and ambiguous that a party cannot reasonably be required to

frame a responsive pleading.” The motion under HRCP Rule 12(e)

“shall point out the defects complained of and the details

desired.” HRCP Rule 12(e). Thus, under HRCP Rule 12(e), a

court may order that any “vague or ambiguous” pleadings be

cured; should a party fail to comply, the court may also strike

9
HRCP Rule 9(c), titled “Conditions precedent,” reads: “In pleading the
performance or occurrence of conditions precedent, it is sufficient to aver
generally that all conditions have been performed or have occurred. A denial
of performance or occurrence shall be made specifically and with
particularity.”
10
HRCP Rule 9(g), titled “Special Damage,” reads: “When items of special
damage are claimed, they shall be specifically stated.”

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the pleading to which the motion was directed or issue other

orders as deemed just.

Lastly, the HRCP are to “be construed and administered to

secure the just, speedy, and inexpensive determination of every

action.” HRCP Rule 1. The framework for our rules of civil

procedure support notice pleading, as our rules contain a

variety of methods to determine the merits of a case. See Hall,

53 Haw. at 218, 491 P.2d at 544 (“Such simplified ‘notice

pleading’ is made possible by the liberal opportunity for

discovery and the other pretrial procedures established by the

Rules to disclose more precisely the basis of both claim and

defense and to define more narrowly the disputed facts and

issues.” (quoting Gibson, 355 U.S. at 47-48) (construing the

federal rule that is analogous to HRCP Rule 8(a)))). For

example, HRCP Rule 26 gives the trial court wide discretion in

managing discovery to “secure the just, speedy, and inexpensive

determination of every action,” HRCP Rule 1, as HRCP Rule

26(b)(2) “secure[s] the just, speedy, and inexpensive

determination of every action” by limiting the frequency or

extent of the discovery methods used.11

11
Limitations. By order, the court may alter the limits
in these rules on the number of depositions and
interrogatories or the length of depositions under Rule 30.
By order, the court may also limit the number of requests
under Rule 36. The frequency or extent of use of the
discovery methods otherwise permitted under these rules
(continued. . .)

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Notably, our case law cites heavily to Conley v. Gibson,

355 U.S. 41, 47 (1957). For many years the Supreme Court of the

United States similarly interpreted FRCP Rule 8(a)(2), the

federal counterpart to HRCP Rule 8, as requiring a complaint to

provide notice of the plaintiff’s claim and the grounds upon

which it rests. But in 2007 with the issuance of Twombly, the

Court expanded the requirements imposed on a complaint by FRCP

Rule 8(a)(2). As the ICA in Pavsek cited to Twombly for its

standard, it is important that we discuss Gibson, 355 U.S. 41,

and its progeny.

In Gibson, the Court addressed what became known as the “no

set of facts” standard. See 355 U.S. at 44. The Supreme Court

held, among other things, the petitioners’ complaint containing

general allegations survived a motion to dismiss because the

FRCP did not require claimants to set out detailed facts for the

basis of their claim. See 355 U.S. at 47. The Court stated it

(. . .continued)
shall be limited by the court if it determines that: (i)
the discovery sought is unreasonably cumulative or
duplicative, or is obtainable from some other source that
is more convenient, less burdensome, or less expensive;
(ii) the party seeking discovery has had ample opportunity
by discovery in the action to obtain the information
sought; or (iii) the burden or expense of the proposed
discovery outweighs its likely benefit, taking into account
the needs of the case, the amount in controversy,
limitations on the parties’ resources, the importance of
the issues at stake in the litigation, and the importance
of the proposed discovery in resolving the issues. The
court may act upon its own initiative after reasonable
notice or pursuant to a motion under Rule 26(c).

HRCP Rule 26(b)(2).

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followed the accepted rule that “a complaint should not be

dismissed for failure to state a claim unless it appears beyond

doubt that the plaintiff can prove no set of facts in support of

his claim which would entitle him to relief.” 355 U.S. at 45-46

(footnote omitted). Further, the Court reasoned the FRCP only

required a “‘short and plain statement of the claim’ that will

give the defendant fair notice of what the plaintiff’s claim is

and the grounds upon which it rests.” 355 U.S. at 47 (footnote

omitted). Following the “simple guide” of FRCP Rule 8(f) that

“all pleadings shall be so construed as to do substantial

justice,” the Court concluded the FRCP rejected the approach

that “pleading is a game of skill in which one misstep by

counsel may be decisive to the outcome and accept the principle

that the purpose of pleading is to facilitate a proper decision

on the merits.” 355 U.S. at 48 (citation omitted).

The Court abrogated Gibson in Twombly, however, holding

that a “plausibility” standard governed pleadings of a complaint

alleging an antitrust conspiracy. Twombly, 550 U.S. at 555–57.

In this context, the Court stated the pleading must contain

“enough facts to state a claim to relief that is plausible on

its face.” 550 U.S. at 570. Further, the Court stated it is

not sufficient for the pleading to contain mere “labels and

conclusions [or] a formulaic recitation of the elements of a

cause of action.” 550 U.S. at 555. To survive a motion for

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dismissal, the “[f]actual allegations must be enough to raise a

right to relief above the speculative level.” Id.

Justice Stevens, joined by Justice Ginsburg, dissented in

Twombly. See 550 U.S. at 570-97. Pointing out that the

plausibility standard was an evidentiary standard, Justice

Stevens stated that the plausibility standard contradicted what

the FRCP intended to codify. See 550 U.S. at 580. He

explained: “Under the relaxed pleadings standards of the Federal

Rules, the idea was not to keep litigants out of court but

rather to keep them in. The merits of a claim would be sorted

out during a flexible pretrial process and, as appropriate,

through the crucible of trial.” 550 U.S. at 575. Justice

Stevens noted that twenty-six States and the District of

Columbia utilized the Gibson Court’s language of “whether it

appears ‘beyond doubt’ that ‘no set of facts’ in support of the

claim would entitle the plaintiff to relief.” 550 U.S. at 578

(footnote omitted).

Two years after Twombly, the Supreme Court clarified the

plausibility standard in Ashcroft v. Iqbal, 556 U.S. 662 (2009).

The Court held that the Twombly plausibility standard was not

limited to complaints in the antitrust conspiracy context, but

instead, was applicable to “all civil actions and proceedings in

the United States district courts.” Iqbal, 556 U.S. at 678-80,

684 (quoting FRCP Rule 1). The Court explained the two

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principles in Twombly underlying the plausibility standard:

first, “the tenet that a court must accept as true all of the

allegations contained in a complaint is inapplicable to legal

conclusions,” and second, “only a complaint that states a

plausible claim for relief survives a motion to dismiss.”

Iqbal, 556 U.S. at 678–79 (citing Twombly, 550 U.S. at 555–56).

The Court explained that “[d]etermining whether a complaint

states a plausible claim for relief will . . . be a context-

specific task that requires the reviewing court to draw on its

judicial experience and common sense.” Id. (citation omitted).

Further, the Court stated that if “the well-pleaded facts do not

permit a court to infer more than the mere possibility of

misconduct, the complaint has alleged — but it has not ‘shown’ —

‘that the pleader is entitled to relief.’” Id. (quoting FRCP

Rule 8(a)(2)) (brackets omitted).

Although “[t]he advent of plausibility pleading in Twombly

and Iqbal was motivated in significant part by a desire . . . to

deter allegedly abusive practices . . . and to contain costs,”

when compared to the “notice pleading” standard, the

“plausibility” pleading standard is restrictive as it results in

decreased access to the courts for citizens. Arthur R. Miller,

From Conley to Twombly to Iqbal: A Double Play on the Federal

Rules of Civil Procedure, 60 Duke L.J. 1, 21 & n.67 (2010)

(“[T]he perception among many practicing attorneys and

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commentators is that the grant rate [for motions to dismiss] has

increased, particularly in civil rights cases, employment

discrimination, private enforcement matters, class actions, and

proceedings brought pro se. Some initial empirical evidence

supports these impressions.”).

Indeed, when the FRCP was promulgated in 1938, “[t]he

rulemakers believed in citizen access to the courts and in the

resolution of disputes on their merits,” and therefore had

“established a relatively plainly worded, non-technical

procedural system.” Arthur R. Miller, Are the Federal

Courthouse Doors Closing? What’s Happened to the Federal Rules

of Civil Procedure?, 43 Tex. Tech. L. Rev. 587, 587–88 (2011)

(footnotes omitted); see also Twombly, 550 U.S. at 573 (Stevens,

J., dissenting) (“Rule 8(a)(2) of the Federal Rules requires

that a complaint contain ‘a short and plain statement of the

claim showing that the pleader is entitled to relief.’ The Rule

did not come about by happenstance, and its language is not

inadvertent. [In contrast to hypertechnical English pleading

rules, the Rule intended to set forth] a pleading standard that

was easy for the common litigant to understand and sufficed to

put the defendant on notice as to the nature of the claim

against him and the relief sought.” (emphasis added)). Just

like Hawaii’s “notice pleading” standard, “[t]he [Federal] Rules

had a notice pleading regime that abjured factual detail and

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verboseness.” See Miller, 43 Tex. Tech. L. Rev. at 588 (citing

Gibson, 355 U.S. 41).

The “plausibility” pleading standard, i.e., “fact pleading

by another name,” however, has effectively “tak[en] federal

civil practice back toward code and common law procedure and

their heavy emphasis on detailed pleadings and frequent

resolution by a demurrer to the complaint or code motion to

dismiss.” Miller, 60 Duke L.J. at 21. Indeed, Twombly suggests

“parity between the level of scrutiny applied to claims at the

Rule 12(b)(6) and Rule 56 stages — with the only distinction

being that between alleged facts and evidenced facts . . . .”

A. Benjamin Spencer, Plausibility Pleading, 49 B.C. L. Rev. 431,

487 (2008); see also Twombly, 550 U.S. at 586 (Stevens, J.,

dissenting) (“Everything today’s majority says would therefore

make perfect sense if it were ruling on a Rule 56 motion for

summary judgment and the evidence included nothing more than the

Court has described. But it should go without saying . . . that

a heightened production burden at the summary judgment stage

does not translate into a heightened pleading burden at the

complaint stage.”). This “approach [is] wholly out of line with

the original liberal vision of the rules and would ultimately

saddle plaintiffs in disfavored actions like antitrust and civil

rights claims with burdens they will have difficulty meeting.”

Spencer, 49 B.C. L. Rev. at 488 (footnotes omitted).

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Furthermore, “[s]ince Iqbal, what constitutes ample facts, and

whether those facts appear plausible, are matters left to the

presiding judge’s discretion — whereas one judge may

subjectively regard a claim as fanciful or implausible, another

may permit a similar claim to proceed.” Ramzi Kassem,

Implausible Realities: Iqbal’s Entrenchment of Majority Group

Skepticism Towards Discrimination Claims, 114 Penn St. L. Rev.

1443, 1465 (2010).

For all of these reasons, the ICA’s adoption of the Pavsek

“plausibility” standard is contrary to our well-established

historical tradition of liberal notice pleading and undermines

citizen access to the courts and to justice. Instead of deeming

the factual allegations as true as we have consistently held to

govern HRCP Rule 12(b)(6) motions to dismiss, the standard in

Pavsek results in factual weighing by the trial court, resulting

in inconsistent application.

For approximately seventy years, we have upheld our liberal

notice pleading standard. See, e.g., Kawakami v. Kahala Hotel

Investors, LLC, 142 Hawaiʻi 507, 518, 421 P.3d 1277, 1288 (2018)

(“Under our rules, a complaint is good if it contains a short

and plain statement of the claim showing that the pleader is

entitled to relief.” (quoting Yap v. Wah Yen Ki Tuk Tsen Nin Hue

of Honolulu, 43 Haw. 37, 39 (Haw. Terr. 1958)); Laeroc Waikiki

Parkside, LLC v. K.S.K. (Oahu) Ltd., 115 Hawaiʻi 201, 166 P.3d

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961 (2007) (citing In re Genesys Data Techs., Inc., 95 Hawaiʻi at

41, 18 P.3d at 903; Au, 63 Haw. at 220–21, 626 P.2d at 181));

Hall, 53 Haw. at 221, 491 P.2d at 545; Midkiff v. Castle &

Cooke, Inc., 45 Haw. 409, 413–16, 368 P.2d 887, 890-92 (1962).

Courts should “not depart from the doctrine of stare decisis

without some compelling justification.” State v. Garcia, 96

Hawai‘i 200, 206, 29 P.3d 919, 925 (2001) (quoting Hilton v.

South Carolina Pub. Ry. Comm’n, 502 U.S. 197, 202 (1991))

(emphasis in original). Not once have we questioned, or found

ambiguous, our standards for HRCP Rule 8(a) and a motion to

dismiss. If a complaint meets the requirements of HRCP Rule

8(a), dismissal pursuant to HRCP Rule 12(b)(6) is appropriate

where “the allegations of the complaint itself clearly

demonstrate that plaintiff does not have a claim,” Touchette v.

Ganal, 82 Hawaiʻi 293, 303, 922 P.2d 347, 357 (1996), and in

weighing the allegations of the complaint as against a motion to

dismiss, the court “will not accept conclusory allegations

concerning the legal effect of the events the plaintiff has

[alleged].” 5B Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure § 1357, at pp. 548–53 (3d ed. 2004).

Although Twombly and Iqbal are persuasive in interpreting

and applying HRCP Rule 8, we are not bound by the Supreme

Court’s interpretation of an analogous federal rule. See, e.g.,

Kawamata Farms, Inc. v. United Agri Products, 86 Hawaiʻi 214,

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251-52, 948 P.2d 1055, 1092-93 (1997) (“[N]otwithstanding their

persuasiveness, interpretations of the FRCP by federal courts

are by no means conclusive with respect to our interpretation of

any rule within the HRCP.”); Roxas v. Marcos, 89 Hawaiʻi 91, 119,

969 P.2d 1209, 1237 (1998) (noting that although HRCP Rule 25

was “nearly identical to its federal counterpart,” the rules

“are not coextensive, and the federal court’s interpretation of

the federal rule is not binding on Hawaii’s interpretation of

its own rule”). See also Hawaiʻi Const. art. VI, § 7 (“The

supreme court shall have power to promulgate rules and

regulations in all civil and criminal cases for all courts

relating to process, practice, procedure and appeals, which

shall have the force and effect of law.”). We find no reason to

depart from our established precedent in evaluating an HRCP Rule

12(b)(6) motion to dismiss. Accordingly, we reject the ICA’s

standard in Pavsek and clarify that our well-established notice

pleading standard governs in Hawai‘i.

Having reaffirmed our traditional notice pleading standard,

we now turn to the issue of whether the ICA erred in affirming

the circuit court’s dismissal of three counts of Homeowner’s

counterclaim.

B. Wrongful Foreclosure Claim

In the following analysis, we first address whether the ICA

erred in concluding there must first be a foreclosure before a

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wrongful foreclosure claim can be brought. We then apply the

traditional notice pleading standard to determine whether the

circuit court erred in dismissing Homeowner’s wrongful

foreclosure claim.

Although we have not previously squarely addressed whether

a wrongful foreclosure counterclaim may be brought in a judicial

foreclosure case when no foreclosure or sale of the property has

yet occurred, upon careful review, we hold that such a wrongful

foreclosure claim exists in Hawai‘i. We base our conclusion on

our past consideration of potential circumstances in which a

wrongful foreclosure claim may exist in non-judicial

foreclosures. See Hungate, 139 Hawaiʻi at 407, 391 P.2d at 14

(holding there was no need to create a cause of action against a

foreclosing mortgagee’s attorney under former HRS § 667-5

concerning non-judicial foreclosures as “the mortgagor can

protect its interest through filing a claim against the

mortgagee for wrongful foreclosure”); Santiago, 137 Hawaiʻi at

157-58, 366 P.3d at 632-33 (holding the mortgagee’s non-judicial

foreclosure of the mortgagors’ property after the mortgagors

cured their default was wrongful); Mount v. Apao, 139 Hawaiʻi

167, 180, 384 P.3d 1268, 1281 (2016) (concluding the mortgagee’s

non-judicial foreclosure violated former HRS § 667-5(c)(1) and

was, therefore, wrongful). We see no reason why a different

standard should exist for judicial foreclosures.

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In Reyes-Toledo I, we recognized and discussed the problems

associated with modern mortgage securitization practices. See

Reyes-Toledo I, 139 Hawaiʻi at 369 & n.14, 390 P.3d at 1256 &

n.14. We noted that “[t]he requirement that a foreclosing

plaintiff prove its entitlement to enforce the note at the

commencement of the proceedings ‘provides strong and necessary

incentives to help ensure that a note holder will not proceed

with a foreclosure action before confirming that it has a right

to do so.’” Id. (citations omitted). “Basic requirements of

Hawaii’s Uniform Commercial Code and our law on standing should

not be modified, especially in light of the widespread problems

created by the securitization of mortgages, because a

requirement that seems to be merely technical in nature may

serve an essential purpose.” Id. “[T]he possession

requirement, which applies unless a specific statutory exception

exists, protects the maker of an instrument from multiple

enforcements of the same instrument.” Id. (citing Hanalei, BRC

Inc. v. Porter, 7 Haw. App. 304, 308, 760 P.2d 676, 679 (1988)).

Accordingly, a foreclosing plaintiff 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,” as well as prove entitlement to enforce

the defaulted upon note. Reyes-Toledo I, 139 Hawai‘i at 367–68,

390 P.3d at 1254–55.

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It follows that if a foreclosing plaintiff does not prove

the aforementioned elements and commences a foreclosure action,

the mortgagor should be able to challenge the lawsuit without

having to await a foreclosure decree. Indeed, other

jurisdictions have held that a party may not foreclose without

having the legal power to do so.12 See, e.g., Barrionuevo v.

Chase Bank, N.A., 885 F. Supp. 2d 964, 974 (N.D. Cal. 2012)

(holding the mortgagors stated a claim of wrongful foreclosure

against the bank, trustee under a deed of trust, and others by

alleging the defendants were not current beneficiaries under the

deed of trust); 100 Lakeside Trail Trust v. Bank of America,

N.A., 804 S.E.2d 719, 725 (Ga. App. 2017) (noting that under

Georgia law, “an attempted wrongful foreclosure claim exists

when, in the course of a foreclosure action that was not

completed, a defendant makes a knowing and intentional

publication of untrue and derogatory information concerning the

debtor’s financial condition, and damages were sustained as a

direct result of the publication” (citation and brackets

omitted)); Fields v. Millsap & Singer, P.C., 295 S.W.3d 567, 571

12
Generally, if a foreclosure is conducted negligently or in bad faith to
the detriment of the mortgagor, the mortgagor may assert a claim of wrongful
foreclosure by establishing the following elements: (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. See James Buchwalter et al., 59 C.J.S. Mortgages § 650
(2009). However, an action for damages against the mortgagee “lies . . .
only when the mortgagee had no right to foreclose at the time foreclosure
proceedings were commenced.” Id. (footnote omitted).

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(Mo. Ct. App. 2009) (stating “[a] tort action for damages for

wrongful foreclosure lies against a mortgagee only when the

mortgagee had no right to foreclose at the time foreclosure

proceedings were commenced,” but “[i]f the right to foreclose

existed, no tort cause of action for wrongful foreclosure can be

maintained” (citation omitted)); Gregorakos v. Wells Fargo Nat’l

Ass’n, 647 S.E.2d 289, 292 (Ga. App. 2007) (stating that in

Georgia, “a plaintiff asserting a claim of wrongful foreclosure

must establish a legal duty owed to it by the foreclosing party,

a breach of that duty, a causal connection between the breach of

that duty and the injury it sustained, and damages” (citation

and brackets omitted)); McKnight Family, L.L.P. v. Adept Mgmt.,

310 P.3d 555, 559 (Nev. 2013) (stating a wrongful foreclosure

claim challenges the authority behind the foreclosure, not the

foreclosure act itself). Thus, we hold that a mortgagor may

bring a wrongful foreclosure claim before a foreclosure decree

is entered.

Therefore, to assert a wrongful foreclosure claim, the

foreclosing plaintiff must have failed to establish its standing

as required by Reyes-Toledo I and the mortgagor must have

suffered an “injury in fact” and damages as a result. As

explained above, a mortgagor need not wait for a foreclosure

decree to assert a wrongful foreclosure claim. If a party with

no authority or standing files a foreclosure action, no

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foreclosure decree would result, yet the mortgagor would have

spent time and incurred expenses to defend against such a

lawsuit. Allowing a mortgagor to bring a wrongful foreclosure

counterclaim without awaiting an actual foreclosure benefits

judicial economy and efficiency, as a foreclosure defendant

should not have to institute a separate legal action after the

pending foreclosure case is decided. Accordingly, a mortgagor

should be able to assert a counterclaim for wrongful foreclosure

based on the underlying facts of the pending foreclosure case.

However, we emphasize this does not mean a mortgagor must assert

the wrongful foreclosure claim as a compulsory counterclaim.

Here, it remains an issue of fact whether Bank of America

attempted to foreclose on Homeowner’s Property without standing

to do so. See Reyes-Toledo I, 139 Hawai‘i at 371, 390 P.3d at

1258 (“A foreclosing plaintiff’s burden to prove entitlement to

enforce the note overlaps with the requirements of standing in

foreclosure actions as ‘[s]tanding is concerned with whether the

parties have the right to bring suit.’” (citation omitted)). As

a result of defending against Bank of America’s lawsuit,

Homeowner alleged she incurred costs and expenses. Thus, the

ICA erred when it concluded Homeowner did not yet have a claim

for wrongful foreclosure against Bank of America.

We next address whether Homeowner’s wrongful foreclosure

count was properly dismissed by the circuit court, which the ICA

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affirmed applying the incorrect “plausibility” pleading

standard. By incorporating the defenses in her Answer into her

wrongful foreclosure count, Homeowner asserted Bank of America

was not the real party-in-interest, owner, holder, or holder in

due course of the Note and Mortgage. She also asserted there

was “no valid negotiation for value of [her] promissory note to

[Bank of America].” She argued that, therefore, “[Bank of

America]’s conduct in commencing this case was willful,

malicious, without just cause,” and she was entitled to

“general, special, and punitive damages in an amount to vest

this Court with jurisdiction.”

Taking Homeowner’s allegations as true, as we must in

evaluating a Rule 12(b)(6) motion to dismiss, the wrongful

foreclosure count within her counterclaim satisfies HRCP Rule

8(a) and our traditional notice pleading standard. There is an

issue of fact regarding whether Bank of America had standing

prior to commencing the lawsuit, and Homeowner has provided

notice through her allegations that, if not, Homeowner has been

injured, establishing a claim for damages. Thus, Homeowner’s

wrongful foreclosure count should not have been dismissed.

C. Declaratory Judgment Claim

Homeowner’s declaratory judgment count, which incorporated

by reference the allegations set forth in her wrongful

foreclosure count, asserted she was entitled to declaratory

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relief under HRS § 632-1. On remand, it appears the ICA based

its analysis on the Pavsek standard, and seemed to assume as

true the assertions with respect to the parties and assignment

documents contained in Bank of America’s Complaint, as opposed

to the Counterclaim filed by Homeowner. Additionally, the ICA

focused solely on issues regarding MERS raised in Bain, and

disregarded Homeowner’s remaining assertions in her declaratory

judgment count of her counterclaim.

As Homeowner argues, the declaratory judgment count also

asserted: (1) Bank of America was not the owner and holder of

the Mortgage and Note; (2) Bank of America was not entitled to

foreclose on the Mortgage and Note; (3) MERS was not the

mortgagee on the Mortgage but rather was a “sham and fraud” and

MERS “acted only as a strawman”; (4) the court should decide who

is the mortgagee on the Mortgage and the Note; and (5) Homeowner

can recover costs and attorney’s fees pursuant to HRS § 607-14.

Applying HRCP Rule 8(a)’s notice pleading standard, Homeowner’s

declaratory judgment count provided sufficient notice of her

claim and should not have been dismissed pursuant to HRCP Rule

12(b)(6). Taking the allegations asserted by Homeowner as true,

it does not appear beyond doubt that Homeowner could not prove a

set of facts entitling her to relief. Thus, the ICA erred in

affirming the circuit court’s dismissal of the declaratory

judgment count within Homeowner’s counterclaim.

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D. Quiet Title Claim

Homeowner also incorporated by reference the allegations in

her wrongful foreclosure count into her quiet title count.

Stating she was the owner of the Property, she sought to quiet

title to the Property against Bank of America’s adverse claim,

asserting Bank of America was not the mortgagee. Accepting

Homeowner’s allegations as true, she has satisfied HRCP Rule

8(a)’s pleading requirements by asserting that she has a

substantial interest in the Property, and that her interest in

the Property is greater than Bank of America’s. See Kaʻupulehu

Land LLC v. Heirs & Assigns of Pahukula, 136 Hawaiʻi 123, 137,

358 P.3d 692, 706 (2015) (“While it is not necessary for the

plaintiff to have perfect title to establish a prima facie case,

he must at least prove that he has a substantial interest in the

property and that his title is superior to that of the

defendants.” (quoting Maui Land & Pineapple Co., 76 Hawaiʻi at

408, 879 P.2d at 513)). If Bank of America is indeed not the

mortgagee, Homeowner’s quiet title count states a claim upon

which relief can be granted. Thus, we conclude the ICA erred in

affirming the circuit court’s dismissal of the quiet title count

within her counterclaim.

V. Conclusion

For the foregoing reasons, the ICA erred in affirming the

circuit court’s dismissal of the remaining three counts of

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Homeowner’s counterclaim because the assertions satisfied our

traditional notice pleading standard. Accordingly, we vacate

the ICA’s Judgment on Remand. We also vacate the circuit

court’s Order Dismissing Counterclaim and Order Denying Motion

for Reconsideration to the extent it denied reconsideration of

the Order Dismissing Counterclaim,13 and we remand to the circuit

court for further proceedings consistent with this opinion.

R. Steven Geshell /s/ Paula A. Nakayama
for petitioner
/s/ Sabrina S. McKenna
Jade Lynne Ching,
Nakashima Ching LLC /s/ Richard W. Pollack
for respondent
/s/ Michael D. Wilson

/s/ Colette Y. Garibaldi

13
In light of Reyes-Toledo I setting aside the grant of summary judgment
of foreclosure in favor of Bank of America, our holding to reinstate the
remaining three counts of Homeowner’s counterclaim, and the ICA’s decision to
reinstate the UDAP count, which was not challenged by Bank of America, we
need not address the remaining issue in Homeowner’s Application regarding the
circuit court’s refusal “to allow [Homeowner] to use her home as the
supersedeas bond.”

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