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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
21-JUN-2021
09:25 AM
Dkt. 58 MO
SCWC-XX-XXXXXXX
IN THE SUPREME COURT OF THE STATE OF HAWAI‘I
U.S. BANK NATIONAL ASSOCIATION
AS TRUSTEE FOR CSMC MORTGAGE LOAN TRUST 2006-7,
Petitioner/Plaintiff-Appellee,
vs.
WATOSHINA LYNN COMPTON,
Respondent/Defendant-Appellant,
and
GABI A. BENGIS; RON SERLE;
DEPARTMENT OF TAXATION – STATE OF HAWAI‘I,
Respondents/Defendants-Appellees.
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 17-1-0025(3))
MEMORANDUM OPINION
(By: Recktenwald, C.J., Nakayama, McKenna, Wilson, and Eddins, JJ.)
This appeal arises from U.S. Bank National Association as
Trustee for CSMC Mortgage Loan Trust 2006-7’s (“U.S. Bank”)
motion for summary judgment and interlocutory decree of
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foreclosure (“MSJ”) against Watoshina Lynn Compton (“Compton”).
U.S. Bank initiated foreclosure proceedings against Compton
in January 2017. In February 2018, U.S. Bank moved for summary
judgment. U.S. Bank supported its MSJ with loan documents,
including a promissory note (the “Note”) executed by Compton in
favor of Countrywide Home Loans, Inc. (“Countrywide”). Two
declarations also supported U.S. Bank’s MSJ. Carol Davis, an
employee of Nationstar Mortgage LLC, U.S. Bank’s loan servicer,
prepared one; Gina Santellan, a custodian of records for U.S.
Bank’s counsel, wrote the other.
The circuit court granted U.S. Bank’s motion. It entered
judgment for U.S. Bank. Compton appealed. On appeal, Compton
argued that because U.S. Bank had not established its possession
of the Note at the time it filed its complaint, the circuit
court had erred in concluding U.S. Bank had standing to sue.
The ICA agreed. It ruled that because neither Davis nor
Santellan could speak to the record-keeping practices of the
Note’s creator, Countrywide, the Note could not be admitted
under the business records exception to the hearsay rule. Given
the inadmissibility of the Note, the ICA concluded, U.S. Bank
was not entitled to summary judgment: there was a “genuine issue
of material fact as to whether U.S. Bank had standing to
initiate this foreclosure action when it was commenced.”
On certiorari, U.S. Bank presents two questions: (1) “To
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introduce a promissory note into evidence, must a creditor
satisfy the business records exception to the hearsay rule?” and
(2) “If a party incorporates a third party’s records into its
own, must it present testimony about the third party’s record-
keeping in order to satisfy the business records exception?”
We answered these questions in U.S. Bank v. Verhagen, SCWC-
XX-XXXXXXX (Haw. June 21, 2021).
As we explained in Verhagen, promissory notes are not
hearsay because they have independent legal significance. Here,
U.S. Bank presented the Note to establish Compton’s legal
obligation to the Note’s holder. The Note was therefore not
hearsay and need not fall within an exception to the hearsay
rule to be admissible.
Our opinion in Verhagen also explained that under the
incorporated records doctrine, the foundation for the admission
of business records incorporated into the records of a receiving
business can, in certain cases, be established by testimony from
a custodian or other witness qualified to testify about the
record-keeping practices of the incorporating business. The ICA
thus erred in ruling that the Note was inadmissible absent
testimony about its creator’s record-keeping systems.
Here, U.S. Bank has submitted admissible evidence that
collectively shows it possessed the original Note, indorsed in
blank, at the time it sued Compton. Compton has not set forth
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any “specific facts showing that there is a genuine issue” as to
whether U.S. Bank actually possessed the Note at the time it
filed suit. See Hawaiʻi Rules of Civil Procedure Rule 56(e). By
showing it possessed and was entitled to enforce the Note when
it filed its complaint, U.S. Bank has established its standing
to foreclose against Compton. See Bank of Am., N.A. v. Reyes-
Toledo, 139 Hawai‘i 361, 390 P.3d 1248 (2017) (holding that to
establish standing a foreclosing plaintiff must show it was
entitled to enforce the subject note when the lawsuit began).
The circuit court correctly determined that U.S. Bank provided
Compton the necessary notice of default. The Note is valid and
Compton is in default under its terms. U.S. Bank is thus
entitled to summary judgment.
Accordingly, we hold the ICA erred in reversing the circuit
court’s grant of summary judgment to U.S. Bank. We vacate the
ICA’s memorandum opinion and judgment on appeal and affirm the
circuit court’s findings of fact, conclusions of law and order
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granting plaintiff’s motion for summary judgment against all
defendants and for interlocutory decree of foreclosure.
DATED: Honolulu, Hawaii, June 21, 2021.
Jade Lynne Ching, /s/ Mark E. Recktenwald
(David A. Nakashima, Ryan B.
Kasten, Alan M. Hurst, and /s/ Paula A. Nakayama
Justin D. Balser on the briefs)
/s/ Sabrina S. McKenna
for petitioner
/s/ Michael D. Wilson
Matthew K. Yoshida,
(Keith M. Kiuchi on the briefs) /s/ Todd W. Eddins
for respondent
Patricia J. McHenry,
for Amicus Curiae
Federal Housing Finance Agency
Crystal K. Rose and
Adrian L. Lavarias
for Amicus Curiae
Mortgage Bankers Association and
Mortgage Bankers Association of
Hawaii
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