U.S. Bank National Association as Trustee for CSMC Mortgage Loan Trust 2006-7 v. Compton

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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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