NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
24-MAR-2022
07:47 AM
Dkt. 74 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK,
AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF THE CWALT,
INC., ALTERNATIVE LOAN TRUST 2006-5T2 MORTGAGE PASSTHROUGH
CERTIFICATES 2006-5T2, Plaintiff-Appellee, v.
NATHAN EARL AIWOHI; LEAH LEIKO AIWOHI, Defendants-Appellants,
and GATHER FEDERAL CREDIT UNION; AOAO OF ARRUDA ESTATES I;
JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50;
DOE CORPORATIONS 1-50; DOE ENTITIES 1-50; AND
DOE GOVERNMENTAL UNITS 1-50, Defendants
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH CIRCUIT
(CIVIL NO. 13-1-0082)
SUMMARY DISPOSITION ORDER
(By: Leonard, Presiding Judge, Nakasone and McCullen, JJ.)
Defendants-Appellants Nathan Earl Aiwohi and Leah Leiko
Aiwohi (the Aiwohis) appeal from the Judgment entered on
September 20, 2018 (Foreclosure Judgment), by the Circuit Court
of the Fifth Circuit (Circuit Court),1 in favor of Plaintiff-
Appellee The Bank of New York Mellon fka the Bank of New York, as
Trustee for the Certificateholders of the CWALT, Inc.,
Alternative Loan Trust 2006-5T2 Mortgage Pass-Through
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The Honorable Kathleen N.A. Watanabe presided.
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Certificates, Series 2006-5T2 (Bank of New York). The Aiwohis
also challenge the Circuit Court's September 20, 2018 Findings of
Fact, Conclusions of Law and Order Granting Plaintiff's Motion
for Summary Judgment Against All Defendants and for Interlocutory
Decree of Foreclosure (Foreclosure Decree).
The Aiwohis raise a single point of error on appeal,
contending that the Circuit Court erred in granting Plaintiff's
Motion for Summary Judgment Against All Defendants and for
Interlocutory Decree of Foreclosure filed on June 25, 2018
(Motion for Summary Judgment), because the court erroneously
relied upon the hearsay testimony of Bank of New York's declaring
witnesses, which it admitted under the business records exception
to the hearsay rule, even though Bank of New York produced no
business records to corroborate its witnesses' self-serving
hearsay testimony that Bank of New York was in possession of the
original note evidencing the Aiwohis' debt (the Note) at the time
the Complaint was filed, and even though no evidence was produced
demonstrating that the Note had been indorsed prior to that date.
Upon careful review of the record and the briefs
submitted by the parties, and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve the Aiwohis' point of error as follows:
The Aiwohis argue that Keli Smith's (Smith's)
declaration testimony, based upon her alleged review of business
records, did not establish the requisite element of personal
knowledge with respect to the business records at issue. Smith's
declaration provided, inter alia, that she was a document
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coordinator employed by Bank of New York's loan servicer, Bayview
Loan Servicing, LLC (Bayview).
Bank of New York attached a copy, not an original, of
the Note to its Motion for Summary Judgment. Therefore, the
duplicate Note must be authenticated with extrinsic evidence.
See Hawaii Rules of Evidence (HRE) Rule 901(b)(1); U.S. Bank
Trust, N.A. v. Verhagen, 149 Hawai#i 315, 323-25, 489 P.3d 419,
427-29 (2021). To authenticate a copy of a promissory note,
"[t]estimony of a witness with personal knowledge of a document
may establish the foundation necessary for its admission."
Verhagen, 149 Hawai#i at 325, 489 P.3d at 429. Smith declared
under penalty of perjury, inter alia, that she reviewed the
"records and files in Bayview's possession regarding this
matter," and that a "true and correct copy of the Note . . .
known to [her] to be a true and accurate copy of said promissory
note" was attached to her Declaration. Smith's Declaration was
sufficient to satisfy HRE Rule 901(b)(1).
We note that Smith did not need to have personal
knowledge of the record-keeping systems of the loan servicers
prior to Bayview. Verhagen, 149 Hawai#i at 325, 489 P.3d at 429.
The Hawai#i Supreme Court in Verhagen, restating the holding in
Wells Fargo Bank, N.A. v. Behrendt, 142 Hawai#i 37, 414 P.3d 89
(2018), provided that "a person may be qualified to authenticate
an incorporated record even if the person lacks familiarity with
the records or record-keeping practices of the entity that
actually created the record." Verhagen, 149 Hawai#i at 325, 489
P.3d at 429. The supreme court further stated:
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Incorporated records are admissible under HRE Rule 803(b)(6)
when a custodian or qualified witness testifies that [1] the
documents were incorporated and kept in the normal course of
business, [2] that the incorporating business typically
relies upon the accuracy of the contents of the documents,
and [3] the circumstances otherwise indicate the
trustworthiness of the document.
Id. at 325-26, 489 P.3d at 429-30. Therefore, "[i]f each of
these three conditions is satisfied, an incorporated record is
admissible even in the absence of testimony concerning its actual
creation." Id. at 326, 489 P.3d at 430.
Smith's declaration provided that she had personal
knowledge of Bayview's procedures for creating business records.
Smith further testified that "Bayview took custody and control of
loan documents and business records of the Prior Servicers and
incorporated all such records into the business records of
Bayview." Smith also testified that Bayview kept the records and
files "in the ordinary course of business." Smith declared that
"Bayview relies upon the accuracy of the Prior Servicers' records
and those records are now a part of and used for all purposes in
the conduct of Bayview's regularly conducted activity of keeping
and maintaining its own business records." Thus, the first two
Verhagen conditions establishing admissibility of incorporated
records, including the Note, are met.
The last condition, providing testimony that
establishes that the circumstances otherwise indicate
trustworthiness of the document, is also met. Here, similar to
the declaration testimony in Verhagen, Smith's declaration
provided that before Bayview incorporated the prior loan
servicers' records, Bayview "conducted a review of the Prior
Servicers' records and found them in keeping with industry wide
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loan servicing standards and found the Prior Servicers' records
were made as a part of a regularly conducted activity, met
industry standards and determined to be trustworthy." Smith's
declaration also provided that "Bayview did review and determine
the Prior Servicers' business records were trustworthy otherwise
it would not have incorporated it into its own records." The
record sufficiently establishes that the prior servicers' loans
were vetted by Bayview prior to incorporating the records and
files. See Verhagen, 149 Hawai#i at 326, 489 P.3d at 430.
Therefore, we conclude that Bayview's incorporated records,
including the Note, as authenticated by Smith's declaration, were
admissible under HRE Rule 803(b)(6).
It is now well-established that "a foreclosing
plaintiff must establish its standing to bring a lawsuit at the
commencement of the proceeding, not merely at the summary
judgment stage." Verhagen, 149 Hawai#i at 327, 489 P.3d at 431
(citing Bank of Am., N.A. v. Reyes-Toledo, 139 Hawai#i 361, 369,
390 P.3d 1248, 1256 (2017)). The Aiwohis argue that Bank of New
York "offered no admissible evidence, either in its motion, or
ever, that it possessed the note at the time it filed its
complaint."
Bank of New York's attachments to its Motion for
Summary Judgment included a blank-indorsed Note. That Note does
not reflect the date of the blank indorsement. Smith's
declaration does not indicate when the indorsement occurred.
Smith's declaration provides that "Prior Servicers' records
indicate that [Bank of New York] had possession of the original
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Note on 03/12/2013, the date of the filing of the complaint in
this foreclosure." Here, Smiths' Declaration further provides,
in part:
11. Bayview became [Bank of New York]'s loan
servicer for the Loan being foreclosed in this action
on 09/01/2017.
. . . .
26. Prior Servicers' records indicate that
Plaintiff had possession of the original Note on
03/12/2013, the date of the filing of the complaint in
this foreclosure.
However, Smith's declaration does not provide
sufficient evidence that Bank of New York possessed the Note on
or before March 12, 2013, and Bank of New York fails to provide
any additional evidence establishing that it, or its agent, had
possession of the original Note at the time of filing the
Complaint. In Verhagen, the supreme court explained that a
witness's sworn testimony, based on knowledge of a loan
servicer's records and record-keeping practices, provided as
evidence that the foreclosing bank had possession of the Note at
the time it filed the complaint "standing alone and
uncorroborated by documentary evidence, would be insufficient to
establish [that the foreclosing bank] possessed the Note when it
filed the complaint." 149 Hawai#i at 327, 489 P.3d at 431. In
Verhagen, there was additional evidence that a witness
"personally verified" possession of the subject note prior to the
date the complaint was filed and a letter from a bailee
established that the loan servicer sent the note to the
foreclosing bank prior to the date the complaint was filed. Id.
Here, standing alone, Smith's declaration that the records
"indicate" that Bank of New York had possession of the original
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Note as of the date Bank of New York filed its Complaint is
insufficient to establish standing. In addition, there is no
evidence regarding the date when the blank indorsement occurred
or whether it was present on the Note on the date the Complaint
was filed herein. We conclude that Bank of New York did not
provide sufficient evidence that it had possession of the
original blank-indorsed Note at the time it filed its Complaint.
For these reasons, the Circuit Court's September 20,
2018 Judgment is vacated, and this case is remanded to the
Circuit Court for further proceedings.
DATED: Honolulu, Hawai#i, March 24, 2022.
On the briefs:
/s/ Katherine G. Leonard
Frederick J. Arensmeyer, Presiding Judge
for Defendants-Appellants.
/s/ Karen T. Nakasone
Charles R. Prather, Associate Judge
Robin Miller,
Sun Young Park, /s/ Sonja M.P. McCullen
Peter T. Stone, Associate Judge
(TMLF Hawaii LLC),
for Plaintiff-Appellee.
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