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

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Electronically Filed
Supreme Court
SCWC-15-0000005
28-FEB-2017
08:06 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---o0o---

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-15-0000005

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-15-0000005; CIVIL NO. 12-1-0668)

FEBRUARY 28, 2017

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 POLLACK, J.

This case raises issues of standing and appellate

jurisdiction that pertain to foreclosure proceedings. We
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consider whether a foreclosing plaintiff seeking summary

judgment must prove it had standing to foreclose on the

homeowner’s property at the commencement of the lawsuit to be

entitled to foreclosure of the subject property. We also

determine the extent of appellate jurisdiction over

interlocutory orders leading up to a foreclosure decree.

I. BACKGROUND

The subject of the foreclosure proceedings is the home

of Grisel Reyes-Toledo (“Homeowner”). On September 24, 2007,

Homeowner executed a promissory note made payable to Countrywide

Bank, FSB (the “Note”). The Note was secured by a mortgage on

the property encumbering the property to mortgagee, Mortgage

Electronic Registration Systems, Inc., as nominee for the

lender, Countrywide Bank, FSB (the “Mortgage”). The Mortgage

was recorded on September 28, 2007, in the Office of the

Assistant Registrar of the Land Court of the State of Hawaiʻi.

In early 2011, Homeowner received a notice of intent

to accelerate from BAC Home Loans Servicing, LP, a Bank of

America company, dated January 7, 2011. The acceleration notice

stated that BAC Home Loans Servicing, LP, services the loan on

her property “on behalf of the holder of the promissory note”

and that her loan was in serious default because required

payments had not been made.

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An assignment of the Mortgage from Mortgage Electronic

Registration Systems, Inc., “solely as nominee for Countrywide

Bank, FSB,” to Bank of America, N.A., a National Association, as

successor by merger to BAC Home Loans Servicing, LP, was

recorded in the Office of the Assistant Registrar of the Land

Court of the State of Hawaiʻi on October 19, 2011 (the

“Assignment”). The Assignment was dated October 12, 2011.

On March 12, 2012, Bank of America, N.A., Successor by

Merger to BAC Home Loans Servicing, LP FKA Countrywide Home

Loans Servicing LP (“Bank of America”), filed a complaint in the

Circuit Court of the First Circuit (the “circuit court”) seeking

to foreclose on Homeowner’s property. The complaint asserted

that Bank of America was in possession of the Mortgage and Note

and entitled to foreclosure of the Mortgage and sale of

Homeowner’s property.

Homeowner subsequently filed an answer and

counterclaims on September 28, 2012, denying all allegations in

the complaint except those relating to her personal background

and the execution of the Note and Mortgage. Homeowner asserted

numerous defenses, including that Bank of America was not the

holder of the Note and Mortgage and therefore not entitled to

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foreclosure.1 Homeowner attacked the validity of the Assignment2

and any negotiation of the Note.3 Homeowner also asserted

additional defenses that would apply if the Note and Mortgage

were transferred into a trust and securitized.4 Homeowner

asserted four counterclaims: wrongful foreclosure, declaratory

relief, quiet title, and unfair and deceptive trade practice.

Bank of America subsequently filed a motion to dismiss

Homeowner’s counterclaims, which was granted by the court in a

February 12, 2013 order (“Order Granting Motion to Dismiss

Counterclaims”). Homeowner filed a motion for reconsideration

or certification for appeal, which the circuit court denied in a

December 31, 2013 order (“Order Denying Motion for

Reconsideration and Certification”).

1
By extension, Homeowner raised fraud and illegality defenses
based on her understanding that Bank of America was not entitled to enforce
the Note and Mortgage. Homeowner also claimed the following: the complaint
failed to state a claim upon which relief could be granted; assumption of
risk and contributory negligence; Bank of America was not the real party-in-
interest; and Mortgage Electronic Services, Inc., could not be a lawful
beneficiary of a mortgage if it lacked possession of the Note.
2
Homeowner maintained that there was “no valid interim assignment”
of the Mortgage to Bank of America and that Mortgage Electronic Systems,
Inc., “was nothing more than a strawman and a conduit for fraud.”
3
Homeowner contended that there was no valid negotiation for value
of the Note and that Bank of America was not a holder in due course.
4
Homeowner asserted violations of the terms of the trust, the
Internal Revenue Code, New York trust law, and the Pooling and Service
Agreement. Homeowner also asserted that the “purported assignment may have
been performed by robo-signers” and was therefore fraudulent and void; that
the “promissory note and mortgage may never have been deposited or
transferred into the trust”; and that “the signatures may have been by
unauthorized persons and, therefore, are void as forgeries.”

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Bank of America moved for summary judgment and an

interlocutory decree of foreclosure, asserting that it was

entitled to judgment as a matter of law. Bank of America

maintained that, in order to obtain summary judgment, it was

required to prove the existence of an agreement, the terms of

the agreement, default, and the giving of the requisite notice.

Bank of America contended that no genuine issue as to any

material fact existed because the declarations and exhibits

attached to its motion demonstrated the existence of the

Mortgage and Note, the terms of the Mortgage and Note,

Homeowner’s default, and the giving of the requisite notice to

Homeowner.

The attachments to Bank of America’s motion for

summary judgment included a “Declaration of Indebtedness” by

Katherine M. Egan, an officer of Bank of America (“Egan

Declaration”). The Egan Declaration was dated January 27, 2014,

and it stated that Bank of America “has possession” of the Note

and that the Note “has been duly endorsed to blank.” Also

attached was a copy of the Note that was signed by Homeowner,

which identified Countrywide Bank, FSB, as the lender. The Note

included two stamps with undated signatures that read as

follows:

PAY TO THE ORDER OF

WITHOUT RECOURSE
COUNTRYWIDE HOME LOANS, INC.

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BY: [signature Michele Sjolander]
MICHELE SJOLANDER
EXECUTIVE VICE PRESIDENT

******

PAY TO THE ORDER OF
COUNTRYWIDE HOME LOANS, INC
WITHOUT RECOURSE
COUNTRYWIDE BANK, FSB
BY: [signature Laurie Meder]
LAURIE MEDER
Senior Vice President

The attachments to the motion also included a copy of the

Mortgage, a copy of the Assignment, a copy of the January 7,

2011 notice of intent to accelerate, and payment records for

Homeowner’s loan account.

In opposition to Bank of America’s motion for summary

judgment, Homeowner asserted that material questions of fact

remained as to the validity of the Assignment and whether Bank

of America was the lawful holder of the Note. Homeowner argued

that she did “not have to prove who owns the note and mortgage”

and that it was Bank of America’s burden “to prove by a

preponderance of the evidence that it owns the note and

mortgage.” Homeowner contended that the evidence produced by

Bank of America was insufficient as there was no evidence of the

date of the transfer of the Note. Homeowner also asserted that

the motion for summary judgment should be denied because

discovery was ongoing, or alternatively, that the circuit court

should continue the hearing pending the completion of discovery.

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The circuit court granted Bank of America’s motion for

summary judgment, entering its December 9, 2014 “Findings of

Fact, Conclusions of Law, Order Granting Plaintiffs Motion for

Summary Judgment Against All Parties and for Interlocutory

Decree of Foreclosure Filed April 4, 2014” (“Foreclosure

Decree”). The court found that Bank of America was the “current

holder” of the Note and Mortgage.5 The court concluded that Bank

of America was entitled to foreclosure of the Mortgage and sale

of the property. The Foreclosure Decree also provided that it

was “entered as a final judgment pursuant to Rule 54(b) of the

Hawaiʻi Rules of Civil Procedure (HRCP) as there was no just

reason for delay.” The court also entered a separate judgment

on December 9, 2014, directing that the Foreclosure Decree was

entered “as a final judgment in favor of Plaintiff and against

all Defendants as there [was] no just reason for delay pursuant

to [HRCP] Rule 54(b)” (the “Judgment”).

Homeowner timely filed a notice of appeal from the

Judgment.6 On appeal to the Intermediate Court of Appeals (ICA),

5
The court found, “Plaintiff is the current holder of the Note and
Mortgage by an Assignment of Mortgage (‘Assignment’) recorded on October 19,
2011 in the Office of the Assistant Registrar of the Land Court of the State
of Hawaii as Document No. 4105159 and noted on Transfer Certificate of Title
No. 878,760.”
6
Prior to filing her notice of appeal, Homeowner moved for a stay
of the Foreclosure Decree and cancellation of the sale of the property. In
her supporting memorandum, Homeowner requested that the circuit court “stay
the summary judgment order and the judgment, cancel any proposed sale, and

(continued . . .)

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Homeowner asserted that the circuit court erred in holding that

Bank of America had standing to bring the foreclosure action, in

granting summary judgment to Bank of America, in dismissing her

counterclaims, and in denying her motion for reconsideration of

the dismissal of her counterclaims.

In a summary disposition order, the ICA affirmed the

circuit court’s Judgment. The ICA’s decision first addressed

Homeowner’s assertion that Bank of America lacked standing to

foreclose. With regard to Bank of America’s standing to enforce

the Note, the ICA concluded that Bank of America produced

sufficient evidence to establish its authority to enforce the

Note.7 The ICA reasoned that Bank of America “provided evidence

that it was in possession of the Note, the blank endorsement

permit [Homeowner’s] house to act as collateral for the supersedeas bond.”
It does not appear from the record that the circuit court resolved
Homeowner’s motion for a stay prior to the filing of the notice of appeal.

Homeowner also moved for a stay in the ICA requesting that the
ICA stay the Foreclosure Decree, cancel the sale of the property, and allow
the property to act as a supersedeas bond. The ICA granted the motion in
part on the condition that, within twenty days, Homeowner submit to the
circuit court for approval a supersedeas bond issued by a licensed surety in
the amount of $300,000.
7
The ICA also concluded that Homeowner’s arguments with respect to
the validity of the Assignment were without merit. With respect to
Homeowner’s assertion that any transfers of the Note and Mortgage were void
and in violation of the rules of the trust, the ICA noted that Homeowner
failed “to cite to the record or any evidence to support her assertion that
the Note and Mortgage were in a trust that dissolved, or that the transfers
were based on forged documents,” and the ICA concluded that Homeowner thus
“failed to demonstrate that the assignment of the Note and Mortgage was
void.” Finally, the ICA determined that Homeowner failed to establish that
she was entitled to a continuance to complete discovery pursuant to HRCP Rule
56(f).

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established that [Bank of America] was the ‘holder’ of the Note,

and the Egan Declaration stated that the Note was a true and

correct copy of the Note in [Bank of America’s] possession.”

The ICA also considered whether it had appellate

jurisdiction over Homeowner’s challenge to the Order Granting

Motion to Dismiss Counterclaims and Order Denying Motion for

Reconsideration and Certification. The ICA concluded that it

did not have jurisdiction over these orders as they were not

final appealable orders and had not been reduced to a final

appealable judgment. The ICA reasoned that it had jurisdiction

over the appeal of the Judgment on the Foreclosure Decree as a

final and appealable order under Hawaii Revised Statutes (HRS) §

667-51(a)(1) but that HRS § 667-51 did not provide appellate

jurisdiction over the orders regarding the counterclaims. Thus,

the ICA affirmed the circuit court Judgment.

Homeowner filed an application for writ of certiorari

with this court, which was granted.

II. DISCUSSION

There are two primary issues presented in Homeowner’s

application to this court.8 The first issue is whether the ICA

8
Homeowner presents four questions on certiorari to this court:
(1) whether the ICA erred in affirming the circuit court’s grant of summary
judgment to Bank of America; (2) whether the ICA erred in affirming the
dismissal of her counterclaims; (3) whether the ICA erred in affirming the
circuit court’s denial of her motion for reconsideration of the dismissal of

(continued . . .)

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erred in affirming the circuit court’s grant of summary judgment

in favor of Bank of America. The second issue is whether the

appellate courts have jurisdiction to review the circuit court’s

Order Granting Motion to Dismiss Counterclaims and related Order

Denying the Motion for Reconsideration and Certification under

HRCP Rule 54(b), which were issued prior to the Judgment.

A. Summary Judgment

Homeowner argues that the ICA erred in affirming the

circuit court’s grant of summary judgment in favor of Bank of

America “where the evidence proved” that Bank of America did not

own or hold the Mortgage and Note by valid assignment.9

Homeowner asserts that she “does not have to prove who owns the

note and mortgage” and that Bank of America “had to prove by a

preponderance of the evidence that it owns the note and

her counterclaims and HRCP Rule 54(b) request for certification; and (4)
whether the ICA erred in affirming the denial of her request “to use her home
as the supersedeas bond.”
9
“We review the circuit court’s grant or denial of summary
judgment de novo.” Querubin v. Thronas, 107 Hawaiʻi 48, 56, 109 P.3d 689, 697
(2005). The court views all the evidence and inferences in the light most
favorable to the party opposing the motion. Durette v. Aloha Plastic
Recycling, Inc., 105 Hawaiʻi 490, 501, 100 P.3d 60, 71 (2004). The moving
party bears the burden of demonstrating that there is no genuine issue as to
any material fact with respect to the essential elements of the claim or
defense and must prove that the moving party is entitled to judgment as a
matter of law. French v. Haw. Pizza Hut, Inc., 105 Hawaiʻi 462, 470, 99 P.3d
1046, 1054 (2004). “A fact is material if proof of that fact would have the
effect of establishing or refuting one of the essential elements of a cause
of action or defense asserted by the parties.” Durette, 105 Hawaiʻi at 501,
100 P.3d at 71 (quoting Haw. Cmy. Fed. Credit Union v. Keka, 94 Hawaiʻi 213,
221, 11 P.3d 1, 9 (2000)).

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mortgage.” In both her application for writ of certiorari and

her opening brief to the ICA, Homeowner argued that there was no

evidence regarding the date of the transfer of the Note. The

ICA determined that Bank of America sufficiently evidenced its

authority to enforce the Note because the blank endorsement of

the Note established that Bank of America was the holder.

In order to prove entitlement to foreclose, the

foreclosing party must demonstrate that all conditions precedent

to foreclosure under the note and mortgage are satisfied and

that all steps required by statute have been strictly complied

with. See 55 Am. Jur. 2d Mortgages § 575 (Nov. 2016 Update).

This typically requires the plaintiff to 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. See Bank of Honolulu, N.A. v. Anderson, 3

Haw. App. 545, 551, 654 P.2d 1370, 1375 (1982) (citing 55 Am.

Jur. 2d Mortgages § 554 (1971)). A foreclosing plaintiff must

also prove its entitlement to enforce the note and mortgage.

HRS § 490:3-301 (providing who is entitled to enforce an

instrument); see id. § 490:3-308 (concerning proof of signatures

and status as a holder in due course); id. cmt. 2 (noting that

“[i]f a plaintiff producing the instrument proves entitlement to

enforce the instrument, either as a holder or a person with

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rights of a holder, the plaintiff is entitled to recovery unless

the defendant proves a defense or claim in recoupment”).10

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.” Mottl v. Miyahira,

95 Hawaiʻi 381, 388, 23 P.3d 716, 723 (2001). Typically, a

plaintiff does not have standing to invoke the jurisdiction of

the court unless the plaintiff has suffered an injury in fact.

Id. at 391, 23 P.3d at 726.11 A mortgage is a conveyance of an

interest in real property that is given as security for the

payment of the note. HRS § 490:9-102 (defining “mortgage”). A

foreclosure action is a legal proceeding to gain title or force

a sale of the property for satisfaction of a note that is in

default and secured by a lien on the subject property. HRS §

667-1.5 (providing for foreclosure by action); id. § 490:9-

601(a) (providing that after default, a secured party “[m]ay

10
See also Bank of Am., N.A. v. Hermano, 138 Hawaiʻi 140, 377 P.3d
1058 (App. 2016) (SDO) (interpreting HRS § 490:3-301 to require that
plaintiff establish that it is the holder of, or otherwise entitled to
enforce, the promissory note and mortgage in order to be entitled to summary
judgment in a foreclosure action).
11
The standing inquiry involves consideration of whether the
plaintiff suffered an actual or threatened injury as a result of the
defendant’s conduct; whether the injury is traceable to the challenged
action; and whether the injury is likely to be remedied by a favorable
judicial decision. Mottl, 95 Hawaiʻi at 391, 23 P.3d at 726.

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reduce a claim to judgment, foreclose, or otherwise enforce the

claim, security interest, or agricultural lien by any available

judicial procedure”). See generally 55 Am. Jur. 2d Mortgages §

573 (Nov. 2016 Update) (discussing the nature and purpose of a

foreclosure suit). Thus, the underlying “injury in fact” to a

foreclosing plaintiff is the mortgagee’s failure to satisfy its

obligation to pay the debt obligation to the note holder.

Accordingly, in establishing standing, a foreclosing plaintiff

must necessarily prove its entitlement to enforce the note as it

is the default on the note that gives rise to the action. See

HRS § 490:9-601 (providing for a secured party’s rights after

default).

“It is well settled that the crucial inquiry with

regard to standing is whether the plaintiff has alleged such a

personal stake in the outcome of the controversy as to warrant

his or her invocation of the court’s jurisdiction and to justify

exercise of the court’s remedial powers on his or her behalf.”

Mottl, 95 Hawaiʻi at 389, 23 P.3d at 724 (quoting Akinaka v.

Disciplinary Bd. of Haw. Supreme Ct., 91 Hawaiʻi 51, 55, 979 P.2d

1077, 1081 (1999)). As standing relates to the invocation of

the court’s jurisdiction, it is not surprising that standing

must be present at the commencement of the case. Sierra Club v.

Haw. Tourism Auth., 100 Hawaiʻi 242, 257, 59 P.3d 877, 892 (2002)

(noting that “standing must be established at the beginning of

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the case”). Accordingly, a foreclosing plaintiff does not have

standing to foreclose on mortgaged property unless the plaintiff

was entitled to enforce the note that has been defaulted on.

See Hanalei, BRC Inc. v. Porter, 7 Haw. App. 304, 310, 760 P.2d

676, 680 (1988) (noting that “an action cannot be maintained if

it is prematurely commenced” before the plaintiff is entitled to

enforce the instrument).12

The principle that a foreclosing plaintiff must

establish entitlement to enforce the note at the time the action

was commenced has been recognized in several other

jurisdictions. See, e.g., U.S. Bank, N.A. v. Ugrin, 91 A.3d

924, 930 (Conn. App. Ct. 2014) (“Generally, in order to have

standing to bring a foreclosure action the plaintiff must, at

the time the action is commenced, be entitled to enforce the

promissory note that is secured by the property.”); McLean v. JP

Morgan Chase Bank Nat. Ass’n, 79 So. 3d 170, 173 (Fla. Dist. Ct.

App. 2012) (“A crucial element in any mortgage foreclosure

proceeding is that the party seeking foreclosure must

demonstrate that it has standing to foreclose.”); Deutsche Bank

Nat. Trust Co. v. Johnston, 369 P.3d 1046, 1052 (N.M. 2016)

12
It is noted that the Porter case allowed for the curing of the
premature commencement by the filing of an amended complaint after the
plaintiff came into possession of the instrument. We note that this case
does not present the issue of whether an amended complaint will cure the
premature filing of a foreclosure action, and therefore we do not address
this aspect of the Porter case.

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(holding that “standing must be established as of the time of

filing suit in mortgage foreclosure cases”); U.S. Bank, N.A. v.

Collymore, 890 N.Y.S.2d 578, 580 (N.Y. App. Div. 2009) (noting

that “the plaintiff must prove its standing in order to be

entitled to relief” and that, “[i]n a mortgage foreclosure

action, a plaintiff has standing where it is both the holder or

assignee of the subject mortgage and the holder or assignee of

the underlying note at the time the action is commenced”); Bank

of N.Y. Mellon v. Grund, 27 N.E.3d 555, 559 (Ohio Ct. App. 2015)

(noting that, in a mortgage foreclosure action, the mortgage

lender must establish an interest in the promissory note or the

mortgage “as of the filing of the complaint” (citing Fed. Home

Loan Mortg. Corp. v. Schwartzwald, 979 N.E.2d 1214, 1219 (Ohio

2012))); Deutsche Bank Nat. Trust v. Brumbaugh, 270 P.3d 151,

154 (Okla. 2012) (“Being a person entitled to enforce the note

is an essential requirement to initiate a foreclosure lawsuit.

In the present case, there is a question of fact as to when

Appellee became a holder, and thus, a person entitled to enforce

the note. Therefore, summary judgment is not appropriate.”);

U.S. Bank Nat. Ass’n v. Kimball, 27 A.3d 1087, 1092 (Vt. 2011)

(affirming the circuit court’s granting of summary judgment for

the homeowner where the bank could not prove it was the holder

of the note).

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The 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.”

Deutsche Bank Nat. Trust Co. v. Johnston, 369 P.3d 1046, 1052

(N.M. 2016); see Porter, 7 Haw. App. at 308, 760 P.2d at 679

(noting that the general requirement that a holder be in

possession of the instrument is meant “to protect the maker or

drawer from multiple liability on the same instrument”). The

Supreme Court of New Mexico recently observed that “[t]his

procedural safeguard is vital because the securitization of

mortgages has given rise to a pervasive failure among mortgage

holders to comply with the technical requirements underlying the

transfer of promissory notes and, more generally the recording

of interests in property.”13 Johnston, 369 P.3d at 1053.

Indeed, scholars have commented on the widespread documentation

problems that are associated with modern mortgage securitization

practices.14 It appears that “[u]nder these circumstances, not

13
See, e.g., Wells Fargo Bank, N.A. v. Marchione, 887 N.Y.S.2d 615,
617 (N.Y. App. Div. 2009) (foreclosing bank claimed standing based on an
assignment of the relevant mortgage and note that was executed after the
commencement of the action).
14
See, e.g., Shaun Barnes et al., In-House Counsel’s Role in the
Structuring of Mortgage-Backed Securities, 2012 Wis. L. Rev. 521, 528 (2012)
(“Unfortunately, over the years procedural standards in mortgage

(continued . . .)

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even the plaintiffs may be sure if they actually own the notes

they seek to enforce.” Id. at 1052. 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. For example, the possession

requirement, which applies unless a specific statutory exception

exists, protects the maker of an instrument from multiple

enforcements of the same instrument. See Porter, 7 Haw. App. at

308, 760 P.2d at 679.

securitizations appear to have deteriorated along with loan-underwriting
standards. As a result, in some, if not many or most, cases, notes were
neither indorsed nor delivered to the [special purpose vehicle] or its agent
in accordance with the delivery instructions. Moreover, it appears that
mortgage loan servicers seeking to enforce notes on behalf of the [special
purpose vehicle] did not always bother to take physical possession of the
notes in accordance with state law.”); Elizabeth Renuart, Uneasy
Intersections: The Right to Foreclose and the U.C.C., 48 Wake Forest L. Rev.
1205, 1209-10 (2013) (“The evidence reveals the failure to deliver the
original notes with proper indorsements to the trustee or its document
custodian, the routine creation of unnecessary lost note affidavits, the
destruction of the original notes, and the falsification of necessary
indorsements.”); Alan M. White, Losing the Paper - Mortgage Assignments, Note
Transfers and Consumer Protection, 24 Loy. Consumer L. Rev. 468, 475 (2012)
(“Much anecdotal evidence suggests that servicers of private-label
securitized mortgages either delivered original notes without endorsements to
document custodians for the trust, routinely prepared lost note affidavits in
lieu of delivering notes to foreclosure attorneys and trustees, routinely
destroyed original notes, and/or obtained or forged necessary endorsements
long after the transfers were supposed to have taken place.” (footnotes
omitted)).

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Whether a party is entitled to enforce a promissory

note is determined by application of HRS § 490:3-301 (2008),

which provides the following:

“Person entitled to enforce” an instrument means (i) the
holder of the instrument, (ii) a nonholder in possession of
the instrument who has the rights of a holder, or (iii) a
person not in possession of the instrument who is entitled
to enforce the instrument pursuant to section 490:3-309 or
490:3-418(d). A person may be a person entitled to enforce
the instrument even though the person is not the owner of
the instrument or is in wrongful possession of the
instrument.

Bank of America has maintained that it was the holder

of the Note based on the Egan Declaration and the blank

indorsement on the Note. Accordingly, we consider whether the

Bank produced sufficient evidence to demonstrate that it was

entitled to enforce the Note as a holder of the instrument at

the time that the foreclosure proceedings were commenced.15

15
A “holder in due course” is defined as follows:

Subject to subsection and section 490:3-106(d), “holder in
due course” means the holder of an instrument if:

(1) The instrument when issued or negotiated to the holder
does not bear such apparent evidence of forgery or
alteration or is not otherwise so irregular or incomplete
as to call into question its authenticity; and

(2) The holder took the instrument (i) for value, (ii) in
good faith, (iii) without notice that the instrument is
overdue or has been dishonored or that there is an uncured
default with respect to payment of another instrument
issued as part of the same series, (iv) without notice
that the instrument contains an unauthorized signature or
has been altered, (v) without notice of any claim to the
instrument described in section 490:3-306, and (vi)
without notice that any party has a defense or claim in
recoupment described in section 490:3-305(a).

HRS § 490:3-302(a) (2008).

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The negotiation asserted by Bank of America involved

negotiation by blank indorsement and transfer of possession of

the Note. In contrast, a special indorsement occurs if the

indorsement is made by the holder of an instrument and the

indorsement identifies a person to whom it makes the instrument

payable. HRS § 490:3-205(a). When an instrument is specially

indorsed, it becomes payable to the identified person and may be

negotiated only by the indorsement of that person. Id. A blank

indorsement occurs when an indorsement is made by the holder of

an instrument and is not a special indorsement; in other words,

a blank indorsement is not payable to an identified person. Id.

§ 490:3-205(b). When indorsed in blank, an instrument becomes

payable to bearer and may be negotiated by transfer or

possession alone until specially indorsed. Id.

Here, the Note, which was attached to Bank of

America’s motion for summary judgment as Exhibit A, contains two

indorsements. One indorsement is a special indorsement by

Countrywide Bank, FSB, to Countrywide Home Loans, Inc. See HRS

§ 490:3-205(a). The other is a blank indorsement by Countrywide

Home Loans, Inc. See id. § 490:3-205(b). Thus, because the

Note was last negotiated by a blank indorsement, it may be

negotiated by transfer of possession.

Although Bank of America produced evidence that it

possessed the blank-indorsed Note at the time it sought summary

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judgment, a material question of fact exists as to whether Bank

of America possessed the Note, or was otherwise a holder, at the

time it brought the foreclosure action. Indeed, the copy of the

Note attached to the summary judgment motion does not reflect

the date of the blank indorsement, and the Egan Declaration,

which was made after the filing of the complaint in this case,

does not indicate when the indorsement occurred. Further, there

is no additional evidence in the record regarding the date of

the indorsements or whether Bank of America possessed the Note

at the time of the filing of the complaint. Thus, there is a

material question of fact as to whether Bank of America was the

holder of the Note at the time the foreclosure proceedings were

commenced, which in turn raises the issue of whether Bank of

America had standing to foreclose on the Property at the time it

brought the foreclosure action.16

Both the ICA and the circuit court appear to have

determined that Bank of America was entitled to enforce the Note

as the holder at the time Bank of America moved for summary

judgment. As the moving party, it was Bank of America’s burden

to demonstrate there was no genuine issue as to any material

16
It is noted that Bank of America may also demonstrate its
standing by establishing that at the commencement of the suit it was either a
nonholder in possession of the instrument with the rights of a holder or a
person not in possession of the instrument who was entitled to enforce the
instrument pursuant to HRS §§ 490:3-309 or 490:3-418(d). See HRS § 490:3-
301.

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fact with respect to the essential elements of a foreclosure

action. See French v. Haw. Pizza Hut, Inc., 105 Hawaiʻi 462,

470, 99 P.3d 1046, 1054 (2004). Here, there is no evidence in

the record, either through the Note itself, the Egan

Declaration, or the other documents attached to the motion for

summary judgment, showing that the blank indorsement on the Note

occurred prior to the initiation of the suit.17 Consequently,

there is a genuine issue as to whether Bank of America was

entitled to foreclose when it commenced the proceeding. Thus,

viewing the facts and inferences in the light most favorable to

Homeowner, there is a genuine issue of material fact as to

whether Bank of America held the Note at the time it filed the

complaint. Accordingly, Bank of America failed to meet its

burden of demonstrating that it was entitled to judgment as a

matter of law, and the circuit court erred in granting Bank of

17
An assignment of the Mortgage to Bank of America prior to the
commencement of the action would not be sufficient to establish standing as
an injury to the plaintiff in a foreclosure proceeding, which is premised on
the default under the note. Although the security follows the debt, the debt
does not automatically follow the security. See HRS § 490:9-203(g) & cmt. 9
(2008) (codifying the common law rule that a transfer of an obligation
secured by a security interest or other lien on personal or real property
also transfers the security interest or lien); see also, e.g., Vega v. CTX
Mortg. Co., LLC, 761 F. Supp. 2d 1095, 1097 (D. Nev. 2011) (“The Traditional
Rule is that the mortgage or deed of trust (the security instrument)
automatically follows the secured debt, but not vice versa.”); Restatement
(Third) of Property (Mortgages) § 5.4(c) (1997) (“A mortgage may be enforced
only by, or in behalf of, a person who is entitled to enforce the obligation
the mortgage secures.”).

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America’s motion for summary judgment.18 In light of this

ruling, we need not address Homeowner’s arguments with respect

to whether the Mortgage was validly assigned to Bank of America.

B. Appellate Jurisdiction Over the Circuit Court Orders
Concerning Dismissal of the Counterclaims

Homeowner also argues on certiorari to this court that

the ICA erred in holding that it lacked jurisdiction to review

the dismissal of her counterclaims. The ICA determined that,

although it had jurisdiction over the Judgment and Foreclosure

Decree, it did not have jurisdiction over the Order Granting

Motion to Dismiss Counterclaims or the Order Denying Motion for

Reconsideration and Certification. For the reasons discussed

below, we conclude that the circuit court’s Judgment was a final

appealable judgment, and thus, there is appellate jurisdiction

over all interlocutory orders leading up to the Judgment in this

case, including the court’s two orders concerning the dismissal

of Homeowner’s counterclaims.

HRS § 641-1(a)19 provides for appeals as of right in

civil cases from final judgments, orders, or decrees of circuit

18
It is noted that this decision does not modify notice pleading
standards. See Johnston, 369 P.3d at 1055 (explaining that in foreclosure
cases a foreclosing plaintiff satisfies notice pleading requirements by
simply alleging that it is the holder of the note without attaching any
additional documentary evidence).
19
HRS § 641-1(a) (Supp. 2012) provides, “Appeals shall be allowed
in civil matters from all final judgments, orders, or decrees of circuit and

(continued . . .)

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and district courts. Thus, a party typically does not have a

right to appeal unless there is entry of a final judgment. See

Jenkins v. Cades Schutte Fleming & Wright, 76 Hawaiʻi 115, 118,

869 P.2d 1334, 1337 (1994) (requiring entry of final judgment on

a separate document even where orders purport to be final).

However, in foreclosure cases, appellate jurisdiction over

appeals is further defined by HRS § 667-51, which provides for

appellate jurisdiction over a judgment on a decree of

foreclosure.

HRS § 667-51(a) provides the following with regard to

appeals in foreclosure actions:

Without limiting the class of orders not specified in
section 641-1 from which appeals may also be taken, the
following orders entered in a foreclosure case shall be
final and appealable:

(1) A judgment entered on a decree of foreclosure, and if
the judgment incorporates an order of sale or an
adjudication of a movant’s right to a deficiency judgment,
or both, then the order of sale or the adjudication of
liability for the deficiency judgment also shall be deemed
final and appealable;

(2) A judgment entered on an order confirming the sale of
the foreclosed property, if the circuit court expressly
finds that no just reason for delay exists, and certifies
the judgment as final pursuant to rule 54(b) of the Hawaii
rules of civil procedure; and

(3) A deficiency judgment; provided that no appeal from a
deficiency judgment shall raise issues relating to the
judgment debtor’s liability for the deficiency judgment (as
opposed to the amount of the deficiency judgment), nor
shall the appeal affect the finality of the transfer of

district courts and the land court to the intermediate appellate court,
subject to chapter 602.”

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title to the foreclosed property pursuant to the order
confirming sale.

HRS § 667-51 (Supp. 2004) (emphases added). Under HRS § 667-51,

foreclosure cases are bifurcated into two separately appealable

parts: (1) the decree of foreclosure and order of sale

appealable pursuant to HRS § 667-51(a)(1) and (2) all other

orders that “fall within the second part of the bifurcated

proceedings.”20 Mortg. Elec. Registration Sys., Inc. v. Wise,

130 Hawaiʻi 11, 16, 304 P.3d 1192, 1197 (2013). This is

consistent with the court’s well-established holding that a

decree of foreclosure “finally determines the merits of the

controversy.” Id. (quoting MDG Supply, Inc. v. Diversified

Invs., Inc., 51 Haw. 375, 380, 463 P.2d 525, 528 (1969)).

In this case, the circuit court entered its Judgment

on the Foreclosure Decree. As a judgment entered on a decree of

foreclosure, it is “final” and “appealable,” HRS § 667-51(a),

and thus it is a final judgment under HRS § 641-1. Because the

20
Orders confirming sale, deficiency judgments, orders directing
the distribution of proceeds, and other orders issued subsequent to the
decree of foreclosure are separately appealable pursuant to HRS § 667-
51(a)(2)-(3) and therefore “fall within the second part of the bifurcated
proceedings.” Mortg. Elec. Registration Sys., Inc. v. Wise, 130 Hawaiʻi 11,
16, 304 P.3d 1192, 1197 (2013); see also Sec. Pac. Mortg. Corp. v. Miller, 71
Haw. 65, 70, 783 P.2d 855, 858 (1989) (treating an appeal from an order
confirming sale and for deficiency judgment as separate from an appeal from
the decree of foreclosure); E. Sav. Bank, FSB v. Esteban, 129 Hawaiʻi 154, 296
P.3d 1062 (2013) (treating an appeal from the judgment confirming the
foreclosure sale as a separate matter from the judgment of foreclosure).

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Judgment was final and complied with HRCP Rule 58,21 the ICA had

jurisdiction over the circuit court’s Judgment.

As an appeal from a final judgment, Homeowner’s appeal

from the circuit court’s Judgment brought up for review “all

interlocutory orders not appealable directly as of right which

deal with issues in the case.” See Ueoka v. Szymanski, 107

Hawaiʻi 386, 396, 114 P.3d 892, 902 (2005) (quoting Pioneer Mill

Co. v. Ward, 34 Haw. 686, 694 (1938)); see also Lussier v. Mau-

Van Dev., Inc., 4 Haw. App. 359, 395-96, 667 P.2d 804, 827

(1983) (“It is well-settled that an appeal from a final judgment

brings up for appellate review all interlocutory orders dealing

with issues in the case not appealable directly as of right.”).

The circuit court’s orders concerning the dismissal of

Homeowner’s counterclaims were both issued prior to the

Foreclosure Decree and concerned issues involving the

foreclosure in this case. Thus, Homeowner’s appeal of the

circuit court’s Judgment to the ICA brought up for review the

circuit court’s Order Granting Motion to Dismiss Counterclaims

and Order Denying Motion for Reconsideration and Certification,

21
HRCP Rule 58 (2010), provides in relevant part, “Every judgment
shall be set forth on a separate document.”

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in addition to the Foreclosure Decree.22 See Ueoka v. Szymanski,

107 Hawaiʻi at 396, 114 P.3d at 902.

The circuit court’s description of its Foreclosure

Decree as interlocutory, and the Judgment’s explanation that it

was “entered as a final judgment . . . as there is no just

reason for delay” has no bearing on whether the court’s Judgment

is a final, appealable judgment in this case.23 See Sec. Pac.

Mortg. Corp. v. Miller, 71 Haw. 65, 67 n.1, 783 P.2d 855, 856

n.1 (1989) (stating that the use of the term “interlocutory” has

no bearing on the finality of the order). Thus, a judgment

22
This conclusion logically follows well-settled law addressing the
scope of issues that may be raised on appeal from a foreclosure decree and
from an order confirming the foreclosure sale. Issues that are not “unique”
to the confirmation of sale must be raised with respect to the foreclosure
decree. See, e.g., Wise, 130 Hawaiʻi at 17-18, 304 P.2d at 1198-99
(concluding that mortgagors were precluded from challenging nominee’s
standing to bring foreclosure action in an appeal from an order confirming
the foreclosure sale). None of the counterclaims would be considered
“unique” to the confirmation of sale, and, thus, they must be addressed
simultaneously with the foreclosure decree. See id. at 17, 304 P.2d at 1198
(“[W]here an appellant challenges the right of a party to obtain a deficiency
judgment in a foreclosure case, he must take his appeal in a timely fashion
from the order which finally determined the right to a deficiency, i.e., the
order granting summary judgment.” (internal quotation marks omitted) (quoting
Miller, 71 Haw. at 71, 783 P.2d at 858)).
23
It appears that the characterization of the Foreclosure Decree as
an “interlocutory decree” stems from Bank of America’s motion for summary
judgment, which requested that “Pursuant to Rule 54(b) of the HRCP, Plaintiff
moves for a determination and direction that there is no just reason for the
delay in entry of Judgment and Decree of Foreclosure as a final judgment.”
HRCP Rule 54(b) provides that, when there are multiple claims for relief
presented in an action, the court may “direct the entry of a final judgment
as to one or more but fewer than all of the claims or parties upon an express
determination that there is no just reason for delay and upon an express
direction for the entry of judgment.” It was unnecessary for Bank of America
to request a judgment pursuant to HRCP Rule 54(b) because the decree of
foreclosure is a final appealable order as discussed above.

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reflecting that it is entered in accordance with HRCP Rule

54(b)24 is not dispositive of whether the Judgment is itself a

final, appealable judgment that would allow review of other

interlocutory orders.

Accordingly, for the reasons discussed above, the ICA

erred in its determination that it did not have jurisdiction

over the circuit court’s Order Granting Motion to Dismiss

Counterclaims or the Order Denying Motion for Reconsideration

and Certification. Given that the ICA did not reach the merits

of Homeowner’s appeal with respect to the dismissal of her

counterclaims, we remand the case to the ICA to address the

merits of Homeowner’s appeal of the dismissal of her

counterclaims.25

III. CONCLUSION

For the reasons discussed, the ICA’s April 13, 2016

judgment on appeal is vacated. The circuit court’s December 9,

24
HRCP Rule 54(b) (2000), provides in relevant part:

When more than one claim for relief is presented in an
action, whether as a claim, counterclaim, cross-claim, or
third-party claim, or when multiple parties are involved,
the court may direct the entry of a final judgment as to
one or more but fewer than all of the claims or parties
only upon an express determination that there is no just
reason for delay and upon an express direction for the
entry of judgment.
25
We need not consider Homeowner’s arguments regarding her motion
for stay and request to allow her home to act as supersedeas bond in light of
our disposition of the case.

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2014 Judgment is also vacated to the extent it grants summary

judgment to Bank of America. The case is remanded to the ICA

for a determination of whether the circuit court erred in

dismissing Homeowner’s counterclaims.

R. Steven Geshell /s/ Paula A. Nakayama
for petitioner
/s/ Sabrina S. McKenna
Jade Lynne Ching, /s/ Richard W. Pollack
J. Blaine Rogers and
Kee M. Campbell /s/ Michael D. Wilson
for respondents /s/ Colette Y. Garibaldi

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