Lima, Jr. v. Deutsche Bank National Trust Company ( 2021 )

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Electronically Filed
Supreme Court
SCCQ-XX-XXXXXXX
03-SEP-2021
11:32 AM
Dkt. 402 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
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LIONEL LIMA, JR., et al., individually and on behalf of all
others similarly situated, Plaintiffs-Appellees,
vs.
DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendant-Appellant.
(CIV. NO. 12-00509 SOM-WRP)
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EVELYN JANE GIBO, et al., individually and on behalf of all
others similarly situated, Plaintiffs-Appellees,
vs.
U.S. BANK NATIONAL ASSOCIATION, Defendant-Appellant.
(CIV. NO. 12-00514 SOM-WRP)
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DAVID EMORY BALD, et al., individually and on behalf of all
others similarly situated, Plaintiffs-Appellees,
vs.
WELLS FARGO BANK, N.A., Defendant-Appellant.
(CIV. NO. 13-00135 SOM-RT)
SCCQ-XX-XXXXXXX
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CERTIFIED QUESTION FROM THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAIʻI
SEPTEMBER 3, 2021
RECKTENWALD, C.J., NAKAYAMA, McKENNA, AND WILSON, JJ.,
AND CIRCUIT JUDGE TONAKI, ASSIGNED BY REASON OF VACANCY
OPINION OF THE COURT BY NAKAYAMA, J.
The United States District Court for the District of
Hawaiʻi (District Court) has asked this court to determine:
When (a) a borrower has indisputably defaulted on a
mortgage for real property, (b) a lender has conducted a
nonjudicial foreclosure sale but has not strictly complied
with the requirements governing such sales, and (c) the
borrower sues the lender over that noncompliance after the
foreclosure sale and, if the property was purchased at
foreclosure by the lender, after any subsequent sale to a
third-party purchaser, may the borrower establish the
requisite harm for liability purposes under the law of
wrongful foreclosure and/or section 480-2 of Hawaiʻi Revised
Statutes by demonstrating the loss of title, possession,
and/or investments in the property without regard to the
effect of the mortgage on those items?
Phrased differently, the District Court asks:
Is the effect of the mortgage considered only as a matter
of setoff that a lender has the burden of proving after the
borrower establishes the amount of the borrower’s damages,
or does a borrower with no preforeclosure rights in
property except as encumbered by a mortgage bear the burden
of accounting for the effect of the mortgage in
establishing the element of harm in the liability case?
We hold that a borrower bears the burden of accounting
for the effect of a mortgage when establishing the element of
harm in the liability case for a wrongful foreclosure or unfair
or deceptive acts or practices case.
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I. BACKGROUND
A. Factual Background
This certified question arises from three putative
class actions: Lionel Lima, Jr., et al. v. Deutsche Bank
National Trust Company, Civ. No. 12-00509 SOM-WRP (D. Haw. filed
Sept. 10, 2012); Evelyn Jane Gibo, et al. v. U.S. Bank National
Association, Civ. No. 12-00514 SOM-WRP (D. Haw. filed Sept. 12,
2012); and David Emory Bald, et al. v. Wells Fargo Bank, N.A.,
Civ. No. 13-00135 SOM-RT (D. Haw. filed Mar. 20, 2013). This
opinion collectively refers to the plaintiffs in all cases as
“Plaintiff Borrowers,” and the defendants in all cases as
“Defendant Banks.”
Each case shares roughly the same facts. Each
Plaintiff Borrower mortgaged real property to one of the
Defendant Banks. However, Plaintiff Borrowers defaulted on
their mortgages. The relevant Defendant Bank conducted
nonjudicial foreclosure sales of the mortgaged properties
pursuant to Hawaiʻi Revised Statutes (HRS) § 667-5.1 However,
1 HRS § 667-5 (Supp. 2008) (repealed 2012) provided in relevant part:
Foreclosure under power of sale; notice; affidavit
after sale. (a) When a power of sale is contained in a
mortgage, and where the mortgagee . . . desires to
foreclose under power of sale upon breach of a condition of
the mortgage, the mortgagee . . . shall be represented by
an attorney who is licensed to practice law in the State
and is physically located in the State. The attorney
shall:
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(1) Give notice of the mortgagee’s . . . intention
to foreclose the mortgage and of the sale of
the mortgaged property, by publication of the
notice once in each of three successive weeks
(three publications), the last publication to
be not less than fourteen days before the day
of sale, in a newspaper having a general
circulation in the county in which the
mortgaged property lies; and
(2) Give any notices and do all acts as are
authorized or required by the power contained
in the mortgage.
(b) Copies of the notice required under subsection
(a) shall be:
(1) Filed with the state director of taxation; and
(2) Posted on the premises not less than twenty-one
days before the day of sale.
(c) Upon the request of any person entitled to notice
pursuant to this section and sections 667-5.5 and 667-6,
the attorney [or] the mortgagee . . . shall disclose to the
requestor the following information:
(1) The amount to cure the default, together with
the estimated amount of the foreclosing
mortgagee’s attorneys’ fees and costs, and all
other fees and costs estimated to be incurred
by the foreclosing mortgagee related to the
default prior to the auction within five
business days of the request; and
(2) The sale price of the mortgaged property once
auctioned.
(d) Any sale, of which notice has been given as
aforesaid, may be postponed from time to time by public
announcement made by the mortgagee . . . . Upon request
made by any person who is entitled to notice pursuant to
section 667-5.5 or 667-6, or this section, the mortgagee
. . . shall provide the date and time of a postponed
auction, or if the auction is canceled, information that
the auction was cancelled. The mortgagee within thirty
days after selling the property in pursuance of the power,
shall file a copy of the notice of sale and the mortgagee’s
affidavit, setting forth the mortgagee’s acts in the
premises fully and particularly, in the bureau of
conveyances.
(e) The affidavit and copy of the notice shall be
recorded and indexed by the registrar, in the manner
provided in chapter 501 or 502, as the case may be.
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Defendant Banks did not strictly comply with the procedural
requirements of HRS § 667-5. For instance, Defendant Banks
allegedly postponed some of the foreclosure auctions without
publishing a notice. The properties were then either sold to
third parties during the foreclosure sales or purchased by the
mortgage-holding Defendant Bank and resold to third parties
after the foreclosure sales.
B. Procedural Background
1. Federal District Court Proceedings
Defendant Banks removed Plaintiff Borrowers’ suits to
federal court. Plaintiff Borrowers allege that Defendant Banks’
nonjudicial foreclosure sales violated (1) HRS § 667-5 and
(2) HRS § 480-2.2 In particular, Plaintiff Borrowers complained
that Defendant Banks
(f) This section is inapplicable if the mortgagee is
foreclosing on personal property only.
2 HRS § 480-2 (2008) provides in relevant part:
Unfair competition, practices, declared unlawful.
(a) Unfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce
are unlawful.
. . . .
(d) No person other than a consumer, the attorney
general or the director of the office of consumer
protection may bring an action based upon unfair or
deceptive acts or practices declared unlawful by this
section.
. . . .
Additionally, HRS § 480-13 (2008) provides in relevant part:
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a. Record[ed] and publish[ed] Notices of Sale that did not
include a “description of the mortgaged property” (a) as
required by HRS Section 667-7(a)(1) (2008) and (b) which
was “sufficient to inform the public of the nature of the
property to be offered for sale” and “calculated to
interest purchasers,” as required by Ulrich v. Sec. Inv.
Co., 35 Haw. 158, 172-73 (1939);
b. Publish[ed] and/or post[ed] the Notice of Sale for less
time than required by statute;
c. S[old] the property despite having failed to send the
borrower a notice of acceleration that gave the notice that
the standard form mortgage required about the unconditional
right the borrower had to bring a separate suit to stop the
sale[;]
d. Issu[ed] notices of sale that lacked a description of
the property that would interest prospective buyers and/or
comply with statute;
e. Advertis[ed] the auctions of properties by “quitclaim
deed” and/or without any covenants or warranties of title
whatsoever;
f. Postpon[ed] auctions so frequently that the substantial
majority of sale dates advertised in the Class’s published
notices of sale were not the actual auction dates;
g. Postpon[ed] auctions without publishing notices of the
rescheduled auctions’ new dates and times;
Suits by persons injured; amount of recovery,
injunctions. . . . .
(b) Any consumer who is injured by any unfair or
deceptive act or practice forbidden or declared unlawful by
section 480-2:
(1) May sue for damages sustained by the consumer,
and, if the judgment is for the plaintiff, the
plaintiff shall be awarded a sum not less than
$1,000 or threefold damages by the plaintiff
sustained, whichever sum is the greater, and
reasonable attorney’s fees together with the
costs of suit . . . ; and
(2) May bring proceedings to enjoin the unlawful
practices, and if the decree is for the
plaintiff, the plaintiff shall be awarded
reasonable attorney’s fees together with the
costs of suit.
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h. Chang[ed] the location of the auction without publishing
the new location; and
i. Include[ed] as a term of sale that time was of the
essence and that successful bidders were expected to close
their sales within thirty days of their auctions, when in
fact such sales either never, or almost never, closed
within the specific timeframe.
In 2019, Defendant Banks moved for summary judgment on
Plaintiff Borrowers’ claims, asserting, inter alia, that
Plaintiff Borrowers could not prevail because they could not
prove the damages, or harm, element of either of their claims.
In particular, Defendant Banks contended that Plaintiff
Borrowers would not be able to show that they were harmed, or
suffered any damages, because Plaintiff Borrowers did not show
that (1) they could have made their loans current, (2) their
properties could have sold at a higher price but for Defendant
Banks’ alleged actions, or (3) their properties were worth more
than their remaining mortgage debts.
Plaintiff Borrowers opposed Defendant Banks’ motions,
responding that it was sufficient for Plaintiff Borrowers to
show that they lost title, possession, and any investments in
their properties to establish their damages to survive a motion
for summary judgment. Plaintiff Borrowers asserted they did not
need to factor in their remaining mortgage debts because the
debts were only relevant as a set off Defendant Banks must
prove.
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On April 30, 2019, the District Court heard argument
on Defendant Banks’ motions for summary judgment. Following the
hearing, the District Court asked the parties to brief the
question of whether the District Court should certify a question
to this court regarding the damages issue.
On May 16, 2019, the District Court issued an order
certifying the above question to this court.
2. Supreme Court Proceedings
On June 13, 2019, this court accepted the certified
question without determining whether it would answer the
question. This court simultaneously ordered briefing on the
certified question from the parties.
i. Defendant Banks’ Opening Briefs
Defendant Banks point out that plaintiffs seeking
relief under a wrongful foreclosure or unfair or deceptive acts
or practices (UDAP) claim bears the burden of proving their
damages. Defendant Banks argue that Plaintiff Borrowers must
prove their net damages, as opposed to gross damages, in order
to establish Defendant Banks’ liability. Defendant Banks base
this argument on the premise that the purpose of damages for
wrongful foreclosure and UDAP claims is to restore plaintiffs to
the position they would have been in had they not been injured.
Thus, Defendant Banks claim that Plaintiff Borrowers must factor
in their remaining mortgage debts when proving their damages.
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Defendant Banks additionally note that the remaining mortgage
debts are significant, ranging from $169,000 to $945,000.
ii. Plaintiff Borrowers’ Answering Briefs
Plaintiff Borrowers do not directly address the
District Court’s certified question. At best, Plaintiff
Borrowers suggest that the extent of their harm is irrelevant.
The represented3 Plaintiff Borrowers assert, in the alternative,
that Defendant Banks bear the burden of proof to demonstrate the
impact of the remaining mortgage debt on Plaintiff Borrowers’
damages. Plaintiff Borrowers additionally contend that even if
they must prove their net damages and account for their
remaining mortgage debt, their claims will survive summary
judgment because they are entitled to nominal and punitive
damages; as well as recovery of interest, loss of use payments,
and past payments.
The represented Plaintiff Borrowers focus their
attention instead on two different questions: “(1) what items of
damages are recoverable, either in restitution, tort, or under
the consumer statute, for the unlawful disposition of real
property using a power of sale, and (2) how is each item
3 Plaintiff Borrowers Lionel Lima, Jr. and Barbara Ann Delizo-Lima
(collectively, the Limas) terminated their counsel around November 2019.
This court granted the Limas pro se status.
Liberally construing the Limas’ separate answering brief, the Limas do
not present any argument responsive to the certified question. This opinion
therefore focuses on the represented Plaintiff Borrowers’ arguments.
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measured?” Using this framework, Plaintiff Borrowers argue that
they are entitled to restitution based on Defendant Banks’
“unlawfully obtained benefits.” In particular, Plaintiff
Borrowers argue that the alleged wrongful foreclosures
constituted intentional torts. They consequently reason that
the fact that they defaulted on their loans is irrelevant.
Plaintiff Borrowers instead aver that they are entitled to
whatever benefits Defendant Banks received from wrongfully
foreclosing on their properties.
Plaintiff Borrowers further assert that their
restitution damages should include (1) the value for which
Defendant Banks sold or resold the foreclosed properties,
(2) interest for the loss of use of the foreclosed properties,
and (3) any value Plaintiff Borrowers paid on the mortgages.
Moreover, Plaintiff Borrowers argue that Defendant Banks cannot
offset the restitution damages they owe Plaintiff Borrowers by
the remaining mortgage debts because this would merely
incentivize Defendant Banks to wrongfully foreclose other
properties.
iii. Defendant Banks’ Reply Briefs
Defendant Banks reply that this court should decline
to address Plaintiff Borrowers’ alternative questions.
Defendant Banks counter that, by raising the alternative
questions, Plaintiff Borrowers ask this court to grant them an
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unjustified and unprecedented windfall. As an example,
Defendant Bank Wells Fargo, N.A. points out that Plaintiff
Borrowers Mike and Tham Myers (collectively, the Myers) owed
Wells Fargo, N.A. over $100,000 more than their property was
worth at the time of the nonjudicial foreclosure sale. However,
using Plaintiff Borrowers’ requested restitution formula would
grant the Myers over $1,771,000 in damages simply because Wells
Fargo did not strictly comply with certain procedural
requirements when conducting the nonjudicial foreclosure sales.
Defendant Banks further respond that, in any event,
they did not realize any unjustified benefit that would entitle
Plaintiff Borrowers to restitution because (1) Defendant Banks
were entitled to foreclose on the properties and (2) Defendant
Banks suffered a loss when they sold or resold the properties
for less than the relevant mortgage’s value.
II. STANDARD OF REVIEW
A. Certified Question
“[T]he supreme court shall have jurisdiction and
powers . . . [t]o answer, in its discretion . . . any question
or proposition of law certified to it by a federal district or
appellate court if the supreme court shall so provide by
rule[.]” HRS § 602-5(a)(2) (2016).
When a federal district or appellate court certifies to the
Hawaiʻi Supreme Court that there is involved in any
proceeding before it a question concerning the law of
Hawaiʻi that is determinative of the cause and that there is
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no clear controlling precedent in the Hawaiʻi judicial
decisions, the Hawaiʻi Supreme Court may answer the
certified question by written opinion.
Hawaiʻi Rules of Appellate Procedure (HRAP) Rule 13(a) (2000).
“An issue of law presented by certified question is
reviewed by this court de novo under the right/wrong standard of
review.” Miller v. Hartford Life Ins. Co., 126 Hawaiʻi 165, 173,
268 P.3d 418, 426 (2011) (citation omitted).
III. DISCUSSION
A. The Certified Question
As a preliminary matter, this court clarifies the
issue this opinion shall address. This court may answer a
certified question (1) that concerns the law of Hawaiʻi, (2) that
is determinative of the cause, and (3) for which there is no
clear controlling Hawaiʻi precedent. See HRAP Rule 13(a). The
parties do not dispute that the certified question concerns the
law of Hawaiʻi or that there is no clear controlling state
precedent on the matter. However, Plaintiff Borrowers make a
perfunctory claim that the certified question is not
determinative of the cause, implying that this court should not
answer the certified question. Nevertheless, Plaintiff
Borrowers ask this court to resolve two alternative questions.
Thus, this court must first determine whether it may
address either the District Court’s question or Plaintiff
Borrowers’ questions. See HRAP Rule 13(a).
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This court concludes it may answer the certified
question because an answer will be determinative of the cause.
The court respectfully declines Plaintiff Borrowers’ invitation
to address additional, non-dispositive issues.
1. It is appropriate for the court to resolve the
question certified by the District Court.
Again, the District Court asked this court to
determine:
Is the effect of the mortgage considered only as a matter
of setoff that a lender has the burden of proving after the
borrower establishes the amount of the borrower’s damages,
or does a borrower with no preforeclosure rights in
property except as encumbered by a mortgage bear the burden
of accounting for the effect of the mortgage in
establishing the element of harm in the liability case?
The District Court reasoned that this question is “determinative
of the cause” because it will likely grant summary judgment in
favor of Defendant Banks if Plaintiff Borrowers must account for
their mortgage debts. The District Court explained that this is
because “Plaintiff Borrowers’ only evidence of harm relates to
the loss of title, possession, and investments in the properties
without regard to any mortgage.”
Plaintiff Borrowers disagree. According to Plaintiff
Borrowers, their claims will survive Defendant Banks’ motions
for summary judgment because they are also entitled to nominal
damages; punitive damages; and the recovery of interest, loss of
use payments, and past payments.
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We agree with the District Court’s assessment.
Plaintiff Borrowers must be able to establish a prima facie case
for compensatory damages, factoring in their pre-nonjudicial
foreclosure positions, to survive Defendant Banks’ motions for
summary judgment. Thus, the District Court’s question is
determinative of the cause if Plaintiff Borrowers fail to make
such a case.
It is axiomatic that plaintiffs bear the burden of
establishing all necessary elements for their claims. Kelly v.
1250 Oceanside Partners, 111 Hawaiʻi 205, 233, 140 P.3d 985, 1013
(2006). Where, as here, a defendant has moved for summary
judgment,
summary judgment [in favor of the movant] is proper when
the [non-movant plaintiff]
Fails to make a showing sufficient to establish the
existence of an element essential to [the
plaintiff’s] case, and on which [the plaintiff] will
bear the burden of proof at trial. In such a
situation, there can be no genuine issue as to any
material fact, since a complete failure of proof
concerning an essential element of the [plaintiff’s]
case necessarily renders all other facts immaterial.
The [defendant] is entitled to judgment as a matter
of law because the [plaintiff] has failed to make a
sufficient showing on an essential element of her
case with respect to which she has the burden of
proof.
Exotics Hawaii-Kona, Inc. v. E.I. du Pont de Nemours & Co., 116
Hawaiʻi 277, 302, 172 P.3d 1021, 1046 (2007) (quoting Hall v.
State, 7 Haw. App. 274, 284, 756 P.2d 1048, 1055 (1988))
(emphasis omitted).
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Plaintiff Borrowers must establish an element of
damages for each of their claims. Here, Plaintiff Borrowers
raised two claims in the underlying proceedings: a wrongful
foreclosure claim and a UDAP claim. In order to establish a
prima facie case that Defendant Banks are liable for wrongful
foreclosure, Plaintiff Borrowers must establish “(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.” Bank
of America, N.A. v. Reyes-Toledo, 143 Hawaiʻi 249, 264 n.12, 428
P.3d 761, 776 n.12 (2018). To establish a prima facie case for
a UDAP claim, Plaintiff Borrowers must establish “(1) either
that the defendant violated the UDAP statute (or that its
actions are deemed to violate the UDAP statute by another
statute), (2) that the consumer was injured as a result of the
violation, and (3) the amount of damages sustained as a result
of the UDAP violation.” Kawakami v. Kahala Hotel Investors,
LLC, 142 Hawaiʻi 507, 519, 421 P.3d 1277, 1289 (2018) (citations
omitted). Thus, in order to survive a motion for summary
judgment on their claims, Plaintiff Borrowers must adduce
evidence that they have suffered damages. See Exotics Hawaii-
Kona, 116 Hawaiʻi at 302, 172 P.3d at 1046.
Plaintiff Borrowers must make a case for compensatory
damages. Plaintiff Borrowers acknowledge that their claims
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arise in tort. Hawaiʻi law recognizes three categories of
damages in tort actions: (1) compensatory damages, (2) punitive
damages, and (3) nominal damages. Zanakis-Pico v. Cutter Dodge,
Inc., 98 Hawaiʻi 309, 327, 47 P.3d 1222, 1240 (2002) (Acoba, J.,
concurring). “Compensatory damages seek to ‘compensate the
injured party for the injury sustained,’ in hopes of
‘restor[ing] a plaintiff to his or her position prior to the
tortious act[.]” Bynum v Magno, 106 Hawaiʻi 81, 85, 101 P.3d
1149, 1153 (2004) (quoting Kuhnert v. Allison, 76 Hawaiʻi 39, 44,
868 P.2d 457, 462 (1994); Zanakis-Pico, 98 Hawaiʻi at 327, 47
P.3d at 1240 (Acoba, J., concurring)).
In contrast to compensatory damages, nominal damages
are “‘a small and trivial sum awarded for a technical injury due
to a violation of some legal right and as a consequence of which
some damages must be awarded to determine the right.” Zanakis-
Pico, 98 Hawaiʻi at 327, 47 P.3d at 1240 (Acoba, J., concurring)
(quoting Van Poole v. Nippu Jiji Co., 34 Haw. 354, 360 (1937)).
Lastly, punitive damages are awarded “to punish the
defendant, rather than to compensate the plaintiff.” Id. at
330, 47 P.3d at 1243 (Acoba, J., concurring). However, punitive
damages generally must be supported by an award of nominal or
compensatory damages. See id. (“nominal damages may be the
basis for punitive damages in . . . tort actions”) (emphasis
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added); Masaki v. General Motors Corp., 71 Haw. 1, 6, 780 P.2d
566, 570 (1989) (“Punitive or exemplary damages are generally
defined as those damages assessed in addition to compensatory
damages for the purpose of punishing the defendant for
aggravated or outrageous misconduct and to deter the defendant
and others from similar conduct in the future.”) (emphasis
added).
Contrary to Plaintiff Borrowers’ assertion, Plaintiff
Borrowers cannot rely on nominal damages to withstand a motion
for summary judgment. This court has noted that where a tort
claim requires a plaintiff to “separately establish damages,”
the plaintiff cannot simply infer damages based upon the alleged
tort –– i.e., nominal damages. Weinberg v. Mauch, 78 Hawaiʻi 40,
50, 890 P.2d 277, 287 (1995). This is because a crucial
component of such a claim is that “the plaintiff suffer[ed]
damages as a consequence of the defendant’s conduct[.]” Id.(quoting Chemawa Country Golf, Inc. v. Wnuk, 402 N.E.2d 1069,
1072-73 (Mass. App. 1980)). As previously noted, Plaintiff
Borrowers must establish damages as an element of both their
wrongful foreclosure and UDAP claims. See Reyes-Toledo, 143
Hawaiʻi at 264 n.12, 428 P.3d at 776 n.12; Kawakami, 142 Hawaiʻi
at 519, 421 P.3d at 1289. Given that these claims require
Plaintiff Borrowers to “suffer damages as a consequence of the
[Defendant Banks’] conduct,” a claim for nominal damages is not
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sufficient to preserve Plaintiff Borrowers’ claims. See
Weinberg, 78 Hawaiʻi at 50, 890 P.2d at 287. Plaintiff Borrowers
consequently must establish compensatory damages to salvage
their claims. See id.Nor does Plaintiff Borrowers’ request that the
District Court impose punitive damages alleviate their burden to
prove compensatory damages. Given that Plaintiff Borrowers may
not rely on a claim for nominal damages to survive summary
judgment, Plaintiff Borrowers must provide an alternative basis
for a punitive damages award. See Zanakis-Pico, 98 Hawaiʻi at
330, 47 P.3d at 1243 (Acoba, J., concurring); Masaki, 71 Haw. at
6, 780 P.2d at 570. In other words, Plaintiff Borrowers must
show that they are entitled to compensatory damages –– the only
other independent source of damages –– before they may receive
punitive damages.4
Finally, Plaintiff Borrowers’ identified items for
recovery –– interest, loss of use payments, and past payments ––
are not sufficient to establish their damages. Again,
compensatory damages are intended to restore a plaintiff to the
4 This court notes that Plaintiff Borrowers are statutorily precluded
from receiving punitive damages for their UDAP claim. Zanakis-Pico, 98
Hawaiʻi at 319, 47 P.3d at 1232 (“HRS § 480-13(b) enumerates the specific
damages that a consumer may recover under this chapter . . . and makes no
provision for punitive damages.”).
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position they would have been in prior to the alleged tortious
act. Bynum, 106 Hawaiʻi at 85, 101 P.3d at 1153.
The law divides such “damages into two broad categories–
general and special.” Ellis v. Crockett, 51 Haw. 45, 50,
451 P.2d 814, 819 (1969). General damages “encompass all
the damages which naturally and necessarily result from a
legal wrong done[,]” id., and include such items as “pain
and suffering, inconvenience, and loss of enjoyment which
cannot be measured definitively in monetary terms.” Dunbar
v. Thompson, 79 Hawaiʻi 306, 315, 901 P.2d 1285, 1294 (App.
1995) (citation omitted). Special damages are “the natural
but not the necessary result of an alleged wrong[,]” Ellis,
51 Haw. at 50, 451 P.2d at 819, and are “often considered
to be synonymous with pecuniary loss and include such items
as medical and hospital expenses, loss of earnings, and
diminished capacity.” Dunbar, 79 Hawaiʻi at 315, 901 P.2d
at 1294.
Id. In light of the purpose of compensatory damages, Plaintiff
Borrowers must make a prima facie case that their requested
damages will restore them to their pre-tort position to survive
summary judgment. See id.; Exotics Hawaii-Kona, 116 Hawaiʻi at
302, 172 P.3d at 1046. In this context, the items that
Plaintiff Borrowers identified constitute, at best, pecuniary
losses that form a mere component of their compensatory damages.
See Bynum, 106 Hawaiʻi at 85, 101 P.3d at 1153. As discussed in
greater detail below, Plaintiff Borrowers consequently must
still factor in their pre-nonjudicial foreclosure statuses to
demonstrate their compensatory damages. Infra at 22-24.
An answer requiring Plaintiff Borrowers to account for
their remaining mortgage debts would be “dispositive of the
cause.” Given that Plaintiff Borrowers must establish
compensatory damages that will restore them to their pre-tort
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positions to survive summary judgment, Plaintiff Borrowers’
failure to account for their pre-tort positions precludes the
satisfaction of the damages elements of their claims. See
Bynum, 106 Hawaiʻi at 85, 101 P.3d at 1153. Consequently, an
answer to the question certified by the District Court would be
“dispositive of the cause” when Plaintiff Borrowers have only
provided evidence of a portion of their compensatory damages.
Exotics Hawaii-Kona, 116 Hawaiʻi at 302, 172 P.3d at 1046; see
also HRAP Rule 13(a).
This court may therefore address the question
certified by the District Court.
2. This court declines to address Plaintiff Borrowers’
alternative questions.
In contrast, this court notes that it would be
inappropriate to resolve Plaintiff Borrowers’ alternative
questions. Plaintiff Borrowers ask this court to address
“(1) what items of damages are recoverable, either in
restitution, tort, or under the consumer statute, for the
unlawful disposition of real property using a power of sale, and
(2) how is each item measured[.]” However, Plaintiff Borrowers
do not contend that a resolution to either of their alternative
questions would be “determinative of the cause.” See HRAP Rule
13(a). In fact, Plaintiff Borrowers’ second question
acknowledges that any resolution this court could provide would
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require further fact-finding. Specifically, Plaintiff Borrowers
would leave for the District Court the actual measurement of any
recoverable damages. Accordingly, this court declines to
reformulate the certified question to conform to Plaintiff
Borrowers’ request and to answer Plaintiff Borrowers’
alternative questions. Matsuura v. E.I. du Pont de Nemours &
Co., 102 Hawaiʻi 149, 168, 73 P.3d 687, 706 (2003).
B. Plaintiff Borrowers must account for their mortgage debts
when establishing harm.
Having determined that this court may address the
question certified by the District Court, we turn to the
question’s merits.
For the following reasons, this court concludes that
Plaintiff Borrowers may not establish the damages elements of
their wrongful foreclosure or UDAP claims without accounting for
their remaining mortgage debts.
1. Plaintiff Borrowers bear the burden of establishing
their damages.
Plaintiffs bear the burden of establishing all
necessary elements for their claims. Kelly, 111 Hawaiʻi at 233,
140 P.3d at 1013. This remains the case when a plaintiff
opposes a motion for summary judgment. Exotics Hawaii-Kona, 116
Hawaiʻi at 302, 172 P.3d at 1046. In these cases, the common
element between Plaintiff Borrowers’ wrongful foreclosure and
UDAP claims is compensatory damages. Reyes Toledo, 143 Hawaiʻi
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at 264 n.12, 428 P.3d at 776 n.12; Kawakami, 142 Hawaiʻi at 519,
421 P.3d at 1289. Moreover, “[i]t is well-settled that all tort
claims require that damages be proven with reasonable
certainty.” Exotics Hawaii-Kona, 116 Hawaiʻi at 292, 172 P.3d at
1036. Consequently, Plaintiff Borrowers –– not Defendant Banks
–– bear the burden of establishing their damages with reasonable
certainty. See id.
2. In establishing damages, Plaintiff Borrowers must
account for the value of their mortgages.
The fact that Plaintiff Borrowers must show
compensatory damages places the onus on Plaintiff Borrowers to
account for their mortgage debts. As detailed above, Plaintiff
Borrowers must establish compensatory damages to satisfy the
damages elements of their wrongful foreclosure and UDAP claims.
Supra at 14-18. The purpose of compensatory damages is “‘to
recompense a tort victim for the value of the loss
sustained[.]’” Zanakis-Pico, 98 Hawaiʻi at 327, 47 P.3d at 1240(Acoba, J., concurring) (quoting 1 Minzer, et al., Damages in
Tort Actions, § 3.01 (Matthew Bender 1996)). Therefore, “‘the
general rule in measuring damages is to give a sum of money to
the person wronged which as nearly as possible, will restore him
[or her] to the position he [or she] would be in if the wrong
had not been committed.’” Tabieros v. Clark Equip. Co., 85
Hawaiʻi 336, 389, 944 P.2d 1279, 1332 (1997) (quoting Nobriga v.
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Raybestos-Manhattan, Inc., 67 Haw. 157, 162, 683 P.2d 389, 393
(1984)) (alterations in Tabieros). In light of the purpose of
compensatory damages, Plaintiff Borrowers must show that the
damages they seek “will restore [them] to the position [they]
would be in if the wrong had not been committed.” See id.In these cases, the tortious acts Plaintiff Borrowers
challenge are Defendant Banks’ nonjudicial foreclosure sales of
their properties. Plaintiff Borrowers concede that, prior to
the nonjudicial foreclosure sales, their property interests were
encumbered by “standard-form mortgages” that they “could not
repay.” Under such circumstances, Plaintiff Borrowers’ mortgage
debts are a key factor in determining their damages because the
debts constitute a portion of their pre-tort positions. See
Tabieros, 85 Hawaiʻi at 389, 944 P.2d at 1332.
Moreover, Plaintiff Borrowers’ burden to prove their
damages with “reasonable certainty” militates in favor of
requiring Plaintiff Borrowers to account for their remaining
mortgage debts. Plaintiff Borrowers do not dispute that the
mortgage debts at issue ranged from approximately $169,000 to
nearly $1,000,000 at the time of the nonjudicial foreclosure
sales. These are not insignificant sums. Plaintiff Borrowers’
failure to account for such sums makes it impossible for the
trier of fact to determine what damages would restore Plaintiff
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Borrowers to their pre-foreclosure positions. Contra Tabieros,
85 Hawaiʻi at 389, 944 P.2d at 1332.
Using the Myers as an example, the Myers owed
$944,759.00 on their mortgage at the time of the applicable
nonjudicial foreclosure sale. Wells Fargo then sold the Myers’
property for $815,000.00. Thus, the Myers must at least
subtract $815,000.00 from the total amount of damages they seek
in order to account for their mortgage debt.5
Plaintiff Borrowers nevertheless assert that Defendant
Banks should bear the burden of proving “deductions” during the
damages phase. Specifically, Plaintiff Borrowers contend that
they should be allowed to disregard their remaining mortgage
debts, and that it is instead up to Defendant Banks to prove any
amounts that should be “deducted” from Plaintiff Borrowers’
damages. Plaintiff Borrowers base this “deductions” response on
a restitution theory that Defendant Banks should not be unjustly
enriched. Plaintiff Borrowers additionally cite Beneficial
Hawaii, Inc. v. Kida, 96 Hawaiʻi 289, 30 P.3d 895 (2001), as
5 This court uses the lesser amount based on the assumption that Wells
Fargo sought a deficiency judgment. In this scenario, the Myers would have
received a value of $815,000.00 from the foreclosure sale in the form of
forgiven mortgage debt. However, the Myers would still owe Wells Fargo
$129,759.00 through a deficiency judgment.
In the event that Wells Fargo did not seek a deficiency judgment, the
Myers would have received the full value of their remaining mortgage debt in
the form of forgiven debt. In such a case, the Myers would be required to
offset their requested costs by their full mortgage debt of $944,759.00.
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evidence that Defendant Banks bear the burden for accounting for
Plaintiff Borrowers’ mortgage debts.
This contention is unavailing. First, Plaintiff
Borrowers concede that their claims arise in tort. Plaintiff
Borrowers’ reliance on restitution theory is therefore
inapposite when tort damages are generally intended to make
plaintiffs whole. See Zanakis-Pico, 98 Hawaiʻi at 327, 47 P.3d
at 1240 (Acoba, J., concurring) (discussing the damages
available in tort actions).
Second, Kida arose in a distinguishable procedural
posture. In that case, plaintiff Beneficial Hawaii, Inc. sought
to foreclose on property owned by defendant Donald Muneo Kida.
96 Hawaiʻi at 295-96, 30 P.3d at 901-02. In addressing whether
Beneficial Hawaii, Inc. could seek equitable remedies, this
court explained that Beneficial Hawaii, Inc. was not entitled to
any relief when it failed to satisfy its burden of proving that
it could enforce the note and mortgage. See Kida, 96 Hawaii at
315-16, 30 P.3d at 921-22. Kida therefore reinforces the
longstanding precedent that a plaintiff must provide sufficient
evidence to establish all necessary elements of their claims.
See Kelly, 111 Hawaiʻi at 233, 140 P.3d at 1013.
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3. Santiago confirms that Plaintiff Borrowers must
account for their mortgage debts when establishing
their compensatory damages.
This court’s holding in Santiago v. Tanaka, 137 Hawaiʻi
137, 366 P.3d 612 (2016), does not change this analysis. The
District Court identifies its “conundrum” as “how, if at all,
the ‘out-of-pocket losses’ restitution analysis bears on whether
a borrower can prove the harm element in the liability portion
of a wrongful foreclosure claim.” In particular, the District
Court reasons that “Santiago may suggest that any remaining
mortgage debt be disregarded, and the investment value in the
property be returned to borrowers without setoff.”
Santiago does not support this proposition. There,
Louis Santiago and Yong Santiago (together, the Santiagos)
purchased a tavern from Ruth Tanaka (Tanaka) for $1.3 million.
Id. at 140, 366 P.3d at 615. The Santiagos paid $800,000 in
cash, and executed a mortgage to Tanaka for the remaining
$500,000. Id. During a dispute over sewer maintenance fees,
the Santiagos temporarily withheld a mortgage payment. Id. at
144, 366 P.3d at 619. In response, Tanaka accelerated the
mortgage and initiated nonjudicial foreclosure proceedings. Id.
The Santiagos subsequently resumed their mortgage payments and
ultimately paid Tanaka some $585,161.60 on the mortgage. Id. at
144, 146 n.22, 366 P.3d at 619, 621 n.22. Nevertheless, Tanaka
completed the foreclosure sale, resold the tavern to a third
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party, and kept the approximately $1.4 million in payments from
the Santiagos. Id. at 146, 366 P.3d at 621. Thus, in contrast
to Plaintiff Borrowers who owed significant sums they could not
repay on their mortgages, the Santiagos had effectively paid off
their mortgage debt. See id. at 158, 366 P.3d at 634. In other
words, the Santiagos had no remaining mortgage debt to
disregard. See id.
In fact, Santiago makes clear that courts must apply a
set off in determining Plaintiff Borrowers’ injuries and
damages. This court applied the out-of-pocket rule to calculate
the Santiagos’ damages. Id. at 158-59, 366 P.3d at 633-34. In
doing so, we explained that, “[u]nder the out-of-pocket rule,
‘the damages are the difference between the actual value of the
property received and the price paid for the property, along
with any special damages naturally and proximately caused . . .
, including expenses incurred in mitigating the damages.” Id.
at 159, 366 P.3d at 634 (quoting B.F. Goodrich Co. v. Mesabi
Tire Co., 430 N.W.2d 180, 182 (Minn. 1988); citing 37 Am. Jur.
2d Fraud and Deceit § 434 (2013)).
Notably, when determining out-of-pocket losses, the
party seeking damages “is precluded from any recovery if the
value of the property that he or she received in exchange equals
or exceeds the value of the property parted with by him or her.”
37 Am. Jur. 2d Fraud and Deceit § 434. Courts have long
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recognized that this is because the party does not sustain any
injury in such an equivalent or beneficial exchange. See, e.g.,
Stratton’s Independence v. Dines, 135 F. 449, 460 (8th Cir.
1905). Thus, Santiago demonstrates that Plaintiff Borrowers’
“price paid” must be set off by the “actual value of the
property received” when calculating damages. See 137 Hawaiʻi at
159, 366 P.3d at 634.
Applying these rules to the present circumstances
shows that Plaintiff Borrowers must account for their remaining
mortgage debts when they establish their damages. Although
Plaintiff Borrowers did not receive any actual property, they
nevertheless received significant value in the form of forgiven
mortgage debts.6 This constitutes the “actual value of the
property received” by Plaintiff Borrowers. Meanwhile, Plaintiff
Borrowers’ “price paid for the property” consists of whatever
mortgage payments they had made before the nonjudicial
foreclosures as well as any other special damages they can
prove. Under these circumstances, Santiago establishes that
Plaintiff Borrowers’ investments and special damages must be
6 As previously noted, the actual value received depends on whether the
relevant Defendant Bank sought a deficiency judgment. Supra at n.5. If so,
the applicable offset is limited to the amount by which the Plaintiff
Borrower’s mortgage debt is reduced. If not, the applicable offset would be
equal to the full amount of the Plaintiff Borrower’s mortgage debt.
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offset by their mortgage debts. See 137 Hawaiʻi at 159, 366 P.3d
at 634.
IV. CONCLUSION
For the foregoing reasons, we answer the District
Court’s certified question as follows: Under Hawaiʻi law, a
borrower with no pre-foreclosure rights in property except as
encumbered by a mortgage bears the burden of accounting for the
effect of the mortgage in establishing the element of harm.
Edmund K. Saffery, Deirdre /s/ Mark E. Recktenwald
Marie-Iha, Lauren K. Chun, and
Loren W. Coe*, Mark D. Lonergan* /s/ Paula A. Nakayama
and Erik Kemp*, for Defendant-
Appellant Wells Fargo Bank, N.A. /s/ Sabrina S. McKenna
Megan A. Suehiro, Andrew V. /s/ Michael D. Wilson
Beaman, Leroy E. Colombe,
and Bernard J. Garbutt III*, for /s/ John M. Tonaki
Defendant-Appellant U.S. Bank
National Association, as Trustee
and Deutsche Bank National Trust
Company, as Trustee
James J. Bickerton, Bridget G.
Morgan-Bickerton, John F. Perkin,
Stanley H. Roehrig, and
Van-Alan H. Shima for Plaintiffs-
Appellees Calvin Jon Kirby II,
Deirdre-Dawn K. Cabison, James C.
Clay, Scott A. Coryea, Katheryn
Coryea, Richard H. Farnham,
Nancy L. Farnham, Timothy Ryan,
Donna Ryan, Kaniala Salis, and
Brian S. Weatherly, Individually
and on behalf of all others
similarly situated in Civil No.
12-00509; for Plaintiffs-Appellees
Evelyn Jane Gibo, Patrick Stephen
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Hemmens, Deanne Davidson Hemmens,
Vincent Labasan and Jennifer Stike
in Civil No. 12-00514; and
for Plaintiffs-Appellees
David Emory Bald, James L. K.
Dahlberg, Michael John Myers, Jr.,
Tham Nguyen Myers, David Levy, and
Thomas T. Au, individually and on
behalf of all others similarly
situated in Civil No. 13-00135
Lionel N. Lima, Jr., and
Barbara Ann Delizo-Lima,
Plaintiffs-Appellees pro se
*admitted pro hac vice
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