Delapinia v. Nationstar Mortgage LLC. ( 2021 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
25-OCT-2021
08:41 AM
Dkt. 48 OP
IN THE SUPREME COURT OF THE STATE OF HAWAI‘I
---o0o---
RAY A. DELAPINIA and ROBYN M. DELAPINIA,
Petitioners/Plaintiffs-Appellants,
vs.
NATIONSTAR MORTGAGE LLC; FEDERAL NATIONAL MORTGAGE
ASSOCIATION; TERRY LOUISE COLE; MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.; AMERICAN SAVINGS BANK, F.S.B.,
Respondents/Defendants-Appellees.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIV. NO. 2CC161000432)
OCTOBER 25, 2021
RECKTENWALD, C.J., NAKAYAMA, McKENNA, WILSON, JJ.,
AND CIRCUIT JUDGE WONG, IN PLACE OF POLLACK, J., RECUSED
OPINION OF THE COURT BY RECKTENWALD, C.J.
I. INTRODUCTION
In 2010, the plaintiffs’ Kihei property was foreclosed
by nonjudicial foreclosure under Hawai‘i Revised Statutes (HRS)
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Part I (since repealed). Several years later, the plaintiffs
sued for wrongful foreclosure and quiet title against various
defendants: their mortgagees, the subsequent purchaser of the
property, and the subsequent purchaser’s mortgagees. The
defendants moved for, and the circuit court granted, dismissal
of all claims. The Intermediate Court of Appeals (ICA), in a
published opinion, vacated in part but affirmed as to one
defendant: the subsequent purchaser’s mortgagee. Delapinia v.
Nationstar Mortgage LLC, 146 Hawai‘i 218, 458 P.3d 929 (Haw. Ct.
App. 2020).
We accepted the plaintiffs’ application for writ of
certiorari to consider two aspects of the ICA’s decision: First,
the ICA adopted the “tender rule,” a requirement under which a
plaintiff seeking to quiet title must plead that it can tender
the amount of indebtedness. We decline to opine whether the
tender rule applies in Hawai‘i wrongful foreclosure cases
generally. But we hold that it is inapplicable on these facts,
where the defendant asserting the rule against a quiet title
claim is the subsequent purchaser’s mortgagee, to whom the
plaintiff is not in debt. As the defendant who sought to assert
the tender rule was not the plaintiffs’ mortgagee, the
plaintiffs do not need to plead tender in order to establish
superior title as to that defendant.
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Second, this case requires us to consider whether
foreclosures that violate the power of sale are voidable or
void. Silva v. Lopez, 5 Haw. 262 (1884), suggests that such
wrongful foreclosures are void. However, we have considered
this question in other wrongful foreclosure contexts more
recently, and those cases favor protecting the reliance
interests of a bona fide purchaser. Accordingly, we hold that
wrongful foreclosures in violation of the power of sale are
voidable, and to the extent Silva is to the contrary, it is
overruled.
II. BACKGROUND
A. Circuit Court Proceedings
1. The Complaint
This case arises from several motions brought before
the Circuit Court of the Second Circuit 1 (circuit court) in the
Delapinias’ wrongful foreclosure suit: Nationstar Mortgage LLC
(Nationstar) and Federal National Mortgage Association’s (Fannie
Mae) (collectively, “Nationstar defendants”) motion for judgment
on the pleadings; defendant Terry Louise Cole’s motion to
dismiss, in which defendant American Savings Bank F.S.B (ASB)
joined (collectively, “Cole defendants”); and defendant Mortgage
Electronic Registration Systems, Inc.’s (MERS) motion to
1 The Honorable Rhonda I.L. Loo presided.
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dismiss. The circuit court granted all of the above motions
(although only the motions to dismiss are at issue on
certiorari), and accordingly, all facts alleged in the
plaintiffs’ First Amended Complaint (FAC) will be taken as true.
Goran Pleho, LLC v. Lacy, 144 Hawaiʻi 224, 236, 439 P.3d 176, 188
(2019).
The Delapinias alleged the following in the FAC. The
Delapinias owned property in Kihei, which was secured by
mortgage executed in 2007. “In 2010, Nationstar claimed to be
the assignee of the Mortgage . . . [and] claimed to be a
mortgagee or successor to a mortgagee entitled under HRS Chapter
667 Part I (2008) to exercise the power of sale in the
Mortgage.” In fact, “Nationstar was acting at the direction and
behest of Fannie Mae” and “did not satisfy the conditions
precedent to the valid exercise of that power.”
Nationstar, “purporting to act under the power of sale
in the Mortgage, executed a deed conveying the Property to
Fannie Mae,” but “[t]hat deed was void because Nationstar and
Fannie Mae, as the foreclosing mortgagee, did not comply with
the power of sale in the mortgage or the statute then governing
their exercise of the power of sale, HRS Chapter 667 Part I.”
The Delapinias identified the following violations of the power
of sale clause and of the statutes:
a) Plaintiffs were not served with a notice of acceleration
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that complied with Paragraph 22 of the Mortgage;
b) The notice of intention of foreclosure published by
Nationstar and Fannie Mae did not contain a description
of the Property as required by HRS Section 667-7(a)(1),
but merely published the address and Tax Map Key Number
of the Property, which did not constitute the
“description” contemplated by the statute;
c) The Notice did not offer buyers of the Property a
warranty that the putative mortgagee had the right to
sell or that the sale was conducted lawfully in
compliance with the applicable statute and the power of
sale;
d) No Defendant first advertised the notice of sale more
than 28 days before the proposed auction date as
required by HRS Section 667-7 (2008);
e) No Defendant used a Hawaii attorney to perform all of
the acts required by the power of sale, including but
not limited [to] having an attorney sign and give the
notice of sale to Plaintiffs and having an attorney who
conducted the sale executive the Affidavit of
Foreclosure;
f) No Defendant ever published any date on which the
Property was actually sold, in violation of Paragraph 22
of the Mortgage which stated that the mortgagee “shall
sell” at the time specified in the published notice;
g) No Defendant ever held an auction on a published date,
in violation of Paragraph 22 of the Mortgage which
stated that the mortgagee “shall sell” at the time
specified in the published notice;
h) No Defendant ever issued a written notice to the public
of any postponed auction date, despite the requirement
of Paragraph 15 of the Mortgage that “all notices” in
connection with the Mortgage be “in writing” and state
law requiring a “public announcement” of any
postponement;
i) The date when the Property was purportedly sold to
Nationstar or Fannie Mae (depending on whether one
believes the Affidavit of Foreclosure or the quitclaim
deed from Nationstar) was never published in a newspaper
or otherwise in writing to the public; and
j) No Defendant ever recorded a lawful Affidavit of
Foreclosure signed by the attorney conducting the
putative sale.
(Emphases in original).
Fannie Mae purchased the property, and subsequently
sold it to Cole by limited warranty deed. 2 But the Delapinias
2 The Delapinias also contest whether Cole was a bona fide
purchaser, as they argue subsequent purchasers should have been charged with
constructive notice of the defects that were inferable from the Foreclosure
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contended that both conveyances are “void and not merely
voidable” under Silva v. Lopez, 5 Haw. 262, 271 (1884), and Lee
v. HSBC Bank USA, 121 Hawaiʻi 287, 218 P.3d 775 (2009), because
of the statutory and contractual violations that rendered the
foreclosure wrongful. The plaintiffs therefore sought “the
‘classic remedy’ for a challenged nonjudicial foreclosure,”
return of title and possession, citing Santiago v. Tanaka, 137
Hawaiʻi 137, 154 n.33, 366 P.3d 612, 629 n.33 (2016).
The Delapinias brought two claims against the
defendants based on these allegations. In Count I (quiet
title), the Delapinias asked the court to quiet title in the
property in favor of the plaintiffs – except for the 2007
Mortgage, “which should remain on the Property when it is
returned to Plaintiffs” – ejectment of the third-party
purchaser, possession, and damages from the lost rental value.
In Count II (wrongful foreclosure), the Delapinias further
alleged that the Nationstar defendants failed to act “in
accordance with their duties as mortgagee”– since “no lawful
published auction ever occurred,” those duties continued. The
plaintiffs asked for compensatory and punitive damages on the
wrongful foreclosure count.
Affidavit. Whether Cole is in fact a bona fide purchaser is not at issue in
this appeal.
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2. Motions to Dismiss and for Judgment on the Pleadings
The Cole defendants moved to dismiss 3 the FAC under
Hawaiʻi Rules of Civil Procedure (HRCP) Rule 8(a) 4 and Rule
12(b)(6) 5 on the basis that they were protected by their status
as bona fide purchasers. 6 The Cole defendants pointed to this
court’s decisions in Santiago and Mount v. Apao, 139 Hawaiʻi 167,
384 P.3d 1268 (2016), 7 which they claim establish that “an
unlawful nonjudicial foreclosure is at most ‘voidable,’ unless
the property has been sold to innocent purchasers for value, in
which case the appropriate remedy is an award of damages.” As
pleaded, it was “apparent from the face of the pleading” that
the foreclosure was at most voidable, not void. Under Santiago
and Mount, the appropriate remedy when the property has been
conveyed to “innocent purchasers for value” is damages. It was
also “apparent from the face of the FAC” that Cole was a bona
fide purchaser.
The Delapinias argued in response that this court has
described “the classic remedy for such a cause of action [as]
3 The Nationstar defendants supported and joined in the arguments
set forth in this motion.
4 HRCP Rule 8(a) provides:
A pleading which sets forth a claim for relief . . . shall
contain (1) a short and plain statement of the claim showing that
the pleader is entitled to relief, and (2) a demand for judgment
for the relief the pleader seeks. Relief in the alternative or of
several different types may be demanded.
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return of title and possession.” (Emphasis omitted). Moreover,
the Delapinias contend Mount did not address the remedy when the
sale violated the power of sale clause, rather than the statute.
On the other hand, Silva “is on point and is
ultimately controlling here.” Per the plaintiffs, that case
stands for the principle that “if the power of sale was violated
by improper publication of notice of the sale, the sale is ‘void
and not merely voidable,’” quoting Silva, 5 Haw. at 271. They
maintained that Silva remains good law – cited approvingly by
Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai‘i 227, 240 n.26, 361
P.3d 454, 467 n.26 (2015), and Mount – and as a result, “[the]
foreclosure was void and conveyed nothing,” negating the Cole
5 HRCP Rule 12(b)(6) allows for the dismissal of complaints for
“failure to state a claim upon which relief can be granted.”
6 They also contended that the Delapinias’ claims were time-barred.
Likewise, the Nationstar defendants filed an answer to the FAC, largely
denying the allegations and asserting as a defense, among other things, the
statute of limitations. They subsequently moved for judgment on the
pleadings, or in the alternative for summary judgment, per HRCP Rule 12(c).
In that motion, they too argued that the Delpainias’ claims were time barred,
either by a two- or six-year statute of limitations. The motion also
reiterated the arguments that “an improperly completed non-judicial
foreclosure is voidable” not void. (Emphasis omitted). In the alternative,
they argued that laches barred recovery.
The Delapinias contended that the relevant statute of limitations
was twenty years.
The court circuit concluded that the two-year statute of
limitations applied and barred the claim.
7 Mount was decided after the FAC but before the relevant motions
from the defendants.
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defendants’ bona fide purchaser defense. (Original emphasis
altered).
MERS also moved to dismiss the FAC. It raised
substantially similar arguments regarding Cole’s bona fide
purchaser status, contending that the foreclosure sale cannot be
voided pursuant to Santiago and Mount. MERS asserted that
“citation to the [1884] Silva decision ignores the rulings in
both Mount and Santiago.” And, like the Cole defendants, MERS
argued that Cole was a bona fide purchaser because only notice
of pending litigation – not the record notice alleged in the
complaint – would have undermined the protection afforded to
third-party purchasers for value.
Further, MERS argued that “[w]hile this case should be
dismissed in its entirety against MERS based on Cole’s bona fide
purchaser defense, Plaintiffs’ underlying claims are equally
meritless” because the Delapinias failed to “allege that they
have paid or are able to tender the amount of indebtedness that
would be due under the Mortgage,” citing cases from the United
States District Court for the District of Hawaiʻi that appear to
adopt the “tender rule.” “Here, Plaintiffs[’] Count I should be
dismissed because they do not allege that they have paid or are
able to tender the amount of indebtedness. In fact, Plaintiffs
argue that if they prevail that ‘the Property remains encumbered
by the [Mortgage].’”
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In opposition to MERS, the Delapinias reiterated many
of the same arguments as they presented in their response to the
Cole defendants’ motion. They emphasized that Silva directly
controls this case and renders the deed void, not voidable. The
Delapinias also addressed MERS’s contention that the “tender
rule” barred their complaint. They acknowledged this rule has
been “adopted in some mainland jurisdictions,” but asserted it
is inapplicable here. (Capitalization altered). MERS cited
cases in which the quiet title claim was against the mortgagee;
here, “[t]he FAC plainly alleges that the original mortgage that
Plaintiffs gave to Nationstar’s and Fannie Mae’s assignor
remains on the property, and Plaintiffs only seek to quiet the
title to the Property[.]” (Emphasis in original). They “will
accept the Property back with the mortgage still on it,” at
which point the Nationstar defendants are free to “attempt a
lawful foreclosure” should the default remain. In any event,
Santiago “does not hold that the mortgagor must first pay off or
offer to pay off the mortgage before being entitled to” relief
in the form of possession.
The circuit court granted the Cole defendants’ motion,
orally ruling as follows:
Even when accepting Plaintiffs’ factual allegations
as true, dismissal of the claims against Terry Cole,
American Savings Bank and Nationstar is appropriate.
. . .
As to the sale being void or voidable, any reading of
the law in Hawaii is improperly completed nonjudicial
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foreclosure sales are voidable -- my reading of the law,
excuse me, is that nonjudicial foreclosure sales are
voidable if the claim is timely and the current owners are
not bona fide purchasers.
There’s no allegation that Defendants did not pay
value for the property, and there is no allegation that the
current owners had actual notice of Plaintiffs’ claims.
There is no allegation that Plaintiffs or anyone else
recorded any kind of documentation reasonably indicating
Plaintiffs had any interest in the subject [property].
Therefore, the argument for the non-bona fide purchaser
status under constructive or inquiry notice fails as well.
So I’m going to go ahead and grant both motions.
The circuit court subsequently granted MERS’s motion
as well, issuing the following in its written order:
1. Under Hawaiʻi law, a properly completed non-
judicial foreclosure sale is voidable if the claim is
timely and the current owners are bona fide purchasers.
There is no allegation that Cole did not acquire the
property for value and there is no allegation that Cole had
notice of Plaintiffs’ outstanding claims if any, so Cole is
a bona fide purchaser. The court notes that it has already
dismissed claims against Cole because of her innocent bona
fide purchaser status. As Cole’s mortgagee, Defendant MERS
receives the same protection as Cole.
2. Plaintiffs fail to state a Quiet Title Claim as
they do not allege that they have paid or are able to
tender the amount of indebtedness due under their mortgage.
3. The notice of sale complied with the mortgage.
The notice of sale properly described the property under
HRS 667-7(a)(1).
4. The publishing of the notice of sale complied
with HRS 667-7.
5. A Hawaii attorney is not required to sign the
notice of sale or affidavit of foreclosure.
6. Lastly, written publication of postponement of an
auction is not necessary.
B. ICA Proceedings
The Delapinias appealed. The ICA affirmed in part and
vacated in part 8 the circuit court’s judgment in a published
8 The ICA vacated the circuit court’s order granting judgment on
the pleadings to Nationstar and Fannie Mae and the order dismissing the Cole
defendants, which was based in part on the conclusion that the Delapinias’
claim was time-barred by the two-year statute of limitations. As before the
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opinion. Regarding the dismissal of MERS, the ICA reasoned that
the tender rule barred the Delapinia’s claim:
The tender rule is based on the principle that a plaintiff
seeking to quiet title “must at least prove that he has a
substantial interest in the property and that his title is
superior to that of the defendants.” Maui Land & Pineapple
Co.[ v. Infiesto], 76 Haw[ai‘i] [402,] 408, 879 P.2d [507,]
513 [(1994)]. The tender rule requires as [sic] borrower,
in bringing a quiet title action, to allege that he has
paid, or is able to tender, the amounts owed. Klohs v.
Wells Fargo Bank, N.A., 901 F. Supp. 2d 1253, 1262-63 (D.
Haw. 2012).
Delapinia, 146 Hawaiʻi at 228, 458 P.3d at 939.
In this case, “the Delapinias did not allege either
that ‘they have paid off [Nationstar Mortgage] or are prepared
to tender all amounts owing’ to Nationstar such as is necessary
to establish superior title and maintain a quiet title action.”
Id. (brackets in original) (quoting Klohs, 901 F. Supp. 2d at
1262).
The ICA also concluded that no exception to the tender
rule applied. The ICA reasoned that tender requirement does not
apply “where the borrower brings a quiet title claim against a
party who, according to the allegations in the Complaint (which
the court accepts as true), is not a mortgagee and who otherwise
circuit court, see supra note 6, the parties argued in their ICA briefs over
whether the relevant statute of limitations was 2-, 6-, or 20-years.
The ICA concluded that the statute of limitations was six years,
and that the Delapinias timely filed their complaint. Delapinia, 146 Hawaiʻi
at 224–26, 458 P.3d at 935–37. As no defendant sought certiorari review,
this memo will not address the statute of limitations issue any further.
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has no interest in the property whatsoever.” Id. (quoting
Klohs, 901 F. Supp. 2d at 1263 n.6). However,
based on the Delapinias’ allegations in the FAC, MERS has
an interest in the Property. In the portion of the FAC
describing the parties to the action, the Delapinias
described MERS as “a foreign corporation which is and at
all relevant times was doing business in Hawaii, and which
claims to hold a mortgage on the Property as nominee.” In
their quiet title count, the Delapinias alleged that
“Defendant Cole has purported to grant a first mortgage on
the Property to Defendant MERS as nominee of ‘Pinnacle
Capital Mortgage Corporation[.]’” Thus, where MERS has an
interest in the Property according to the allegations in
the FAC, the tender rule applies.
Id. (brackets in original).
As to the Cole defendants, “[t]o the extent that the
Delapinias alleged that a wrongful foreclosure voided the sale
and all subsequent transfers, we reject this contention as a
matter of law.” Id. at 229, 458 P.3d at 940. “While it is true
that the supreme court has not expressly overruled Silva, the
supreme court has more recently held that improper foreclosure
sales are voidable.” Id. The ICA pointed to Kondaur and
Santiago for this principle, noting that in both cases, we
determined the foreclosure sale to be “voidable.” Id. (citing
Kondaur, 136 Hawaiʻi at 240, 361 P.3d at 467; Santiago, 137
Hawaiʻi at 158, 366 P.3d at 633). And while this court in Mount
cited Silva approvingly and acknowledged that in Lee, we held a
foreclosure sale to be void, Mount also factually distinguished
Lee on the grounds that the sale in Lee was not yet completed.
Id. (citing Mount, 139 Hawaiʻi at 180, 384 P.3d at 1281). Thus,
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the ICA “conclude[d] that improper foreclosure sales are
voidable, rather than void, and that the supreme court has
either distinguished or impliedly overruled its earlier
decisions holding to the contrary.” Id.
Nonetheless, the ICA vacated the order dismissing the
Cole defendants because “[t]he Delapinias were not required to
make any allegations pertaining to possible affirmative defenses
in the FAC,” and the circuit court’s conclusion that Cole was a
bona fide purchaser as a matter of law was improper. Id.
C. Supreme Court Proceedings
On certiorari, the Delapinias challenge the ICA’s
holding adopting the tender rule and the ICA’s treatment of
Silva. First, they argue that the ICA gravely erred by
“requiring a wrongful foreclosure victim to also plead and prove
the ability to tender the full amount of the wrongfully
foreclosed mortgage as a condition to receiving the ‘classic
remedy’ [of return of title and possession].” (Emphasis
omitted). Even if the tender rule were Hawaiʻi law, the
Delapinias argue that the ICA did not correctly analyze the
rule’s exceptions. Second, the Delapinias argue that the ICA
“gravely erred in exceeding its constitutional authority and
declaring that Silva v. Lopez, . . . a decision of this court
that has stood for over 135 years, has been ‘impliedly
overruled[.]’” Per the Delapinias, “[t]his court has never
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distinguished Silva” on its holding that improper foreclosure
sales are void as opposed to voidable. “[T]he ICA does not have
the power to limit decisions of this court,” and Silva directly
controls.
The Nationstar defendants and the Cole defendants
argued in response that the ICA correctly declined to apply
Silva. MERS additionally defended the ICA’s application of the
tender rule: per MERS, the Delapinias are conflating their
wrongful foreclosure claim against the Nationstar defendants
with the quiet title claim against MERS. Quiet title requires
that the Delapinias establish the superiority of their title,
which MERS claims requires the Delapanias to “prov[e] that
[they] can cure the default[.]” The rule is rooted in equity:
“[e]quity will not interpose its remedial power in the
accomplishment of what seemingly would be nothing but an idly
and expensively futile act[.]” (Quoting Arnolds Mgmt. Corp. v.
Eischen, 158 Cal. App. 3d 575, 578-79 (1984)).
III. STANDARD OF REVIEW
A trial court’s ruling on a motion to dismiss is
reviewed de novo. The court must accept plaintiff’s
allegations as true and view them in the light most
favorable to the plaintiff; dismissal is proper only if it
appears beyond doubt that the plaintiff can prove no set of
facts in support of his or her claim that would entitle him
or her to relief.
Goran Pleho, 144 Hawaiʻi at 236, 439 P.3d at 188 (quoting Wong v.
Cayetano, 111 Hawaiʻi 462, 476, 143 P.3d 1, 15 (2006)) (emphasis
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omitted).
IV. DISCUSSION
A. MERS May Not Assert the Tender Rule to Bar the Quiet Title
Action in this Case
The tender rule has been described as follows:
As a general rule, a debtor cannot set aside the
foreclosure based on irregularities in the sale without
also alleging tender of the amount of the secured debt.
. . . “The rationale behind the rule is that if [the
borrower] could not have redeemed the property had the sale
procedures been proper, any irregularities in the sale did
not result in damages to the [borrower].”
Ram v. OneWest Bank, FSB, 183 Cal. Rptr. 3d 638, 649-50 (Cal.
Ct. App. 2015) (citations omitted) (brackets in original).
Although we have not determined whether the tender
rule is Hawaiʻi law, in other jurisdictions, the rule is rooted
in the principle that “a defaulted borrower who seeks to set
aside a [foreclosure] sale is required to do equity before the
court will exercise its equitable powers.” Lona v. Citibank
N.A., 202 Cal. App. 4th 89, 112 (2011). Said differently,
plaintiffs must “come into equity with clean hands” by paying
their outstanding debts. Shimpones v. Stickney, 28 P.2d 673,
678 (Cal. 1934). Allowing plaintiffs to claim property without
paying what they owe “would give them an inequitable windfall,
allowing them to evade their lawful debt.” Stebley v. Litton
Loan Servicing, LLP, 134 Cal. Rptr. 3d 604, 607 (Cal. Ct. App.
2011); see also Dimock v. Emerald Properties LLC, 97 Cal. Rptr.
2d 255, 262 (Cal. Ct. App. 2000) (“Th[e tender] requirement is
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based on the theory that one who is relying upon equity in
overcoming a voidable sale must show that he is able to perform
his obligations under the contract so that equity will not have
been employed for an idle purpose.”).
In jurisdictions in which the tender rule applies,
“there is no exclusive list of circumstances where a tender is
not essential.” 9 5 Miller & Starr, Cal. Real Estate § 13:256
cmt. (4th ed. 2019). The question of tender turns on the
“equities of the situation,” the “degree of prejudice” or
“misconduct,” and the “nature” of the default. Id. In
California, for instance, the requirement of tender is an
element of a wrongful foreclosure claim, but California courts
recognize several exceptions:
9 The ICA seemed to conclude that the only exception to the tender
rule lies “where the borrower brings a quiet title claim against a party who,
according to the allegations in the Complaint (which the court accepts as
true), is not a mortgagee and who otherwise has no interest in the property
whatsoever.” Delapinia, 146 Hawaiʻi at 228, 458 P.3d at 939 (emphasis
omitted) (quoting Klohs, 901 F. Supp. 2d at 1263 n.6). Because the FAC
alleged that MERS claimed an interest in the property, the ICA reasoned that
the tender rule could not be excused.
But the language “who otherwise has no interest in the property
whatsoever” comes from the United States District Court for the District of
Hawaiʻi case Klohs v. Wells Fargo Bank, N.A., 907 Supp. 2d 1253, 1263 n.6 (D.
Haw. 2012), which in turn was quoting Amina v. Bank of New York Mellon, No.
CIV. 11-00714 JMS, 2012 WL 3283513, at *4 (D. Haw. Aug. 9, 2012). In
context, that language merely reflected the facts of Amina, in which the
plaintiffs alleged the defendant bank was threatening to foreclose when it
lacked any connection at all to the mortgage. Id. at *1. As explained
herein, there are a number of exceptions to the tender rule. Indeed, as the
Delapinias point out, every quiet title action will, by its nature, require
the plaintiffs to allege that the defendants have claimed an interest in the
property, so it cannot be the case that mere allegations that the defendant
has claimed an interest will per se require the plaintiff to plead tender.
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First, if the borrower’s action attacks the validity
of the underlying debt, a tender is not required since it
would constitute an affirmation of the debt. . . .
Second, a tender will not be required when the person
who seeks to set aside the trustee’s sale[ 10] has a
counterclaim or setoff against the beneficiary. In such
cases, it is deemed that the tender and the counterclaim
offset one another, and if the offset is equal to or
greater than the amount due, a tender is not
required. . . .
Third, a tender may not be required where it would be
inequitable to impose such a condition on the party
challenging the sale. (Humboldt Savings Bank v. McCleverty
(1911) 161 Cal. 285, 291, 119 P. 82 (Humboldt).) In
Humboldt, the defendant’s deceased husband borrowed $55,300
from the plaintiff bank secured by two pieces of property.
The defendant had a $5,000 homestead on one of the
properties. (Id. at p. 287, 119 P. 82.) When the
defendant’s husband defaulted on the debt, the bank
foreclosed on both properties. In response to the bank’s
argument that the defendant had to tender the entire debt
as a condition precedent to having the sale set aside, the
court held that it would be inequitable to require the
defendant to “pay, or offer to pay, a debt of $57,000, for
which she is in no way liable” to attack the sale of her
$5,000 homestead. (Id. at p. 291, 119 P. 82.)
Fourth, no tender will be required when the trustor
is not required to rely on equity to attack the deed
because the trustee’s deed is void on its face.
Lona, 202 Cal. App. 4th at 112-13 (citations and footnotes
omitted).
We need not and do not decide whether the tender rule
applies in wrongful foreclosure claims. We hold, however, that
the rule does not bar the quiet title action against MERS under
the circumstances of this case, where the party asserting the
rule in a motion to dismiss is not the plaintiff’s mortgagee.
The Delapinias are not indebted to MERS, who asserts the tender
rule here and who is involved in this case through the
10 In California, a trustee’s sale is a nonjudicial foreclosure
procedure; the trustee holds the power of sale. See 5 Miller & Starr, Cal.
Real Estate § 13:1.
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subsequent purchaser – MERS, in other words, was never the
Delapinias’ mortgagee. Cf. Trusty v. Ray, 249 P.2d 814, 817
(Idaho 1952) (“A mortgagor cannot without paying his debt quiet
title as against the mortgagee[.]” (emphasis added)); Rockridge
Tr. v. Wells Fargo, N.A., 985 F. Supp. 2d 1110, 1158 (N.D. Cal.
2013) (“[A] borrower may not assert a quiet title action against
a mortgagee without first paying the outstanding debt on the
property.” (emphasis added)); Marzan v. Bank of Am., 779 F.
Supp. 2d 1140, 1156 (D. Haw. 2011), abrogated on other grounds
by Compton v. Countrywide Fin. Corp., 761 F.3d 1046 (9th Cir.
2014) (“[I]n order to assert a claim for ‘quiet title’ against a
mortgagee, a borrower must allege they have paid, or are able to
tender, the amount of indebtedness.” (emphasis added)).
Bank of America, N.A. v. Reyes-Toledo, 143 Hawaiʻi 249,
428 P.3d 761 (2018), supports this conclusion. In that case,
the ICA concluded that the tender rule barred a homeowner’s
quiet title counterclaim as against a bank seeking foreclosure
on her property, which she alleged was not her mortgagee. Id.
at 254, 428 P.3d at 766. We vacated the decision of the ICA,
reasoning that under our notice-pleading standard, the
homeowner, by asserting that the bank was not her mortgagee,
stated a quiet title claim sufficient to survive a motion to
dismiss. Id. at 265-66, 428 P.3d at 777-78. Reyes-Toledo thus
suggests that the tender rule, if it is Hawai‘i law, does not bar
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a suit from proceeding against a party who is not the
plaintiff’s mortgagee, as the homeowner’s quiet title claim
survived in that case by virtue of the fact that they pleaded
that the bank was not the mortgagee. 11 We did not require the
homeowner to satisfy their debt against the true mortgagee in
order to “come into equity with clean hands,” Shimpones, 28 P.2d
at 678, because the debt was allegedly not the defendant’s to
enforce.
This conclusion makes sense given the equitable
reasons underpinning the rule. In a quiet title action,
“[w]hile it is not necessary for the plaintiff to have perfect
title to establish a prima facie case, he must at least prove
that he has a substantial interest in the property and that his
title is superior to that of the defendants.” Ibbetson v.
Kaiawe, 143 Hawaiʻi 1, 17, 422 P.3d 1, 17 (2018) (quoting Maui
Land & Pineapple Co. v. Infiesto, 76 Hawai‘i 402, 407-08, 879
11 One federal district court has taken Reyes-Toledo as
implicit endorsement of the [tender] rule; after all, the
survival of Reyes-Toledo’s quiet title claim, devoid as it
was of allegations of tender, appears to have been
predicated on the Hawaiʻi Supreme Court’s acceptance at face
value, under the notice pleading standard, of her
allegations that Bank of America was not the mortgagee.
Gamblin v. Nationstar Mortgage LLC, 2018 WL 5831207 at *13 (D. Haw.
November 7, 2018) (emphasis in original).
While we have not implicitly or explicitly endorsed the tender
rule, we agree that Reyes-Toledo supports the conclusion that a non-mortgagee
defendant to a quiet title claim, like MERS in this case, may not invoke it.
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P.2d 507, 512-13 (1994)). The Delapinias do not need to plead
tender to establish superior title to MERS, even assuming they
would in a wrongful foreclosure action against the Nationstar
defendants, because the Delapinias claim MERS acquired its
interest via a non-innocent third-party purchaser, who knowingly
purchased the property from a wrongful foreclosure. 12 Cf.
Carpenter v. PNC Bank, N.A., 386 F. Supp. 3d 1339, 1347 (D. Haw.
2019) (holding that quiet title plaintiffs had adequately
pleaded their “superior title” to defendants when plaintiffs
alleged that the defendants purchased the subject property
following a wrongful foreclosure and were not bona fide). The
wrongful foreclosure count was not dismissed. Allowing those in
MERS’s position – non-mortgagees who are allegedly non-bona fide
purchasers – to evade the quiet title action altogether by
asserting the tender rule against the Delapinias in a motion to
dismiss would not serve the rule’s equitable purpose of
preventing the Delapinias from “evad[ing] their lawful debt,”
Stebley, 134 Cal. Rptr. 3d at 607, because it is not MERS’s debt
to enforce in this case.
12 “A non-bona fide purchaser is one who does not pay adequate
consideration, ‘takes with knowledge that his transferor acquired title by
fraud, or buys registered land with full notice of the fact that it is in
litigation between the transferor and a third party.’” Kondaur, 136 Hawai‘i
at 240 n.27, 361 P.3d at 467 n.27 (brackets and ellipsis omitted) (quoting
Akagi v. Oshita, 33 Haw. 343, 347 (Haw. Terr. 1935)).
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On the other hand, if the third-party purchasers were
indeed innocent purchasers for value, 13 their interests are
adequately safeguarded by virtue of our conclusion below that
the sale is at most voidable. If the purchasers were bona fide,
damages would be the appropriate remedy. See infra Part IV.B.
Accordingly, if the purchasers were innocent purchasers for
value, the Delapinias have failed to establish “that [their]
title is superior to that of [MERS],” Ibbetson, 143 Hawaiʻi at
17, 422 P.3d at 17 (2018), as required for a quiet title claim
to succeed; innocent purchasers for value would enjoy superior
title to the Delapinias if the sale is not void ab initio. 92A
C.J.S. Vendor and Purchaser § 528 (2021) (“A bona fide
purchaser, meaning one who acquires an interest in a property
for valuable consideration, in good faith, and without notice of
another party’s adverse interests in the property, takes such
title free of any interests of third persons except those of
which the bona fide purchaser has notice.”). For this reason,
MERS’s argument that the tender rule is needed to protect bona
fide purchasers is unavailing – that the sale is voidable means
13 Whether Cole was in fact a bona fide purchaser is a contested
issue upon which we do not comment in this opinion.
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their purported bona fide purchaser status is a defense to the
quiet title action. 14
Therefore, under the facts of this case, we hold that
the tender rule does not bar the action against MERS, and MERS
should not have been dismissed on that basis. We emphasize that
the scope of this holding is limited: the application of the
tender rule to wrongful foreclosures generally, or to factual
and procedural circumstances unlike those presented by this
case, is not before us. We hold only that the tender rule is
not an absolute bar to a quiet title action against a party to
whom the plaintiff is not indebted under the facts of this case,
and the Delapinias have alleged sufficient facts for their quiet
title action against MERS to survive dismissal at this stage.
B. A Wrongful Foreclosure in Violation of the Power of Sale Is
Voidable, Not Void, and Silva Is Overruled to the Extent it
Held to the Contrary
We next turn to whether, if true, the facts alleged in
the Delapinias’ complaint render the foreclosure sale void or
voidable. If void, the sale is “invalid” and “unenforceable,”
and a subsequent purchaser “is entitled only to return of
[their] down[ ]payment plus accrued interest.” Lee v. HSBC Bank
USA, 121 Hawai‘i 287, 292, 218 P.3d 775, 780 (2009). If
14 If the sale were void, the tender rule would not apply in any
event. E.g., Barrionuevo v. Chase Bank, N.A., 885 F. Supp. 2d 964, 970 (N.D.
Cal. 2012) (“[W]here a sale is void, rather than simply voidable, tender is
not required.” (citation omitted)).
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voidable, the sale can be invalidated at the timely election of
the mortgagor, but “where the property has passed into the hands
of an innocent purchaser for value, rendering the voiding of a
foreclosure sale impracticable, an action at law for damages is
generally the appropriate remedy.” Mount v. Apao, 139 Hawai‘i
167, 180, 384 P.3d 1268, 1281 (2016). Answering this question
requires us to revisit the rule set forth in Silva v. Lopez.
The ICA correctly observed that Silva’s holding is in tension
with our recent wrongful foreclosure precedent. We therefore
take this opportunity to overrule Silva to that extent that case
would render foreclosures in violation of the power of sale
void. Foreclosures in violation of the power of sale are
voidable.
In Silva, the defendant mortgagee failed to comply
with “all the directions of the power of sale”: he did not
“ent[er] upon or demand for the possession of the mortgaged
premises and chattels” and, as particularly important here, he
did not provide “three weeks to intervene between the first
publication and the time of sale mentioned.” 5 Haw. at 263,
271. The mortgagee held the sale on June 24, 1884; had he done
so on June 25, 1884, “the advertisement would have been
sufficient in time,” but as it was, the mortgagee failed to
comply with the power of sale, which required three weeks’
notice. Id. at 268. Justice Austin held in the decision
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appealed from that “if the notice is insufficient, the sale
under it is void and not merely voidable,” and the supreme court
adopted this analysis. Id. at 271; see also id. at 265
(referring to the opinion of Justice Austin “[f]or the full
discussion and citation of authorities” on the issue of notice).
Justice Austin acknowledged that “[t]here are several purchasers
upon whom this decree will operate as a hardship.” Id. at 273.
Nonetheless, “the sale must be set aside, and the conveyances
made thereunder must be cancelled.” Id.
The Delapinias argue that here, as in Silva, they have
alleged that the mortgagees failed to comply that the
advertising provisions of the power of sale, allegations that we
take as true; accordingly, they contend the ICA was bound to
follow Silva, and the sale is void. We agree that to the extent
the ICA concluded that Silva has been impliedly overruled, it
erred. As recently as in Mount, we noted: “As far back as 1884,
this court voided a mortgage sale of real estate and livestock
because the mortgagee had not complied with the conditions of
the power of sale by scheduling the foreclosure sale one day too
early.” 139 Hawaiʻi at 180, 384 P.3d at 1281 (citing Silva, 5
Haw. at 263). We also explained that Lee and the United States
Court of Appeals for the Ninth Circuit opinion In re Kekauoha-
Alisa, 674 F.3d 1083 (9th Cir. 2012), which applied Hawai‘i law,
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likewise held wrongful foreclosures to be void rather than
voidable. Id. But we distinguished those cases on their facts.
In Lee, the high bidder at the nonjudicial foreclosure sale
had not completed the sale. 121 Hawaiʻi at 289, 218 P.3d at
777. Under those facts, we held that the sale was void and
that the high bidder was entitled only to return of his
down payment plus accrued interest. Id. In Kekauoha–Alisa,
the lender itself had purchased the property through a
credit bid, so no third party was involved. 674 F.3d at
1086.
Mount, 139 Hawaiʻi at 180, 384 P.3d at 1281.
That said, Silva is inconsonant with the direction of
our recent precedent, and we clarify today that a wrongful
foreclosure that violates the power of sale is voidable, not
void. This conclusion flows from our cases that make clear that
if a foreclosure violates a statute governing the nonjudicial
foreclosure scheme, or other law extrinsic to the mortgage
itself, the sale is “voidable at the election of the mortgagor,”
and in turn, “where the property has passed into the hands of an
innocent purchaser for value, . . . an action at law for damages
is generally the appropriate remedy.” Mount, 139 Hawaiʻi at 180,
384 P.3d at 1281. In Mount, for instance, the mortgagee had
“fail[ed] to provide reinstatement or cure information to [the
mortgagor], as required by HRS § 667–5(c)(1),” and accordingly,
“the nonjudicial foreclosure sale was conducted in violation of
HRS § 667–5.” Id. at 179–80, 384 P.3d 1268, 1280–81.
Nonetheless, we noted that the third-party purchasers had
“completed the sale, took possession of the Property, and have
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now had the Property for some time . . . rendering the voiding
of a foreclosure sale impracticable[.]” Id. at 180, 384 P.3d at
1281; see also Kondaur, 136 Hawaiʻi at 242 n.29, 361 P.3d at 469
n.29 (“[I]f the Ulrich[ v. Sec. Inv. Co., 35 Haw. 158, 168
(1939)] requirements were not satisfied, a quitclaim deed would
convey only a voidable interest in the property.”).
Santiago is particularly instructive. That case arose
from an ejectment action after a foreclosure pursuant to HRS
§ 667-5; the mortgagors raised wrongful foreclosure as a defense
to the action, arguing that either the power of sale clause in
the mortgage was deficient to permit nonjudicial foreclosure, or
they had a right to cure the defect, which they properly
exercised. Santiago, 137 Hawaiʻi at 154, 366 P.3d at 629. The
circuit court concluded neither argument had merit; we reversed
on both issues. But as to the mortgagor’s remedy, we explained:
Where it is determined that the nonjudicial
foreclosure of a property is wrongful, the sale of the
property is invalid and voidable at the election of the
mortgagor, who shall then regain title to and possession of
the property. See Ulrich v. Sec. Inv. Co., 35 Haw. 158,
168 (1939) (holding that where a self-dealing mortgagee
fails to exercise its right to non-judicial foreclosure in
a manner that is fair, reasonably diligent, and in good
faith and to demonstrate that an adequate price was
procured for the property, the resulting sale is void); Lee
v. HSBC Bank USA, 121 Hawaiʻi 287, 292, 218 P.3d 775, 780
(2009) (concluding “that an agreement created at a
foreclosure sale conducted pursuant to HRS section 667–5 is
void and unenforceable where the foreclosure sale is
invalid under the statute”). Voiding the foreclosure sale
at this time, however, has been rendered impracticable
because the [property] has already been resold by [the
defendant] to a third party. See 123 Am. Jur. Proof of
Facts 3d § 31 (2011) (“It has long been held that if the
property has passed into the hands of an innocent purchaser
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for value, an action at law for damages is generally the
appropriate remedy.”).
Santiago, 137 Hawaiʻi at 158, 366 P.3d at 633.
Even though we held that the mortgagee altogether
lacked a power of sale, we nonetheless determined that the sale
was at most voidable, and where the property had passed to a
bona fide purchaser, the appropriate remedy was damages. Id.
We see no reason why a foreclosure in violation of a power of
sale ought to be treated differently. It stands to reason that
if damages were proper absent any authorizing power of sale, the
same must be true when the defect is failure to comply with an
otherwise-valid power of sale.
The Delapinias attempt to distinguish Santiago and
related cases. They argue that rather than supply a blanket
rule, we “used such non-exclusive terms as ‘impracticable’ and
‘generally,’” pointing out “the purchaser was not before the
court” in Santiago. But these distinctions are unavailing. The
impracticability of voiding the sale does not stem from the
absence of the bona fide purchaser to the suit but from the
reliance interests they have accrued. In Santiago, we relied on
Jenkins v. Wise, 58 Haw. 592, 574 P.2d 1337 (1978), to justify
the award of damages. Jenkins explains: “Equity, however,
abhors forfeitures and where no injustice would thereby result
to the injured party, equity will generally favor compensation
rather than forfeiture against the offending party.” Id. at
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597, 574 P.2d at 1341. In a wrongful foreclosure in violation
of a power of sale where the purchasers have “completed the
sale, took possession of the Property, and have now had the
Property for some time,” Mount, 139 Hawai‘i at 180, 384 P.3d at
1281, the principle from Jenkins disfavoring forfeiture applies
with equal force.
The Delapinias argue that failure to adopt their
position would leave Hawaiʻi “out of step” with other states, but
we are not persuaded by the cases they cite from other
jurisdictions. The Massachusetts Supreme Judicial Court
decision Pinti v. Emigrant Mortgage Co., 33 N.E.3d 1213 (Mass.
2015) is a particularly useful counterpoint insofar as it
illustrates the differences between Hawai‘i law and that of other
states. In that case, the Massachusetts Supreme Judicial Court
concluded that a mortgagee must strictly comply with the terms
of the power of sale. 33 N.E.3d at 1218. The mortgagee failed
to strictly comply because it alerted the mortgagors of their
“right to assert in any lawsuit for foreclosure and sale the
nonexistence of a default or any other defense,” whereas the
power of sale required notice of “the right to bring a court
action.” Id. at 1222 (emphasis in original). The court
reasoned that in a nonjudicial foreclosure state like
Massachusetts, the former language might wrongly give the
impression that the mortgagor need not initiate an action but
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may simply raise the defense in due course of judicial
foreclosure proceedings. Id.
A majority of the Pinti court concluded that this
defect rendered the foreclosure void and any subsequent
conveyances to third parties a nullity. “[A] bona fide
purchaser’s ‘title is not to be affected by mere irregularities
in executing a power of sale contained in a mortgage, of which
irregularities he has no knowledge, actual or constructive.’”
Id. at 1225 (citing Chace v. Morse, 76 N.E. 142, 143-44 (Mass.
1905); Rogers v. Barnes, 47 N.E. 602, 604 (Mass. 1897)). The
deficient notice amounted to more than a “mere irregularity”
because of the “disastrous consequences” it could have:
if the mortgagor has a valid defense to the foreclosure
sale going forward, but is not made aware that he or she
must initiate an action in court against the mortgagee to
raise that defense, the sale may well proceed and result in
title passing to a bona fide purchaser without knowledge of
the issue—at which point, and depending on the nature of
the defense, the mortgagor’s right to redeem his or her
home may well be lost.
Id. at 1225-26.
Three justices dissented on this issue. They would
have held that the sale was voidable, but only because in their
view, the notice provision was not a substantive requirement of
the power of sale. Id. at 1228 (Cordy, J., dissenting).
Indeed, even the dissenters agreed with the “familiar rule that
one who sells under a power [of sale] must follow strictly its
terms. If he fails to do so, there is no valid execution of the
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power, and the sale is wholly void.” Id. at 1228-29 (brackets
in original) (quoting U.S. Bank Nat’l Ass’n v. Ibanez, 941
N.E.2d 40 (Mass. 2011)) (quotation marks omitted). The
dissenters explained that failure to adhere to the integral
terms of a power of sale (e.g., “the existence of a default”;
“assignment of the note or authority to act on behalf of the
note holder at the time of foreclosure”; or, saliently here,
“proper advertisement of the foreclosure sale”) renders a deed
void ab initio. Id. at 1229. By contrast, where “there are
equitable reasons why the sale should be set aside,” the deed is
voidable in equity - in which case, “[t]he principle which is
applied in courts of equity is that they will not throw the loss
upon a person who has innocently acquired title to property for
value.” Id. at 1228-29 (citations omitted).
It would seem, then, that the Pinti court would
unanimously agree that if, as the plaintiffs allege, the
Nationstar defendants failed to strictly comply with the
advertisement requirements of the power of sale, the deed would
be void ab initio in Massachusetts. See McGreevey v.
Charlestown Five Cents Sav. Bank, 2 N.E.2d 543, 544 (Mass. 1936)
(holding that a sale advertised in the wrong county did not
“strictly compl[y]” with power of sale, and “the sale is wholly
void”).
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Other states likewise do not apply a blanket rule as
to when a sale is void versus voidable, and instead evaluate the
magnitude of the error – “mere irregularities” (as put in
Massachusetts) will not void a sale, but substantial defects
will. 15 See, e.g., Ram, 234 Cal. App. 4th at 11 (“A sale is not
rendered void merely because of minor or technical
defects. . . . A sale is rendered void, though, when the
defects are substantial, such as when there has been a failure
to give notice of sale to the trustor or to specify the correct
default in the notice of default.”); Williams v. Kimes, 996
S.W.2d 43, 45 (Mo. 1999) (“In circumstances where the defect is
so great that it goes to the very right or power to foreclose,
then the non-judicial foreclosure is void and no title is
conveyed through the sale.”).
But Pinti provides a useful touchpoint here because
Massachusetts and other jurisdictions that apply this framework
to determine whether a sale is void or voidable would also have
likely concluded that the sale in Santiago, in which the
mortgagee altogether lacked a power of sale, was void, whereas
15 The Delapinias would claim that failure to adhere to the terms of
the power of sale qualifies was more than a “mere irregularity,” but some of
these jurisdictions may well conclude that deviation from the advertisement
requirements in the power of sale was merely procedural and the sale
voidable. Cf. Ram, 234 Cal. App. 4th 1, 17 (2015) (notice of default
executed by individual who was not trustee at that time (and would only
become trustee weeks thereafter) was not void, but at most voidable, because
notice defect was nonprejudicial).
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our court concluded the sale to be voidable. Compare 137 Hawaiʻi
at 158, 366 P.3d at 633 (“Where it is determined that the
nonjudicial foreclosure of a property is wrongful, the sale of
the property is invalid and voidable at the election of the
mortgagor[.]”) with Rogers v. Barnes, 47 N.E. 602, 604 (Mass.
1897) (“The argument certainly is strong that a bona fide
purchaser for value ought to be protected in his title by what
appears on the record in the registry of deeds, in the absence
of knowledge to the contrary; but the argument is, we think,
stronger that a mortgagor should not be deprived, without his
knowledge, of his equity of redemption, by a sale under a power
contained in a mortgage, which authorizes a sale only in case of
a default, when there has been no default.”). And while the
Delapinias argue that failure to adopt their position would
leave Hawaiʻi “out of step” with other states, some other
jurisdictions nonetheless appear to come out the other way. 16
The Supreme Court of Michigan, for instance, explained:
It was true that failure to advertise according to the
terms of the power of sale invalidates the sale. Eubanks
v. Becton, 158 N.C. 230, 73 S.E. 1009 [(1912)]. But it is
said that such sale is not absolutely void, but will pass
the legal title. Eubanks v. Becton[ ]; Brett v. Davenport,
16 And by the same token, some of the out-of-state cases cited by
the Delapinias would hold that sales conducted in violation of statute are
void. See, e.g., Jensen v. Andrews, 163 N.W. 571, 571 (S.D. 1917) (failure
to state the specific hour at which the sale is to take place in the
advertisement, in violation of the state code, “will be void and of no effect
to convey title”). But Mount held that such a sale is voidable. 139 Hawaiʻi
at 180, 384 P.3d at 1281.
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151 N.C. [56], 65 S.E. 611 [(1909)]. While such sale would
be set aside as to the purchaser, a subsequent or remote
grantee without notice and in good faith takes a good title
against such defects or irregularities in the sale of which
he had no notice.
Fox v. Jacobs, 286 N.W. 854, 856 (Mich. 1939) (quoting Hinton v.
Hall, 82 S.E. 847, 848 (N.C. 1914)). 17
There is therefore precedent from other jurisdictions
that supports both positions – void or voidable. But Hawaiʻi law
has moved unmistakably towards the conclusion that sales
pursuant to a wrongful foreclosure are voidable, regardless of
whether the violation was statutory or contractual, substantial
or a mere irregularity. This policy protects the interests
accrued by innocent purchasers and avoids forfeiture if
possible, while deterring the conduct of the party that
wrongfully foreclosed through a damages remedy. Applied to
these facts, we hold that wrongful foreclosures in violation of
a power of sale are voidable. Thus, “where the property has
passed into the hands of an innocent purchaser for value,
rendering the voiding of a foreclosure sale impracticable, an
action at law for damages is generally the appropriate remedy.”
17 Fox arose from a statutory violation, but as is clear from the
quoted passage, it did not distinguish between a statutory versus contractual
violation. See Kim v. JPMorgan Chase Bank, N.A., 825 N.W.2d 329, 336-37
(Mich. 2012) (describing a lower court’s holding that a foreclosure
undertaken before the mortgagee acquired his interest in the property was
void ab initio to be “contrary to the established precedent of this Court,”
which has “long held that defective mortgage foreclosures are voidable”).
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Mount, 139 Hawaiʻi at 180, 384 P.3d at 1281 (citing Santiago, 137
Hawaiʻi at 158, 366 P.3d at 633).
V. CONCLUSION
For the foregoing reasons, the ICA’s March 13, 2020
judgment on appeal is vacated in part, as to defendant MERS, and
affirmed as to all other defendants. The circuit court’s
April 18, 2017 Final Judgment is vacated, and this case is
remanded to the circuit court for further proceedings consistent
with this opinion.
James J. Bickerton /s/ Mark E. Recktenwald
(Bridget G. Morgan-Bickerton,
Stanley H. Roehrig, /s/ Paula A. Nakayama
John F. Perkin and
Van-Alan H. Shima /s/ Sabrina S. McKenna
with him on the briefs)
for petitioners /s/ Michael D. Wilson
Jade Lynne Ching (David A. /s/ Paul B.K. Wong
Nakashima and Kanoelani S.
Kane with her on the brief)
for respondents Nationstar
Mortgage LLC and Federal
National Mortgage Association
Michael C. Bird (Jonathan W.Y.
Lai, Thomas J. Berger and
Summer H. Kaiawe with him
on the brief) for respondents
Terry Louise Cole and
American Savings Bank, F.S.B.
Patricia J. McHenry
and Janjeera S. Hail
for respondent Mortgage
Electronic Registration
Systems, Inc.
35