The Bank of New York Mellon v. R. Onaga, Inc. , 140 Haw. 358 ( 2017 )

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Electronically Filed
Supreme Court
SCWC-14-0000426
03-AUG-2017
07:58 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
---o0o---
THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK,
NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE FOR
THE BENEFIT OF THE CERTIFICATE HOLDERS OF THE CWMBS 2006-10
TRUST, MORTGAGE PASS THROUGH CERTIFICATES, SERIES 2006-10,
Respondent/Plaintiff-Appellee,
vs.
R. ONAGA, INC., a Hawai#i corporation,
Respondent/Defendant-Appellant,
and
ROBERT NISPEROS MARQUEZ; MARLYN MIRANDA MARQUEZ; MORTGAGE
ELECTRONIC REGISTRATIONS SYSTEMS, INC., solely as nominee for
CASTLE & COOKE MORTGAGE, LLC, a Hawai#i corporation; DEPARTMENT
OF TAXATION, STATE OF HAWAI#I; UNITED STATES OF AMERICA,
DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE,
Respondents/Defendants-Appellees,
and
LYLE ANTHONY FERRARA and LINDA SUSAN FERRARA,
Petitioners/Intervenors.
(CIVIL NO. 11-1-2095)
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R. ONAGA, INC., a Hawai#i corporation,
Respondent/Defendant-Appellant,
vs.
ROBERT NISPEROS MARQUEZ; MARLYN MIRANDA MARQUEZ; BANK OF
NEW YORK MELLON, TRUSTEE; MORTGAGE ELECTRONIC REGISTRATIONS
SYSTEMS, INC.; DEPARTMENT OF TAXATION, STATE OF HAWAI#I;
INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY, U.S.A.,
Respondents/Defendants-Appellees.,
and
LYLE ANTHONY FERRARA and LINDA SUSAN FERRARA,
Petitioners/Intervenors.
(CIVIL NO. 12-1-1758)
SCWC-14-0000426
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-14-0000426)
AUGUST 3, 2017
RECKTENWALD, C.J., NAKAYAMA, POLLACK, AND WILSON, JJ., AND
CIRCUIT JUDGE KIM, IN PLACE OF McKENNA, J., RECUSED
OPINION OF THE COURT BY RECKTENWALD, C.J.
This case requires us to determine whether an appeal of
an order confirming sale is moot when the appellant does not post
a supersedeas bond to obtain a stay of the proceedings prior to
the sale of the property to a bona fide purchaser. We answer
this question in the affirmative. In doing so, we adopt the
general rule stated by the Intermediate Court of Appeals (ICA) in
City Bank v. Saje Ventures II that “the right of a good faith
purchaser to receive property acquired at a judicial sale cannot
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be affected by the reversal of an order ratifying the sale where
a supersedeas bond has not been filed.” 7 Haw. App. 130, 133,
748 P.2d 812, 814 (1988) (internal brackets, quotation marks, and
citation omitted).
This case arises from the foreclosure sale of a house
(the Property) once owned by Robert Nisperos Marquez and Marlyn
Miranda Marquez (the Marquezes). R. Onaga, Inc. (Onaga) and The
Bank of New York Mellon FKA the Bank of New York (BONY) each
initiated foreclosure proceedings against the Marquezes. Both
claimed to have a first priority lien and requested foreclosure
and sale of the Property. The Circuit Court of the First Circuit
(circuit court) granted summary judgment in favor of BONY,
finding that BONY had a first priority lien.1 Onaga then filed a
motion to stay BONY’s foreclosure proceeding, and the circuit
court ordered Onaga to post a supersedeas bond in order to stay
the proceedings. Onaga did not post a bond. Meanwhile,
petitioners Lyle Anthony Ferrara and Linda Susan Ferrara (the
Ferraras) were the highest bidder at the foreclosure sale, and
the court issued judgment confirming the sale.
Onaga initiated two separate appeals to the ICA: the
first challenged the court’s grant of summary judgment in favor
of BONY; the second, this appeal, challenged the order confirming
1
The Honorable Edwin C. Nacino presided.
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the foreclosure sale. The ICA filed a summary disposition order
in the first appeal, vacating the circuit court’s grant of
summary judgment.
The Ferraras intervened in this appeal and moved to
dismiss. They argued that this appeal was moot because the sale
of the Property cannot be undone, even if the ICA were to vacate
the order confirming foreclosure. The ICA denied the Ferraras’
motion, noting that Hawai#i Revised Statutes (HRS) § 501-118
(Supp. 1998) provides, “In case of foreclosure by action, a
certified copy of the final judgment of the court confirming the
sale may be filed or recorded . . . after the time for appealing
therefrom has expired and the purchaser shall thereupon be
entitled to the entry of a new certificate.” (Emphasis added.)
Thus, the ICA reasoned that Onaga’s appeal was not moot because
it was pending at the time the certificate of title was issued to
the Ferraras. Accordingly, the ICA vacated the circuit court’s
judgment confirming the sale.
The Ferraras’ application presents the following
question: “Whether the ICA gravely erred when it denied the
Petitioners’ motions to dismiss the appeal on mootness grounds.”
The application of HRS § 501-118 in judicial
foreclosures is a question of first impression before this court.
Under Hawai#i Rules of Civil Procedure (HRCP) Rule 62(d), an
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appellant may obtain a stay by posting a supersedeas bond, and
Hawai#i case law establishes that a certificate of title has
conclusive effect on the question of title to land. Because
Onaga failed to post a supersedeas bond as required by the
circuit court, its appeal of the foreclosure proceeding is moot
in light of the Ferraras’ certificate of title. In reaching that
conclusion, we reject the ICA’s interpretation of HRS § 501-118
as providing that a bona fide purchaser must wait until an appeal
is resolved before it can obtain a certificate of title.
We therefore reverse the ICA’s July 20, 2016 judgment
on appeal, and affirm the circuit court’s February 21, 2014
judgment confirming the sale of the Property to the Ferraras.
I. Background
A. Circuit Court Proceedings
BONY filed a complaint for mortgage foreclosure in
circuit court on September 13, 2011, naming, among others, the
Marquezes and Onaga as defendants. BONY attached (1) a
promissory note in the amount of $720,400 and (2) a mortgage on
the Property recorded in Land Court on February 21, 2006; both
documents were executed by the Marquezes. BONY asserted that it
was assigned the mortgage and note pursuant to an assignment of
mortgage recorded in Office of the Assistant Registrar of the
Land Court (Land Court) on March 31, 2011. BONY stated that it
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was entitled to foreclose because the Marquezes had failed to
make their scheduled payments.
In May 2012, Onaga filed a “Motion to Dismiss and/or
Motion for Summary Judgment” against BONY. Onaga alleged that
the note attached to BONY’s complaint showed that the last entity
to hold the note was Countrywide Home Loans, Inc., and nothing
indicated that Countrywide had transferred its interest in the
note to BONY. Thus, Onaga argued that BONY had not demonstrated
that it was the current note holder and therefore could not
enforce the Marquezes’ note through a mortgage foreclosure.
BONY opposed Onaga’s motion, arguing that “the Note was
made payable to a bearer and [BONY] is in possession of the
Note.” BONY asserted that its possession of the note and the
assignment of mortgage was sufficient to establish that it is
entitled to foreclose on the mortgage, citing Ocwen Federal Bank,
FSB v. Russell, 99 Hawai#i 173, 184, 53 P.3d 312, 323 (2002).
Onaga subsequently filed a complaint for mortgage
foreclosure in circuit court (Civil No. 12-1758-12). Onaga
alleged that the Marquezes “purchased the assets” of Onaga, and
executed and delivered a $75,000 promissory note to Onaga on
December 1, 2003. Onaga also stated, “On November 26, 2003, [the
Marquezes and Onaga] executed a Real Estate Mortgage and
Financing Statement which was secured on a condominium, then
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owned by [the Marquezes] as additional protection for payment of
the asset purchase agreement and promissory note.”
According to the complaint, Onaga agreed to release the
mortgage on the condominium so that the Marquezes could sell the
condominium and use the sale proceeds to purchase the Property.
In exchange, the Marquezes agreed to “substitute the mortgage
from the condominium to the Property,” but later “reneged on
their promise.” The complaint explained that Onaga sued the
Marquezes for specific performance, and the circuit court entered
final judgment in favor of Onaga in December 2007. The complaint
then stated that Onaga and the Marquezes executed a mortgage “to
secure the asset purchase agreement and promissory note entered
earlier in 2003.” Onaga stated that both the final judgment and
the mortgage were recorded in the Land Court in March 2008.
Onaga alleged that the Marquezes failed to make the payments
required under the asset purchase agreement and therefore Onaga
was entitled to foreclose on the Property.
The BONY and Onaga foreclosure actions were
consolidated in November 2012.
BONY filed a “Motion for Summary Judgment for
Foreclosure Against All Defendants and for Interlocutory Decree
of Foreclosure.” BONY noted that it was required to prove the
following facts to be entitled to summary judgement: (1) the
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existence of an agreement between the parties; (2) the terms of
the agreement; (3) default under the agreement; and (4) notice.
See Bank of Honolulu v. Anderson, 3 Haw. App. 545, 551, 654 P.2d
1371, 1375 (1982) BONY attached (1) a “Declaration of
Indebtedness” by BONY’s servicing agent for the loan, (2) the
February 15, 2006 note and mortgage, (3) the March 31, 2011
assignment of mortgage, (4) documents related to the Marquezes’
loan default, and (5) a declaration by BONY’s counsel. BONY
argued that these exhibits satisfied the Bank of Honolulu
requirements.
Onaga filed a cross motion for summary judgment and for
decree of foreclosure. Onaga argued that it had a first priority
lien on the Property and that BONY had no interest in the note.
The circuit court denied Onaga’s cross motion.
On July 5, 2013, the circuit court filed its findings
of fact (FOFs), conclusions of law (COLs), and order granting
BONY’s motion for summary judgment for foreclosure against all
defendants and for an interlocutory decree of foreclosure. The
court determined that BONY was the owner of the note and mortgage
based on the March 31, 2011 assignment of mortgage. Thus,
because the Marquezes defaulted on their loan, the court
determined that BONY was entitled to foreclose on the Property.
With respect to Onaga, the court found that it “may claim an
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interest in the Property,” but that “[i]ts interest in the
Property, if any, is junior to [BONY’s] lien.” The court
concluded that there was no genuine issue of material fact and
granted summary judgment in favor of BONY and an interlocutory
decree of foreclosure. The court filed its judgment on July 5,
2013.
On July 24, 2013, Onaga filed its first notice of
appeal (CAAP-13-2287), challenging the circuit court’s order
granting BONY’s motion for summary judgment and denying Onaga’s
motion for summary judgment.
On August 8, 2013, the court filed amended FOFs, COLs,
and order appointing a commissioner. The court filed its amended
judgment on September 6, 2013.2
On October 29, 2013, Onaga filed a “Motion for an Order
to Stay Proceedings Without Conditions or Bond.” Onaga argued
that its pending appeal “will decide which mortgagee, [BONY] or
R. Onaga has standing and priority in this consolidated judicial
mortgage foreclosure action.” (Emphases in original.) Onaga
requested a stay of the proceedings, since “proceeds out of the
foreclosure sale enforcing the court’s judgment are to be paid to
2
On October 10, 2013, Onaga filed a “Motion for an Order to Void
Amended Judgment Filed on September 6, 2013 and the Amended Notice of Entry of
Judgment Filed September 26, 2013.” The motion attached a declaration of
Onaga’s counsel that argued that the September 6, 2013 judgment should be
voided because it violated HRCP Rule 59(e) and was entered without notice to
Onaga. The circuit court denied Onaga’s motion.
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mortgage lien creditors according to their priority.”
The commissioner conducted a public auction on
November 5, 2013, where the Ferraras were the high bidders. BONY
filed a “Motion for Order Confirming Foreclosure Sale, Approving
Commissioner’s Report, Allowance of Commissioner’s Fees,
Attorney’s Fees, Costs, and Directing Conveyance.”
On January 17, 2014, the court granted BONY’s motion,
approving sale of the Property to the Ferraras.
On February 10, 2014, Onaga filed its second notice of
appeal (CAAP-14-426)–-the instant appeal--challenging the circuit
court’s order confirming the foreclosure sale and the order
denying Onaga’s motion to void the amended judgment.
On February 12, 2014, the court denied Onaga’s
October 29, 2013 motion to stay the proceedings pending appeal,
but stated that “Defendant shall post a supersedeas bond in order
to obtain a Stay on the proceedings.”3 Onaga did not post a
supersedeas bond. The court filed its final judgment on
February 21, 2014.
B. ICA Proceedings
In the instant appeal, Onaga argued that the circuit
court erred in three ways:
3
A supersedeas bond is a bond that “suspends a judgment creditor’s
power to levy execution, [usually] pending appeal.” Black’s Law Dictionary
1667 (10th ed. 2014).
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A. The circuit court erred in concluding that it has
subject matter jurisdiction in the [BONY’s] judicial
mortgage foreclosure action based on the Assignment of
Mortgage registered in Land Court on March 31, 2011.
B. The circuit court erred in granting [BONY’s]
motion for confirming foreclosure sale pursuant to
finding it has priority among all mortgagees therein.
C. The circuit court erred in denying R. Onaga’s
motion for stay of proceedings without conditions or
bond pending appeal because the consolidated civil
cases were between two mortgagees and no money
judgments among them were involved.
On September 12, 2014, Onaga moved in the ICA for the
order confirming the foreclosure sale to be stayed during the
pendency of this appeal. Specifically, it asked the ICA to
“enjoin all parties involved in the appeals, including the buyers
and assistant registrars of the Land Court, from engaging in any
action dealing with the subject Property or doing anything with
the subject Property that will alter in any way, the subject
Property title registration pending the resolution of both
appeals.”
On September 18, 2014, the ICA filed a summary
disposition order in CAAP-13-2287. The ICA held that BONY’s
“Declaration of Indebtedness” attached to its motion for summary
judgment did not comply with HRCP Rule 56(e).4 Thus, the ICA
4
HRCP 56(e) provides, in relevant part:
(e) Form of Affidavits; Further Testimony; Defense
Required. Supporting and opposing affidavits shall be
made on personal knowledge, shall set forth such facts
as would be admissible in evidence, and shall show
affirmatively that the affiant is competent to testify
(continued...)
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vacated the circuit court’s order granting BONY’s motion for
summary judgment, and remanded for further proceedings.
On September 19, 2014 the ICA granted Onaga’s
September 12, 2014 motion to stay the circuit court’s order
confirming the foreclosure sale and directing conveyance,
“[g]iven the vacation of summary judgment in favor of [Onaga.]”
On September 28, 2014, the Ferraras filed a motion to
intervene in the instant appeal. The next day, they filed a
motion to dismiss the appeal. The Ferraras acknowledged that the
ICA in CAAP-13-2287 vacated the order granting BONY’s motion for
summary judgment. However, the Ferraras noted that Onaga “failed
to obtain a stay pending appeal and failed to post a supersedeas
bond pending appeal.”
The ICA granted the Ferraras’ motion to intervene, but
denied the Ferraras’ motion to dismiss. The ICA permitted the
Ferraras to intervene for the limited purpose of “addressing
whether the appeal is moot.” With respect to the motion to
dismiss, the ICA cited HRS § 501-825 and stated that “the
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to the matters stated therein. Sworn or certified
copies of all papers or parts thereof referred to in
an affidavit shall be attached thereto or served
therewith.
5
The ICA’s order states:
[HRS] § 501-82 (2014 Supp.) provides, in pertinent
part:
(continued...)
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Ferraras do not assert that a Certificate of Title has been
issued, and even if a Certificate of Title was issued, the
Ferraras would need to establish that there is no encumbrance
noted on such Certificate of Title related to Appellant Onaga’s
mortgage or his claims on the [P]roperty.” Thus, the ICA
concluded that the Ferraras did not establish that the appeal was
moot.
The Ferraras filed a second motion to dismiss on
August 4, 2015, attaching (1) a certificate of title issued on
August 29, 2014, (2) the August 29, 2014 Commissioner’s Deed, and
(3) a mortgage executed by the Ferraras and recorded in Land
Court on August 29, 2014. The Ferraras argued that those
documents “should resolve all of [t]he issues” raised by the
ICA’s order denying the first motion to dismiss.
Onaga filed a memorandum in opposition, arguing that
the certificate of title attached to the Ferraras’ motion was
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(a) Every applicant receiving a certificate of
title in pursuance of a decree of registration,
and every subsequent purchaser of registered
land who takes a certificate of title for value
and in good faith, hold the same free from all
encumbrances except those noted on the
certificate in the order of priority of
recordation, and any of the following
encumbrances which may be subsisting[.]
(Emphasis in ICA order.)
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void. Onaga alleged that, under HRS § 501-118,6 a certificate of
title cannot be filed while the final judgment confirming the
sale is pending on appeal. Onaga argued that the Ferraras “are
obligated to follow the clear language and procedure outlined in
law to obtain a new certificate of title of land registered in
Land Court after a judicial mortgage foreclosure action has run
its course in the appeal process.” Onaga also argued that the
Land Court lacked jurisdiction to issue the August 29, 2014
certificate of title because the notice of appeal was filed on
February 10, 2014.
In a memorandum opinion, the ICA held that Onaga’s
appeal is not moot. Bank of New York Mellon v. R. Onaga, Inc.,
CAAP-14-0000426 (App. June 6, 2016) (mem.). The ICA took
judicial notice of the documents attached to the Ferraras’
6
HRS § 501-118 (Foreclosure) (2006) provides, in relevant part:
In case of foreclosure by action, a certified copy of
the final judgment of the court confirming the sale
may be filed or recorded with the assistant registrar
or the deputy after the time for appealing therefrom
has expired and the purchaser shall thereupon be
entitled to the entry of a new certificate.
. . . . Nothing in this chapter shall be construed to
prevent the mortgagor or other person in interest from
directly impeaching by action or otherwise, any
foreclosure proceedings affecting registered land,
prior to the entry of a new certificate of title.
After a new certificate of title has been entered, no
judgment recovered on the mortgage note for any
balance due thereon shall operate to open the
foreclosure or affect the title to registered land.
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motion. Id. at 9. It then distinguished this case from City
Bank because City Bank “did not involve property registered in
Land Court.” Id. at 11. The ICA cited HRS § 501-887 and stated
that “we must consider that a certificate of title is given
conclusive effect to all matters stated in the certificate,
except as otherwise provided in HRS Chapter 501.” Id. (emphasis
in original).
The ICA noted that HRS § 501-118 expressly provides,
“[i]n case of foreclosure by action, a certified copy of the
final judgment of the court confirming the sale may be filed or
recorded . . . after the time for appealing therefrom has expired
and the purchase shall thereupon be entitled to the entry of a
new certificate.” Id. Thus, the ICA determined that “it is
questionable whether the certificate of title submitted by the
Ferraras is conclusive in passing title to the Ferraras,” since
Onaga “is permitted the opportunity to appeal the foreclosure by
action.” Id. at 11-12. The ICA further noted that the Ferraras
contended that they obtained a certificate of title pursuant to
HRS § 501-106(a)(1), but that “it is questionable whether
7
HRS § 501-88 (Certificate as evidence) (2006) provides:
The original certificate in the registration book, and
any copy thereof duly certified under the signature of
the registrar or assistant registrar, and the seal of
the court, shall be received as evidence in all the
courts of the State and shall be conclusive as to all
matters contained therein, except as otherwise
provided in this chapter.
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subsection (1) governs in the case of a judicial foreclosure in
which case title does not pass by voluntary means.”8 Id. at 12.
Thus, the ICA concluded that the Ferraras “have not carried their
burden” to establish that the appeal is moot. Id.
Regarding the merits of the appeal, the ICA held that,
because the foreclosure judgment was vacated in CAAP-13-2297, the
judgment confirming sale must also be vacated. Id. at 12-13.
The ICA also held that the circuit court did not err in denying
Onaga’s motion for stay of proceedings because Onaga was required
to a post a supersedeas bond pursuant to HRCP Rule 62(d)9 to
obtain the stay, and it did not do so. Id. at 12-14.
C. Application for Writ of Certiorari
In the application for writ of certiorari, the Ferraras
argue that “[t]he general rule is that the right of a good faith
purchaser ‘to receive property acquired at a judicial sale cannot
be affected by the reversal of an order ratifying the sale where
a [supersedeas] bond has not been filed.’” Further, they assert
8
The Ferraras did not mention HRS § 501-106 in their second motion
to dismiss, so it is unclear what the ICA was referring to.
9
HRCP Rule 62(d) provides:
(d) Stay Upon Appeal. When an appeal is taken the
appellant by giving a supersedeas bond may obtain a
stay subject to the exceptions contained in
subdivision (a) of this rule. The bond may be given
at or after the time of filing the notice of appeal or
of procuring the order allowing the appeal, as the
case may be. The stay is effective when the
supersedeas bond is approved by the court.
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that “[t]he sale of a subject property to a good faith purchaser
during the pendency of an appeal renders a challenge to the
confirmation of a foreclosure sale moot as it prevents the
appellate court from granting any effective relief.” (Citing
Lathrop v. Sakatani, 111 Hawai#i 307, 314-15, 141 P.3d 480, 487-
88 (2006)). The Ferraras argue that title of the Property passed
to them through the filing of the August 29, 2014 Commissioner’s
Deed.
The Ferraras also note that they attached a certificate
of title to their second motion to dismiss in direct response to
the reasoning in the ICA’s order denying their first motion to
dismiss. The Ferraras assert that the ICA nonetheless denied
their second motion to dismiss and disregarded Onaga’s failure to
post a supersedeas bond.
The Ferraras argue that the ICA misinterpreted HRS
§ 501-118 and that a recording of a judgment is not required
under HRS § 501-15510 to transfer title. Rather “the filing of
10
HRS § 501-155 (Judgment directing conveyance) (2006) provides:
Any judgment of a court of competent jurisdiction,
whether a federal court or a court of the State of
Hawaii, affecting title or rights in registered land,
may be recorded, whether the claim adjudicated was
legal or equitable in nature. Every instrument
necessary to give effect to the judgment and directed
by the court to be executed, whether executed by a
party or by some other person appointed by the court,
shall be recorded and shall have full force and effect
to bind the land to be affected thereby. A judgment
entered in lieu of directing a conveyance, and having
(continued...)
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the Commissioner’s Deed gives effect to the judgment and when
recorded, as it had been, shall have the full force and effect to
bind the land to be affected thereby.”
Lastly, the Ferraras argue that the ICA’s opinion is
inconsistent with its decisions in City Bank, Cent. Pacific Bank
v. Aikona Maui Props., CAAP-12-0001032, 2015 WL 6231719 (App.
Nov. 29, 2013) (order), and DB Private Wealth Mortg., Ltd. v.
Bouley, CAAP-14-0000585, 2016 WL 3548347 (App. June 28, 2016)
(SDO).
In response, Onaga argues that the certificate of title
is void because “Petitioners’ filing of the commissioner’s deed
and obtaining a new certificate for the Property did not comply
with HRS § 501-118.” It contends that the ICA’s interpretation
of HRS § 501-118 was consistent with Aames Funding Corp. v.
Mores, 107 Hawai#i 95, 101, 110 P.3d 1042, 1048 (2005), because
“[t]he Supreme Court in Aames and the ICA in this appeal are
ascertaining and giving effect to the intention of the
legislature of giving mortgagors, owners of Land Court property,
the right to appeal in HRS § 501-118.”
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(...continued)
the effect of a conveyance, shall be recorded with
like force and effect.
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II. Standards of Review
A. Mootness
“Appellate courts review issues of mootness de novo.”
State v. Tui, 138 Hawai#i 462, 466, 382 P.3d 274, 278 (2016).
B. Statutory Interpretation
Statutory interpretation is reviewed de novo by [the
appellate] court. When construing a statute, our
foremost obligation is to ascertain and give effect to
the intention of the legislature, which is to be
obtained primarily from the language contained in the
statute itself. Moreover, it is a cardinal rule of
statutory interpretation that, where the terms of a
statute are plain, unambiguous and explicit, we are
not at liberty to look beyond that language for a
different meaning. Instead, our sole duty is to give
effect to the statute's plain and obvious meaning.
Bhakta v. Cnty. of Maui, 109 Hawai#i 198, 208, 124 P.3d 943, 953
(2005) (internal quotation marks, citations, and brackets in
original omitted).
III. Discussion
The only issue presented in the Ferraras’ application
is whether the ICA erred in determining that the appeal was not
moot. Specifically, we must determine whether, in judicial
foreclosures involving Land Court property, an appeal of an order
confirming sale is moot when the appellant does not obtain a stay
of the proceedings prior to the sale of the property to a bona
fide purchaser and the issuance of a new certificate of title.
With regard to mootness, this court has stated:
[A] case is moot where the question to be determined
is abstract and does not rest on existing facts or
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rights. Thus, the mootness doctrine is properly
invoked where events have so affected the relations
between the parties that the two conditions of
justiciability relevant on appeal––adverse interest
and effective remedy––have been compromised.
Okada Trucking Co. v. Bd. of Water Supply, 99 Hawai#i 191, 195-
96, 53 P.3d 799, 803-04 (2002) (internal brackets, quotation
marks, ellipses, and citation omitted). In other words, “[a]
case is moot if the reviewing court can no longer grant effective
relief.” Kaho#ohanohano v. State, 114 Hawai#i 302, 332, 162 P.3d
696, 726 (2007) (quoting City Bank, 7 Haw. App. at 134, 748 P.2d
at 815).
HRCP Rule 62, titled “Stay of Proceedings to Enforce a
Judgment,” states in relevant part:
(d) Stay Upon Appeal. When an appeal is taken the
appellant by giving a supersedeas bond may obtain a
stay subject to the exceptions contained in
subdivision (a) of this rule. The bond may be given
at or after the time of filing the notice of appeal or
of procuring the order allowing the appeal, as the
case may be. The stay is effective when the
supersedeas bond is approved by the court.
Here, Onaga appealed the circuit court’s grant of
summary judgment in favor of BONY, and later filed a “Motion for
an Order to Stay Proceedings Without Conditions or Bond.”
Consistent with HRCP Rule 62(d), the circuit court denied Onaga’s
motion, stating, “[Onaga] shall post a supersedeas bond in order
to obtain a Stay on the proceedings.” The ICA agreed, concluding
that the circuit court did not err in denying Onaga’s motion for
stay of proceedings because Onaga failed to comply with HRCP Rule
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62(d). Thus, the foreclosure proceedings continued: the
Ferraras purchased the Property at the foreclosure sale, the
Commissioner’s Deed was recorded, and a new certificate of title
was issued for the Property.
A. Onaga was Required to Post a Supersedeas Bond in Order to
Obtain a Stay
HRCP Rule 62(d) provides that an appellant may obtain a
stay of proceedings “by giving a supersedeas bond.”11 Onaga
never posted a bond. Accordingly, the circuit court did not err
in allowing the foreclosure sale to proceed or issuing its order
confirming the sale and directing conveyance of the Property to
the Ferraras.
The ICA’s opinion in City Bank is instructive on this
point. In City Bank, the bank filed a complaint to foreclose on
the defendant’s mortgage, and the circuit court granted summary
judgment in favor of the bank and a junior mortgagee. 7 Haw.
App. at 132, 748 P.2d at 814. The property was sold to the
highest bidder, and the circuit court entered an order confirming
the sale and directing distribution of the proceeds. Id. The
defendants timely appealed the order confirming sale. Id. at
11
HRCP Rule 62 also gives courts broad discretion to stay execution
of a judgment pending a motion for a new trial or for alteration of a
judgment. See HRCP Rule 62(b). Additionally, HRCP Rule 62(c) provides that,
in an appeal taken from a judgment relating to an injunction, “the court in
its discretion may suspend, modify, restore, or grant an injunction during the
pendency of the appeal upon such terms as to bond or otherwise as it considers
proper for the security of the rights of the adverse party.”
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133, 748 P.2d at 814.
The ICA stated, “[t]he general rule is that the right
of a good faith purchaser ‘to receive property acquired at a
judicial sale cannot be affected by the reversal of an order
ratifying the sale where a [supersedeas] bond has not been
filed.” Id. (quoting Leisure Campground & Country Club Ltd.
P’ship v. Leisure Estates, 372 A.2d 595, 598 (Md. 1977)). The
ICA explained that the purpose of the rule is to advance “the
stability and productiveness of judicial sales.” Id. (quoting 47
Am. Jur. 2d Judicial Sales § 55 (1969)12). It noted that the
exceptions to this rule are when the reversal is based on
jurisdictional grounds or when the purchaser is the mortgagee,
explaining that the mortgagee in that case “does not free himself
from the underlying dispute to which he is a party.” See id.
(quoting Leisure Campground, 372 A.2d at 598) (brackets omitted).
The ICA then noted that the purchaser of the property
12
The current version of this section is 46 Am. Jur. 2d. Judicial
Sales § 20 (2016), which states:
The reversal of a decree directing a judicial sale, on
account of an error or irregularities not going to the
jurisdiction, does not vitiate the title of one who,
as a stranger to the proceeding, has in good faith
purchased property at the sale, either before an
appeal or writ of error or pending the same without
supersedeas. This principle advances the stability
and productiveness of judicial sales and the value of
titles derived under them and operates as well in the
interests of the owners of the property sold as for
the protection of purchasers. . . .
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was a third party, good faith purchaser,13 and that “[t]here was
no stay of the execution of the confirmation order and the sale
of the Property has been closed.” See id. at 133, 748 P.2d at
814-15. Thus, the ICA concluded that “the appeal is moot and
subject to dismissal.” Id. at 134, 748 P.2d at 815.
City Bank comports with this court’s analysis in
Lathrop v. Sakatani, which addressed the issue of whether the
circuit court erred in expunging a lis pendens (i.e., a notice of
an action pending against real property). We held that the
appeal was moot because the property had been sold. 111 Hawai#i
at 313-15, 141 P.3d at 486-88. We stated that “it is appellant’s
burden to seek a stay if post-appeal transactions could render
the appeal moot.” Id. at 313, 141 P.3d at 486 (quoting In re
Gotcha Int’l L.P., 311 B.R. 250, 255 (B.A.P. 9th Cir. 2004)). We
then dismissed the appeal, reasoning that “the plaintiffs failed
to seek a stay on the execution of the circuit court’s order
expunging the lis pendens pending the disposition of the appeal”
and that “[s]uch failure permitted the defendants to proceed with
13
An “innocent” or good faith purchaser is “one who, by an honest
contract or agreement, purchases property or acquires an interest therein,
without knowledge, or means of knowledge sufficient to charge him in law with
knowledge, of any infirmity in the title of the seller.”• Ka#u Agribusiness
Co. v. Heirs or Assigns of Ahulau, 105 Hawai#i 182, 193, 95 P.3d 613, 624
(2004) (citation omitted). When the Ferraras purchased the Property, the
circuit court had already determined in the consolidated proceedings that BONY
had a first priority lien on the Property. Thus, at the time of the purchase,
there would not have been an “infirmity in the title” based on Onaga’s
mortgage.
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the sale transaction.” Id. at 314, 141 P.3d at 487.
Moreover, the City Bank rule makes practical sense in
the foreclosure context and is consistent with the principles
underlying the Land Court system mentioned above. “The policy
underlying this rule is to encourage nonparty individuals to bid
at [foreclosure] sales.” Leisure Campground, 372 A.2d at 223.
The appeals process can last several years--for example, this
appeal was filed in February 2014. If a party challenging a
foreclosure is not required to post a bond to stay the
proceedings pending the outcome of the appeal (or excused by the
court from doing so), third parties would be dissuaded from
purchasing a foreclosed property given the long-term uncertainty
on the investment.
This court has never explicitly adopted the rule
described in City Bank. In accordance with Hawai#i precedent and
the policy considerations underlying the Land Court system, we
hereby adopt City Bank’s rule for application to Land Court
properties as well as properties administered pursuant to HRS
Chapter 502 (Regular System).14 Thus, we hold that an appellant
14
In this case, the ICA distinguished City Bank by stating that
“City Bank did not involve property registered in Land Court.” Bank of New
York, mem. op. at 11. However, it is unclear whether the property in City
Bank was registered in Land Court, and later unpublished ICA decisions have
applied City Bank to Land Court properties. See Cent. Pacific Bank,
CAAP-12-0001032 at *1; Bouley, CAAP-14-0000575 at *2; In re Marn Family
Litigation, CAAP-12-0000574 at *2.
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challenging a foreclosure must post a supersedeas bond or
otherwise obtain a stay pursuant to HRCP Rule 62 or Hawai#i Rules
of Appellate Procedure (HRAP) Rule 8.15 We further hold that the
appellant here, who has failed to obtain a stay by posting a
bond, may not attack a good-faith purchaser’s title to property
purchased at a judicial sale and confirmed by court order.16
Thus, it was Onaga’s burden to post a bond and thereby
obtain a stay if Onaga believed that it, and not BONY, was
entitled to foreclose on the Property. It failed to do so. The
circuit court properly allowed the foreclosure proceedings to
continue, a sale was held, and the Ferraras purchased the
Property in good faith.
B. Onaga’s Appeal is Moot, as the Certificate of Title
Conclusively Establishes the Ferraras’ Title to the Property
In Aames, this court held that “conclusive effect is to
be given the certificate of title on the question of title to
land.” 107 Hawai#i at 101, 110 P.3d at 1048. Notably, Aames
15
Our holding does not affect a court’s discretion to grant a stay
without requiring a bond. See, e.g., Fed. Prescription Serv., Inc. v. Am.
Pharm. Ass’n, 636 F.2d 755, 757–58 (D.C. Cir. 1980); 2A Barbara J. Van Arsdale
et. al., Federal Procedure, Lawyers Edition § 3:653 (June 2017 Update)
(discussing cases).
16
Following City Bank, our holding does not extends to cases in
which the underlying order ratifying the sale has been reversed on
jurisdictional grounds, or when the purchaser of the property is the
mortgagee. See City Bank, 7 Haw. App. at 133, 748 P.2d at 814. Nor does it
apply to cases in which a court has granted a party’s motion for relief from
judgment or order pursuant to HRCP Rule 60(b).
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addressed the provision of HRS § 501-118 dealing with foreclosure
by power of sale, not foreclosure by action; thus it could be
argued that the Aames holding only applies to nonjudicial
foreclosure proceedings. See id. at 101, 110 P.3d at 1048.
However, Aames discussed the legislative history of HRS Chapter
501 and the Land Court system generally, stating:
HRS chapter 501 pertains to “registration of title
[with the Land Court] to land and easements or rights
in land held and possessed in fee simple within the
state of Hawai#i.” HRS § 501–1 (1993). The 1903
legislative history of HRS chapter 501 is sparse.
However, the legislature indicated that Act 56, which
established the statute, incorporated what is commonly
known as the “Torrens Land Act.” S. Com. Rep., in
1903 Senate Journal, at 337.
According to the legislative history, . . . [i]t
provides an economical and convenient manner of
recording land titles, which, when the plan is fully
adopted by the people, will do away with the present
cumbersome plan of records and largely reduce the
expense of land transfers. . . .
The system of land title registration adopted by the
Torrens Land Act and codified in HRS chapter 501 is a
system for registration of land under which, upon the
landowner’s application, the court may, after
appropriate proceedings, direct the issuance of a
certificate of title. The purpose of this
registration system is to conclusively establish title
to land through the issuance of a certificate of
title.
Id. (internal quotation marks, ellipses, and citations omitted;
emphasis added).
In order words, by relying on certificates of title,
the Torrens system is intended to promote “certainty, economy,
simplicity, and facility.” 11 Thompson on Real Property,
§ 92.10(a) (David A. Thomas ed., 3rd ed. 2015). Giving
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certificates of title conclusive effect in the judicial
foreclosure context, as well as in the non-judicial foreclosure
context, furthers these purposes.
Furthermore, it is unclear what relief Onaga can obtain
in this appeal, which challenges the order confirming sale. In
its opening brief, Onaga requested that the ICA (1) “reverse the
order granting summary judgment and decree of foreclosure and
final judgment to [BONY] and remand for entry of dismissal of its
action” and (2) “reverse the order denying R. Onaga’s cross-
motion for summary judgment and remand ordering the circuit court
to enter an order granting summary judgment and decree of
foreclosure in favor of R. Onaga and to proceed with the
foreclosure sale.” Alternatively, Onaga requested that the ICA
“enter summary judgment and interlocutory decree of foreclosure
in favor of R. Onaga before sending the matter back to circuit
court for it to proceed with the foreclosure sale.” Thus, Onaga
appears to request a decision on the merits of the foreclosure
decree, as well as new foreclosure proceedings.
However, this court has explained that “a judgment of
foreclosure finally determines the merits of the controversy,”
and “[s]ubsequent proceedings are simply incidents to its
enforcement.” Mortg. Electr. Registration Sys., Inc. v. Wise,
130 Hawai#i 11, 16, 304 P.3d 1192, 1197 (2013) (internal
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quotation marks and citations omitted). An appellant cannot
challenge the merits of a foreclosure decree in an appeal of an
order confirming sale. See id. (“[O]rders confirming sale are
separately appealable from the decree of foreclosure[.]”)
Moreover, title to the Property has already passed to
the Ferraras. See HRS § 501-118 (“After a new certificate of
title has been entered, no judgment recovered on the mortgage
note for any balance due thereon shall operate to open the
foreclosure or affect the title to registered land.”). Allowing
Onaga to undo or otherwise hinder the sale of the Property to the
Ferraras would be inconsistent with the purposes underlying our
Land Court system. See HRS § 501-88 (“The original certificate
in the registration book, and any copy thereof duly certified[,]
. . . shall be conclusive as to all matters contained therein,
except as otherwise provided in this chapter).
Thus, because Onaga did not post a bond to stay the
proceedings pending appeal, the instant appeal is moot under HRCP
Rule 62(d) and Aames.
C. HRS § 501-118 Does Not Prevent the Ferraras from Taking
Title to the Property
In denying the Ferraras’ second motion to dismiss, the
ICA determined that “it is questionable whether the certificate
of title submitted by the Ferraras is conclusive in passing title
to the Ferraras,” because under HRS § 501-118, Onaga “is
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permitted the opportunity to appeal the foreclosure by action.”
Bank of New York, mem. op. at 11-12. The ICA also held that the
Ferraras did not comply with HRS § 501-118 because they “do not
contend that they filed a certified copy of the Judgment
Confirming Sale, instead claiming that title was vested in them
upon the recording of the Commissioner’s Deed.” Id. at 12.
Thus, the ICA held that a certificate of title must also comply
with HRS § 501-118, thereby placing two requirements for good-
faith purchasers such as the Ferraras to prove mootness: (1) any
appeal regarding a foreclosure by action must be complete, and
(2) the purchaser must file a certified copy of the judgment
confirming sale. See id. at 11-12.
This court has not previously interpreted the provision
of HRS 501-118 at issue here. The first paragraph of HRS §
501-118 provides:
In case of foreclosure by action, a certified copy of
the final judgment of the court confirming the sale
may be filed or recorded with the assistant registrar
or the deputy after the time for appealing therefrom
has expired and the purchaser shall thereupon be
entitled to the entry of a new certificate.
The ICA appears to have interpreted “after the time for
appealing therefrom has expired” as meaning the completion of the
appeal. However, by its plain language “the time for appealing
therefrom” clearly refers to the window within which a party may
file a notice of appeal after the entry of a judgment, i.e.,
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thirty days (subject to extension). See HRAP Rule 4(a)(1), (4).
Moreover, the ICA’s interpretation appears inconsistent
with HRCP Rule 62(d), discussed above, which provides that a
party may obtain a stay as of right by posting a supersedeas
bond–-if an appeal of a foreclosure automatically prevents the
purchaser from taking title, a bond would never be necessary.
Furthermore, this interpretation places an undue burden on third
parties such as the Ferraras, as they must monitor an appeal to
which they are not parties and/or intervene in the appeal, wait
until the appeal has been completely disposed of, and then
finally obtain a certified copy of the final judgment.
The ICA’s interpretation of HRS § 501-118 also appears
inconsistent with HRS § 501-155. The ICA stated that the
Ferraras’ certificate of title was “contrary to the express
provisions of HRS § 501-118” because “[t]he Ferraras do not
contend that they filed a certified copy of the Judgment
Confirming Sale, instead claiming that title was vested in them
upon recording of the Commissioners’ Deed.” Bank of New York,
mem. op. at 12. However, HRS § 501-155 provides that a judgment
directing conveyance “may be recorded” in Land Court, but that
“[e]very instrument necessary to give effect to the judgment and
directed by the court to be executed . . . shall be recorded and
shall have full force and effect to bind the land to be affected
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thereby.” (Emphases added.) The Ferraras recorded the
Commissioner’s Deed conveying the Property in Land Court, as
directed by the circuit court’s order confirming sale, and then
obtained a certificate of title. This was sufficient to
demonstrate that title of the Property conclusively transferred
to the Ferraras.17 See Aames, 107 Hawai#i at 101, 110 P.3d at
1048 (“[C]onclusive effect is to be given the certificate of
title on the question of title to land.”).
In sum, we interpret HRS § 501-118 as providing a
nonexclusive means for a purchaser of a property at a foreclosure
sale to obtain a certificate of title, i.e., by filing a
certified copy of the final judgment after the thirty day period
allowed to file a notice of appeal has elapsed. HRS § 501-118
does not preclude good faith purchasers at a foreclosure sale
from obtaining a certificate of title by other statutory
procedures, such as those provided in HRS § 501-155.
Accordingly, HRS § 501-118 does not prevent the Ferraras from
taking title to the Property.
17
The ICA also noted that the Ferraras may not have been entitled to
a certificate of title under HRS § 501-106(a)(1) because “it is questionable
whether subsection (1) governs in the case of a judicial foreclosure in which
case title does not pass by voluntary means.” Bank of New York, mem. op. at
12 (citing HRS § 501-106(a)(1), which provides that “[n]o new certificate of
title shall be entered . . . except . . . [i]n pursuance of any deed or other
voluntary instrument”). The ICA’s interpretation is incorrect, as it would
mean that no purchaser of a foreclosed property would be entitled to a
certificate of title, regardless of whether the foreclosure was judicial or
non-judicial, because foreclosures are never “voluntary” under the ICA’s
meaning of the word.
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IV. Conclusion
A party who wishes to stay an order confirming a
foreclosure sale pending appeal must post a supersedeas bond or
otherwise obtain a stay pursuant to HRCP Rule 62 or HRAP Rule 8.
If a stay is not obtained and the property is sold to a bona fide
purchaser, the appeal should be dismissed as moot because no
effective relief can be granted. In the instant case, Onaga
failed to post a supersedeas bond or otherwise obtain a stay, and
the Ferraras lawfully purchased the Property in good faith.
Accordingly, ICA erred in concluding that Onaga’s appeal was not
moot.
The ICA’s July 20, 2016 judgment on appeal is reversed,
and the circuit court’s February 21, 2014 judgment confirming the
sale of the Property to the Ferraras is affirmed.
Richard Naiwieha Wurdeman /s/ Mark E. Recktenwald
for petitioners
/s/ Paula A. Nakayama
Lloyd Y. Asato for
respondent R. Onaga, Inc. /s/ Richard W. Pollack
/s/ Michael D. Wilson
/s/ Glenn J. Kim
32