The Bank of New York Mellon v. Laudig

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
22-JUN-2023
08:29 AM
Dkt. 63 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI‘I

THE BANK OF NEW YORK MELLON FKA THE BANK OF NEW YORK
AS TRUSTEE FOR THE CERTIFICATEHOLDERS CWALT, INC.,
ALTERNATIVE LOAN TRUST 2004-28CB, MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2004-28CB, Plaintiff-Appellee, v.
STEPHEN LAUDIG, Defendant-Appellant, and
ASSOCIATION OF APARTMENT OWNERS OF UNIVERSITY COURT,
Defendant-Appellee; JOHN DOES 1-20; JANE DOES 1-20;
DOE CORPORATIONS 1-20; DOE ENTITIES 1-20;
AND DOE GOVERNMENTAL UNITS 1-20,
Defendants-Appellees.

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 1CC151001533)

SUMMARY DISPOSITION ORDER
(By: Hiraoka, Presiding Judge, Wadsworth and McCullen, JJ.)

Defendant-Appellant Stephen Laudig (Laudig) appeals

from the Circuit Court of the First Circuit's (1) July 8, 2019

"Findings of Fact, Conclusions of Law and Order Granting

Plaintiff's Motion for Summary Judgment Against All Defendants

and for Interlocutory Decree of Foreclosure" (Foreclosure
NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Order), (2) July 8, 2019 Judgment, and (3) October 1, 2019

"Order Denying Defendant Stephen Laudig's Nonhearing Motion for

Reconsideration of the [Foreclosure Order and Judgment]" (Order

Denying Reconsideration). 1

On appeal, Laudig contends the circuit court erred in

granting Plaintiff-Appellee Bank of New York's 2 Motion for

Summary Judgment Against All Defendants and for Interlocutory

Decree of Foreclosure, arguing that (1) Mhari Holtzclaw

(Holtzclaw) was not a qualified witness, (2) Bank of New York

failed to show delivery of the "Notice of Intent to Accelerate

Indebtedness and Foreclose" (Default Notice), and (3) Bank of

New York failed to show it possessed the note at the time the

complaint was filed. 3

Upon careful review of the record and briefs submitted

by the parties, and having given due consideration to the issues

1 The Honorable James C. McWhinnie presided.

2 The Bank of New York's full name in this litigation is "Bank of New
York Mellon FKA the Bank of New York as Trustee for the Certificateholders
CWALT, Inc., Alternative Loan Trust 2004-28CB, Mortgage Pass-Through
Certificates, Series 2004-28CB."

3 Laudig raises a fourth point of error, arguing that the circuit court
erred by failing to consider the declaration of James M. Kelley. Based on
our decision today, we decline to address this point.

We also note that, within his points of error, Laudig raises additional
arguments that were not raised before the circuit court, which we also
decline to address. See Cnty. of Hawai‘i v. UNIDEV, LLC, 129 Hawai‘i 378, 387,
301 P.3d 588, 597 (2013) ("It is axiomatic that where a party fails to raise
an argument before the courts below, that argument may be deemed waived for
purposes of appeal.").

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raised and arguments advanced, we resolve Laudig's points of

error as follows, and vacate and remand.

At the outset, we emphasize that "[i]n order to prove

entitlement to foreclose, the foreclosing party must demonstrate

that all conditions precedent to foreclose under the note and

mortgage are satisfied and that all steps required by statute

have been strictly complied with." Bank of Am., N.A. v. Reyes-

Toledo, 139 Hawai‘i 361, 367, 390 P.3d 1248, 1254 (2017). Thus,

the foreclosing party must "prove the existence of an agreement,

the terms of the agreement, a default by the mortgagor under the

terms of the agreement, and giving of the cancellation notice."

Id. "A foreclosing plaintiff must also prove its entitlement to

enforce the note and mortgage." Id.

We review the granting of summary judgment de novo.

U.S. Bank N.A. v. Mattos, 140 Hawai‘i 26, 30, 398 P.3d 615, 619

(2017).

(1) Laudig first contends that Holtzclaw was not a

qualified witness to introduce and authenticate records that

loan servicer New Penn Financial, LLC d/b/a Shellpoint Mortgage

Servicing (Shellpoint), received from prior loan servicers Bank

of America, N.A. and Resurgent Mortgage Servicing (Resurgent)

because she failed to establish personal knowledge with respect

to the business records at issue. Laudig argues that the

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Holtzclaw Declaration "is contradictory" as to whether the

"prior servicer" is Resurgent, Bank of America, or both. Bank

of New York counters that, because Shellpoint acquired

Resurgent, "the records of Resurgent should be considered those

of Shellpoint rather than those of a prior servicer."

Under the incorporation doctrine "[r]ecords received

from another business and incorporated into the receiving

business' records may in some circumstances be regarded as

'created' by the receiving business." Wells Fargo Bank, N.A. v.

Behrendt, 142 Hawai‘i 37, 45, 414 P.3d 89, 97 (2018) (citing

Mattos, 140 Hawai‘i at 32, 398 P.3d at 621). Thus, incorporated

records are admissible under Hawai‘i Rules of Evidence (HRE)

Rule 803(b)(6) "when a custodian or qualified witness testifies

that the documents were incorporated and kept in the normal

course of business, that the incorporating business typically

relies upon the accuracy of the contents of the documents, and

the circumstances otherwise indicate the trustworthiness of the

document." Id. (citing Mattos, 140 Hawai‘i at 32, 398 P.3d at

621; State v. Fitzwater, 122 Hawai‘i 354, 367-68, 227 P.3d 520,

533-34 (2010)).

Further, "evidence that a business has incorporated

and relied on a record created by another organization speaks

directly to that record's reliability. When accompanied by

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testimony about other circumstances that also indicate the

record's trustworthiness, such evidence is an acceptable

substitute for testimony concerning a record's actual creation."

U.S. Bank Tr., N.A. as Tr. for LSF9 Master Participation Tr. v.

Verhagen, 149 Hawai‘i 315, 326, 489 P.3d 419, 430 (2021)

(emphasis omitted).

As to Resurgent's records, although Holtzclaw's

Declaration asserts that Resurgent's records became part of

Shellpoint's records due to the acquisition, there was no

testimony that Shellpoint kept Resurgent's documents in the

normal course of business, relied on them, or otherwise

described their trustworthiness. See generally, Behrendt, 142

Hawai‘i at 45, 414 P.3d at 97. Therefore, Bank of New York

failed to establish the admissibility of these records under HRE

Rule 803(b)(6).

As to Bank of America's records, although Holtzclaw's

declaration describing their incorporation may have otherwise

satisfied the factors of the incorporation doctrine under

Behrendt and Verhagen, Holtzclaw's declaration appears to

incorrectly state that Bank of America's records were

incorporated by Shellpoint rather than by Resurgent, despite

indicating that Resurgent became the servicer prior to

Shellpoint acquiring Resurgent. Cf. Wilmington Sav. Fund Soc'y,

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FSB v. Akehi, 144 Hawai‘i 430, 443 P.3d 122, No. CAAP-XX-XXXXXXX,

2019 WL 2559486 at *7 (App. June 21, 2019) (SDO) ("In order for

Pope to establish the admissibility of a document attached to

her declaration, Pope must, at a minimum, accurately describe

the contents of the document, particularly with the respect to

which entity is responsible for having provided the requisite

notice . . .") (emphases added). Holtzclaw's declaration must

be accurate in its factual description of which entity actually

incorporated Bank of America's documents to establish the

admissibility of these records under HRE Rule 803(b)(6).

(2) Laudig next contends that Bank of New York failed

to show that a notice of default was given to him.

To establish that notice was given to Laudig, Bank of

New York provided (1) a copy of two Default Notices addressed to

Laudig and dated July 11, 2013, and (2) Holtzclaw's declaration

stating that "[w]ritten notice ('Notice') was given to Borrower

of the default and of mortgagee's intention to accelerate the

loan if the default was not cured."

The Default Notices provided appear to be records from

Resurgent as they were on Resurgent letterhead, required payment

to be sent to Resurgent, and were signed by a Resurgent

representative. But, as discussed above, Bank of New York

failed to establish the admissibility of Resurgent's records

under HRE Rule 803(b)(6).

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(3) Finally, Laudig contends that Bank of New York

failed to prove it possessed the note when the complaint was

filed.

When a note is indorsed in blank, it becomes payable

to the bearer and may be negotiated by transfer or possession

alone. See Reyes-Toledo, 139 Hawai‘i at 370, 390 P.3d at 1257.

Thus, when a lender forecloses on a mortgage secured by a note

indorsed in blank, the lender must establish, inter alia, that

it held the original indorsed note at the time it filed the

complaint. 139 Hawai‘i at 368, 390 P.3d at 1255.

To prove that it was in possession of the note at the

time the complaint was filed, Bank of New York provided the

following: (1) the note indorsed in blank; (2) the February 25,

2015 Bailee Letter; (3) Holtzclaw's declaration; and (4) Gina

Santellan's (Santellan) declaration.

The Bailee Letter, establishing that the note was

received by Bank of New York's representative, was dated

February 25, 2015. Santellan's declaration, stating that the

Note "is currently in our custody as custodian for Plaintiff and

Plaintiff's counsel[,]" was dated December 31, 2018. With the

Bailee Letter and Santellan's declaration, Bank of New York

established that it received the note on February 25, 2015 and

was still in possession of the note on December 31, 2018, which

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would show that it possessed the note when the complaint was

filed on August 4, 2015.

The burden then shifted to Laudig to set "forth

specific facts showing that there is a genuine issue for trial."

Kondaur Cap. Corp. v. Matsuyoshi, 136 Hawai‘i 227, 240-41, 361

P.3d 454, 467-68 (2015) (cleaned up). Laudig, however,

presented no evidence showing that there was a genuine issue as

to whether Bank of New York continuously held the note between

February 25, 2015 and December 31, 2018.

In conclusion, because Bank of New York failed to

establish that Resurgent's and Bank of America's records were

admissible, the circuit court erred in granting Bank of New

York's motion for summary judgment. We vacate the circuit

court's Foreclosure Order, Judgment, and Order Denying

Reconsideration, and remand this case for further proceedings

consistent with this order.

DATED: Honolulu, Hawai‘i, June 22, 2023.

On the briefs: /s/ Keith K. Hiraoka
Presiding Judge
Keith M. Kiuchi,
for Defendant-Appellant. /s/ Clyde J. Wadsworth
Associate Judge
Charles R. Prather,
Peter T. Stone, /s/ Sonja M.P. McCullen
for Plaintiff-Appellee. Associate Judge

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