428 P.3d 761
Haw.2018Background
- Homeowner Grisel Reyes-Toledo filed counterclaims (wrongful foreclosure, declaratory relief, quiet title, and UDAP) in response to Bank of America’s judicial foreclosure complaint on her property.
- Bank of America moved to dismiss the counterclaims under HRCP Rule 12(b)(6); the circuit court granted dismissal and denied reconsideration.
- On prior certiorari (Reyes-Toledo I), the Hawai‘i Supreme Court vacated a foreclosure decree because genuine issues existed whether Bank of America held the note when it filed suit, and remanded the dismissal issue to the ICA.
- On remand the ICA affirmed dismissal of wrongful foreclosure, declaratory relief, and quiet title counts applying the Twombly/Iqbal ‘‘plausibility’’ standard, but reinstated the UDAP claim.
- Homeowner sought certiorari arguing Hawai‘i should apply its traditional notice-pleading Rule 8(a) standard (not plausibility) and that wrongful foreclosure may be pleaded before an actual foreclosure.
- The Hawai‘i Supreme Court (this opinion) rejected Twombly/Iqbal for HRCP Rule 8(a), reaffirmed the notice-pleading standard, held a wrongful foreclosure claim can be asserted before a foreclosure decree, and vacated the dismissals (except UDAP which ICA already reinstated).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper pleading standard for HRCP 12(b)(6) | Apply Twombly/Iqbal plausibility standard to require factual plausibility | Apply Hawai‘i’s traditional notice-pleading Rule 8(a) — short and plain statement giving fair notice | Court rejected plausibility; reaffirmed notice-pleading under HRCP Rule 8(a) |
| Whether wrongful foreclosure claim exists pre-foreclosure | N/A (Homeowner asserted it exists) | Bank: wrongful-foreclosure arises only after foreclosure/sale; pre-foreclosure claim improper | Court held wrongful foreclosure may be pleaded before foreclosure decree; mortgagor may challenge lack of standing and seek damages |
| Sufficiency of wrongful foreclosure counterclaim under Rule 8(a) | Homeowner: incorporated defenses alleging Bank lacked ownership/standing; alleged injury and damages from defending suit | Bank: allegations are defenses, not affirmative claims; insufficient detail to show wrongful acts | Under notice pleading, allegations suffice to give fair notice; wrongful foreclosure claim should not have been dismissed |
| Sufficiency of declaratory-judgment and quiet-title counts | Homeowner: alleged Bank not owner/holder, MERS a strawman, asked court to declare mortgagee identity; alleged superior interest | Bank: relied on MERS designation in mortgage and authority approving MERS assignments; quiet-title fails without tender or ability to pay | Court held both counts met notice-pleading requirements and should not have been dismissed (fact issues remain on standing/ownership) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (established federal "plausibility" pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (applied Twombly beyond antitrust; clarified plausibility standard)
- Conley v. Gibson, 355 U.S. 41 (1957) (longstanding notice-pleading standard)
- Bank of America, N.A. v. Reyes-Toledo (Reyes-Toledo I), [citation="139 Hawai'i 361, 390 P.3d 1248"] (2017) (vacated foreclosure decree; addressed standing/possession of note)
- Santiago v. Tanaka, [citation="137 Hawai'i 137, 366 P.3d 612"] (2016) (recognized wrongful non-judicial foreclosure claims)
- Hungate v. Law Office of David B. Rosen, [citation="139 Hawai'i 394, 391 P.3d 1"] (2017) (touched on pleading and foreclosure-related issues)
- Hall v. Kim, 491 P.2d 541 (Haw. 1971) (interpreting HRCP Rule 8(a); endorsing notice pleading)