Lima, Jr. v. Deutsche Bank National Trust Company
149 Haw. 457
| Haw. | 2021Background
- Three putative class actions in federal court: borrowers defaulted on mortgages; lenders conducted nonjudicial foreclosures under HRS §667-5 but failed to strictly comply with statutory notice/posting requirements (e.g., postponed auctions without republishing notices).
- Some properties were sold to third parties at foreclosure; others were purchased by the mortgagee-bank and later resold.
- Plaintiffs sued for wrongful foreclosure (tort) and consumer UDAP under HRS §480-2, alleging procedural defects and claiming they lost title, possession, and investments.
- Defendants moved for summary judgment arguing plaintiffs cannot prove compensatory damages because plaintiffs did not account for remaining mortgage debt (which often exceeded property value).
- The U.S. District Court certified the question whether a borrower must account for the mortgage’s effect (i.e., net out mortgage debt) when proving harm; the Hawai‘i Supreme Court accepted and answered that question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether borrower must account for remaining mortgage debt when proving damages for wrongful foreclosure/UDAP | Borrowers: showing loss of title, possession, and investments is enough; any mortgage effect is a setoff burden for banks to prove | Banks: plaintiffs must prove net (not gross) damages; must subtract remaining mortgage debt to show actual harm | Held: Borrowers bear the burden to account for mortgage effect when proving compensatory damages; must show net damages |
| Whether nominal or punitive damages let plaintiffs survive summary judgment without compensatory damages | Plaintiffs: nominal, punitive, interest, loss-of-use, and past payments suffice to avoid summary judgment | Banks: plaintiffs must prove compensatory damages; nominal damages alone insufficient; punitive requires support | Held: Nominal damages do not suffice to survive summary judgment; plaintiffs must show compensatory damages. Punitive damages require a compensatory/nominal basis and UDAP punitive relief is statutorily precluded |
| Whether restitution/unjust-enrichment remedies permit ignoring mortgage debt (i.e., no offset) | Plaintiffs: restitution for unlawfully obtained benefits should not be offset by mortgage debt; Kida supports bank bearing deduction burden | Banks: restitution not a substitute for tort compensatory framework; any value received (e.g., forgiven debt) must be set off | Held: Restitution theory does not excuse accounting for mortgage; Santiago and precedent require setoff for value received (forgiven mortgage debt) when measuring out-of-pocket losses |
Key Cases Cited
- Miller v. Hartford Life Ins. Co., [citation="126 Hawai'i 165, 268 P.3d 418"] (2011) (de novo review standard for certified questions)
- Kelly v. 1250 Oceanside Partners, [citation="111 Hawai'i 205, 140 P.3d 985"] (2006) (plaintiff bears burden to prove all elements)
- Exotics Hawaii‑Kona, Inc. v. E.I. du Pont de Nemours & Co., [citation="116 Hawai'i 277, 172 P.3d 1021"] (2007) (damages must be proved with reasonable certainty at summary judgment)
- Bank of Am., N.A. v. Reyes‑Toledo, [citation="143 Hawai'i 249, 428 P.3d 761"] (2018) (elements of wrongful foreclosure include damages)
- Kawakami v. Kahala Hotel Investors, LLC, [citation="142 Hawai'i 507, 421 P.3d 1277"] (2018) (UDAP damages element requires proof of injury and amount)
- Zanakis‑Pico v. Cutter Dodge, Inc., [citation="98 Hawai'i 309, 47 P.3d 1222"] (2002) (distinguishing compensatory, nominal, and punitive damages)
- Bynum v. Magno, [citation="106 Hawai'i 81, 101 P.3d 1149"] (2004) (compensatory damages aim to restore pre‑tort position)
- Tabieros v. Clark Equip. Co., [citation="85 Hawai'i 336, 944 P.2d 1279"] (1997) (general rule: restore plaintiff to pre‑wrong position)
- Beneficial Hawaii, Inc. v. Kida, [citation="96 Hawai'i 289, 30 P.3d 895"] (2001) (procedural posture illustrating burden to prove enforceability before equitable relief)
- Santiago v. Tanaka, [citation="137 Hawai'i 137, 366 P.3d 612"] (2016) (applied out‑of‑pocket rule; value received must offset price paid when measuring damages)
- Weinberg v. Mauch, [citation="78 Hawai'i 40, 890 P.2d 277"] (1995) (where damages are an element, nominal damages are insufficient)