304 P.3d 1192
Haw.2013Background
- In 2006 Petitioners Wise and Nihipali executed a mortgage and note to Flexpoint; Mortgage listed MERS as "mortgagee" and "nominee."
- In May 2009 MERS (as nominee) sued to foreclose; MERS moved for summary judgment in July 2009 and obtained default against defendants for failing to answer.
- In May 2010 the circuit court granted MERS's motion for summary judgment and entered a foreclosure judgment; Petitioners did not appeal that judgment.
- MERS conducted a commissioner’s sale in September 2010 and sought confirmation; Petitioners objected at the confirmation hearing, arguing MERS lacked standing and that Chase’s later ratification under HRCP 17 could not cure that defect.
- In April 2011 the circuit court confirmed the sale, finding Chase had ratified MERS’s commencement and that Chase was holder of the note by endorsement; ICA affirmed.
- The Supreme Court affirmed the ICA, holding Petitioners were precluded from raising MERS’s standing at the sale-confirmation stage because the standing challenge was not unique to confirmation and was barred by res judicata due to the unappealed foreclosure judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MERS lacked standing to bring the foreclosure action | MERS: foreclosure judgment is valid; sale confirmation may proceed; Chase ratified MERS’s actions under HRCP 17 | Petitioners: MERS never held the note; standing defect is incurable by later ratification; Chase was not the holder at suit commencement | The court did not decide merits of standing; held Petitioners are precluded from relitigating standing at confirmation because the issue was not unique to confirmation and was barred by res judicata (foreclosure judgment final) |
| Whether HRCP 17 ratification can cure a standing defect retroactively | MERS: Chase’s ratification under HRCP 17 corrected any standing issue and bound Chase to the proceedings | Petitioners: Rule 17 cannot be used where the real party lacked standing at commencement; ratification requires evidence of holder status at outset | Court declined to resolve this substantive question on the merits because of res judicata; ratification issue left undecided |
| Whether confirmation proceedings are a proper stage to challenge standing | MERS: confirmation is an enforcement step; only errors unique to confirmation may be raised there | Petitioners: standing is jurisdictional and may be litigated at any stage, including on appeal from confirmation | Court: challenges not unique to confirmation must be raised timely from the foreclosure judgment; failure to appeal foreclosure judgment precludes raising standing at confirmation |
| Whether res judicata bars raising defenses at confirmation after a final foreclosure judgment | MERS: foreclosure judgment finally adjudicated the right to foreclose, so subsequent confirmation is enforcement and res judicata applies | Petitioners: standing is jurisdictional and may be raised anytime, including during confirmation | Court: res judicata applies here—confirmation is analogous to an action on the judgment; defenses that could have been litigated in the foreclosure action are precluded by the final foreclosure judgment |
Key Cases Cited
- Security Pacific Mortg. Corp. v. Miller, 71 Haw. 65, 783 P.2d 855 (Haw. 1989) (foreclosure proceedings are bifurcated; errors unique to post-judgment orders may be appealed separately)
- MDG Supply, Inc. v. Diversified Investments, Inc., 51 Haw. 375, 463 P.2d 525 (Haw. 1969) (foreclosure judgment finally determines the merits; subsequent proceedings are enforcement incidents)
- Eastern Savings Bank, FSB v. Esteban, [citation="129 Hawai'i 154, 296 P.3d 1062"] (Haw. 2013) (res judicata can bar claims at confirmation that could have been litigated in the foreclosure action)
- Kaho'ohanohano v. State, [citation="114 Hawai'i 302, 162 P.3d 696"] (Haw. 2007) (standing is a jurisdictional issue that may ordinarily be addressed at any stage)