Oral Argument Before the Hawaii Supreme Court
No. SCWC-12-0000867, Tuesday, July 7, 8:45 a.m.
KONDAUR CAPITAL CORPORATION, Respondent/Plaintiff-Appellee, vs. LEIGH MATSUYOSHI, Petitioner/Defendant-Appellant.
The above-captioned case has been set for argument on the merits at:
Supreme Court Courtroom
Ali`iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813
Attorneys for Petitioner:
James J. Bickerton, Bridget G. Morgan, and Joe Moss
Attorney for Respondent:
Jonathan W. Y. Lai, Michael C. Bird, and Thomas J. Berger
NOTE: Order accepting Application for Writ of Certiorari, filed 05/18/15.
COURT: MER, CJ; PAN, SSM, RWP, and MDW, JJ.
Leigh Matsuyoshi purchased a residential property located in Li`hue, Kaua`i (Property) that she financed with a $500,000 loan, secured by a mortgage on the Property from Resmae Mortgage Corporation (Resmae). The mortgage included an acceleration and power of sale clause. When Matsuyoshi defaulted on the loan, Resmae commenced non-judicial foreclosure proceedings under the power of sale in the mortgage. Resmae later assigned the mortgage to Resmae Liquidation Properties (RLP). Thereafter, RLP bought the Property at a foreclosure auction sale in Honolulu. RLP then conveyed the Property by a quitclaim deed to Kondaur Capital Corporation (Kondaur).
Kondaur commenced an ejectment action against Matsuyoshi on June 5, 2012. On June 27, 2012, Kondaur moved for summary judgment, which Matsuyoshi opposed on several grounds. The circuit court granted the motion and Matsuyoshi appealed. The Intermediate Court of Appeals (ICA), following a remand from the supreme court, affirmed the circuit court’s grant of summary judgment in favor of Kondaur. On April 6, 2015, Matsuyoshi filed her Application seeking review of the ICA’s judgment.
Matsuyoshi argues that under Ulrich v. Security Investment Company, 35 Haw. 158 (Haw. Terr. 1939), mortgagees are bound to exercise the foreclosure power with fairness and diligence, especially when the mortgagee is self-dealing in a manner that creates an inherent conflict of interest. Matsuyoshi contends that Kondaur, in order to prevail on summary judgment, was required to establish in its moving papers that RLP’s foreclosure sale of the Property was properly and fairly conducted and that the price was adequate–requirements that RLP failed to establish, particularly because RLP sold the Property on O`ahu rather than on Kaua`i. In her Application, Matsuyoshi identifies a split among local federal courts as to whether Ulrich remains good law. Additionally, Matsuyoshi asserts that Kondaur is not a bona fide purchaser because Kondaur was on notice of her claim to the Property by virtue of the quitclaim deed that it received from RLP.
In response, Kondaur argues that Matsuyoshi’s “reasonable diligence” argument was not preserved for this court’s review and was therefore waived. Additionally, Kondaur contends that even if this argument was properly preserved, requiring a third-party successor-in-interest such as Kondaur to establish a predecessor-in-interest’s reasonable diligence is tantamount to requiring such a successor-in-interest to disprove every possible defense to an ejectment action, which a summary judgment movant is not required to do. According to Kondaur, Ulrich requires the mortgagor, not the mortgagee, to introduce credible evidence to support a defense that the sale price at auction was fraudulent–a burden that Kondaur argues Matsuyoshi failed to satisfy in this case. Lastly, Kondaur contends that Matsuyoshi’s challenge to the sale of the Property on O`ahu rather than on Kaua`i is without merit because neither the pre-2012 version of the non-judicial foreclosure statute nor the power of sale contained in the parties’ mortgage required the sale to be conducted in the same county as where the Property is located.