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Oral Argument Before the Intermediate Court of Appeals–CAAP-13-1760

CAAP-13-0001760, Wednesday, December 14, 2016, 9 a.m.

HIWALANI P S HOLDINGS, LLC and ROBERT N. FABRIQUE, Plaintiffs-Appellees, vs. WELLS FARGO BANK, N.A., AS TRUSTEE FOR OPTION ONE MORTGAGE LOAN TRUST 2007-6 ASSET-BACKED CERTIFICATES, SERIES 2007-6, Defendant-Appellant.

The above-captioned case was set for argument on the merits at:

Supreme Court Courtroom
Ali iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813

Attorneys for Defendant-Appellant:

Paul Alston and J. Blaine Rogers of Alston Hunt Floyd & Ing

Attorneys for Plaintiffs-Appellees:

Steven K. S. Chung, Chanelle M. C. Fujimoto, and Debra M. Peake of Imanaka Asato, LLLC

COURT: Nakamura, CJ, Reifurth, and Ginoza, JJ.

[ Listen to the entire audio recording in mp3 format ]

Brief Description:

Buyer purchased a property in Pukalani, Hawaiʻi, (“Property”) and executed a note and mortgage in favor of Option One Mortgage Company. Defendant-Appellant Wells Fargo Bank, N.A., was assigned the mortgage on March 20, 2009. The mortgage reserved a power of sale if the buyer fell into default. Buyer defaulted and, in April 2009, Wells Fargo initiated nonjudicial foreclosure proceedings.

Parallel to the foreclosure, Wells Fargo discussed a possible loan modification with Buyer. On June 4, 2009 Wells Fargo’s servicing agent placed the foreclosure “on hold” in their internal system based on apparent progress in the discussions with the Buyer.

The internal hold notwithstanding, on June 5, 2009 a Wells Fargo agent auctioned off the Property. Plaintiff-Appellee Robert N. Fabrique was the high bidder. Thereafter Fabrique tendered deposits for more than 10% of the purchase price and advised that the Property would be held as a tenancy in severality in the name of Plaintiff-Appellee Hiwalani P S Holdings, LLC. In return for his deposits, Fabrique was tendered a receipt and vesting instructions. On the next business day, Wells Fargo’s counsel informed Hiwalani’s principal that the bank intended to cancel the sale.

Hiwalani filed this action alleging breach of contract and sought specific performance and damages. In 2010, Hiwalani withdrew its request for specific performance, citing the Property’s damaged state. Wells Fargo moved the Circuit Court for Summary Judgment, which was granted. Hiwalani appealed and this court vacated the judgment and remanded the case, holding that the question of Buyer’s default involved a genuine issue of material fact.

On remand, Wells Fargo moved to amend its answer to include a statute of frauds defense, and Hiwalani filed a motion for partial summary judgment on the issue of liability. The Circuit Court denied Wells Fargo’s motion to amend on the basis of futility and granted Hiwalani summary judgment and benefit of the bargain damages, as well as prejudgment interest and attorneys’ fees. Wells Fargo appeals.

Wells Fargo raises six points or error on appeal:

(1) “The Circuit Court erred in ruling that a ‘valid contract’ was formed between the parties because the [a]uction was void as it was not conducted in strict compliance with both the Mortgage’s power of sale clause and Section 5.”

(2) “Even if the auction was not void due to lack of compliance with Section 5 and the power of sale, the Circuit Court erred in rejecting Wells Fargo’s [argument] against formation of a contract based upon mistake.”

(3) “The Circuit court erred in rejecting Wells Fargo’s motion to amend its answer on the basis of futility.”

(4) “The Circuit Court erred by considering evidence purporting to justify Hiwalani’s damage claim that was first submitted to the court with Plaintiffs’ reply memorandum.”

(5) “The Circuit Court erred in finding Hiwalani proved it was entitled to damages in excess of the return of its deposit with interest thereon.”

(6) “Because summary judgment was improperly granted, Hiwalani is not the prevailing party and the Circuit Court erred in awarding Hiwalani attorneys’ fees and costs and prejudgment interest.”