Background
In December 2006, Stuart and Raynette Saito executed an adjustable-rate promissory note for $391,000 in favor of Mortgagepointer.com, Inc., secured by a mortgage on their property at 45-580C Keaʻahala Road, Kāneʻohe, Hawaii. The note was subsequently transferred through a series of allonges, with the third allonge containing an undated special indorsement to Wells Fargo. After the Saitos defaulted, PHH Mortgage Corporation — the loan servicer — mailed a Notice of Default to the Saitos on August 21, 2020, and Wells Fargo filed a foreclosure complaint in the Circuit Court of the First Circuit on October 28, 2020.
Despite having the entry of default against them set aside, the Saitos never filed an answer to the complaint. In February 2024, Wells Fargo moved for summary judgment and a decree of foreclosure. The circuit court granted the motion, entering its Summary Judgment Order and Judgment on July 3, 2024. The Saitos timely appealed, challenging Wells Fargo’s standing, the authenticity of the note’s indorsements, and the adequacy of the default notice mailing.
The Court’s Holding
The Hawaii Intermediate Court of Appeals affirmed the circuit court on all three grounds. First, the court held that Wells Fargo properly authenticated the note and established standing through the declaration of attorney Steven Iwamura, who personally reviewed the original note and allonges on the day the foreclosure complaint was filed and attested to his firm’s possession of the originals since July 5, 2017. This satisfied the requirement that a foreclosing party prove it was entitled to enforce the note at the time the complaint was filed.
Second, the court rejected the Saitos’ argument that the circuit court improperly barred them from challenging the note’s indorsement. Under Hawaii Rules of Civil Procedure Rule 8(d), averments in a complaint go admitted when a defendant fails to file a responsive pleading — and the Saitos undisputedly never answered, even after default was set aside. Third, the court found that the mailing of the Notice of Default was adequately established through the declaration of PHH records custodian Claribel Lopez, whose declaration explained how PHH integrated and validated records from prior servicers Homeward Residential and Ocwen, satisfying the business records exception under Hawaii Rules of Evidence Rule 803(b)(6).
Key Takeaways
- An attorney who personally reviewed original loan documents before filing suit is a competent witness to authenticate those documents and establish the lender’s standing to foreclose.
- Under HRCP Rule 8(d), a defendant who fails to file an answer — even after a default is set aside — admits all well-pleaded averments in the complaint, including those relating to the validity of note indorsements.
- A successor loan servicer’s records custodian can lay a sufficient business records foundation for predecessor servicer records by describing the due-diligence and integration process used when those records were acquired.
Why It Matters
This decision reinforces the procedural consequences of failing to answer a foreclosure complaint in Hawaii. Even when a default is vacated and a borrower has a second opportunity to contest the lender’s claims, failing to file an answer forecloses a wide range of defenses at the summary judgment stage. Lenders and their counsel can take comfort that personal review of original loan documents at the time of filing — combined with a clear chain of custody — will satisfy Hawaii’s standing and authentication requirements.
The case also provides practical guidance on how successor mortgage servicers can authenticate transferred loan records. By articulating the multi-step validation process used to integrate predecessor records, a servicer’s custodian can bring those records within the business records hearsay exception — a common battleground in Hawaii foreclosure litigation following the Hawaii Supreme Court’s framework established in Verhagen.