In April 2009, the note was assigned to the mortgagee. The mortgagee initiated a foreclosure action on the adjustable-rate note, which was secured by a mortgage on the mortgagor’s real property. The lower court granted several motions, including granting a summary judgment motion in favor of the mortgagee. The mortgagor subsequently appealed those motions, arguing several points of error. On appeal, the court considered whether the mortgagee could enforce a lost note under Haw. Rev. Stat. § 490:3-309 and whether a foreclosing plaintiff has standing to pursue foreclosure when it cannot demonstrate entitlement to enforce the note.
In U.S. Bank, N.A. v. Webb, 566 P.3d 376 (Haw. Ct. App. 2025), the court vacated the lower court’s summary judgment order and remanded the case for further proceedings. The court first analyzed the language of HRS § 490:3-309 and affidavits submitted by the mortgagee. The court analyzed the following relevant portions of the statute: (a)(i) “the person was in rightful possession of the instrument and entitled to enforce it when loss of possession occurred,” and (b) “a person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument.” The affidavit submitted by the mortgagee chronicled the timeline of events, dating back to an earlier foreclosure attempt, as well as the times the note and other collateral files had been exchanged between the mortgage or other possible holders of the note and the law firm representing the mortgagee or those other possible holders of the note at the time. A supplement to the affidavit stated that the bank’s law firm believed the note and collateral files had been inadvertently shredded prior to this suit and had not been located. The court noted several problems with the assertions made in the affidavit. First, the record did not establish whether the note was lost because it was unclear whether it had been included in the collateral files. Second, the affidavit contained several inferences about a loan servicer’s transmittal practices, that the mortgagee’s prior counsel had made without any personal knowledge of the facts. Finally, the affidavit never established that the prior law firm of the mortgagee or its predecessors in interest had received the files, which allegedly included the note, on behalf of a mortgagee. The court noted this issue raised a genuine question of material fact as to whether the mortgagee was “in rightful possession of the instrument and entitled to enforce it when loss of possession occurred” as required by the Haw. Rev. Stat. § 490:3-309 and whether the note had been transmitted to the law firm at all. Although the mortgagee produced a release transmittal referring to the mortgagor as the borrower, the document did not mention the note. Because genuine questions of material fact remained regarding whether the note had been transmitted to the law firm and whether the mortgagee was in rightful possession of the note when it was allegedly lost or destroyed, those issues directly affected the mortgagee’s standing to enforce the note. Accordingly, the court remanded the case for further proceedings.
By Jace Brown [email protected]
Edited by Olivia Lewis [email protected]
Edited By Callighan Ard [email protected]
Edited By Hayden Mariott [email protected]