The borrower appealed a judgment from a Hawai’i circuit court granting the bank’s motion for summary judgment, which sought a decree of foreclosure and an order of sale of the home. The bank had been assigned the mortgage. The borrower contended that the state circuit court had errored in its judgment because (1) the bank lacked standing; (2) the mortgage had not been validly assigned to the bank because the assignor was in bankruptcy at the time of the purported assignment; and (3) the borrower’s liability was discharged in his earlier personal bankruptcy case and for that reason the bank was “deprived [ ] of standing to foreclose.”
In Deutsche Bank Nat’l Trust Co. v. Kozma, 562 P.3d 968 (Haw. Ct. App. 2025), the state appellate court affirmed the circuit court. The court applied Hawai’i Revised Statute (HRS) § 409:3-301 to resolve whether the bank had standing. It explained that § 409:3-301 provides that a foreclosing party must establish they are the party entitled to enforce the note at the time of filing a foreclosure complaint. A party is “entitled to enforce an instrument” when it is the holder of the instrument, such as by being in possession (i.e., the bearer) of a note indorsed in blank. HRS § 490:3-301; Bank of Am., N.A. v. Reyes-Toledo, 390 P.3d 1248 (2017). Therefore, a party has standing if the evidence shows that it had possession of a note indorsed in blank and “‘the blank indorsement occurred before the initiation of the suit.’” Id. An employee of the bank testified that the note was indorsed in blank and that the bank had possession of the note and mortgage before the filing date of the complaint. Therefore, the court found the bank had standing to foreclose on the home. Next, the court found that the borrower did not present evidence that the note and mortgage had been part of the bankruptcy estate in the assignor’s bankruptcy case. Finally, the court found that the borrower’s earlier personal bankruptcy did not affect the bank’s ability to foreclose because the order of discharge provided that “a creditor with a lien may enforce a claim against the debtors’ property subject to that lien… for example, a creditor may have the right to foreclose a home mortgage.”
By Teddy Groce [email protected]
Edited By Conor Doris [email protected]
Edited By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]