Opposition Brief — Albano v. Norwest Financial Hawaii, Inc.

Supreme Court, Ua]

| PILED

No. 01-299 _ SEP 19 2001

L -

|_ORFICE OF THE CLERK

In The ee

Supreme Court of the United States

= —¢ —

WARREN Y.S.C. ALBANO and

CAROLINE C.S. ALBANO,

Petitioners,

NORWEST FINANCIAL HAWAII, INC.,

Respondent.

a

On Petition For Writ Of CertiGrari

To The United States Court Of Appeals

For The Ninth Circuit

+

BRIEF IN OPPOSITION

- ¢

Goopsitt ANDERSON QUINN & STIFE!

A Limitep Liasiurry LAw Partnersuir LLP

Bruce L. LAMon 2738-0*

Lisa A. Bait 6021-0

Alii Place, Suite 1800

1099 Alakea Street

Honolulu, HI 96813

Telephone: (808) 547-5600

Attorneys for Respondent

Norwest Financial Hawati, Inc., nka

Wells Fargo Financial Hawaut, Inc.

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO, (800) 225-6464

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether the United States District Court and the

Ninth Circuit Court of Appeals properly decided that

under Hawaii law, the doctrine of res judicata bars a

borrower’s federal court lawsuit for rescission of a real

estate mortgage under the Truth In Lending Act, where

an earlier state court foreclosure judgment against the

borrower on the same real estate mortgage was a final

judgment and was not appealed.

li

PARTIES TO THE PROCEEDING AND

DISCLOSURE UNDER SUP. CT. R. 29.6

Pursuant to Sup. Ct. R. 29.6, Respondent Norwest

Financial Hawaii, Inc., nka Wells Fargo Financial Hawaii,

Inc. (“Norwest”) makes the following disclosures:

1. List all parent companies of said party:

Norwest is a Hawaii corporation that is wholly

owned by Wells Fargo Financial, Inc.; Wells

Fargo Financial, Inc. is an lowa corporation that

is wholly owned by Wells Fargo Financial Ser-

vices, Inc.; Wells Fargo Financial Services, Inc. is

a Delaware corporation that is wholly owned by

Wells Fargo & Company, a Delaware corpora-

tion.

2. List any publicly held company that

owns 10% or more.of the said party’s stock:

None.

DATED: Honolulu, Hawaii, September 19, 2001.

ill

TABLE OF CONTENTS

Page

GPRS EMM PMEORINEED, 00.0 cc cscscccccccccaccens i

PARTIES TO THE PROCEEDING AND DISCLOSURE

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AES TE PARP PETIA TEIED 6 oc cree ccccccsnccescsacce Vv

EY Ns og cine sebset Cue dasceccesusesse 1

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I. THE UNDERLYING ACTIONS................. l

II. THE NINTH CIRCUIT OPINION .............. 3

REASONS FOR DENYING THE PETITION......... 4

I. THE NINTH CIRCUIT COURT OF APPEALS

PROPERLY HELD THAT A PRIOR STATE

COURT FORECLOSURE JUDGMENT BARS

SUBSEQUENT RESCISSION LAWSUITS

UNUGR FILA SECTION 1635 ............0002: 5

A. The Court Of Appeals Properly Granted

Full Faith And Credit To The Hawaii State

Court Foreclosure Judgment .............. 5

B. The Panel Below Correctly Interpreted Res

Judicata Principles In Accordance With

Hawaii Law And Determined That Peti-

tioners’ TILA Claims Are Barred.......... 7

1. The Ninth Circuit’s Decision Was Made

On Res Judicata Grounds, Not The

Hawaii Rule Of Civil Procedure Govern-

ing Compulsory Counterclaims ........ 7

2. Unambiguous Hawaii Precedent Con-

firms That Res Judicata Bars Petitioners’

ES oo ah case aweea wns cde ans y

iv

TABLE OF CONTENTS — Continued

Page

Il. THIS CASE DOES NOT IMPLICATE BEACH V.

OCWEN FEDERAL BANK OR THE OTHER

AUTHORITIES CITED BY PETITIONERS......

III. PETITIONERS’ REQUEST FOR FEDERAL “PRE-

EMPTION” OF THE STATE COURT’S FORE-

CLOSURE JUDGMENT VIOLATES THE

ROOKER-FELDMAN DOCTRINE ..............

I shoo see deen ee

WII, Biss Lois ORs App.

TIE Bioko EN ae App.

MR Gc ee App.

TABLE OF AUTHORITIES

FEDERAL CASES

Albano v. Norwest Financial Hawaii, Inc., 244 F.3d

BOGS. (90 CAR. BPE < ccs cee es eecuunieeasee

Beach v. Ocwen Federal Bank, 523 U.S. 410, 118

S. Ct. 1408, 140 L. Ed. 2d 566 (1998)..........

District of Columbia Court of Appeals v. Feldman, 460

U.S. 462, 103 S. Ct. 1303, 75 L. Ed. 2d 206 (1983) ....

Kremer v. Chemical Constr. Corp., 456 U.S. 461

(ROU? 6 «eae dan scesn ede eee eee

Matsushita Elec. Indust. Co., Ltd. v. Epstein, 516 U.S.

367, 116 S. Ct. 873, 134 L. Ed. 2d 6 (1996)....

Migra v. Warren City School Dist. Bd. of Ed., 465

US. 75 (UGGS) ni cdddvcccsae denna

Pedrina v. Chun, 97 F.3d 1296 (1996).............

Postma v. First Federal Savings & Loan of Sioux City,

74 F.3d 160 (Ot Cie. 1996)... 2.0 en ss ncwacses

Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S. Ct.

149, @6 &. Gk. Bie CR os os ss dase sa eee ee

Rowland v. Novus Financial Corp., 949 F. Supp. 1447

(DD. TEGW: BORG). ssn cinsn es Veotendaa aes

Smith v. Wells Fargo Credit Corp., 713 F. Supp. 354

Oe. ene merry Sere ree rere ae

Worldwide Church of God v. McNair, 805 F.2d 888

(Pi CO. TOG. oo che thci wasn cielers seen ieee

Page

vi

TABLE OF AUTHORITIES - Continued

Page

State Cases

Bailey v. State, 57 Haw. 144, 552 P.2d 365 (1976)...... 8

Ellis v. Crocket, 51 Haw. 45, 451 P.2d 814 (1969) ..... 12

Fuller v. Pac. Med. Collections, Inc., 78 Haw. 213,

891 P.2d 300 (Ct. App. 1950). ..iccccccnccccccccncs 10

In re Apaydin, 201 B.R. 716 (E.D. Pa. 1996) .......... 14

In re Laubach, 77 B.R. 483 (E.D. Pa. 1987)............ 14

Kauhane v. Acutron Co., Inc., 71 Haw. 458, 795 P.2d

ZFO C1IDDD) oo cccicnccrecevencegcscundabebesneakeanee 9

Pacific Concrete Federal Credit Union v. Kauanoe, 62

Haw. 334, 614 P.2d 936 (1980) .............. 8, 11, 14

Security Pac. Mortgage Corp. v. Miller, 71 Haw. 65,

7E3 P28 GES CUSED occcccicccccdvautccucdvenueuaes 10

FEDERAL STATUTES

15 USC. § GlaMR) ...0scdeccccedenesssuneuwuaeeeseees 2

15 USC. § 163GG oc cvcscvcncteusstassustuveeusenean 12

2B USC. © W7aB ic vccccccccsesssscteuaveuneeeesenee 6

Sep. Ct. R. 19... ccccccccccscccavenseegkeusasumeueuens 5

Sap. Ct. R. 206 oiscnccccecccuwcsvaved¥asaeneeeeeuees ii

State STATUTES

Haw. R. Ciw. FB USAD occccccdecesecsendeeesanee 9

HLRS. Chapter Q00 2.0.0 cccccsvecsussssssaneenueeeeen 2

OPINIONS BELOW

The decision of the Ninth Circuit Court of Appeals in

Albano v. Norwest Financial Hawaii, Inc., CV-99-16109 is

reported at 244 F.3d 1061. 1063 (9th Cir. 2001) (Respon-

dent’s Appendix “A”). The order of the District Court for

the District of Hawaii, granting Respondent’s Motion for

Summary Judgment, which was the subject of this appeal

is not reported. (Respondent’s Appendix “B”). The order

of the Circuit Court in the Second Circuit State of Hawaii,

granting Respondent summary judgment against Peti-

tioners and a decree of foreclosure is not reported.

(Respondent’s Appendix “C”).

¢

STATEMENT OF THE CASE

I. THE UNDERLYING ACTIONS

Petitioners Warren Y.S.C. Albano and Caroline C.S.

Albano (“Petitioners”) entered into a mortgage transac-

tion on March 15, 1994 and refinanced it on July 11, 1994.

Subsequently, Petitioners defaulted on their July 11, 1994

loan. On May 17, 1996, Respondent Norwest Financial

Hawaii, Inc. (“Respondent”), holder of the mortgage

note, filed a foreclosure suit against Petitioners in Circuit

Court of the Second Circuit of the State of Hawaii.

Default was entered on June 26, 1996. After a hearing on

Respondent's motion for summary judgment, the court

entered an order and judgment on January 13, 1997,

which foreclosed the mortgage.

The state court found as a matter of fact and law that

Petitioners’ mortgage was “a valid first lien on the mort-

gaged property” and decided as a matter of law that the

Petitioners were “perpetually barred of and from any and

all right, title, and interest in the mortgaged property.”

Petitioners did not answer or appear in the foreclosure

suit, did not attend the summary judgment hearing, did

not appeal, and never asked the state court to vacate or

reconsider its judgment. The court transferred title to the

property to its appointed Commissioner on January 13,

1997. The property was subsequently sold at a foreclosure

sale, and is currently owned by third parties.

In March of 1997, Petitioners separately sent Respon-

dent notices of rescission, demanding loan cancellation

pursuant to the Truth In Lending Act (“TILA”). Respon-

dent denied the requests on the basis that TILA did not

apply to the mortgage, as the mortgage was not made on

Petitioners’ primary residence.!

One of the Petitioners filed a TILA complaint in

United States District Court on March 14, 1997, and the

other joined on October 27, 1998. In their amended com-

plaint, Petitioners sought rescission of their mortgage,

damages under TILA, damages under the Federal Trade

Commission Act, 15 U.S.C. § 45(a)(1) and relief under

Hawaii Revised Statutes Chapter 480. Respondent filed a

motion for summary judgment, which was granted by the

District Court on January 28, 1999. The court held that

1 Solely for purposes of the appeal, the Ninth Circuit

assumed that the loan at issue was made on Petitioners’

principal residence. However, this detail was not material to the

court’s decision.

Petitioners’ claims were barred by the res judicata effect of

the prior foreclosure action. Petitioners appealed the

decision to the Ninth Circuit Court of Appeals.

Il. THE NINTH CIRCUIT OPINION

On March 30, 2001, the Ninth Circuit Court of

Appeals affirmed the judgment in favor of Respondents

on res judicata grounds, holding that the prior state court

foreclosure judgment barred Petitioners’ TILA action for

rescission of their mortgage.

The court noted that Hawaii law determines the res

judicata effect of the foreclosure judgment. The panel

concluded that there was a final judgment on the merits,

and that both parties were the same as in the prior

adjudication. The only issue remaining for the Ninth

Circuit was whether Petitioners’ TILA rescission claim

“could have been raised” in the prior foreclosure action.

The panel concluded that the foreclosure judgment

was a final judgment to which res judicata principles

apply, and that TILA claims arise from the loan transac-

tion which is the subject of the foreclosure suit, based on

Hawaii precedent. Thus, the Ninth Circuit concluded that

Petitioners could have raised the TILA rescission claim in

the foreclosure action. As the court properly determined,

were Petitioners’ TILA defense successful, it would have

voided the mortgage and the foreclosure.

+

REASONS FOR DENYING THE PETITION

The proper question at issue before this Court is

whether Hawaii's state res judicata doctrine bars a bor-

rower’s federal court lawsuit for rescission of a real estate

mortgage under the TILA, where an earlier state court

foreclosure judgment against the borrower on the same

real estate mortgage was a final judgment which was not

appealed.

Petitioners argue that the Ninth Circuit erroneously

failed to construe TILA as preempting the mortgage fore-

closure field as to rescission rights. Petitioners also claim

that the court below erred in finding that Hawaii’s res

judicata doctrine controls in this case. According to Peti-

tionérs, the Ninth Circuit’s decision “is in conflict” with,

“every federal court” that has addressed the issue in

recent years including this Court’s decision in Beach v.

Ocwen Federal Bank, 523 U.S. 410, 118 S. Ct. 1408, 140

L. Ed. 2d 566 (1998). Finally, petitioners claim that the

Ninth Circuit misinterpreted Hawaii law.

However, despite Petitioners’ characterization, the

issues in this case do not implicate the Commerce Clause,

the Supremacy Ciause, or the issues involved in Beach.

The Ninth Circuit decision is in accord with Hawaii legal

precedent and undeniable federal principles of the Full

Faith and Credit Act.

Neither the Ninth Circuit’s ruling, nor the record

below support the arguments presented by the Petition.

Moreover, the ruling has no far-reaching implications.

Rather, Petitioners attempt to make a federal issue out of

what is, and always was a question of the scope of

Hawaii res judicata law.

1e|

In sum, there is no reason for this Court to undertake

the extraordinary remedy of certiorari review, because

both the United States District Court for the District of

Hawaii and the Ninth Circuit Court of Appeals properly

held that under Hawaii law, res judicata bars such a

lawsuit. None of the conceivably applicable consider-

ations set forth in Sup. Ct. R. 10 — conflict among the

circuits; conflict upon an important federal question with

a decision by this Court, a court of appeals or by a state

court of last resort; or need for an exercise of this Court’s

supervisory power — is implicated by the decision below.

No “compelling reasons” have been presented for grant-

ing the petition.

I. THE NINTH CIRCUIT COURT OF APPEALS PROP-

ERLY HELD THAT A PRIOR STATE COURT FORE-

CLOSURE JUDGMENT BARS SUBSEQUENT

RESCISSION LAWSUITS UNDER TILA SECTION

1635.

A. The Court of Appeals Properly Granted Full

Faith And Credit to the Hawaii State Court

Foreclosure Judgment.

Petitioners do not dispute that after Respondents

filed their foreclosure petition against Petitioners in state

court, the Hawaii state court entered default on June 26,

1996, and granted Respondent’s motion for summary

judgment on January 13, 1997. The first issue addressed

by the panel was whether it should give full faith and

credit to the prior Hawaii foreclosure judgment.

In essence, Petitioners argue that prior foreclosure

judgments should not be given full faith and credit

because TILA preempts “the mortgage foreclosure field”

by allowing rescission of a mortgage when a lender has

engaged in certain TILA violations. (Petition at 8).? In

other words, Petitioners want this Court to overlook

years of United States Supreme Court precedent concern-

ing the preclusive effect of state court judgments, and

turn a blind eye t6 the mandates of the Full Faith and

Credit Act.

The Full Faith and Credit Act, 28 U.S.C. § 1738

“directs all courts to treat a state court judgment with the

same respect that it would receive in the courts of the

rendering state. Federal courts may not ‘employ their

own rules . . . in determining the effect of state judg-

ments,’ but must ‘accept the rules chosen by the State

from which the judgment is taken.’ ” Matsushita Elec.

Indust. Co., Ltd. v. Epstein, 516 U.S. 367, 373, 116 S. Ct. 873,

877, 134 L. Ed. 2d 6 (1996), quoting Kremer v. Chemical

Constr. Corp., 456 U.S. 461, 481-82 (1982). .

This Court has long determined that “in the absence

of federal law modifying the operation of § 1738, the

preclusive effect in federal court of [a] state-court judg-

ment is determined by [state] law.” Migra v. Warren City

School Dist. Bd. of Ed., 465 U.S. 75, 81, 104 S. Ct. 892, 896,

79 L. Ed. 2d 56 (1984). Petitioners do not and cannot point

to any provision of TILA or other federal law that mod-

ifies this Court’s interpretation of the Full Faith and

Credit Act.

2 Petitioners’ argument on this point was not raised before

the United States District Court, and was not addressed by the

Ninth Circuit.

The Ninth Circuit declined Petitioners’ invitation to

disregard years of Supreme Court precedent on the issue,

and disposed of Petitioners’ faulty argument in one para-

graph. The panel concluded that pursuant to the Full

Faith and Credit Act, it should “give the same preclusive

effect to a state-court judgment as another court of that

State would give [to it.]” Albano v. Norwest Financial

Hawaii, Inc., 244 F.3d 1061, 1063 (9th Cir. 2001). For that

reason, the Ninth Circuit correctly held that it must “look

to the law of the State of Hawaii in order to determine the

res judicata effect of the foreclosure judgment.” fd.

(emphasis added). Thus, the panel’s decision is in line

with this Court’s prior decisions on questions of federal

law.

B. The Panel Below Correctly Interpreted Res

Judicata Principles In Accordance With Hawaii

Law And Determined That Petitioners’ TILA

Claims Are Barred.

Petitioners’ attempt to formulate their own compli-

cated preclusion doctrines using authorities outside of

Hawaii's res judicata doctrine is a red herring. The Ninth

Circuit applied the proper standards in its Albano deci-

sion.

1. The Ninth Circuit’s Decision Was Made On

Res Judicata Grounds, Not The Hawaii Rule

of Civil Procedure Governing Compulsory

Counterclaims.

Petitioners contend that the Ninth Circuit misin-

terpreted and misapplied Hawaii law concerning the

doctrine of res judicata. Specifically, Petitioners claim that

the panel interpreted the Hawaii Supreme Court's deci-

sion in Pacific Concrete Federal Credit Union v. Kauanoe, 62

Haw. 334, 614 P.2d 936 (1980), as holding that in Hawaii,

TILA claims are compulsory counterclaims. (Petition at

21). The panel made no such holding. The Ninth Circuit’s

opinion in Albano did not mention compulsory counter-

claim doctrine; rather it based its analysis and decision

upon res judicata principles. In analyzing claim preclusion

under Hawaii law, the panel noted that the test under

Hawaii law is whether the claim now presented “could

have been raised in the earlier state court actions.”

Albano, 244 F.3d at 1063 (citations omitted).

In order to determine whether Petitioners’ TILA

claim “could have been brought” in the state court fore-

closure action, the panel relied upon Pacific Concrete’s

holding that TILA claims arise out of the same transac-

tion as creditor’s collection suits. Id. Accordingly, the

panel found that “[t]here can be no doubt whatsoever

that the Albanos TILA claim could have been litigated in -

the foreclosure action.” Id. The panel never discussed

compulsory counterclaims in its analysis.

Thus, Petitioners’ analysis of the Ninth Circuit's

opinion in Albano renders their argument on this point

simply wrong.

Furthermore, the Ninth Circuit’s reliance upon

Hawaii res judicata principles rather than a compulsory

counterclaim analysis was appropriate. Application of the

two doctrines does not produce identical results. In fact,

in Bailey v. State, 57 Haw. 144, 148, 552 P.2d 365, 368

(1976), the Hawaii Supreme Court pointed out that under

Re Se ee

Hawaii law, Rule 13(a) of the Hawaii Rules of Civil Pro-

cedure does not establish the same absolute bar to later

claims that res judicata creates. Id. Thus, the Ninth Circuit

properly based its analysis upon res judicata principles,

not Rule 13(a), which is not germane to this Court’s

decision.

2. Unambiguous Hawaii Precedent Confirms

That Res Judicata Bars Petitioners’ TILA

Claims.

Relying almost exclusively on the case law of other

jurisdictions, Petitioners argue that res judicata does not

apply because the foreclosure action involves different

issues than Petitioners’ TILA rescission claim. (Petition at

11-13). At the same time, Petitioners admit that fore-

closure claims and TILA rescission suits seem to arise

from the same transaction. (Petition at 17).

Regardless, as explained above, the Ninth Circuit’s

Albano decision properly rested upon Hawaii's res judicata

doctrine. The high court of the State has held that under

Hawaii law:

[t]he judgment of a court of competent jurisdic-

tion is a bar to a new actian in any court

between the same parties or their privies con-

cerning the same subject matter, and precludes

the relitigation, not only of the [claims] which

were actually litigated in the first action, but

also of all grounds of claim [and defense] which

might have been properly litigated in the first

action but were not litigated or decided.

Kauhane v. Acutron Co., Inc., 71 Haw. 458, 463, 795 P.2d

276, 278 (1990) (citation omitted) (emphasis added).

10

Specifically, Hawaii courts engage in a three-part

inquiry for res judicata which asks whether: (1) the claim

asserted in the action in question was or could have been

asserted in the prior action; (2) the parties in the present

action are identical to, or in privity with, the parties in

the prior action; and (3) a final judgment on the merits

was rendered in the prior action. Pedrina v. Chun, 97 F.3d

1296, 1301 (1996).

The Ninth Circuit correctly found that the second

and third elements of res judicata were met in this case. To

begin with, the parties to this action are identical to the

parties in the state court foreclosure proceeding. More-

over, there is no dispute that on January 13, 1997, suin-

mary judgment was entered against Petitioners in the

foreclosure proceeding, and Petitioners did not appeal.

And in Hawaii, a judgment of foreclosure and order of

sale is final and appealable even though it contains provi-

sions for the determination of matters incident to its

administration and for disposition of the proceeds and

sale. Security Pac. Mortgage Corp. v. Miller, 71 Haw. 65, 69,

783 P.2d 855, 857 (1989).

Consequently, the only issue before the Ninth Circuit

concerned the first element of res judicata. In this regard,

the panel asked whether Petitioners’ TILA claim “could

have been” raised in the prior foreclosure action. Albano,

244 F.3d at 1064. As set forth above, the Ninth Circuit

3 The Ninth Circuit recognized that under Hawaii law, even

a default judgment is a final judgment to which res judicata

principles apply. See Albano, 244 F.3d at 1064 (citing Fuller v. Pac.

Med. Collections, Inc., 78 Haw. 213, 218-19, 891 P.2d 300, 305-06

(Ct. App. 1995)).

11

held that the Hawaii Supreme Court's decision in Pacific

Concrete Federal Credit Union v. Kauanoe, 62 Haw. 334, 614

P.2d 936 (1980), leaves no doubt that TILA claims can be

raised defensively in Hawaii foreclosure actions.

In Pacific Concrete, a creditor brought am action

against a debtor to collect the outstanding balamce owed

on two loans. The debtor counterclaimed, asserting that

the creditor did not meet the disclosure requirements set

forth in TILA. The creditor argued that the debtor’s TILA

counterclaims were barred by the statute of limitations.

To resolve that issue, the court had to determine whether

the debtor’s TILA claim arose out of the “same transac-

tion” as the creditor’s collection claim.

The creditor in Pacific Concrete argued that the

alleged TILA violations were separate and apart from the

debtor’s loan obligations and that the debtor’s claims

involved a different statute. In its decision, the Hawaii

Supreme Court examined the decisions of other jurisdic-

tions that hold that TILA violations do not arise out of the

same transaction as the original loan obligation because

they are not a breach of the loan agreement. The Hawaii

Supreme Court rejected the reasoning of those cases,

holding that:

[the] TILA violations centered around appellee’s

failure to disclose fully certain aspects of the

loan. These loans were the very ones that were

the subject of appellee’s claims. . . . [I]t seems

“inescapable that credit terms are an integral

part of a loan transaction.” We find that appel-

lant’s claims arose out of the same loan transac-

tion as appellee’s suit... .

Id. at 341; 614 P.2d at 940.

12

Relying on the Hawaii Supreme Court’s conclusion

that TILA counterclaims arise from the original loan

transaction, the panel below correctly decided that Peti-

tioners “could have” raised their TILA claim in the state,

court foreclosure proceeding.* a

Petitioners do not deny that they could have raised

their TILA rescission claim as an affirmative defense or '

counterclaim at the time of the foreclosure action.>

Indeed, Petitioners’ successful TILA rescission claim

would have voided Respondent's security interest in the

property and would have been a a! defense to the

foreclosure action.

Therefore, in applying Hawaii res judicata law, the

Ninth Circuit in Albano correctly found that Petitioners’

TILA claims are barred. Hence, there are no compelling

reasons for this Court to grant the Petition.

=

+ The Hawaii Supreme Court has held that a rescission

claim may be brought as a defense to a foreclosure action. See

Ellis v. Crocket, 51 Haw. 45, 57, 451 P.2d 814 (1969). However, if it

is not raised in the foreclosure action, it is barred by res judicata.

Id.

5 In addition, TILA expressly authorizes borrowers to use

foreclosure proceedings to raise their right of rescission. 15

U.S.C. § 1635(i). Section 1635(i) provides that a debtor may

bring-a TILA rescission claim based upon more stringent

disclosure standards than those that apply to ordinary creditors,

if the debtor exercises his rescission rights as a defense in a

foreclosure action. 15 U.S.C. § 1635(i).

13

Il. THIS CASE DOES NOT IMPLICATE BEACH V.

OCWEN FEDERAL BANK OR THE OTHER

AUTHORITIES CITED BY PETITIONERS.

In the face of overwhelming authority to the contrary,

Petitioners argue that the Ninth Circuit should have uti-

lized this Court’s rationale in Beach v. Ocwen Federal Bank,

523 U.S. 410, 118 S. Ct. 1408, 140 L. Ed. 2d 566 (1998) to

apply res judicata principles. However, it is clear that

Beach has no relevance to this case.

Beach concerned whether TILA’s statutory right of

rescission can extend beyond the three-year expiration

period set forth in the statute when raised as an affirma-

tive defense in a collection action. However, res judicata

was not an issue in Beach. As the Ninth Circuit stated in

Albano:

In an attempt to save their position, the Albanos

point to Beach v. Ocwen Federal Bank, 523 U.S.

410, 118 S. Ct. 1408, 140 L. Ed. 2d 566 (1998).

However, Beach offers them no succor. That case

simply held that the TILA rescission right has a

limited — three-year — life. Id. at 419, 118 S. Ct. at

1413. That fact merely sets out the right’s maxi-

mum life span; it does not affect the procedural

or substantive requirements that might end its

existence even earlier.

Albano, 244 F.3d at 1064 n.2.

Moreover, the Ninth Circuit correctly discerned that

the other extra-jurisdictional cases cited by Petitioners,

like Beach, are irrelevant to the Hawaii res judicata issue.

To address this line of cases, the Ninth Circuit in Albano

stated “[w]e do not, of course, decide what the result

would be in a state where res judicata principles are

14

enunciated or applied in a different manner.” Id. at 1064

(citing Smith v. Wells Fargo Credit Corp., 713 F. Supp. 354,

357-59 (D. Ariz. 1989). See, e.g., In re Apaydin, 201 B.R. 716

(E.D. Pa. 1996) (Pennsylvania decision utilizing rationale

specifically rejected by the Hawaii Supreme Court in

Pacific Concrete); In re Laubach, 77 B.R. 483 (E.D. Pa. 1987)

(decided under Pennsylvania law); see also, Rowland v.

Novus Financial Corp., 949 F. Supp. 1447 (D. Haw. 1996)

(Hawaii res judicata not an issue in case because no final

judgment).

~~

As explained above, the Ninth Circuit’s decision does

not implicate conflicts among the circuits, important fed-

eral questions or decisions by this Court. Therefore, this

Court should disregard the numerous cases cited in the

Petition which are of no utility because either they cannot

overcome Hawaii Supreme Court authority, or they do

not address the Hawaii res judicata doctrine.

Ill. PETITIONERS’ REQUEST FOR FEDERAL “PRE-

EMPTION” OF THE STATE COURT’S FORE-

CLOSURE JUDGMENT VIOLATES THE

ROOKER-FELDMAN DOCTRINE.

Petitioners ask this Court to overturn the Hawaii

state court foreclosure judgment by holding that TILA

preempts “the mortgage foreclosure field.” (Petition at 8).

However, such action is prohibited under the Rooker-

Feldman doctrine.

Although the court below did not reach the issue, the

Rooker-Feldman abstention doctrine prohibits a losing

party in state court from seeking what essentially would

be appellate review of the state judgment in a United

15

States District Court. District of Columbia Court of Appeals

v. Feldman, 460 U.S. 462, 482, 103 S. Ct. 1303, 1315, 75

L. Ed. 2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S.

413, 44 S. Ct. 149, 68 L. Ed. 362 (1923); see also Worldwide

Church of God v. McNair, 805 F.2d 888, 890 (9th Cir. 1986)

(“the United States District Court, as a court of original

jurisdiction, has no authority to review the final deter-

mination of a state court in judicial proceedings.”)

Court of Appeals dismissed TILA claims under circum-

stances almost identical to those at issue here. In Postma

v. First Federal Savings & Loan of Sioux City, 74 F.3d 160

(8th Cir. 1996), debtors brought claims in federal court

alleging, inter alia, violations of TILA arising from a mort-

gage on their land. A decree of foreclosure on the mort-

gage had previously been entered in favor of the lender.

The court held that the lower court correctly determined—

it did not have subject matter jurisdiction over the claims,

noting that the current claims were “essentially a collat-

eral attack in federal district court on a state foreclosure

judgment.” 74 F.3d at 162.

Under the Rooker-Feldman doctrine, the Eighth Circuit

|

|

The Rooker-Feldman doctrine prohibits Petitioners

from circumventing the prior foreclosure-judgment by

filing suit in federal court after they failed to appear in

the state court proceeding or appeal the state court judg-

ment. It further illustrates that there are no “compelling

reasons” for granting the Petition.

+

16

CONCLUSION

For the reasons set forth herein, Norwest respectfully

requests that the Court deny the Petition for Writ of

Certiorari.

Respectfully submitted,

Bruce L. LAMON*

Lisa A. Bait

Goopsitt. ANDERSON QUINN & STIFEL

A Limitep Liasiuity LAw PartnersHie LLP

Alii Place, Suite 1800

1099 Alakea Street

Honolulu, Hawaii 96813

Telephone: (808) 547-5600

Attorneys for Respondent

Norwest Financial Hawaii, Inc., nka

Wells Fargo Financial Hawaii, Inc.

*Counsel of Record

App. 1

APPENDIX A

United States Court of Appeals,

Ninth Circuit.

Warren Y.S.C. ALBANO; Caroline C.S.

Albano, Plaintiffs-Appellants,

Vv.

“NORWEST FINANCIAL HAWAII, INC.,

Defendant-Appellee.

No. 99-16109.

Argued and Submitted Feb. 12, 2001

Filed March 30, 2001

Gary V. Dubin, Dubin Law Offices, Honolulu,

Hawaii, for the plaintiffs-appellants.

Bruce L. Lamon, Goodsill Anderson Quinn & Stifel,

Honolulu, Hawaii, for the defendant-appellee.

Appeal from the United States District Court for the

District of Hawaii; Samuel P. King, Senior Judge, Presid-

ing. D.C. No. CV-97-00247-SP.

Before: BETTY B. FLETCHER, FERNANDEZ, and

PAEZ, Circuit Judges.

FERNANDEZ, Circuit Judge:

Warren Y.S.C. Albano and Caroline C.S. Albano

appeal from the district court’s granting of the motion of

Norwest Financial Hawaii, Inc., for summary judgment.

The district court determined that the doctrine of res

judicata barred the Albanos Truth in Lending Act claim

for rescission of a real estate loan transaction with Nor-

west. See 15 U.S.C. §§ 1601-1667f (TILA). We affirm.

App. 2

BACKGROUND

On March 15, 1994, the Albanos obtained a loan from

Norwest which was secured by a mortgage on real prop-

erty, which may have been the Albanos principal resi-

dence.! At a later date, the loan was refinanced with

Norwest and continued to be secured by the real prop-

erty.

Thereafter, the Albanos defaulted and Norwest com-

menced judicial foreclosure proceedings on May 26, 1996.

There is no dispute that the Albanos received notice of

those proceedings. However, they failed to appear, their

default was entered, and on January 13, 1997, the Hawaii

Circuit Court issued findings of fact and conclusions of

law, and entered judgment of foreclosure against them. It

declared that the mortgage was valid, that it was fore-

closed, and that the Albanos were “perpetually barred of

and from any and all right, title, and interest in the

mortgaged property.” The judgment was declared to be

final. The Albanos did not appeal.

Then, on March 12, 1997, the Albanos purported to

rescind the 1994 loan on the basis that Norwest had not

complied with TILA. See 15-U.S.C. § 1635. Norwest did

not agree, and confirmation of the actual sale of the

mortgaged property took place on August 19, 1997. How-

ever, on March 14, 1997, the Albanos had commenced this

action. The district court ultimately determined that they

could not maintain the action because they had not raised

1 There is a dispute about whether it was the Albanos’

principal residence, but for purposes of this appeal we will

assume that it was.

App. 3

their TILA claim in the state foreclosure proceedings,

although they could have done so. Thus, said the court,

this action was barred by the principle of res judicata.

This appeal followed.

JURISDICTION AND STANDARD OF REVIEW

The district court had jurisdiction over the TILA

claim pursuant to 28 U.S.C. § 1331. We have jurisdiction

pursuant to 28 U.S.C. § 1291.

We review the district court’s grant of summary judg-

ment on the basis of res judicata (claim preclusion) de

novo. Sunkist Growers, Inc. v. Fisher, 104 F.3d- 280, 283 (9th

Cir.1997).

DISCUSSION

The Albanos had the opportunity to participate in the

state court proceedings that resulted in a judgment

against them. We must, of course, “ ‘give the same preclu-

sive effect to a state-court judgment as another court of

that State would give [to it].’” Int’l Evangelical Church v.

Church of the Soldiers, 54 F.3d. 587, 590 (9th Cir.1995)

(citations omitted). Therefore, we must look to the law of

the State of Hawaii in order to determine the res judicata

effect of the foreclosure judgment. See Migra v. Warren

City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 104 S.Ct. 892,

896, 79 L.Ed.2d 56 (1984); Sunkist Growers, 104 F.3d at 283;

Gilbert v. Ben-Asher, 900 F.2d 1407, 1410 (9th Cir.1990).

Under the law of Hawaii:

The doctrine of res judicata basically provides

that “[t]he judgment of a court of competent

App. 4

jurisdiction is a bar to a new action in any court

between the same parties or their privies con-

cerning the same subject matter, and precludes

the relitigation not only of issues which were

actually litigated in the first action, but also of

all grounds of claim and defense which might

have been properly litigated in the first action

but were not litigated or decided.”

Ellis v. Crockett, 51 Haw. 45, 55, 451 P.2d 814, 822

(1969) (citations omitted). In Hawaii the doctrine is

applied in a robust way. That is based upon the Hawaii

Supreme Court's insistence that parties should be spared

unnecessary vexation, expense, and inconsistent results;

that judicial resources shall not be wasted; and that the

“legal efficacy” of final judgments shall not be under-

mined, but rather that final determinations “by compe-

tent tribunals shall be accepted as undeniable legal

truth.” Id. at 57, 451 P.2d at 822. Thus, while everyone is

given the opportunity to present a case, that is “limited to

one such opportunity.” Id.

To serve those ends, the courts of Hawaii ask three

questions when they seek to determine whether res judi-

cata should apply to a case. Two of those questions are:

“Was there a final judgment on the merits? Was the party

against whom the plea is asserted a party or in privity

with a party to the prior adjudication?” Morneau v. Stark

Enters., Ltd., 56 Haw. 420, 424, 539 P.2d 472, 475 (1975).

Those two elements are met in this case. Clearly there

was a final judgment by the state circuit court, which was

not appealed. See Kauhane v. Acutron Co., Inc., 71 Haw.

458, 464-65, 795 P.2d 276, 279 (1990); see also Fund for

Animals, Inc. v. Lujan, 962 F.2d 1391, 1398 (9th Cir.1992). It

ee

App. 5

is equally pellucid that the Albanos and Norwest were

parties to the state court foreclosure proceeding.

The other question asked by the courts in Hawaii

requires a bit more analysis and discussion. It is: “Was the

issue decided in the prior adjudication identical with the

one presented in the action in question?” Actually, when

applied in the context of claim preclusion in Hawaii, this

means that when a claim concerns the same subject mat-

ter, the doctrine applies if the issues “could have been

raised m the earlier state court actions.” Pedrina v. Chun,

97 F.3d 1296, 1301 (9th Cir.1996); see also Santos v. Hawaii,

Dep't of Transp., 64 Haw. 648, 652-53, 646 P.2d 962, 965-66

(1982) (per curiam); Aloha Unlimited, Inc. v. Coughlin, 79

Hawaii 527, 537, 904 P.2d 541, 551 (Ct.App.1995); Fuller v.

Pac. Med. Collections, Inc., 78 Hawaii 213, 218-19, 891 P.2d

300, 305-06 (Ct.App.1995). We recognize that the Albanos

defaulted in state court, but that does not matter. “[A]

default judgment is a final judgment to which” res judi-

cata principles apply. Fuller, 78 Hawaii at 219, 891 P.2d at

306. The only exception is for void judgments, and that

does not apply here. Id.

There can be no doubt whatsoever that the Albanos

TILA claim could have been litigated in the foreclosure

action. It was a defense that would have ineluctably

precluded foreclosure if the Albanos’ claims are mer-

itorious. The Albanos’ complaint asserts as much. Were

there the slightest doubt about the Albanos ability to

raise a TILA counterclaim in the state court proceedings,

the Supreme Court of Hawaii has dispelled that doubt. It

has held that when a party sought to assert a TILA

counterclaim,

App. 6

[h]is allegations of TILA violations centered

around appellee’s failure to disclose fully cer-

tain aspects of the loan. These loans were the

very ones that were the subject of appellee’s

claims. . . . [I]t seems “inescapable that credit

terms are an integral part of a loan transaction.”

We find that appellant’s claims arose out of the

same loan transaction as appellee’s suit and as

such was a recoupment defense to diminish

plaintiff’s recovery.

Pac. Concrete Fed. Credit Union v. Kauanoe, 62 Haw.

334, 341, 614 P.2d 936, 940 (1980) (citations omitted). The

Albanos, rather weakly, assert that in Pac. Concrete the

provenance of the court’s holding was a desire to help the

debtor. Perhaps so, but legal principles often cut in two

directions; if TILA claims arise out of the same transac-

tion they do so for good or ill. The Albanos could have

raised their defense in the state court action. They did not

and it is now too late.2 We do not, of course, decide what

the result would be in a state where res judicata princi-

ples are enunciated or applied in a different manner. See,

e.g., Smith v. Wells Fargo Credit Corp., 713 F.Supp. 354,

357-59 (D.Ariz.1989). We deal here with the preclusive

effect of judgments entered in the courts of the State of

Hawaii.

2 In an attempt to save their position, the Albanos point to

Beach v. Ocwen Fed. Bank, 523 U.S. 410, 118 S.Ct. 1408, 140

L.Ed.2d 566 (1998). However, Beach offers them no succor. That

case simply held that the TILA recission right has a limited —-

three year - life. Id. at 419, 118 S.Ct. at 1413. That fact merely sets

out the right’s maximum life span; it does not affect procedural

or substantive requirements that might end its existence even

earlier.

App. 7

CONCLUSION

Rights can be both powerful and transitory. If they

are not asserted at the proper time, they may vanish

forever. What was once puissant may become a mere

simulacrum - an unreal shadow of its former self. So it is

here. Once the Albanos allowed the state court to proceed

to a final judgment of foreclosure against them, any right

they had to rescind the underlying mortgage transaction

vanished. The district court did not err.

AFFIRMED.

App. 8

APPENDIX B

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF HAWAII

WARREN Y.S.C. ALBANO and

CAROLINE C.S. ALBANO,

Plaintiffs,

Civil No.

97-00247 SPK

ORDER

vs.

)

)

)

)

) .

NORWEST FINANCIAL HAWAII, ) (Filed

INC., ) Jan. 28, 1999)

)

)

)

Defendant.

ORDER GRANTING DEFENDANT NORWEST

FINANCIAL HAWAII, INC.’S

MOTION FOR SUMMARY JUDGMENT

Plaintiffs Warren and Caroline Albano (“Plaintiffs” or

“Albanos”) bring this action under the Truth in Lending

Act (“TILA”), 15 U.S.C. § 1601, as amended, et. seq.,

seeking recission and damages related to a residential

mortgage loan transaction. Plaintiffs assert that Norwest

Financial Hawaii, Inc., (“Defendant” or “Norwest”) vio-

lated certain TILA disclosure requirements when Nor-

west failed to deliver copies of a Regulation Z notice to

cancel and failed to make accurate Regulation Z dis-

closures.

By motion filed November 2, 1998, Norwest seeks

summary judgment on all claims brought by the Albanos.

The matter was heard on January 25, 1999. Bruce Lamon

and Lisa Bail appeared for Defendant; and Gary Victor

Dubin appeared for Plaintiffs. For the reasons set forth,

App. 9

the Court GRANTS Defendant’s Motion for Summary

Judgment.

I. BACKGROUND

On March 15, 1994, Plaintiffs obtained a mortgage

loan in the amount of $97,058.78 from Norwest in connec-

tion with their property located at 769 Wailupe Drive,

Wailuku, Maui (the “Maui Property”). Norwest obtained a

mortgage interest in the Maui Property and the Albanos

refinanced the March 15th loan, borrowing $191,450.43;

Norwest obtained a new mortgage on the Maui Property

and the Albanos signed a new Note and Security Agreement.

TILA requires that all borrowers be given notice of

TILA’s “buyer’s remorse” provision, which allows

borrowers three business days to rescind, without

penalty, a consumer loan that uses their principal dwell-

ing as security. See 15 U.S.C. § 1635(a)!; 12 C.FR.

1 15 U.S.C. § 1635(a) provides:

Except as otherwise provided in this section, in the

case of any consumer credit transaction (including

opening or increasing the credit limit for an open end

credit plan) in which a security interest, including any

such interest arising by operation of law, is or will be

retained or acquired in any property which is used as

the principal dwelling of the person to whom credit is

extended, the obligor shall have the right to rescind

the transaction until midnight of the third business

day following the consummation of the transaction or

the delivery of the information and rescission forms

required under this section together with a statement

containing the material disclosures required under

this subchapter, whichever is later, by notifying the

App. 10

§ 226.23(b)(5).2 TILA and its regulations, issued by the

Federal Reserve System, 12 C.F.R. §§ 226.1-.29, Regulation

Z, require the lender to provide notice disclosing the

borrower’s three-day rescission period. See 15 U.S.C.

§ 1635(a); 12 C.F.R. § 226.23(b)(5). If the lending institu-

tion fails to provide this disclosure, the borrower may

rescind the loan within three years after it was consum-

mated. See 15 U.S.C. § 1635(f).2 The Albanos did not

creditor, in accordance with regulations of the Board,

of his intention to do so.

2 12 C.ER. § 226.23 provides:

(b) Notice of right to rescind. In a transaction subject

to rescission, a creditor shall deliver 2 copies of the

notice of the right to rescind to each consumer

entitled to rescind.

3 15 U.S.C. § 1635(f) provides:

An obligor’s right of rescission shall expire three

years after the date of consummation of the

transaction or upon the sale of the property,

whichever occurs first, notwithstanding the fact that

the information and forms required under this section

or any other disclosures required under this part have

not been delivered to the obligor, except that if (1) any

agency empowered to enforce the provisions of this

subchapter institutes a proceeding to enforce the

provisions of this section within three years after the

date of consummation of the transaction, (2) such

agency finds a violation of this section, and (3) the

obligor’s right to rescind is based in whole or in part

on any matter involved in such proceeding, then the

obligor’s right of rescission shall expire three years

after the date of consummation of the transaction or

upon the earlier sale of the property, or upon the

expiration of one year following the conclusion of the

proceeding, or any judicial review or period of

judicial review thereof, whichever is later.

PE A Rey

App. 11

receive a “Notice of Right to Cancel” disclosure in con-

nection with the 1994 mortgage loans.*

The Albanos defaulted on the July 11, 1994 loan, and

on May 27, 1996, Norwest filed a foreclosure suit against

the Albanos in state court. Default was entered against

them for failure to plead. On January 13, 1997, the Circuit

Court of the Second Circuit, State of Hawaii entered an

order granting Norwest’s motion for summary judgment,

which foreclosed the mortgage.

In March of 1997, Warren and Caroline Albano sep-

arately sent Norwest written cancellation notices seeking

rescission of the 1994 loan agreements. Norwest denied

Plaintiffs’ request, stating that under 15 U.S.C. § 1635(a),

TILA does not provide the Albanos with a right of rescis-

sion because the Maui Property which secures their mort-

gage is not their principal dwelling.

On August 19, 1997, the Maui Property was sold at a

foreclosure sale to Norwest; the sale was confirmed by

court order. On the same date, the state court entered a

Judgment for Possession and a Writ of Possession. Nor-

west took possession of the property and sold it to third

parties.

4 A borrower is entitled to rescind a loan and is entitled to

notice of that right only when the property securing the loan is

used as the borrower’s principal residence. See TILA, 15 U.S.C.

1635(a); Regulation Z, 12 C.F.R. § 226.15(a), (b). Plaintiffs, in

applying for the loan involved here, represented to Norwest

that the Maui Property securing the loan was not their

residence, but was “rental property” occupied by their children.

Conversely, the Albanos deny that such a representation was

made to Norwest, and claim that the Maui Property is, and was

always, their principal dwelling.

App. 12

Plaintiff Warren Albano, proceeding at the time pro

se, instituted this action by filing a Complaint on March

14, 1997, requesting rescission of the 1994 loans and mort-

gages under TILA and Regulation Z. Plaintiff subse-

quently retained the services of Gary Victor Dubin, who

made appearances in this matter on June 16, 1998. An

Amended Complaint, filed October 27, 1998, added Car-

oline Albano as a plaintiff, and was made pursuant not

only to TILA and Regulation Z, but also the Federal Trade

Commission Act, 15 U.S.C. § 45(a)(1) and Hawaii Revised

Statutes (“HRS”) Chapter 480.

Plaintiffs’ opposition to Norwest’s summary judg-

ment motion was untimely filed on January 14, 1999.5

Norwest’s reply was timely filed on January 20, 1999. On

January 25, 1999, Plaintiffs filed a Supplemental Mem-

orandum in Opposition to Defendant’s Summary Judg-

ment Motion.

Il. STANDARD OF REVIEW

Summary judgment is appropriate when there is no

genuine issue as to any material fact and the moving

party is entitled to judgment as a matter of law. See Fed.

R. Civ. P. 56(c). The moving party has the initial burden of

“identifying for the court the portions of the materials on

file [in the case] that it believes demonstrate the absence

of any genuine issue of material fact.” T.W. Elec. Serv., Inc.

5 Plaintiffs’ Opposition was originally due on January 7,

1999. Plaintiffs were granted leave to file an Opposition to

Defendant’s Motion for Summary Judgment by January 13,

1999. Plaintiffs’ Opposition was filed one day late on January 14,

1999.

oe

ee ee an oS

App. 13

v. Pacific Elec. Contractors Ass‘n, 809 F.2d 626, 630 (9th Cir.

1987) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986)). If the moving party meets its burden, then the

opposing party must come forward with “specific facts

showing that there is a genuine issue of trial” in order to

defeat the motion. Fed. R. Civ. P. 56(e); T.W. Elec., 809 F.2d

at 630. The opposing party cannot stand on its pleadings,

nor can it simply assert that it will be able to discredit the

movant’s evidence at trial. See Fed. R. Civ. P. 56(e); T.W.

Elec. Serv., 809 F.2d at 630. In a motion for summary

judgment, the court must view the facts in the light most

favorable to the non-moving party. See State Farm Fire &

Cas. Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989).

III. DISCUSSION

Norwest moves for summary judgment on the fol-

lowing bases: 1) the Albanos have no right of rescission

under TILA because the Maui Property was not their

principal dwelling; 2) the Albanos’ claims are barred by

TILA’s one year statute of limitations; 3) the Albano’s

claims are barred by the Rooker-Feldman abstention doc-

trine; 4) the Albanos’ claims are barred by the doctrine of

res judicata; 5) the Federal Trade Commission does not

allow a private right of action; and 6) HRS chapter 480

does not provide a per se state law rescission remedy for

TILA violations.

A. Res Judicata

Norwest argues that Plaintiffs’ TILA claims are

barred by the doctrine of res judicata. Specifically, Nor-

west states that the Albanos are barred from raising their

App. 14

TILA claims because the issues relating to the loan and

mortgage, which are the subject of the instant federal

action, have been adjudicated in state court.

Res judicata prevents parties from relitigating claims

or issues that have already been decided or could have

been decided by a competent tribunal. See Santos v. State

of Hawati, 64 Haw. 648, 651-52, 646 P.2d 962, 965 (1982). It

protects the integrity of the courts, promotes reliance

upon judicial pronouncements, furthers the finality of

legal disputes and eliminates the time and expense of

relitigation by requiring that parties bring all claims aris-

ing out of a transaction in one action. See id. at 653, 646

P.2d at 966. __

In the federal courts, res judicata arises from the Full

Faith and Credit Clause of the United States Constitution,

28 U.S.C. § 1738.° As a result, federal courts must give

state court judgments the same preclusive effect that the

judgment would be given in state court. See Migra BD.

Warren City School District Board of Education, 465 U.S. 75,

80-81 (1984). Accordingly, “[i]n determining whether a

prior state court action bars a subsequent federal action,

the federal court must look to the res judicata principles

of the state court in which the judgment was rendered.”

6 28 U.S.C. § 1738 states in relevant part:

Such Acts, records and judicial proceedings or copies

thereof, so authenticated, shall have the same full

faith and credit in every court within the United

States and its Territories and Possessions as they have

by law or usage in the courts of such State, Territory

or Possession from which they are taken.

— iis ans ray

App. 15

Pedrina v. Chun, 97 F.3d 1296, 1301 (9th Cir. 1996), cert.

denied, 117 S. Ct. 2441 (1997).

Under the doctrine of res judicata, Hawaii courts

recognize that “ ‘[t]he judgment of a court of competent

jurisdiction is a bar toa new action in any court between

the same parties or their privies concerning the same

subject matter, and precludes the relitigation, not only of

the claims that were actually litigated in the first action,

but also of all grounds of claim [and defense] which

might have been properly litigated in the first action but

were not litigated or decided.’ ” Kauhane v. Acutron Co.,

Inc., 71 Haw. 458, 463, 795 P.3d 276, 278 (1990) (citation

omitted).

In sum, the res judicata doctrine in Hawaii applies

when three conditions are present: 1) the claim asserted

in the action in question was or could have been asserted

in the prior action, 2) the parties in the present action are

identical to, or in privity with, the parties in the prior

action, and 3) a final judgment on the merits was ren-

dered in the prior action. See Pedrina, 97 F.3d at 1301.

1. Claim Could Have Been Asserted

To determine whether a plaintiff is bringing the same

claim as that asserted in the state foreclosure action,

Hawaii law requires that the court look to whether the

claim springs from the same transaction or series of trans-

actions, or series of connected transactions that were at

App. 16

issue in the prior action.” See Kauhane, 71 Haw. at 464, 795

P.2d at 279. Thus, to determine whether the Plaintiffs are

bringing the same claim, the Court must determine

whether Plaintiffs’ TILA action should be deemed tw arise

out of the same transaction upon which the state fore-

closure action was based.

The Hawaii Supreme Court’s decision in Pacific Con-

crete Federal Credit Union v. Kauanoe, 62 Haw. 334, 614 P.2d

936 (1980), offers guidance in resolving this issue. In

Kauanoe, a creditor brought an action against a debtor to

collect the outstanding balance owed on two loans. See id.

at 335, 614 P.2d at 937. The debtor counterclaimed, assert-

ing that the creditor was liable to the debtor for not

meeting the disclosure requirements set forth in TILA. See

id. At issue in the case was whether the TILA claim was

barred by the statute of limitations. To resolve that issue,

the court had to determine whether the debtor’s TILA

claim arose out of the same transaction as the creditor’s

collection claim. See id. at 337-39, 614 P.2d at 938-39. The

creditor argued that debtor’s TILA claim did not arise out

of the same transaction or involve breach of the same

contract, contending that the TILA violations were sepa-

rate and apart from the loan obligations and that the

claims involved different statutes. See id. at 340, 614 P.2d

7 The Hawaii Supreme Court cites the Restatement

(Second) of Judgments in explaining the rationale behind this

transactional definition of “claim,” which states:

The present trend is to see claim in factual terms and

to make it coterminous with the transaction

regardless of the number of substantive theories, or

variant forms of relief flowing from those theories[.]

Kauhane, 71 Haw. at 464, 795 P.2d at 279 n.6.

App. 17

at 940. The court rejected the creditor’s argument and

found that the debtor’s TILA action arose out of the same

transaction as the creditor’s collection suit. See id. at 341,

614 P.2d at 940. The court stated, “it seems ‘inescapable

that credit terms are an integral part of a loan transac-

tion.’ ” Id. (citation omitted). Under Kauanoe, Plaintiffs’

TILA action arises out of the same transaction that was at

issue in the state foreclosure action.

The fact that the Albanos raise claims in this action

that were not alleged in the prior action does not negate

the preclusive effect of the state court action. The doctrine

of res judicata precludes not only the relitigation of issues

which were actually litigated in the first action, but also

all defenses which might have been properly litigated but

were net. See Silver v. Queen’s Hosp., 63 Haw. 430, 435-36,

629 P.2d 1116, 1121 (1981). Plaintiffs could have presented

their TILA claim in state court as an affirmative defense

or counterclaim to Defendant’s foreclosure action. See

Kauanoe, 62 Haw. at 341, 614 P.2d at 940. Accordingly, the

Court finds that Plaintiffs’ TILA claim concerned the

same subject matter as the state foreclosure action and

that Plaintiffs’ TILA claims could have been asserted in

the prior action.

2. Identical Parties

The res judicata doctrine also requires that the parties

in the present action are identical to, or in privity with,

the parties in the prior action. See Kauhane, 71 Haw. at

464, 795 P.2d at 279. There is an identity of parties here in

that the same exact Plaintiffs and Defendant were named

in both this federal action and in the state action.

App. 18

3. Final Judgment on the Meiits

The third res judicata requirement is that there be a

final judgment in the prior case. See Pedrina, 97 F.3d at

1301. Judgment in the state action entering summary

judgment and foreclosing the mortgage was issued on

January 12, 1997. “[I]n cases involving mortgage fore-

closures, a judgment of foreclosure and order of sale is

final and appealable although it contains provisions for

the determination of matters incident to its administra-

tion and for disposition of the proceeds of the sale.”

Security Pac. Mortgage Corp. v. Miller, 71 Haw. 65, 69, 783

P.2d 855, 857 (1989). Plaintiffs did not file an appeal of the

judgment.® Accordingly, the Court finds that final judg-

ment on the merits was rendered in the prior action.

Based on the foregoing, the Court finds that the three

prongs of res judicata analysis have been met, and Plain-

tiffs are clearly subject to res judicata based on the state

court action.

During oral argument, however, Plaintiffs argued

that res judicata was not applicable to TILA rescission

claims based on the Circuit Court of the First Circuit’s

holding in Tokyo Investment Services (International) Inc. v.

Gilman, No. 92-1459-04, (Haw. 1st Cir. Nov. 24, 1998). In

Gilman, Judge Virginia L. Crandall allowed a borrower’s

TILA rescission claim to proceed on the basis that such

claims are permissive counterclaims. See id. at 5. Plaintiffs

claim that Gilman renders the doctrine of res judicata

inapplicable to the instant action because their TILA

8 Perhaps Plaintiffs realized, having represented to

Norwest that the Maui Property was not their principal

dwelling, that they would not succeed.

App. 19

rescission claim is a permissive counterclaim, which can

effectively be brought as a separate suit.

The Gilman decision is irrelevant to this action. First,

the facts surrounding the decision are unclear. More

importantly, however, Gilman is inconsistent with the

Hawaii Supreme Court's decision in Ellis v. Crockett, 51

Haw. 45, 57, 451 P.2d 814, 822 (1969). In Ellis, a plaintiff's

action to rescind a note and mortgage was barred by a

prior court order granting foreclosure of the note and

mortgage. See id. The court found “[t]he rescission action

. . . barred because the [lower] court granted the fore-

closure in the prior suit, thereby deciding all issues relat-

ing to the validity of the mortgage instrument[.]” Id.

Accordingly, the Court finds Norwest’s Motion for

Summary Judgment based on the res judicata effect of the

foreclosure action to have merit and GRANTS the motion

on that basis.

IV. CONCLUSION

For the reasons stated above, the Court GRANTS

Norwest’s Motion for Summary Judgment.

IT IS SO ORDERED.

DATED: Honolulu, Hawaii, January 28, 1999.

/s/ Samuel P. King

SAMUEL P. KING

United States District Judge

App. 20

APPENDIX C

MARVIN S.C. DANG #2221

Law Offices of Marvin S.C. Dang

P.O. Box 4109

Honolulu, Hawaii 96812-4109

(Suite 2511, Century Square)

(1188 Bishop Street, Honolulu, Hawaii 96813)

Telephone No.: (808) 521-8521

Attorney for Plaintiff

IN THE CIRCUIT COURT OF THE SECOND CIRCUIT

STATE OF HAWAII

NORWEST FINANCIAL ) CIVIL NO. 96-0412(2)

HAWAII, INC., (Foreclosure)

Plaintiff, FINDINGS OF FACT;

on CONCLUSIONS OF LAW;

ORDER GRANTING

CAROLINE CS. PLAINTIFF’S MOTION

ALBANO, a.k.a. FOR SUMMARY

CAROLINE C. JUDGMENT AS AGAINST

ALBANO, a.k.a. ALL DEFENDANTS AND

CAROLINE ALBANO; FOR INTERLOCUTORY

WARREN YS.C. DECREE OF

ALBANO, a.k.a. FORECLOSURE; EXHIBIT

WARREN ALBANO; “A”

COUNTY OF MAUI; .

JOHN DOES 1-50; JANE) DATE: Wednesday, July

DOES 1-50; DOE

PARTNERSHIPS 1-50;

DOE CORPORATIONS

1-50; DOE ENTITIES

TIME: 8:30 A.M.

JUDGE: Shackley F.

ee ee ee ee ee ee ee ee ee

GOVERNMENTAL

UNITS 1-50; (Filed Jan. 13, 1997)

Defendants.

App. 21

FINDINGS OF FACT; CONCLUSIONS OF LAW;

ORDER GRANTING PLAINTIFF’S MOTION

FOR SUMMARY JUDGMENT AS AGAINST

ALL DEFENDANTS AND FOR

INTERLOCUTORY DECREE OF FORECLOSURE

Plaintiff NORWEST FINANCIAL HAWAII, INC.

(“Nortwest Financial”) filed a “Motion For Summary

Judgment As Against All Defendants And For Interlocu-

tory Decree Of Foreclosure” on June 26, 1996 in this

action. The Motion came on for hearing before the Honor-

able Shackley F. Raffetto, Judge of the above-entitled

court, in his courtroom on July 17, 1996 at 8:30 A.M.

Norwest Financial was represented by Marvin S.C.

Dang, Esq. No one else appeared.

FINDINGS OF FACT

This Court heard and considered the evidence pre-

sented, and being fully advised, finds as follows:

1. Norwest Financial is a Hawaii corporation doing

business in the City and County of Honolulu, State of

Hawaii.

2. Defendants CAROLINE C.S. ALBANO, a.k.a.

CAROLINE C. ALBANO, a.k.a. CAROLINE ALBANO,

and WARREN Y.S.C. ALBANO, a.k.a. WARREN

ALBANO (collectively called “Defendant Borrower”) are

residents of the City and County of Honolulu, State of

Hawaii.

3. On or about July 11, 1994, Defendant Borrower,

as Borrower, made, signed, and delivered to Norwest

Financial a “Note and Security Agreement (including

App. 22

Loan Statement)” for the amount financed of One Hun-

dred Ninety-One Thousand Four Hundred Fifty and 49/100

Dollars ($191,450.43), plus interest and points (the

“Note”).

4. For the purpose of securing the Note, Defendant

Borrower signed in favor of and delivered to Norwest

Financial, as Mortgagee, a Real Estate Mortgage dated

July 11, 1994 (“Mortgage”), and which was recorded as

Document No. 94-116814 in the Bureau of Conveyances of

the State of Hawaii.

5. The legal description of the mortgaged property

secured by the Mortgage is attached as Exhibit “A” and is

made a part of these Findings. The mortgaged property is

located at 769 Wailupe Drive, Wailuku, Hawaii 96793, Tax

Map Key No.: (2) 3-3-7:51.

6. Norwest Financial is now and has at all times

been the owner and holder of the Note and the Mortgage

since the making, signing and delivery of each document.

7. Defendant Borrower is in default under the terms

of the Note and the Mortgage because Defendant Bor-

rower has breached the promise to pay the amounts due

at the times the amounts became due and payable and/or

Defendant Borrower has breached other promises.

Because of the breaches, Norwest Financial has exercised

Norwest Financial’s option under the terms and condi-

tions of the Note and the Mortgage to declare the entire

principal balance due under the Note and the Mortgage,

immediately due and payable, together with interest,

points, late charges, costs, expenses, advances, and attor-

ney’s fees. Defendant Borrower has failed, neglected, and

refused, and still fails, neglects, and refuses to pay the

‘ne sete hiss

App. 23

amounts owed and/or to comply with the terms of the

Note and the Mortgage.

8. As of April 23, 1996, the amounts due and owing

under the Note and the Mortgage are as follows:

Principal Balance $206,793.26

Interest to and including

April 23, 1996 4,794.82

Advances:

Circuit Court filing fee $100.00

Sheriff’s fees 55.25

Bureau of Conveyances fees 20.00

Messenger fees 5.20

Subtotal for Advances 180.45

Less: Refund of Life Insurance ( 1,756.49)

TOTAL DUE AND OWING $210,012.04

The above amounts, together with interests, points,

attorney's fees, and such other amounts as may be prop-

erly chargeable until the closing of the foreclosure sale,

are a valid lien on the mortgaged property.

The interest on the Note is at the rate of $61.47 per

day for each day after April 23, 1996, plus points, late

charges, costs, expenses, advances, and attorney’s fees.

9. The Mortgage lien is a valid first lien on the

mortgaged property prior and senior to the interests of all

Defendants in the mortgaged property.

10. The Mortgage provides that Norwest Financial

may be the purchaser at any foreclosure sale. Norwest

Financial may be awarded all amounts secured by the

Mortgage, including reasonable attorney’s fees and all

App. 24

costs, expenses, and advances made by Norwest Financial

for the benefit and protection of the Mortgage and/or in

connection with the Mortgage.

11. Under Section 501-151 and/or Section 634-51,

Hawaii Revised Statutes, a Notice of Pendency of Action

of the subject foreclosure action was recorded on May 24,

1996 as Document No. 96-073210 in the Bureau of convey-

ances of the State of Hawaii.

12. There is no just reason for delay in entering a

final judgment as to Norwest Financial’s Complaint.

CONCLUSIONS OF LAW

Pursuant to the above Findings of Fact, this Court

concludes as a matter of law that:

1. This Court has jurisdiction over the parties to this

action based on their residence, their transaction of busi-

ness in this State, their interest, ownership, use, Or POs

session of real estate in this State, and/or their voluntary

submission to this Court’s jurisdiction. This Court also

has jurisdiction because the mortgaged property is

located in the State of Hawaii. the venue of this action is

proper.

2. Norwest Financial is entitled to accelerate the

indebtedness under the Note and the Mortgage. Accord-

ingly, the entire unpaid amounts under the Note and the

Mortgage are due and owing.

3. There is due, owing, and unpaid to Norwest

Financial from Defendant Borrower under the Note, the

sum of $210,012.04, being principal, interest, points, late

charges, costs, expenses, and advances incurred up to

App. 25

and including April 23, 1996, together with interest accru-

ing at the rate of $61.47 per day for each day after April

23, 1996 and such other sums as the Court may determine

to be properly chargeable under the terms of the Note

and the Mortgage, including, but not limited to, interest,

points, late charges, costs, expenses, advances, and attor-

ney’s fees.

4. Norwest Financial is entitled to have a fore-

closure of the Mortgage on the mortgaged property and

to have the mortgaged property sold in a manner autho-

rized by law.

5. The Mortgage is a valid first lien on the mort-

gaged property prior and senior to the interests of all

Defendants in the mortgaged property.

6. Norwest Financial is entitled to a judgment as a

matter of law on Norwest Financial’s Complaint.

7. This Court expressly directs that final judgment

shall be entered as to Norwest Financial’s Complaint

under Rule 54(b), Hawaii Rules of Civil Procedure,

because there is no just reason for delay.

ORDER GRANTING PLAINTIFF’S MOTION

FOR SUMMARY JUDGMENT AS AGAINST

ALL DEFENDANTS AND FOR

INTERLOCUTORY DECREE OF FORECLOSURE

IT IS ORDERED, ADJUDGED, AND DECREED:

1. Norwest Financial’s Motion is granted. A Sum-

mary Judgment and Interlocutory Decree of Foreclosure

is entered in favor of Norwest Financial and against all

Defendants.

App. 26

2. Defendant Borrower is in default under the Note

and the Mortgage, all of which are currently held by

Norwest Financial. Judgment is granted in favor of Nor-

west Financial and against Defendant Borrower for the

amounts due under the Note and the Mortgage. There is

due, owing and unpaid to Norwest Financial from Defen-

dant Borrower under the Note, the sum of $210,012.04,

being principal, interest, points, late charges, costs,

expenses, and advances incurred up to and including

April 23, 1996, together with interest accruing at the rate

of $61.47 per day for each day after April 23, 1996, and

such other sums as the Court may determine to be prop-

erly chargeable under the terms of the Note and the

Mortgage, including, but not limited to, interest, points,

late charges, costs, expenses, advances, and attorney’s

fees.

3. The Mortgage is a valid first lien on the mort-

gaged property prior and senior to the interests of all

Defendants in the mortgaged property.

4. The Mortgage is foreclosed as requested. The

mortgaged property shall be sold at public auction or by

private sale, “AS IS", without any upset price, as autho-

rized by law and under the terms of the Mortgage. The

sale shall not be final until approved and confirmed by

this Court.

5. Renee Ishikawa, Esq., whose address is 1931

Vineyard Street, #201, Wailuku, HI 96793, and whose

telephone number is 243-8032, is appointed as Commis-

sioner by this Court.

App. 27

No bond shall be required of the Commissioner.

If the Commissioner refuses, or becomes unable to

act as Commissioner, this Court shall appoint another

Commissioner without further notice of hearing.

The Commissioner shall be awarded a reasonable fee

and costs as to be subsequently determined by this Court.

The Commissioner's fees and costs shall be deemed to be

secured by Norwest Financial’s lien on the mortgaged

property.

6. The Commissioner shall hold all equitable and _

legal title to the mortgaged property. The Commissioner

is authorized and directed to take possession of the mort-

gaged property, to rent the mortgaged property pending

foreclosure, if appropriate, and to sell the mortgaged

property in its “AS IS” condition, without any representa-

tions or warranties whatsoever as to title or possession,

and with a quitclaim conveyance, either by private sale or

at a public foreclosure sale by auction to the highest

bidder. The mortgaged property shall be sold without

any upset price and in accordance with this Order.

No public Commissioner’s sale shall occur until after

notice of the foreclosure sale is first given by the Com-

missioner by publication in the classified section of a

daily newspaper of general circulation in the County in

which the mortgaged property is located, as may be

directed by this Court from time to time. The notice shall

be published once each week for three (3) consecutive

weeks with the auction to take place no sooner than

fourteen (14) days after the date of the publication of the

third advertisement, and as may be further directed by

this Court from time to time. The notice shall give the

App. 28

date, time, and place of sale and an intelligible descrip-

tion of the mortgaged property, and shall disclose all of

the terms of sale.

The Commissioner may continue any foreclosure sale

from time to time in the Commissioner’s discretion.

The Commissioner may accept a private offer in lieu

of a public auction to purchase the mortgaged property,

subject to confirmation by this Court. Any party to this

action, including the Commissioner, may file a motion to

confirm the private sale.

7. Norwest Financial and all other parties are autho-

rized to purchase at the foreclosure sale. The successful

bidder at the foreclosure sale is to make a down payment

to the Commissioner in an amount not less than ten

percent (10%) of the highest successful bid price. The

payment is to be in cash, money order, or by certified or

cashier’s check. However, Norwest Financial and other

secured lienholders may satisfy the down payment by

offset and credit bid up to the amount of their secured

debt.

Prior to bidding, any person not authorized by this

Order to credit bid must show proof to the Commissioner

of that person’s capability to pay the required down

payment in such form prior to bidding.

At this Court’s discretion, the down payment may be

forfeited in full or in part if the successful bidder fails to

pay the balance of the purchase price as ordered by this

Court. However, that bidder shall not be liable for dam-

ages greater than the forfeiture of the down payment.

App. 29

8. A hearing shall be held to consider the confirma-

tion of the foreclosure sale. At the hearing, this Court

shall hear proof of claim of any other party, and shall

determine the priority among the claims of the other

parties besides Norwest Financial, as appropriate.

At the hearing, this Court will also allow reopening

of the auction by accepting higher bids, the first of which

must be at least one hundred five percent (105%) of the

highest bid at the Commissioner’s sale. Anyone may

reopen the auction by bidding, including all parties to

this action and any other interested person, whether or

not the party or interested person had bid, or could have

bid, at the Commissioner’s sale.

This Court shall determine the amount of the fee and

costs of the Commissioner, and the amount of the attor-

ney’s fees and costs of Norwest Financial and the other

parties. The final payment of the proceeds of the fore-

closure sale shall be directed by this Court.

9. At the hearing, if it appears that the proceeds of.

the foreclosure sale shall be insufficient to pay all the

sums owed to Norwest Financial, and if it appears that

any deficiency exists, this Court shall direct, as appropri-

ate, that a judgment for the deficiency shall be entered

against Defendants CAROLINE C.S. ALBANO, a.k.a.

CAROLINE C. ALBANO, a.k.a. CAROLINE ALBANO,

and WARREN Y.S.C. ALBANO, a.k.a. WARREN

ALBANO, jointly and severally, in favor of Norwest

Financial. Norwest Financial shall have execution on that

judgment.

10. The balance of the purchase price shall be paid

to the Commissioner upon approval and confirmation of

App. 30

the foreclosure sale by this Court and the tender of the

document transferring title to the mortgaged property.

The payment shall be in cash, money order, or by certi-

fied or cashier’s check. However, if Norwest Financial or

any other secured lienholder is the successful purchaser,

then that successful purchaser may satisfy the balance of

the purchase price by offset up to the amount of their

secured debt as determined by this Court.

The Commissioner will close the sale through a

licensed Hawaii escrow company if so requested by the

purchaser or if so ordered by this Court.

The cost and expenses of closing, including, but not

limited to, the costs of conveyance, including preparation

of the conveyance document, conveyance tax, escrow

fees, recording fees, any proof of title, title insurance,

notary fees, and the costs of securing possession of the

mortgaged property at recordation shall be the respon-

sibility of and paid by the purchaser. The purchaser is

responsible for securing possession of the mortgaged

property at closing. Neither the availability of the leased

fee interest (as appropriate), nor the availability of title

insurance or any other insurance, nor the securing of

possession of the mortgaged property shall be a condition

of closing.

11. The Commissioner shall hold all proceeds of the

foreclosure sale of the mortgaged property, and shall

receive, collect, and hold all rents and profits, if any, to

the credit of this action, subject to the directions of this

Court. Upon distribution of the sales proceeds to the

lienors in the order of their priority and according to the

directions of this Court, the Commissioner shall file an

> = 0 athe tar ne

App. 31

accurate accounting of the Commissioner’s receipts,

expenses, and distributions.

This Court reserves jurisdiction to determine the

party or parties to whom any surplus shall be awarded.

12. Defendants CAROLINE CS. ALBANO, a.k.a.

CAROLINE C. ALBANO, a.k.a. CAROLINE ALBANO,

and WARREN Y.S.C. ALBANO, a.k.a. WARREN

ALBANO, and all persons claiming by, through or under

Defendants CAROLINE C.S. ALBANO, a.k.a. CAROLINE

C. ALBANO, a.k.a. CAROLINE ALBANO, and WARREN

Y.S.C. ALBANO, a.k.a. WARREN ALBANO, except any

governmental authority enforcing a lien for unpaid real

property taxes as to the mortgaged property, are perpetu-

ally barred of and from any and all right, title, and

interest in the mortgaged property and any part of the

mortgaged property, except as otherwise ordered by this

Court.

13. If the Commissioner deems it advisable to

remove the occupants and their personal belongings

and/or the personal property of the owners of the mort-

gaged property, the Commissioner may obtain a Writ of

Possession and at the Commissioner’s sole discretion

arrange for the removal of the occupants and their per-

sonal belongings/personal property to a suitable storage

area for storage. If such personal belongings/personal

Property are not claimed within a thirty (30) day period

following initial storage, the Commissioner may in the

Commissioner’s sole discretion dispose of such personal

belongings/ personal property in a commercially reason-

able manner, as provided by law, or by further order of

App. 32

this Court. Any funds generated by the sale shall be

distributed according to the further order of this Court.

14. Pursuant to Section 501-151 and/or 634-51,

Hawaii Revised Statutes, all other or further encum-

brancers or purchasers of the mortgaged property or any

part of the mortgaged property whose interest arises

from and after May 24, 1996, are forever barred and

foreclosed of and from any and all right, title, and interest

and in the mortgaged property and any part of the mort-

gaged property.

15. This Court reserves jurisdiction to determine the

party or parties for whom or against whom a deficiency

judgment may be awarded or applied, and this Court

shall otherwise retain jurisdiction in this action of all

matters and claims not yet determined.

16. This Court expressly directs that pursuant to

Rule 54(b), Hawaii Rules of Civil Procedure, the Sum-

mary Judgment and Decree of Foreclosure is entered as a

Final Judgment as to Norwest Financial’s Complaint

because there is no just reason for delay.

17. Norwest Financial shall have such other and

further relief as this Court may deem to be proper and

appropriate in the premises.

App. 33

FAIR DEBT COLLECTION PRACTICES ACT

NOTICE: THIS IS AN IN ATTEMPT TO COLLECT A

DEBT, AND ANY INFORMATION OBTAINED WILL BE

USED FOR THAT PURPOSE. THE DEBT MAY HAVE

BEEN DISPUTED.

DATED: Honolulu, Hawaii, JAN 13 1997

/s/ Shackley F. Raffetto (Seal)

JUDGE OF THE

ABOVE-ENTITLED COURT

Norwest Financial Corporation vs. Caroline C.S. Albano, a.k.a.

Caroline C. Albano, a.k.a. Caroline Albano, Warren Y.S.C.

Albano, a.k.a. Warren Albano, et all.

Civil No. 96-0412(2)

Second Circuit Court

“Findings Of Fact; Conclusions Of Law; Order Grant-

ing Plaintiff’s Motion For Summary Judgment As

Against All Defendants And For Interlocutory Decree

Of Foreclosure; Exhibit “A” ”

App. 34

EXHIBIT “A”

That certain parcel of land situate at Paukukalo,

Waiehu, Wailuku, Island and County of Maui, State of

Hawaii, described as follows:

Lot 124, area 8,174 square feet, more or less, of the

“Waiehu Heights Subdivision”, as shown on the map

filed in the bureau of Conveyances, State of Hawaii as

File Plan No. 1482.

Being the land conveyed to Warren Y.S.C. Albano and

Caroline C.S. Albano, husband and wife, Tenants by the

Entirety, by Deed dated August 28, 1980, recorded Octo-

ber 8, 1980, in the Bureau of Conveyances, State of

Hawaii, in Book 15041, Page 444.

SUBJECT, HOWEVER, TO THE FOLLOWING:

1. Title to all minerals and metallic mines reserved

to the State of Hawaii.

2. Reservation of all water and water rights within

or appurtenant to the said property in favor of

Wailuku Sugar Company, a Hawaii corporation,

as reserved in that certain Deed dated and

recorded April 5, 1973, in the Bureau of Convey-

ances, State of Hawaii, in Book 9054, Page 67.

END OF EXHIBIT “A”

769 Wailupe Drive

Wailuku, Hawaii 96793

Tax Map Key No.: (2) 3-3-7:51