Indymac Bank v. Miguel (ICA May 9, 2008)
Background. The Miguels executed and delivered a note to Alliance Bancorp on December 1, 1994, but it was signed the next day. The note was secured by a mortgage on the Miguels' house on December 1, 1994. The note and mortgage was also assigned to the Bank of New York on December 1, 1994, but it was notarized the next day. The mortgage was recorded in the Land Court. The note and mortgage was assigned to the Bank of New York on December 1, 1994, but it was recorded on October 17, 1996. Because of a TILA action brought in the United State District Court, the Miguels stopped paying the mortgage. On April 4, 2003, Indymac sued the Miguels seeking a foreclosure sale based on default and determine the amount owed to them. It was not until June 6, 2003, however, when Bank of New York's interest was assigned to Indymac; Indymac soon recorded the assignment.
Courts are for the Injured Only. For a party to bring a lawsuit, it must have standing-- a "personal stake in the outcome" of the case. Baker v. Carr, 369 U.S. 186 (1962). Without standing the court has no jurisdicition. In re: Application of Matson Navigation Co. v. Fed. Deposit Ins. Corp., 81 Hawai'i 270, 275, 916 P.2d 680, 685 (1996). Standing arises when (1) the plaintiff suffered an actual or threatened injury as a result of defendant's wrongful conduct; (2) the injury is fairly traceable to the defendant's action; and (3) a favorable decision would likely provide relief for a plaintiff's injury. Bush v. Watson, 81 Hawai'i 474, 479, 918 P.2d 1130, 1135 (1996). To show the first prong, the plaintiff must show a "distinct and palpable injury" rather than an "abstract, conjectural, or merely hypothetical" one. Mottl v. Miyahira, 95 Hawai'i 381, 389, 23 P.3d 716, 724 (2001).
The Miguels argued that Indymac had no injury to meet the first prong of the standing requirements because it did not obtain an interest in the mortgaged property until after it sued them. The jurisdiction of the court depends on the state of things existing at the time the suit was brought. Minneapolis & St. L. R. Co. v. Peoria & P.U. Ry. Co., 270 U.S. 580, 586 (1926). The ICA agreed that there is nothing showing that Indymac suffered an injury, but it declared that the issue of whether the perfection of an interest that would cure standing before judgment rendered would cure the "unnoticed defect in standing" was one of first-impression.
The Self-Imposed Shield of Justiciability Includes Standing. The ICA observed a "core difference" between federal jurisdictions and Hawai'i. Unlike the federal courts, where standing has a constitutional dimension--Art. III of the fed. constitution limits jurisdiction to "cases and controversies" and standing ensures that--Hawai'i's standing doctrine is but one aspect of the self-imposed doctrines known as justiciability, a nonsense word outside the law. Thus, standing requirements in Hawai'i may be relaxed in order to meet "the needs of justice." Life of the Land v. Land Use Comm'n, 63 Haw. 166, 171, 623 P.2d 431, 438 (1981). The Hawai'i courts appear to put all of those doctrines--mootness, ripeness, standing, political questions, etc.--under justiciability. So if that is the case, then does this mean that all doctrines are subject to the same flexibility? Perhaps we are dealing with branches stemming from the same tree. If standing can be relaxed to meet "the needs of justice," then can mootness requirements be relaxed for the same reason? Political questions too?
Not-so Dramatic Holding? The ICA ultimately allowed a retroactive cure to standing. This cure did not risk additional litigation because those who cannot show an interest in the litigation before judgment are still without jurisdiction. Moreover, the ICA stated that finding no jurisdiction would only cause needless expense and delay and be a matter of form over substance since Indymac could always sue them with the interest in hand. In the end, it seemed that "the needs of justice" called for the relaxing of the standing requirements. And why not? Standing has been more or less relaxed in environmental suits and contested case hearings. After all, if the "needs of justice" afforded standing to plaintiffs who were aesthetically injured, Bremner v. C&C of HNL, 96 Hawai'i 134, 140, 28 P.3d 350, 356 (App. 2001), or plaintiffs who did not have to wait for the injury before bringing the lawsuit, Kaho'ohanohano v. State, 114 Hawai'i 302, 312, 162 P.3d 696, 715 (2007), then this is in step with the past after all.
Relating Back. In footnote four, the ICA pointed out that had the defect in standing been identified before judgment, the plaintiff could have amended its pleadings to "relate back" to the day it was originally filed and include the Bank of New York as a party. HRCP Rule 15. If Bank of New York did not want to join, the plaintiff could still have forced it to under HRCP Rule 19 because "complete relief cannot be accorded among those already parties[.]" Finally, the plaintiffs could have sued them again now that it had the interest and, thus, the injury. This is crucial to the ICA's ultimate resolution of the issue in holding that a retroactive cure is necessary to avoid waste.
Other Issues. The ICA resolved other issues raised by the Miguels, but they did not prevail. These issues related to challenges the assignments of the interest among the banks, collateral estoppels, summary judgment actions, and lis pendens matters.