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    NATIONSTAR MORTGAGE LLC, Respondent/Plaintiff-Appellee, v. Daniel Kaleoaloha KANAHELE and the Estate of Marcus C. Kanahele et al., Petitioner/Defendant-Appellant.
    SCWC-16-0000319
    Supreme Court of Hawai'i.
    MAY 1, 2019
    Lance D. Collins (Bianca K. Isaki with him on the briefs) for petitioner
    David A. Nakashima, Honolulu, for respondent
   RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY RECKTENWALD, C.J.

In 2006, Daniel Kaleoaloha Kanahele (Daniel) and his brother, Marcus C. Kanahele (Marcus), co-signed a mortgage on their property in order to obtain a $ 625,000 loan. While both brothers executed the mortgage, Daniel was the promissory note's (Note) sole signatory. Daniel defaulted on the loan in 2008, and in 2014, Nationstar Mortgage, LLC (Nationstar) initiated this foreclosure action.

After seventeen months of proceedings involving Daniel, Marcus's Estate, and Nationstar, the Circuit Court of the Second Circuit granted Nationstar's motion for summary judgment, and issued final judgment in favor of Nationstar. On appeal, the Intermediate Court of Appeals (ICA) vacated the judgment and remanded the case for further proceedings. Although the ICA ruled in Daniel's favor by vacating the judgment, Daniel asks this court to review the following additional issues, which he contends were either incorrectly resolved or left unresolved by the ICA:

(1) Whether summary judgment is precluded where contradictory declarations by [the] representatives of [a] foreclosing party undercut the trustworthiness of [its] offered business records; and
(2) Whether a foreclosing plaintiff[,] who is not a holder in due course[,] is subject to [a defendant's] affirmative defenses[.]

We hold that the ICA erred with respect to both of those issues, and that Daniel would be prejudiced on remand absent this court's further review.

Although the ICA correctly held that Nationstar had not demonstrated standing to enforce Daniel's Note under Bank of America, N.A. v. Reyes-Toledo, 139 Hawai'i 361, 390 P.3d 1248 (2017), and vacated the circuit court's judgment on this basis, we conclude that the ICA erred in holding that Nationstar's business records were trustworthy under the business records exception to hearsay. See Hawai'i Rules of Evidence (HRE) Rule 803(b)(6) (2002). In light of Nationstar's failure to adequately explain material discrepancies in its business records and its presentation of contradictory declarations regarding which of several versions of the Note was the "wet-ink" original, the ICA should have vacated the circuit court's order on this ground, as well.

We also conclude that Daniel's affirmative defenses should have been addressed by the circuit court, given that Nationstar, which neither pled nor proved its status as the Note's "holder in due course," was simply the Note's "holder." The ICA did not clarify this, despite the circuit court's inaccurate conclusion that "holders" were not subject to obligors' affirmative defenses. See Hawai'i Revised Statutes (HRS) § 490:3-305 (2008).

We therefore affirm the ICA's Judgment on Appeal, but correct its reasoning as set forth below, and remand the case for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual Background

In 2002, Daniel and his younger brother, Marcus, inherited their family home in Kihei, Maui ("Kanahele home" or "the property"). Daniel resided in the home, while Marcus lived in Florida. Daniel agreed to provide Marcus with financial assistance in 2006. Accordingly, the brothers contacted Linda Austin (Austin), a mortgage broker with Maui Mortgage Professionals, to assist them in obtaining a loan and in using their home as collateral.

According to Daniel, the primary purpose of the loan was to provide financial assistance to Marcus in his business pursuits. Austin allegedly knew that Daniel, who had worked most of his life as an unskilled worker, was unemployed at the time he and his brother sought the loan. Despite this, Austin represented to Daniel and his brother that because Daniel was the owner-occupant of the property, he would qualify for the loan if he provided his credit score, "without having to provide any documentation regarding assets or income[.]"

Daniel executed a Note to Lehman Brothers Bank, FSB (Lehman Brothers) for $ 625,000 on December 4, 2006, and was told that the documents would be sent to Marcus in Florida. The Note was secured by a mortgage, executed by the two brothers as mortgagors, in favor of Mortgage Electronic Registration Systems, Inc. (MERS) for Lehman Brothers. The mortgage, which encumbered the Kanahele home, was recorded in the Bureau of Conveyances.

The loan went into default in 2008. The mortgage was assigned from MERS to Aurora Loan Services (Aurora) in 2009, and in June of that year, Aurora mailed the brothers notices of default.

On August 14, 2012, Daniel sent Nationstar, the loan's servicer at the time, a Fair Debt Collection Practices Act request. By letter dated August 27, 2012, Nationstar's customer care specialist, Joyce Lawrence (Lawrence), responded that Wells Fargo Bank owned the Note. She also sent Daniel a copy of the Note, which had two indorsements. The Note was first indorsed from Lehman Brothers to Lehman Brothers Holding, and second, indorsed from Lehman Brothers Holding to Aurora.

The mortgage was subsequently assigned from Aurora to Nationstar for unspecified "good and valuable consideration" on September 20, 2012. On an unspecified date, the Note was indorsed from Aurora to blank, by Nationstar as Aurora's attorney-in-fact.

Marcus died in 2013, having never signed the Note. Daniel thus explained the unique circumstances of the loan and mortgage as follows:

It was only when the litigation began in this case [that] I learn[ed] that I was the only borrower - that my brother [had] never signed the [N]ote. As the mortgage stated us as "co-borrowers" on the signature lines of the mortgage, I had no idea that my brother was not a co-borrower. I was totally surprised and shocked to learn this.
Suffice it to say, it had always been our practice to be co-borrowers when our family house was used as collateral, and it was our stated intention with Ms. Austin and the bank that we were going to be co-borrowers. I would never have agreed to the loan had I known that I was the sole borrower and that I would have been responsible for any "deficiency judgment[,]" the benefits of which went to my brother and his business and did not involve me.

In other words, Daniel "would never have agreed" to obtain the loan had he known he would be the Note's sole borrower, because the purpose of the loan was to benefit Marcus.

B. Procedural Background

1. Circuit Court Proceedings

a. The Complaint

Nationstar filed a Complaint to Foreclose against Daniel, and Marcus's Estate, on October 7, 2014, with the following attachments: (1) a copy of the Note; (2) a verification attesting that the Note was the original; and (3) an attorney affirmation attesting the same.

Like the Note Nationstar had provided to Daniel in 2012, this Note also had two indorsements. While the first indorsement was identical to that of the Note that Daniel received in 2012 - from Lehman Brothers to Lehman Brothers Holding - the second was executed by Lehman Brothers Holding to in-blank, rather than to Aurora.

The verification, executed by Jesslyn Williams (Williams), Nationstar's assistant secretary, stated that: (1) Williams had personally reviewed the documents and records in Nationstar's possession related to the case for accuracy; (2) the records and files she had reviewed were kept by Nationstar in its ordinary course of business and were made at or near the time of such acts; and (3) Nationstar possessed the original Note, indorsed-in-blank. Lloyd T. Workman (Workman), Nationstar's counsel at that time, also attested that the documents Nationstar had submitted to the circuit court were accurate and that they "contained no false statements of fact or law."

b. Nationstar's First Motion for Summary Judgment and Related Proceedings

Nationstar filed its first Motion for Summary Judgment on March 30, 2015, alleging that it had adequately established its ability to foreclose on the Kanahele home. Nationstar attached the same Note to its Motion as it attached to its Complaint, as well as a declaration by Demetrice Person (Person), one of Nationstar's document execution specialists.

Just like Williams had done in her verification, Person attested that: (1) she had personally reviewed the documents and records in Nationstar's possession related to Daniel's case for accuracy; (2) the records and files she had reviewed were kept by Nationstar in its ordinary course of business and were made at or near the time of such acts; and (3) Nationstar possessed the original Note, which had two indorsements, one of which was indorsed-in-blank.

In his opposition memorandum, Daniel argued that summary judgment would be inappropriate because: (1) genuine issues of material fact existed as to who owned the Note, in light of Nationstar's presentation of two different versions of the Note; and (2) Nationstar, which had neither pled nor proven its status as a "holder in due course," had not yet addressed Daniel's affirmative defenses.

c. Nationstar's Renewed Motion for Summary Judgment and Related Proceedings

Nationstar withdrew its first Motion for Summary Judgment to "address [the] issues raised by Daniel," and filed its Renewed Motion for Summary Judgment on December 15, 2015. Attached to Nationstar's new motion was a Note with three indorsements, rather than two, as well as two more declarations affirming that this Note accurately reflected the original. Like the Note presented to Daniel in 2012, the Note's first indorsement was from Lehman Brothers to Lehman Brothers Holding and the second indorsement was from Lehman Brothers Holding to Aurora. The Note's third indorsement, however, had been indorsed in-blank from Aurora, by Nationstar as Aurora's attorney-in-fact.

To support this version of the Note, Nationstar submitted a declaration executed by Toni Vincent (Vincent), a document execution specialist, which stated that: (1) Vincent had personally reviewed the documents and records in Nationstar's possession related to Daniel's case including a "current copy of the original Note," which was indorsed-in-blank and attached to Nationstar's new motion; (2) the records and files were incorporated and kept by Nationstar in its ordinary course of business and verified for their accuracy; and (3) the Note was in the possession of and ha[d] been maintained by Nationstar since before the commencement of th[e] case."

Vincent further declared that she had reviewed Person's declaration submitted with Nationstar's first Motion for Summary Judgment, had conferred with Person, and could confirm that Person's declaration was inaccurate because Person had not followed Nationstar's policies and procedures, had not personally reviewed the "original 'wet-ink' Note," and had attached an outdated copy of the Note to the first motion that "did not contain all of the indorsements currently set forth on the original Note." David Rosen, Nationstar's counsel at the time, also attested via declaration that this Note, with its three indorsements, was the "original 'wet-ink' Note."

Daniel then filed his own Motion for Summary Judgment, raising similar arguments to those raised before. Specifically, Daniel contended that Nationstar had not "produced admissible evidence establishing [the] elements of a remedy of foreclosure[,]" and further, that it had not addressed Daniel's affirmative defenses.

On March 14, 2016, the circuit court issued findings of fact and conclusions of law, entered an order granting Nationstar's Renewed Motion for Summary Judgment, and entered final judgment in Nationstar's favor. The circuit court concluded that Nationstar, as "holder" of Daniel's Note, had adequately proven its ability to foreclose on the mortgage.

2. ICA Proceedings

On appeal, Daniel argued that summary judgment was improper in light of the untrustworthiness of Nationstar's business records and Nationstar's failure to address Daniel's affirmative defenses when it was "holder" of the Note. Nationstar, on the other hand, despite conceding its status as "holder," rather than "holder in due course," denied that its business records were untrustworthy, and further claimed that Daniel's affirmative defenses lacked merit. As such, Nationstar argued that summary judgment was proper.

The ICA's memorandum opinion vacated the circuit court's final judgment and remanded the case for further proceedings. Despite rejecting Daniel's argument that the Note with three indorsements lacked indicia of trustworthiness for admissibility under HRE Rule 803(b)(6), the ICA concluded that Nationstar had not established its standing to enforce the Note under Reyes-Toleldo, 139 Hawai'i 361, 390 P.3d 1248.

As a preliminary matter, the ICA concluded that Nationstar's business records were admissible under HRE Rule 803(b)(6). After examining HRE Rule 803(b)(6) and its commentary, Vincent's declaration, and this court's rulings in U.S. Bank N.A. v. Mattos, 140 Hawai'i 26, 398 P.3d 615 (2017), and Wells Fargo Bank, N.A. v. Behrendt, 142 Hawai'i 37, 414 P.3d 89 (2018), the ICA also concluded that Nationstar's business records were trustworthy.

According to the ICA, Person's declaration had no impact on the third Note's admissibility, despite contradicting Vincent's declaration. The ICA explained that while Person's "inaccurate declaration" may have bore on her own credibility, it did "not necessarily [bear] on the reliability" of Nationstar's record-keeping system or business records, which the court explained, was the "focus" of the trustworthiness requirement.

The ICA further explained that Nationstar's business records were trustworthy under Mattos, 140 Hawai'i 26, 398 P.3d 615, and Behrendt, 142 Hawai'i 37, 414 P.3d 89, because unlike the declarants in those cases, here, Vincent provided enough information in her declaration to establish herself as a qualified witness of Nationstar's business records. More specifically, the ICA found that unlike the declarations in Mattos and Behrendt, Vincent's declaration established that:

Nationstar (1) received the loan documents, including the Note, from prior loan servicers and incorporated them into its records; and (2) that once integrated Nationstar "relie[d] on these business records in the ordinary course of its mortgage loan servicing business." And as stated above, Vincent provided additional facts sufficient to establish the trustworthiness of the documents attached to her declaration.

The ICA concluded the trustworthiness requirement had also been satisfied given that Nationstar did not rely on Person's declaration to establish the elements of its claim, and given Vincent's explanation that her declaration was submitted to correct Person's misstatements and the misinformation presented in Nationstar's previous motion for summary judgment. The ICA also concluded that Nationstar's 2012 letter, which indicated that Wells Fargo owned the Note, was inapposite because the "issue [here] [was] whether Nationstar was the holder at the time of the filing of the Complaint, not the identity of the owner two years ago."

Regardless, the ICA found that Nationstar had not adequately established standing to foreclose under the requirements of Reyes-Toledo, 139 Hawai'i 361, 390 P.3d 1248. The ICA pointed out that, as in Reyes-Toledo,

the copy of the Note attached to the Vincent declaration and the Renewed Motion for Summary Judgment [did] not reflect the date of the blank indorsement.... Although Vincent declared that "the Note was in the possession of and ha[d] been maintained by Nationstar since before the commencement of this case," she did not attest that the Note was indorsed-in-blank prior to the commencement of this case or that the copy attached reflect[ed] the indorsements as they existed when the Complaint was filed.

Consequently, the ICA vacated the circuit court's order and judgment, and declared that on remand, in order to have standing to enforce the Note, Nationstar would have to show that it possessed the Note prior to commencing its action against Daniel in 2014. The ICA did not address Daniel's affirmative defenses, and also did not address Nationstar's acknowledgment, in its appellate briefing, of its status as "holder" of the Note. The ICA's Judgment on Appeal was entered on September 25, 2018.

II. STANDARDS OF REVIEW

A. Summary Judgment

This court reviews "the circuit court's grant or denial of summary judgment de novo." Querubin v. Thronas, 107 Hawai'i 48, 56, 109 P.3d 689, 697 (2005) (citation omitted). Accordingly, "summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law." Iddings v. Mee-Lee, 82 Hawai'i 1, 5, 919 P.2d 263, 267 (1996) ; see also Hawai'i Rules of Civil Procedure (HRCP) Rule 56(c) (2000).

On a motion for summary judgment, "a 'genuine issue as to any [material] fact' ... [in] a conflict in the affidavits as to a particular matter must be of such a nature that it would affect the result." Richards v. Midkiff, 48 Haw. 32, 39, 396 P.2d 49, 54 (1964) (citation omitted). Furthermore, "[a]ffidavits in support of a summary judgment motion [must be] scrutinized to determine whether the facts they aver are admissible at trial and are made on the personal knowledge of the affiant." Adams v. CDM Media USA, Inc., 135 Hawai'i 1, 28, 346 P.3d 70, 97 (2015) (internal quotation marks omitted) (quoting Miller v. Manuel, 9 Haw. App. 56, 66, 828 P.2d 286, 292 (1991) ).

In reviewing a circuit court's grant or denial of a motion for summary judgment, the appellate court "must view all of the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion" and any doubt should be resolved in favor of the non-moving party. Crichfield v. Grand Wailea Co., 93 Hawai'i 477, 483, 6 P.3d 349, 355 (2000) (internal quotation marks, brackets, and citation omitted).

Similarly,

[A] party moving for summary judgment is not entitled to a judgment merely because the facts he offers appear more plausible than those tendered in opposition or because it appears that the adversary is unlikely to prevail at trial. This is true even though both parties move for summary judgment. Therefore, if the evidence presented on the motion is subject to conflicting interpretations, or reasonable men might differ as to its significance, summary judgment is improper.

Makila Land Co., LLC v. Kapu, 114 Hawai'i 56, 67, 156 P.3d 482, 493 (App. 2006) (citation omitted).

B. The Admissibility of Evidence under HRE Rule 803(b)(6)

"Where admissibility of evidence is determined by application of the hearsay rule, there can only be one correct result, and the appropriate standard for appellate review is the right/wrong standard." State v. Fitzwater, 122 Hawai'i 354, 362, 227 P.3d 520, 528 (2010) (internal quotation marks and citation omitted). Thus, we review the admissibility of business records under HRE Rule 803(b)(6) pursuant to the right/wrong standard. However, when "the trial court [ ] base[s] its ruling [of admissibility] on the 'judgment call' of whether the sources of information or other circumstances [related to the records] indicate[ ] a lack of trustworthiness," we review for abuse of discretion. State v. Jhun, 83 Hawai'i 472, 477 n.4, 927 P.2d 1355, 1360 n.4 (1996).

C. Statutory Interpretation

The interpretation of a statute is a question of law that appellate courts review de novo. Sierra Club v. Dep't of Transp., 120 Hawai'i 181, 197, 202 P.3d 1226, 1242 (2009). "[W]here the terms of a statute are plain, unambiguous[,] and explicit, ... our sole duty is to give effect to the statute's plain and obvious meaning." Bhakta v. Cnty. of Maui, 109 Hawai'i 198, 208, 124 P.3d 943, 953 (2005) (internal quotation marks and citation omitted).

III. DISCUSSION

A. The ICA Erred in Concluding that Nationstar's Third Note was Admissible Under HRE Rule 803(b)(6) Because the Sources of Information and Other Circumstances Surrounding the Note Indicated the Note's Lack of Trustworthiness

HRE Rule 803(b)(6) provides that the following are not excluded by the hearsay rule:

A memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, made in the course of a regularly conducted activity, at or near the time of the acts, events, conditions, opinions, or diagnoses, as shown by the testimony of the custodian or other qualified witness, or by certification that complies with rule 902(11) or a statute permitting certification, unless the sources of information or other circumstances indicate lack of trustworthiness.

(emphasis added).

The commentary to HRE Rule 803(b)(6) further provides that:

The hallmark of reliability in this area is not the nature of the business or activity but rather its "regularity and continuity which produce habits of precision, [the] actual experience of [the] business in relying upon [the records], [and the] duty to make an accurate record as part of a continuing job or occupation." A further safeguard is that preliminary determination of the trustworthiness of such records is discretionary with the courts.

(emphasis added).

The ICA concluded that Nationstar's Note with three indorsements bore the requisite indicia of trustworthiness as required under Mattos and Behrendt because Vincent's declaration established "that [ (1) ] Nationstar [ ] received the loan documents, including the Note, from prior loan servicers and incorporated them into its records; [ ] (2) that once integrated[,] Nationstar 'relie[d] on th[o]se business records in the ordinary course of its mortgage loan servicing business[,]' " and that "Vincent provided additional facts sufficient to establish the trustworthiness of the documents attached to her declaration."

While satisfying the requirements of Mattos and Behrendt is necessary to lay a foundation for admissibility under HRE Rule 803(b)(6) with regard to being a qualified witness who may testify as to the reliability of the records at issue, these requirements are not sufficient to show trustworthiness on their own when the totality of circumstances indicate the opposite.

In light of Vincent's declaration, the conflicting attestations of Williams, Workman, and Person, and Nationstar's failure to explain Lawrence's 2012 assertion that Wells Fargo owned the Note, the indicia of trustworthiness required for the Note's admissibility under HRE Rule 803(b)(6) were not present, despite the fact that Vincent may have been a qualified witness with respect to the records under Mattos and Behrendt.

Furthermore, in Hawai'i, an affidavit submitted by a party in support of a motion for summary judgment must be based on the affiant's personal knowledge. Adams, 135 Hawai'i at 28, 346 P.3d at 97. In other words, the affidavit must adequately reflect that the affiant (1) perceived the event about which they testified; and (2) had a present recollection of that perception. See id.; HRE Rule 602 (1992); HRCP Rule 56(e). Affidavits that state ultimate or conclusory facts or conclusions of law may not be used to support a motion for summary judgment. Adams, 135 Hawai'i at 30, 346 P.3d at 99 (citation omitted).

Here, Vincent's declaration was not based on personal knowledge. Vincent attested that Person's declaration "included inaccurate information regarding the loan because Person failed to comply with Nationstar's Declaration Policies and Procedures," that Person "reviewed an outdated copy of the Note," rather than the "original wet-ink Note," and that Vincent's "personal knowledge of these statements was derived from [ ] having inspected a copy of [Person's declaration], the Exhibits thereto, a current copy of the original Note, and [ ] having conferred with Person[.]"

It is clear that Vincent did not personally observe Person reviewing the "outdated copy of the Note" or Person's failure to review the "the original wet-ink Note." Rather, Vincent based her statement that Person "reviewed an outdated copy of the Note" on communications she had with Person. "Were we to dilute the requirement that affidavits be based on personal knowledge, it [would] be all [too] easy to come up with hearsay affidavits effectively undermining the entire summary judgment process." Midland Funding, LLC v. Trahan, 110 So.3d 1154, 1157-58 (La. Ct. App. 2013) (citation omitted).

Given that Vincent's attestation to Person's errors was not based on Vincent's personal knowledge, those portions of her declaration should not have been relied upon by the circuit court in ruling on Nationstar's Renewed Motion for Summary Judgment. Furthermore, without those portions, the declaration merely attested, based on Vincent's own review of Nationstar's documents, that the Note attached to her declaration was "the current copy of the original Note[.]" This, however, was in direct conflict with Person's declaration, which stated that the version of the Note that she attested to was "the current copy of the original Note[,]" as well as the attestations of Williams and Workman. The ICA thus erred in concluding that Vincent's declaration was more credible than any other, and that, on this basis, summary judgment was appropriate.

We clarify, however, that not all mistakes, or allegations of mistake, in a company's business records will render that company's record-keeping practices untrustworthy, and therefore render their records inadmissible. In State v. Forman, the ICA held that "the vague testimony that [a company] 'kept bad paperwork,' without more, [did] not warrant a conclusion that the company's records as a whole were untrustworthy[,]" and further, that the "application of the business records rule" could not be avoided on the basis "that a regular practice is occasionally broken." 125 Hawai'i 417, 424-25, 263 P.3d 127, 134-35 (App. 2011) (citing United States v. McGill, 953 F.2d 10, 15 (1st Cir. 1992) (explaining that to hold otherwise, the business records rule would be "swallowed up by an exception for less-than-perfect business practices")). Unlike in Forman, however, Daniel did not make bald allegations of Nationstar's "bad paperwork" practices, but rather, pointed to specific, material contradictions that Nationstar either did not address, or addressed inadequately.

If, in fact, the Note with three indorsements was the true and correct version of the Note, then Person should have submitted a new declaration in support of Nationstar's Renewed Motion for Summary Judgment, acknowledging that for the purposes of her first declaration, she had reviewed an "outdated copy of the Note" rather than the "original wet-ink Note." These statements, from Person, rather than from Vincent, would have demonstrated the requisite personal knowledge as required for affidavits submitted to support summary judgment motions.

Nationstar incorrectly points to Cordeiro v. Burns, 7 Haw. App. 463, 776 P.2d 411 (1989), to support its contention that Person's and Vincent's declarations were consistent with each other, rather than in conflict. This reliance is misplaced, however, because in Cordeiro, Burns himself explained why his statements, which on their face seemed contradictory, were not. Id. at 470, 776 P.2d at 417. In other words, Burns offered a plausible explanation for why he gave inconsistent statements based on his own personal knowledge. Id. Presumably, Person could have done the same. As such, Person should have been the one to explain why her first declaration was incorrect, if indeed, it was.

In sum, despite the fact that Vincent constituted a qualified witness under Mattos and Behrendt, the Note with three indorsements was not admissible as a business record under HRE Rule 803(b)(6) because the circumstances surrounding the Note indicated a lack of trustworthiness. Nationstar could have avoided this problem if its prior affiants had submitted new affidavits explaining why and how they had erred before, and further, if Nationstar had addressed why it had stated that the Note belonged to Wells Fargo in 2012. Nationstar, however, did neither. Accordingly, Nationstar's motion for summary judgment should have been denied, not only on the ground of standing, but also on the basis of trustworthiness.

B. If Nationstar Establishes its Standing to Enforce the Note on Remand, it will be Required to Address Daniel's Affirmative Defenses as the Note's "holder"

The circuit court concluded that Daniel could not assert his affirmative defenses against "the people who are now holder" of the Note. The circuit court, however, mischaracterized the law by extending the legal protections afforded to "holders in due course" to "holders." We clarify that unless a foreclosing party can establish itself as a "holder in due course," it will be considered a "holder" subject to all of an opposing party's affirmative defenses.

Pursuant to HRS § 490:3-302 (2008), in order to be considered a "holder in due course," a foreclosing party must demonstrate that:

(1) The instrument when issued or negotiated to the holder [did] not bear such apparent evidence of forgery or alteration or [was] not otherwise so irregular or incomplete as to call into question its authenticity; and
(2) The holder took the instrument (i) for value, (ii) in good faith, (iii) without notice that the instrument [was] overdue or ha[d] been dishonored or that there [was] an uncured default with respect to payment of another instrument issued as part of the same series, (iv) without notice that the instrument contain[ed] an unauthorized signature or ha[d] been altered, (v) without notice of any claim to the instrument described in section 490:3-306, and (vi) without notice that any party ha[d] a defense or claim in recoupment described in section 490:3-305(a).

HRS § 490:3-302(a).

The commentary to HRS § 490:3-302 further provides that "[t]he primary importance of the concept of holder in due course is with respect to [the] assertion of defenses or claims in recoupment (Section 3-305) and of claims to the instrument (Section 3-306)." With respect to defenses and claims in recoupment, "[i]f a defense or claim in recoupment is proved," the plaintiff's right to payment is subject to that defense or claim, "except to the extent the plaintiff proves that [it] has rights of a holder in due course which are not subject to [that] defense or claim." HRS § 490:3-308(b) (2008); Reyes-Toledo, 139 Hawai'i at 367, 390 P.3d at 1254 (acknowledging HRS § 490:3-308 and its commentary). "Until proof of a defense or claim in recoupment is made, the issue as to whether the plaintiff has rights of a holder in due course does not arise." HRS § 490:3-308 cmt. 2.

Pursuant to HRS § 490:3-305, "holders in due course," like "holders," are subject to an obligor's "real defenses" against an instrument, which include: (1) infancy; (2) duress, lack of legal capacity, or illegality of the transaction; (3) fraud that induced the obligor to sign the instrument without knowing its terms and without reasonable opportunity to find them out; and (4) discharge of the obligor through insolvency proceedings. See HRS § 490:3-305(a)(1) ; see also HRS § 490:3-305 cmt. 1 (explaining that subsection (a)(1) pertains to "real defenses").

Unlike "holders," however, "holders in due course" are not subject to an obligor's "personal defenses," when those defenses are against the original obligee. HRS § 490:3-305(a)(2)-(3) ; White, Summers, & Hillman, Uniform Commercial Code § 18:29 (6th ed. 2010). In other words, one of the advantages of being a "holder in due course" is the special protection it provides against an obligor's personal defenses against another.

In conclusion, if Nationstar can prove on remand that it possessed the Note with three indorsements prior to filing its Complaint, it will establish its standing to enforce the Note under Reyes-Toledo. However, Nationstar conceded its status as "holder" (rather than as "holder in due course") of Daniel's Note in its ICA briefing. As a "holder," it will be required on remand to respond to Daniel's affirmative defenses that were personal in nature. Lastly, if the case proceeds to trial, discovery should be permitted to the extent that it may help Daniel develop his defenses.

IV. CONCLUSION

We affirm the ICA's September 25, 2018 Judgment on Appeal, which vacated the circuit court's March 14, 2016 Judgment on Foreclosure Decree and remanded the case for further proceedings, subject to the clarifications set forth above.

      The Honorable Peter T. Cahill presided.

      Daniel also asks this court to review whether the circuit court abused its discretion in denying his motion to compel discovery to determine whether Nationstar was the Note's "holder" or "holder in due course." Because Nationstar conceded its status as "holder" in its answering brief to the ICA, we need not resolve whether the circuit court abused its discretion in this respect.

      For the purposes of this section, we accept the facts asserted in Daniel's declarations as true, including Daniel's statements explaining the circumstances under which he obtained the loan. See Crichfield v. Grand Wailea Co., 93 Hawai'i 477, 483, 6 P.3d 349, 355 (2000) (explaining that, for the purposes of summary judgment, the court "must view all of the evidence and the inferences drawn therefrom in the light most favorable to the party opposing the motion" and that any doubt should be resolved in favor of the non-moving party). All other facts in this section were taken from the record on appeal and are otherwise undisputed by the parties.

      The indorsement stamps read as follows:
      Pay To The Order OfLehman Brothers Holding Inc.Without RecourseLehman Brothers Bank, FSBBy: [signature] E. Todd WhittemoreVice President
      PAY TO THE ORDER OFAURORA LOAN SERVICES LLC WITHOUT RECOURSELEHMAN BROTHERS HOLDING INC.BY: [signature] PAUL E. SVEENAUTHORIZED SIGNATORY

      This case has a long and complicated procedural history. Because many of the previous proceedings do not materially affect the analysis, we do not address them in this opinion.

      The indorsements read as follows:
      Pay To The Order OfLehman Brothers Holding Inc.Without RecourseLehman Brothers Bank, FSBBy: [signature] E. Todd WhittemoreVice President
      PAY TO THE ORDER OF___________________WITHOUT RECOURSELEHMAN BROTHERS HOLDING INC.BY: [signature] PAUL E. SVEENAUTHORIZED SIGNATORY

      In relevant part, Workman declared:
      Based upon the communications from Jesslyn Williams, as well as upon my own inspection and other reasonable inquiry under the circumstances, which included a review of copies of the loan documents and other communications with Plaintiff's representatives, I affirm that, to the best of my knowledge, information, and belief, the Summons, Complaint, and other papers filed or submitted to this Court in this matter contain no false statements of fact or law, and that it is my belief based upon a good faith inquiry, that Plaintiff has legal standing to bring this foreclosure action. I understand my continuing obligation to amend this Affirmation in light of newly discovered material facts following its filing.

      The indorsements read as follows:
      Pay To The Order OfLehman Brothers Holding Inc.Without RecourseLehman Brothers Bank, FSBBy: [signature] E. Todd WhittemoreVice President
      PAY TO THE ORDER OFAURORA LOAN SERVICES LLC WITHOUT RECOURSELEHMAN BROTHERS HOLDINGS INC.BY: [signature] PAUL E. SVEENAUTHORIZED SIGNATORY
      Pay to the Order of___________________Without RecourseAurora Loan Services LLC by NationstarMortgage LLC Its Attorney-In-FactBy [signature] Assistant SecretaryJulie Martinez

      In relevant part, Vincent's declaration stated:
      15. On March 10, 2015, Demetrice Person ("Person"), a Document Execution Specialist at Nationstar, executed a Declaration in Support of Plaintiff's Motion for Summary Judgment ("MSJ Declaration") which was filed in the above-captioned case on March 30, 2015.
      16. The MSJ Declaration included inaccurate information regarding the Loan because Person failed to comply with Nationstar's Declaration Policies and Procedures. Specifically, the MSJ Declaration inaccurately stated that: (1) Person "personally reviewed the original wet-ink [Note] [sic ] dated December 4, 2006"; and (2) "[a] true and correct copy of the original Note is attached [to the MSJ Declaration] as Exhibit A".
      17. In fact, Person did not review the original "wet-ink" Note. Rather, Person reviewed an outdated copy of the Note which did not contain all of the indorsements currently set forth on the original Note.
      18. Also, the copy of the Note included as Exhibit A as to the MSJ Declaration was not a true and correct copy of the original Note. Again what was provided was an outdated copy of the Note, which did not contain all of the indorsements currently set forth on the original Note.
      19. My personal knowledge of these statements is derived from my having inspected a copy of the MSJ Declaration, the Exhibits thereto, a current copy of the original Note, and my having conferred with Person regarding this matter.
      20. I, in my role as manager at Nationstar, am responsible for managing Person. As such, I can confirm that after Nationstar discovered that the MSJ Declaration contained inaccurate information, Nationstar: (1) re-trained Person on Nationstar's Declaration Policies & Procedures to ensure that Person understands what she must do to verify the accuracy of information contained in a declaration and to verify that the exhibits to a declaration are true and correct copies of said documents; and (2) conducted an audit of the work Person completed in the 90 days immediately prior to discovering the inaccuracies contained in the MSJ Declaration to ensure that no other mistakes were made by Person.
      (emphases in original).

      Specifically, Nationstar stated in its Answering Brief that "Mr. Kanahele ignores the fact that Nationstar denied it was a holder in due course but stated that it [was] the holder of the Note. As discussed above, Nationstar's status as a "holder in due course" is not at issue[.]" (emphasis in original).

      HRCP Rule 56(c) provides, in relevant part:
      The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

      The commentary to HRE Rule 602 (personal knowledge) provides in relevant part:
      This rule, which is identical with Fed. R. Evid. 602, restates the traditional common-law rule barring a witness from testifying to facts of which he has no direct personal knowledge. See McCormick § § 10, 11. "Personal knowledge," for purposes of this rule, means that the witness perceived the event about which he testifies and that he has a present recollection of that perception. The personal knowledge requirement should not be confused with the hearsay ban, see Rule 802 infra.
      In fact, the requirements of Rule 602 apply to a hearsay statement admitted under any of the hearsay exception rules, 802.1, 803, and 804 infra, in that admissibility of a hearsay statement is predicated on the foundation requirement of the witness' personal knowledge of the making of the statement itself. Evidence of personal knowledge is a general foundation requirement for admissibility of all evidence, subject to Rule 703 relating to expert witnesses.
      (emphasis added).

      HRCP Rule 56 (Summary judgment) provides in relevant part:
      (e) Form of Affidavits; Further Testimony; Defense Required. Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith. The court may permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits. When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
      (emphases added).

      Person's statements to Vincent would appear to be inadmissible hearsay. However, because Daniel did not object to the admission of Vincent's declaration on this ground, we do not address this issue further.

      Daniel's affirmative defenses, raised before the circuit court, included, inter alia, fraud in the inducement, unconscionability, and mistake.

      HRS § 490:3-305 (Defense and claims in recoupment) provides in relevant part:
      (a) Except as stated in subsection (b), the right to enforce the obligation of a party to pay the instrument is subject to the following:
      (1) A defense of the obligor based on (i) infancy of the obligor to the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;
      (2) A defense of the obligor stated in another section of this article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and
      (3) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.
      (b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (a)(1), but is not subject to defenses of the obligor stated in subsection (a)(2) or claims in recoupment stated in subsection (a)(3) against a person other than the holder.
      (emphases added).

      HRS § 490:3-306 (2008) (Claims to an instrument) provides:
      A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim of the instrument.
      (emphasis added).

      A "real defense" is "good against any possible claimant," including holders and holders in due course. Black's Law Dictionary 512 (10th ed. 2014). In contrast, a "personal defense" is "[a]n ordinary defense in a contract action ... that the maker or drawer of a negotiable instrument is precluded from raising against a person who has the rights of a holder in due course." Id.

      White, Summers, and Hillman explain:
      The defenses of the obligor can be summed up neatly as follows: [they are] all defenses provided elsewhere in Article 3 and all defenses that would be available to the obligor against a person who was attempting to enforce the instrument as a simple contract, that is to say, at common law. By tradition, the defenses from which a holder in due course takes free are called "personal defenses" and include[, inter alia,] failure or lack of consideration, breach of warranty, unconscionability, and garden variety fraud (fraud in the inducement). Recall that a holder in due course does not necessarily take free of all "personal" defenses. Rather, the holder in due course is sure to take free only of the personal defenses that do not arise from his own behavior.
      White, Summers, and Hillman, Uniform Commercial Code § 18:29 (6th ed. 2010).


source: Caselaw Access Project

license: Public Domain

text:
    STATE of Hawai'i, Respondent/Plaintiff-Appellee, v. Michelle Helen CASTILLON, Petitioner/Defendant-Appellant.
    SCWC-16-0000421
    Supreme Court of Hawai'i.
    May 16, 2019
    John M. Tonaki, Audrey L. Stanley, Honolulu, for Petitioner
    Mitchell D. Roth, David Blancett-Maddock, for Respondents
   RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY WILSON, J.

I. Introduction

Petitioner/Defendant-Appellant Michelle Helen Castillon ("Castillon") seeks review of the May 31, 2017 opinion of the Intermediate Court of Appeals ("ICA"). State v. Castillon, 140 Hawai'i 242, 398 P.3d 831 (App. 2017). She contends that Respondent/Plaintiff-Appellee State of Hawai'i ("State") bore the burden to prove, pursuant to Hawai'i Revised Statutes ("HRS") § 286-102(a) (2007), that she did not possess a valid driver's license issued by Canada or a valid commercial driver's license issued by Canada or Mexico, which would have exempted her from the requirement to operate a motor vehicle with a valid Hawai'i driver's license. Inasmuch as Castillon bore the initial burden to produce "some evidence" to support an exemption, and she failed to do so, the burden never shifted to the State to prove beyond a reasonable doubt that Castillon did not have a driver's license that qualified as an exemption.

II. Background

Castillon was stopped by Officer Aron Tomota ("Officer Tomota") for driving with expired safety and registration tags on November 19, 2015. When he asked for her State of Hawai'i driver's license, Castillon was not able to provide one. Officer Tomota issued a citation to Castillon for driving a motor vehicle with a revoked license under HRS § 286-132 (2007). The citation was later amended to driving without a license ("DWOL") under HRS § 286-102(b) (Supp. 2012).

A. District Court Proceedings

At trial, the District Court of the Third Circuit ("district court") rejected Castillon's argument that she was entitled to a judgment of acquittal because the State failed to prove that she did not possess a valid driver's license issued by Canada or Mexico.

The State offered testimony in its case-in-chief that established Castillon did not have a valid Hawai'i driver's license. Officer Tomota testified that when he stopped Castillon, he called dispatch to verify whether she had a license. Dispatch responded that Castillon's license had been revoked. At trial, the supervising driver's license examiner for the County of Hawai'i ("Examiner") also testified that Castillon's State of Hawai'i driver's license had been revoked prior to November 19, 2015. The Examiner testified that the State's database precluded her from conducting research regarding Castillon's licensure in Canada. She did not address whether she was precluded from investigating Castillon's licensure in Mexico.

Castillon did not introduce evidence that she possessed a valid driver's license in Canada or Mexico. Rather, she argued the State bore the burden to prove that she did not possess a valid driver's license in Canada or Mexico and noted that, while HRS § 286-102(a) requires all persons in the State of Hawai'i to be "appropriately examined and duly licensed as a qualified driver" before operating a motor vehicle, certain persons described under HRS § 286-105 (2007) are exempted from this requirement, including those who possess a valid driver's license issued by "a province of the Dominion of Canada" and those with a valid commercial driver's license issued by "Mexico, or a province of the Dominion of Canada[.]" HRS § 286-105(3) and (4). Thus, she claimed, the State bore the burden to prove that she did not possess a valid driver's license in Canada or Mexico.

Based on the evidence presented at trial, the district court determined that the State proved beyond a reasonable doubt that Castillon violated HRS § 286-102(b) by operating a motor vehicle without a valid driver's license. Her sentence to pay $187.00 in fees and fines was stayed pending this appeal. Castillon filed an amended motion for reconsideration of judgment and post-trial motion for judgment of acquittal, asserting the same arguments. The district court denied the motions.

B. ICA Proceedings

Before the ICA, Castillon more specifically argued that the State failed to meet its burden to prove every element of the offense beyond a reasonable doubt. Castillon noted that she was charged under HRS § 286-102 which provided, in relevant part, that "[n]o person, except one exempted under section 286-105, ... shall operate any category of motor vehicles listed in this section without first being appropriately examined and duly licensed as a qualified driver of that category of motor vehicles." (Emphasis added.) Included in the exemptions listed under HRS § 286-105(3) and (4) are any persons that possess a valid driver's license issued by Canada or a valid commercial driver's license issued by Canada or Mexico. Thus, Castillon argued, the State was required to prove three elements at trial: (1) on November 19, 2015, Castillon operated a category of motor vehicle listed under HRS § 286-102 ; (2) on November 19, 2015, she was not examined and licensed to drive that category of motor vehicle; and (3) on November 19, 2015, she was not exempted by statute from the driver's license requirements. Castillon emphasized that no evidence was introduced at trial that she did not possess a driver's license issued by Canada or Mexico. Therefore, she claimed, her conviction was not supported by substantial evidence because the State failed to prove an essential element of the offense.

In response to Castillon, the State argued that the defendant bears the initial burden of producing "some evidence" supporting this defense before the burden shifts to the State to disprove it. The State alleged the exemptions listed under HRS § 286-105 are defenses because the exemptions are not included in the section of the statute describing the prohibited act-- HRS § 286-102 (i.e. operating a motor vehicle without a valid driver's license). Noting that Castillon failed to introduce any evidence that she had a driver's license from Canada or Mexico at the time she received the citation, the State claimed that Castillon failed to meet her burden of production and the burden never shifted to the State.

The ICA agreed with the State. Castillon, 140 Hawai'i at 247, 398 P.3d at 836. In its published opinion, the ICA applied the enacting clause test outlined in State v. Nobriga, 10 Haw. App. 353, 357-58, 873 P.2d 110, 112-13 (1994), overruled on other grounds by State v. Maelega, 80 Hawai'i 172, 178-79, 907 P.2d 758, 764-65 (1995). An enacting clause is "the prohibitory declaration of the statute which contains the general or preliminary description of the acts prohibited; i.e., the clause which proscribes the offensive deed." Castillon, 140 Hawai'i at 246 n.2, 398 P.3d at 835 n.2 (quoting Nobriga, 10 Haw. App. at 357 n.1, 873 P.2d at 112 n.1 ). Under the enacting clause test, where an exemption to an offense is embodied in the enacting clause of the statute defining the offense, the prosecution bears the burden of proof. Id. at 245, 398 P.3d at 834. Where the exemption is described in a separate provision from the enacting clause, the initial burden of production is on the defense:

The general and well-settled common law rule is that where an exception is embodied in the language of the enacting clause of a criminal statute, and therefore appears to be an integral part of the verbal description of the offense, the burden is on the prosecution to negative that exception, prima facie, as part of its main case.
... [W]hen the exception appears somewhere other than in the enacting clause, and is thus a distinct substantive exception or proviso, the burden is on the defendant to bring forward evidence of exceptive facts that constitute a defense. The prosecutor is not required in such instances to negative, by proof in advance, exceptions not found in the enacting clause.

Id. at 245-46, 398 P.3d at 834-35 (emphasis and citations omitted) (quoting Nobriga, 10 Haw. App. at 357-58, 873 P.2d at 112-13 ). Applying the enacting clause test, the ICA explained that HRS § 286-102(a) is the enacting clause of the DWOL offense because it describes the prohibited act of driving without a license. See id. at 246-47, 398 P.3d at 835-36. The ICA determined that the HRS § 286-105 exemptions are described in a separate provision and, therefore, not embodied within the enacting clause of the DWOL offense. Id. at 247, 398 P.3d at 836.

To support its interpretation, the ICA discussed State v. Lee, 90 Hawai'i 130, 976 P.2d 444 (1999). Id. at 246-47, 398 P.3d at 835-36. The Lee court applied the enacting clause test to a statute prohibiting operating a motor vehicle without no-fault insurance, HRS § 431:10C-104(a) (1993 & Supp. 1996). Id. at 246, 398 P.3d at 835. HRS § 431:10C-104(a) is the enacting clause of the offense because it describes the prohibited act of operating a motor vehicle without no-fault insurance. The enacting clause refers to a separate statute, HRS § 431:10C-105 (1993), which lists exceptions to the offense. HRS § 431:10C-104(a). The enacting clause states, "Except as provided in section 431:10C-105 [ (the section pertaining to self-insurance) ], no person shall operate or use a motor vehicle upon any public street, road, or highway of [this] State at any time unless such motor vehicle is insured at all times under a no-fault policy." Castillon, 140 Hawai'i at 246, 398 P.3d at 835 (first brackets in original) (quoting Lee, 90 Hawai'i at 132 n.1, 976 P.2d at 446 n.1 ). The Lee court held that the HRS § 431:10C-105 exceptions to the offense of driving without no-fault insurance are only referenced, but not described, in the enacting clause. Id. As such, the HRS § 431:10C-105 exceptions constitute defenses to the offense of driving without no-fault insurance, for which the defendant bears the initial burden of production; the exceptions are not elements of the offense, for which the State bears the burden of proof. Id.

The ICA found the enacting clause for driving without a license-- HRS § 286-102(a) --to be similar to the enacting clause at issue in Lee. Id. HRS § 286-102(a) references a separate section of the statute containing exemptions to the offense, HRS § 286-105, but does not define the exemptions. Id. HRS § 286-102(a) states in pertinent part: "No person, except one exempted under section 286-105, ... shall operate any category of motor vehicles listed in this section without first being appropriately examined and duly licensed as a qualified driver of that category of motor vehicles." (Emphasis added.) Similar to the exceptions in Lee, the ICA concluded the HRS § 286-105 exemptions are not embodied within the enacting clause of the offense-- HRS § 286-102(a) ; thus, the exemptions are not "an integral part of the ... description of the offense[.]" Castillon, 140 Hawai'i at 245-46, 398 P.3d at 834-35 (quoting Nobriga, 10 Haw. App. at 357, 873 P.2d at 113 ). As provisions defined separately from the enacting clause, the ICA held the HRS § 286-105 exemptions to be defenses to the DWOL offense. Id. at 247, 398 P.3d at 836. As defenses, the ICA concluded, Castillon bore the burden to produce evidence that she possessed a valid driver's license in Canada or a valid commercial driver's license in Canada or Mexico before the burden shifted to the State to prove beyond a reasonable doubt that she did not have a driver's license that qualified as an exemption. Id. Because Castillon failed to introduce any evidence that she possessed a driver's license in Canada or Mexico, the ICA held, the burden never shifted to the State. Id.

The ICA further noted that notwithstanding the enacting clause test, exemptions are always a defense, and not an essential element of the offense, "when the facts or evidence concerning the [exemption] are 'peculiarly within the knowledge of the defendant' or 'within the defendant's private control[.]' " Id. at 246, 398 P.3d at 835 (quoting Nobriga, 10 Haw. App. at 358, 873 P.2d at 113 ). Thus, in accordance with Lee, "the statutory [exemptions] referred to in HRS § 286-102(a) are not elements of the DWOL offense, but constitute defenses to the offense." Id. at 247, 398 P.3d at 836. The ICA concluded that Castillon bore the burden of introducing evidence that she possessed a driver's license issued by Canada or Mexico, in part, because she inherently has knowledge or control of such evidence. Id. at 246, 398 P.3d at 835.

III. Standard of Review

A. Statutory Interpretation

"Statutory interpretation is a question of law reviewable de novo." Panado v. Bd. of Trs., Emps.' Ret. Sys., 134 Hawai'i 1, 10, 332 P.3d 144, 153 (2014) (quoting First Ins. Co. of Hawaii v. A&B Props., 126 Hawai'i 406, 414, 271 P.3d 1165, 1173 (2012) ). In reviewing questions of statutory interpretation, we are guided by the following principles:

First, the fundamental starting point for statutory-interpretation is the language of the statute itself. Second, where the statutory language is plain and unambiguous, our sole duty is to give effect to its plain and obvious meaning. Third, implicit in the task of statutory construction is our foremost obligation to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. Fourth, when there is doubt, doubleness of meaning, or indistinctiveness or uncertainty of an expression used in a statute, an ambiguity exists.

Id. at 10-11, 332 P.3d at 153-54 (quoting First Ins. Co. of Hawaii, 126 Hawai'i at 414, 271 P.3d at 1173 ).

IV. Discussion

We concur with the ICA's analysis in all respects but one. The ICA quoted Nobriga for the proposition that an exemption always constitutes a defense "when the facts or evidence concerning the [exemption] are 'peculiarly within the knowledge of the defendant' or 'within the defendant's private control[.]' " Castillon, 140 Hawai'i at 246, 398 P.3d at 835 (quoting Nobriga, 10 Haw. App. at 358, 873 P.2d at 113 ). The statement in Nobriga derives from the thirteenth edition of Wharton's Criminal Evidence, a supplement published over forty years ago that has since been updated to clarify the principle. Compare 1 Wharton's Criminal Evidence § 20, at 33-35 (C. Torcia 13th ed. 1972) (stating that a statutory exception found in the enacting clause is per se a defense when the facts supporting the defense are within the defendant's knowledge or private control), with 1 Wharton's Criminal Evidence § 2:9, at 59 (C. Torcia 15th ed. 1997) (explaining that if a defendant asserts an affirmative defense, the burden of producing evidence to support the defense first rests on the defendant because it is "fair and makes sense, primarily because the facts in support of such a defense would be peculiarly within the knowledge of the accused"). This court has occasionally applied the rule that an exemption is a defense if the facts or evidence of the defense are peculiarly within the knowledge of the defendant or in the defendant's private control. Nonetheless, it is unclear why the practice of citing the rule has persisted, as the statute describing what constitutes a defense does not impose such a requirement. A defense is defined as "a fact or set of facts which negatives penal liability[,]" irrespective of whether the facts are within the defendant's knowledge or private control. HRS § 701-115(a) (2014). As stated in Nobriga and Lee, unless "some evidence" supporting the defense has been adduced, the State has no burden to disprove the defense. Here, if Castillon had introduced "some evidence" that she possessed a valid driver's license in Canada or a valid commercial driver's license in Canada or Mexico, the burden would shift to the State to introduce evidence disproving her defense.

Therefore, we concur with the ICA's conclusion that the exemptions referenced in HRS § 286-102(a) and described in HRS § 286-105 are defenses to the offense of DWOL, for which Castillon bore the initial burden of production. We make this determination irrespective of whether Castillon had knowledge or private control over facts establishing that she had a valid driver's license in Canada or Mexico. Because she did not produce "some evidence" that she possessed a valid driver's license that would qualify her for exemption, as set forth in HRS § 286-105, the burden did not shift to the State. We affirm the ICA's judgment but for the reasons stated in this opinion and remand to the district court for further proceedings.

      At the time of the offense, HRS § 286-102(a) provided:
      No person, except one exempted under section 286-105, one who holds an instruction permit under section 286-110, one who holds a provisional license under section 286-102.6, one who holds a commercial driver's license issued under section 286-239, or one who holds a commercial driver's license instruction permit issued under section 286-236, shall operate any category of motor vehicles listed in this section without first being appropriately examined and duly licensed as a qualified driver of that category of motor vehicles.

      At the time, HRS § 286-102(b) stated:
      A person operating the following category or combination of categories of motor vehicles shall be examined as provided in section 286-108 and duly licensed by the examiner of drivers:
      (1) Mopeds;
      (2) Motorcycles and motor scooters;
      (3) Passenger cars of any gross vehicle weight rating, buses designed to transport fifteen or fewer occupants, and trucks and vans having a gross vehicle weight rating of eighteen thousand pounds or less; and
      (4) All of the motor vehicles in category (3) and any vehicle that is not a commercial motor vehicle.
      A school bus or van operator shall be properly licensed to operate the category of vehicles that the operator operates as a school bus or van and shall comply with the standards of the department of transportation as provided by rules adopted pursuant to section 286-181.

      The Honorable Margaret K. Masunaga presided.

      Under HRS § 286-105(3) and (4), the following persons are exempted from the licensing requirements under HRS § 286-102 :
      (3) Any person who is at least eighteen years of age and who has in the person's possession a valid driver's license to drive the categories of motor vehicles listed in section 286-102(b), except section 286-102(b)(4), that is equivalent to a driver's license issued in this State but was issued to the person in another state of the United States, the Commonwealth of Puerto Rico, United States Virgin Islands, American Samoa, Guam, a province of the Dominion of Canada, or the Commonwealth of the Northern Mariana Islands for that category of motor vehicle which the person is operating;
      (4) Any person who has in the person's possession a valid commercial motor vehicle driver's license issued by any state of the United States, Mexico, or a province of the Dominion of Canada that issues licenses in accordance with the minimum federal standards for the issuance of commercial motor vehicle driver's licenses[.]

      See supra note 4.

      However, the ICA vacated Castillon's conviction on other grounds and remanded for a new trial. Castillon, 140 Hawai'i at 247-48, 398 P.3d at 836-37.

      The exceptions described in HRS § 431:10C-105 provide that the no-fault motor vehicle insurance required under the enacting clause, HRS § 431:10C-104(a), is inapplicable if either the driver of the motor vehicle or the vehicle itself are self-insured. Lee, 90 Hawai'i at 136, 976 P.2d at 450.

      See, e.g., State v. Jenkins, 93 Hawai'i 87, 107, 997 P.2d 13, 33 (2000) ("Inasmuch as the question whether Jenkins did or did not possess a hunting license poses a fact 'peculiarly within [Jenkins's] knowledge,' the general rule, which ordinarily would require the prosecution to establish that fact as part of its case-in-chief, would be inoperative.").

      "Some evidence" is "such evidence [that] would support the consideration of that issue by the jury, no matter how weak, inconclusive, or unsatisfactory the evidence may be." Maelega, 80 Hawai'i at 178-79, 907 P.2d at 764-65 (emphasis omitted) (quoting State v. Pinero, 75 Haw. 282, 304, 859 P.2d 1369, 1379 (1993) ); see also Lee, 90 Hawai'i at 137 n.6, 976 P.2d at 451 n.6.


text:
    STATE of Hawai'i, Respondent/Plaintiff-Appellee, v. Kekoa IONA, Petitioner/Defendant-Appellant.
    SCWC-16-0000100
    Supreme Court of Hawai'i.
    May 22, 2019
    Henry P. Ting (William H. Jameson, Jr. on the brief and application), Honolulu, for Petitioner
    Stephen K. Tsushima, Honolulu, for Respondent
   RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY WILSON, J.

This case arises from a pat-down following an investigative stop in April 2014, in Honolulu. The pat-down occurred after a lieutenant with the Honolulu Police Department ("HPD") noticed Petitioner/Defendant-Appellant Kekoa Iona ("Iona") and two other individuals riding bicycles lacking tax decals, which are required by law on all bicycles with wheels twenty inches or more in diameter.

The police may, in appropriate circumstances and in an appropriate manner, detain individuals for brief, temporary investigative stops based on reasonable suspicion of a crime without violating the prohibition on unreasonable searches and seizures in the United States and Hawai'i Constitutions. However, the police may not prolong these temporary detentions, known as Terry stops, any longer than needed to handle the matter for which the stop was made.

We hold that Iona was seized longer than was necessary for the police to conduct an investigation that confirmed the lieutenant's reasonable suspicion that the required tax decal was missing and to issue a citation to Iona for riding a bicycle without a tax decal.

After the time necessary for the police to conduct an investigation confirming the absence of the required tax decal and to issue a citation for the missing decal had expired, a warrant check came back from dispatch indicating that Iona had an outstanding warrant. Iona was arrested at the scene based on the outstanding warrant, and a search incident to arrest revealed a small amount of drugs and drug paraphernalia. Because the warrant check came back after the span of time necessary for the police to obtain Iona's identifying information from him and to write and issue the citation, Iona's arrest was illegal. Since the arrest was illegal, the evidence obtained as a result of the arrest was fruit of the poisonous tree. Iona's pre-trial motion to suppress the evidence from the search incident to arrest should have been granted, and the evidence seized as a result of that search should have been excluded from his trial. Accordingly, we vacate the Intermediate Court of Appeals' ("ICA") judgment on appeal and the Circuit Court of the First Circuit's ("circuit court") judgment of conviction and sentence, and we remand the case to the circuit court for proceedings consistent with this opinion.

I. Background

At 10:40 a.m. on April 17, 2014, Lieutenant Brent Kagawa, an officer with the HPD, observed Iona and two other individuals on bicycles ride past him on Keeaumoku Street in Honolulu. All three bicycles lacked tax decals, which all standard-sized bikes are required to display by state and local law. Hawai'i Revised Statutes ("HRS") §§ 249-14, 249-15 (2001) ; Revised Ordinances of Honolulu ("ROH") § 15-18.1 (Supp. 1995).

Having observed what appeared to be the absence of the required decals, Lieutenant Kagawa identified himself, stopped all three men, and, in the words of the circuit court's findings of fact, "initiated an untaxed bicycle inquiry. He informed the three males that he had stopped them for untaxed bicycles." The officer queried the men individually about the status of the bikes. Initially, each man stated he owned the bike he was riding. As Lieutenant Kagawa took down this information, however, Iona changed his statement to say that he borrowed the bike from someone named "Nalu" at the park. Lieutenant Kagawa took some additional information, including their names, and then commenced a warrant check on all three individuals. Lieutenant Kagawa estimated this initial exchange took about three or four minutes.

In the meantime, two additional officers, Officers Alison Lynch and Raymond Chandler, arrived at the scene to assist Lieutenant Kagawa. Officer Lynch called nearby officers to assist. When they arrived, Lieutenant Kagawa informed the two additional officers of the facts of the untaxed bicycle investigation and asked them to take over the investigation. Lieutenant Kagawa testified that he was waiting until he had all the information at the end of the investigation before determining whether he would issue a citation for the lack of tax decals.

Officers Lynch and Chandler sought to obtain the bicycles' serial numbers and run them through the system to determine whether they were registered and, if registered, whether they were reported stolen. The officers were only able to read the serial number on the bike Iona had been riding. Once that serial number had been obtained, Officers Lynch and Chandler called dispatch to check the bike registration records in order to determine whether the bike was taxed or untaxed or had been reported stolen.

After a few minutes, dispatch confirmed that the bike was not registered to Iona or to someone named Nalu. Instead, the bike was registered to a Wai'anae resident. The bike had not been reported stolen. Officer Chandler attempted to contact the registered owner but was unsuccessful. He then contacted the police station in Wai'anae and requested that an officer from that station drive to the registered owner's Wai'anae address in order to determine whether the bike was stolen.

The warrant check came back at 10:54 a.m., showing that Iona had an outstanding $100.00 bench warrant for contempt. A total of fourteen minutes elapsed between the initial stop and the return of the outstanding warrant information. At no time within the fourteen-minute period was a citation for failure to display a tax decal written or started to be written. Iona was arrested at the scene on the outstanding warrant. Incident to his arrest, he was patted down. The pat-down revealed a glass pipe in a plastic sleeve as well as a small, ziplock plastic bag containing a white, crystalline substance.

Prior to trial, Iona moved to suppress the glass pipe and the ziplock bag containing a white, crystalline substance, arguing that they were "fruit of the poisonous tree." He argued that he had been illegally seized, that the seizure continued well after its initial justification, that his arrest was therefore illegal, and that the evidence seized in the search incident to his arrest was "fruit of the poisonous tree" and should thus be excluded. He also argued that (1) a violation of HRS § 249-14 is not an arrestable offense, (2) the only penalty authorized for a violation of HRS § 249-14 is the seizure of a bicycle that does not display the required registration decal, (3) Lieutenant Kagawa did not have reasonable suspicion to further detain Iona in order to determine if he had an outstanding bench warrant, (4) Lieutenant Kagawa had no basis to request a warrant check on Iona at the point in time that he did because Lieutenant Kagawa did not suspect Iona of committing an arrestable crime or violation at that time, and (5) Lieutenant Kagawa was not authorized to conduct a warrant check under HRS § 803-6 (2014).

Iona was tried on October 12, 2015. After a bench trial on stipulated facts, Iona was convicted of one count of promoting a dangerous drug in the third degree and one count of unlawful use of drug paraphernalia. See HRS § 712-1243 (2014); HRS § 329-43.5(a) (2010). He was sentenced to two open five-year terms of imprisonment, to run concurrently, and fined $1,000. He appealed to the ICA.

The ICA issued its summary disposition order on June 29, 2017. State v. Iona, No. CAAP-16-0000100, 2017 WL 2812940 (App. June 29, 2017) (SDO). The ICA concluded that the evidence discovered in the search incident to Iona's arrest on the outstanding warrant was not fruit of the poisonous tree. Id. at *3. It held that the length of the stop was reasonable "[b]ased on the police testimony regarding the steps regularly taken in conjunction with an untaxed bicycle investigation" and "Iona's shifting statements regarding the bicycle's ownership, which were inconsistent with the bicycle's registration[.]" Id. at *2. As to Iona's pretext argument, the ICA held that there was "no evidence that follow up inquiries regarding the bicycle's ownership were pretextual or that the officers delayed the attempts to reach the registered owner of the bicycle in order to prolong the warrant check." Id. Accordingly, the ICA affirmed the circuit court's judgment of conviction and sentence. Id. at *3. Iona applied for a writ of certiorari, and his application was accepted.

II. Standards of Review

An appellate court reviews a trial court's ruling on a motion to suppress de novo to determine whether, as a matter of law, the ruling was right or wrong. State v. Eleneki, 106 Hawai'i 177, 180, 102 P.3d 1075, 1078 (2004). A court's findings of fact "are reviewed under the clearly erroneous standard, and will not be set aside on appeal unless they are determined to be clearly erroneous." State v. Kaleohano, 99 Hawai'i 370, 375, 56 P.3d 138, 143 (2002) (internal citations and quotation marks omitted).

III. Discussion

Both the Fourth Amendment to the United States Constitution and article I, section 7 of the Hawai'i Constitution "safeguard the privacy and security of individuals against arbitrary invasions by governmental officials." State v. Navas, 81 Hawai'i 113, 122, 913 P.2d 39, 48 (1996) (quoting Camara v. Mun. Court, 387 U.S. 523, 528, 87 S.Ct. 1727, 18 L.Ed.2d 930 (1967) ); see State v. Tau'a, 98 Hawai'i 426, 446 n.5, 49 P.3d 1227, 1247 n.5 (2002) (Acoba, J., dissenting) ("The fourth amendment was intended both to protect the rights of individuals and to prevent the government from functioning as in a police state." (quoting Donald L. Doernberg, The Right of the People: Reconciling Collective and Individual Interests Under the Fourth Amendment, 58 N.Y.U. L. Rev. 259, 260 (1983) )). Both prohibit unreasonable searches and seizures by government officials. U.S. Const. amend. IV (prohibiting "unreasonable searches and seizures" and requiring a warrant based on probable cause as a condition of any search or seizure); Haw. Const. art. I, § 7 (prohibiting "unreasonable searches, seizures and invasions of privacy" and requiring a warrant based on probable cause as a condition of any search or seizure).

Given these constitutional protections, warrantless searches or seizures are presumed "invalid unless and until the prosecution proves that the search or seizure falls within a well-recognized and narrowly defined exception to the warrant requirement." State v. Prendergast, 103 Hawai'i 451, 454, 83 P.3d 714, 717 (2004). "If the prosecution fails to meet this burden, the evidence obtained from the illegal search will be suppressed as 'fruit of the poisonous tree.' " Id. (quoting State v. Fukusaku, 85 Hawai'i 462, 475, 946 P.2d 32, 45 (1997) ).

A. Constitutional Principles Governing Terry Stops

The temporary investigative detention of an individual by the police without a warrant is constitutionally permissible only within strict and narrow limits. Terry, 392 U.S. at 19, 88 S.Ct. 1868 ("The scope of the search must be 'strictly tied to and justified by' the circumstances which rendered its initiation permissible." (quoting Warden, Md. Penitentiary v. Hayden, 387 U.S. 294, 310, 87 S.Ct. 1642, 18 L.Ed.2d 782 (1967) (Fortas, J., concurring))); Kaleohano, 99 Hawai'i at 378-79, 56 P.3d at 146-47 ("Because temporary investigative stops involve an exception to the general rule requiring that searches and seizures be supported by probable cause, the scope of such detentions must be narrow.").

These strict limitations on the constitutionally permissible scope of a Terry stop govern both its initiation and its duration. The initiation of a temporary investigative detention by police is valid only "if they have a reasonable suspicion based on specific and articulable facts that criminal activity is afoot." State v. Spillner, 116 Hawai'i 351, 357, 173 P.3d 498, 504 (2007) (quoting State v. Kearns, 75 Haw. 558, 569, 867 P.2d 903, 908 (1994) ); State v. Heapy, 113 Hawai'i 283, 285, 151 P.3d 764, 766 (2007) ("It is axiomatic that reasonable suspicion to justify a stop must relate to criminal activity."); State v. Barnes, 58 Haw. 333, 337, 568 P.2d 1207, 1211 (1977) (explaining that "such an intrusion upon personal liberty must be reasonable and be based on something more substantial than inarticulate hunches" (quoting State v. Goudy, 52 Haw. 497, 501, 479 P.2d 800, 803 (1971) )). In addition, under the Hawai'i Constitution, a Terry stop may last no longer than is absolutely necessary under the circumstances to handle the matter for which the stop was made. State v. Estabillio, 121 Hawai'i 261, 271, 218 P.3d 749, 759 (2009) ("In order to pass constitutional muster, the length of time the officer could permissibly detain the defendant must have been 'no greater in intensity than absolutely necessary under the circumstances.' " (emphasis added) (brackets omitted) (quoting State v. Barros, 98 Hawai'i 337, 342-43, 48 P.3d 584, 589-90 (2002) )).

B. The Perez Test and Vehicle Stops

In Hawai'i, the constitutional principles governing unreasonable searches and seizures in the context of traffic stops have been synthesized into a two-part test. See State v. Perez, 111 Hawai'i 392, 397, 141 P.3d 1039, 1044 (2006). Unless the police action during a vehicle stop satisfies both parts of the Perez test, the police action is unlawful, and "the evidence originating from that unlawful action must be suppressed." State v. Alvarez, 138 Hawai'i 173, 182, 378 P.3d 889, 898 (2016).

The first part of the Perez test requires that the investigative stop must be justified at its inception. Perez, 111 Hawai'i at 397, 141 P.3d at 1044. "To justify an investigative stop, ... the police officer must be able to point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant that intrusion." Alvarez, 138 Hawai'i at 182, 378 P.3d at 898 (ellipses in original) (quoting Barnes, 58 Haw. at 338, 568 P.2d at 1211 ); see also Estabillio, 121 Hawai'i at 273, 218 P.3d at 761 (holding that under the first part of the Perez test, a seizure was clearly justified at its inception when the officer had a reasonable suspicion that the defendant was "driving a vehicle with a fraudulent registration sticker").

The second part of the Perez test requires that a search or seizure must be "reasonably related in scope to the circumstances which justified the interference in the first place." Alvarez, 138 Hawai'i at 182, 378 P.3d at 898 (quoting Perez, 111 Hawai'i at 397, 141 P.3d at 1044 ). The constitutionally permissible scope of a vehicle stop has two components. First, "it must 'last no longer than is necessary to effectuate the purpose of the detention.' " Id. (quoting Estabillio, 121 Hawai'i at 270, 218 P.3d at 758 ); see also Estabillio, 121 Hawai'i at 271, 218 P.3d at 759 ("In order to pass constitutional muster, the length of time the officer could permissibly detain the defendant must have been 'no greater in intensity than absolutely necessary under the circumstances.' " (brackets omitted) (quoting Barros, 98 Hawai'i at 342-43, 48 P.3d at 589-90 )). "Second, the subject matter and intensity of the investigative detention must be limited to that which is justified by the initial stop." Alvarez, 138 Hawai'i at 182, 378 P.3d at 898.

C. Under the circumstances presented here, the officers' seizure of Iona exceeded the scope of a constitutionally permissible vehicle stop.

Lieutenant Kagawa stopped Iona while Iona was riding a bicycle. For present purposes we consider a bicycle stop to be a traffic stop (also called a vehicle stop). "A stop of a vehicle for an investigatory purpose constitutes a seizure within the meaning of the constitutional protection against unreasonable searches and seizures." Estabillio, 121 Hawai'i at 270, 218 P.3d at 758 (quoting State v. Bolosan, 78 Hawai'i 86, 92, 890 P.2d 673, 679 (1995) ); Spillner, 116 Hawai'i at 357, 173 P.3d at 504 ("There is no dispute that a traffic stop is a form of seizure for constitutional purposes."). Thus, Iona was seized when Lieutenant Kagawa ordered him off his bike. As to its duration, Lieutenant Kagawa acknowledged during the hearing on Iona's motion to suppress that the seizure lasted up to the point at which Iona was arrested.

Having established that Iona was "seized" for constitutional purposes, we proceed to analyze the facts in light of the two-part Perez test. We assume without deciding that the first part of the Perez test, that "the action was justified at its inception," was satisfied here. Perez, 111 Hawai'i at 397, 141 P.3d at 1044. Lieutenant Kagawa observed that the bicycles of all three individuals he stopped lacked tax decals. Assuming that the lieutenant's observation concerning the missing tax decals is analogous to observing a violation of traffic laws, the action was justified at its inception. Alvarez, 138 Hawai'i at 182, 378 P.3d at 898 ("It is well settled that an investigative stop based on an officer's observation of an apparent traffic violation satisfies the first part of the Perez test.").

As to the second part of the Perez test, we hold that the time during which Iona was seized exceeded the duration necessary to accomplish the purpose for which he was stopped. See id. Here, the matter or purpose for which the stop was made was determined by Lieutenant Kagawa's observation that the bikes lacked tax decals. That lack of decals is what justified the initial stop of Iona. The circuit court's findings of fact based on testimony at the suppression hearing state that "Lt. Kagawa initiated an untaxed bicycle investigation" and that he informed the riders "he had stopped them for untaxed bicycles." However, it is undisputed that Iona was never cited during the Terry stop for riding a bicycle which failed to display a tax decal.

Instead, Iona was held until a warrant check was completed. Rather than issue a citation for failure to display a tax decal, the police called dispatch to determine if the bike was registered and, if so, to identity the owner and determine whether the bike was reported stolen. Dispatch confirmed the bike was registered and that it was not reported stolen. The pursuit of inquiry relevant to theft was not the purpose of the stop, although the stop was used as an opportunity to make such inquiries.

Because what justified the initial stop was the lack of a tax decal on the bike Iona was riding, the time span needed to handle that matter was the sum of the time required under the circumstances for Lieutenant Kagawa to confirm his reasonable suspicion that the decals were missing, the time necessary to obtain the identifying information of Iona required to fill out the citation for riding without a decal, and the time necessary to write and issue the citation. See State v. Wyatt, 67 Haw. 293, 300, 687 P.2d 544, 549 (1984) ("The obvious violation of the Traffic Code gave [the officers] reason to seek information necessary for the issuance of a citation."). It took only seconds to confirm the decals were missing. Lieutenant Kagawa testified that Iona gave him his correct name and date of birth within "maybe three, four minutes" after the initial stop. The warrant check came back fourteen minutes after the initial stop.

Under these circumstances, it was not constitutionally permissible for the police to forego the issuance of a citation and hold Iona. See Estabillio, 121 Hawai'i at 271, 218 P.3d at 759 ("In order to pass constitutional muster, the length of time the officer could permissibly detain the defendant must have been 'no greater in intensity than absolutely necessary under the circumstances.' " (emphasis added) (brackets omitted) (quoting Barros, 98 Hawai'i at 342-43, 48 P.3d at 589-90 )). Officers have the discretion to confiscate a bicycle "liable for the payment of the required fees or which has no tag or decal affixed as required by section 249-14 [.]" HRS § 249-15. At oral argument, the State took the position that the constitutionally permissible duration of the Terry stop at issue here could last as long as it took the officers in their discretion to decide whether or not to confiscate the bicycle. Oral Argument, State v. Iona (SCWC-16-0000100) at 46:00-49:00, http://oaoa.hawaii.gov/jud/oa/18/SCOA_011818_SCWC_16_100.mp3. We disagree.

What justified the initial Terry stop of Iona was a missing tax decal. As Lieutenant Kagawa testified, he stopped all three riders for violating a "[r]evised ordinance," specifically, "1481 or something to that - I'd have to look it up." The ordinance that authorizes a police officer to issue a citation for a missing tax decal, ROH § 15-18.1, applies to any resident bicycle rider; it is not specific to the registered owner:

No person who resides within the City and County of Honolulu shall ride or propel a bicycle on any street, highway, alley, roadway or sidewalk or upon any public path set aside for the exclusive use of bicycles unless such bicycle has been licensed and a license plate two by three inches in size, or a license decal, is attached thereto as provided in this article.

See also ROH § 15-26.9 (stating that "it is a violation for any person to violate any of the provisions of this traffic code" and providing for a range of fines); HRS § 291C-165(a) ("There shall be provided for use by authorized police officers, a form of summons or citation for use in citing violators of those traffic laws which do not mandate the physical arrest of such violators.").

For the police to issue the relevant citation under the ordinance, it is not necessary for the police to know whether the rider of the bicycle is also its owner. Therefore, the subject matter of the investigative detention for which Iona was seized was limited to a citation for the missing decal. See Alvarez, 138 Hawai'i at 182, 378 P.3d at 898 ("[T]he subject matter and intensity of the investigative detention must be limited to that which is justified by the initial stop."). Once the investigation relating to that subject matter was complete, the police should have informed Iona that he was free to leave, regardless of whether the police decided to confiscate the bicycle.

In conclusion, the phase of Iona's investigative detention relating to a police decision whether or not to confiscate the bicycle was not "reasonably related in scope to the circumstances which justified the interference in the first place." Id. (quoting Perez, 111 Hawai'i at 397, 141 P.3d at 1044 ); see Rodriguez v. United States, --- U.S. ----, 135 S. Ct. 1609, 1612, 191 L.Ed.2d 492 (2015) ("A seizure justified only by a police-observed traffic violation ... 'becomes unlawful if it is prolonged beyond the time reasonably required to complete the mission' of issuing a ticket for the violation." (brackets omitted) (quoting Illinois v. Caballes, 543 U.S. 405, 407, 125 S.Ct. 834, 160 L.Ed.2d 842 (2005) )).

Because the constitutionally permissible duration of the stop was limited to the time necessary to confirm the violation, obtain identification necessary to issue a citation, and write the citation, Iona's detention could not be prolonged by Lieutenant Kagawa to conduct a warrant check. By detaining Iona longer than necessary to write the citation, Lieutenant Kagawa clearly exceeded the reasonable time necessary to accomplish the purpose of the stop. Since the arrest was illegal, the evidence obtained as a result of the arrest was "fruit of the poisonous tree." Prendergast, 103 Hawai'i at 454, 83 P.3d at 717 (quoting Fukusaku, 85 Hawai'i at 475, 946 P.2d at 45 ). Iona's pre-trial motion to suppress the evidence from the search incident to arrest should have been granted, and the evidence seized as a result of that search should have been excluded from his trial.

IV. Conclusion

For the reasons stated above, we vacate the ICA's July 28, 2017 judgment on appeal and the circuit court's January 25, 2016 judgment of conviction and sentence, and we remand the case to the circuit court for proceedings consistent with this opinion.

      See Terry v. Ohio, 392 U.S. 1, 22, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968) (recognizing "that a police officer may in appropriate circumstances and in an appropriate manner approach a person for purposes of investigating possibly criminal behavior even though there is no probable cause to make an arrest").

      HRS § 249-14(a) requires the owner of a bicycle with wheels twenty inches or more in diameter to register the bicycle and pay a registration fee. Upon payment of the fee and registration, the owner is furnished with "a metallic tag or decal[,]" which must be affixed to the bicycle on "the upright post attached to the sprocket facing in the forward direction." HRS § 249-14(b). HRS § 249-15 authorizes police officers to seize a bicycle to which no tag or decal is affixed.

      ROH § 15-18.1 provides:
      No person who resides within the City and County of Honolulu shall ride or propel a bicycle on any street, highway, alley, roadway or sidewalk or upon any public path set aside for the exclusive use of bicycles unless such bicycle has been licensed and a license plate two by three inches in size, or a license decal, is attached thereto as provided in this article.
      The penalty for violating the decal requirement is a fine of between $15.00 and $100.00 for a first offense. ROH § 15-26.9(b) (Supp. 2004).

      The Honorable Edward H. Kubo, Jr. presided.

      We have held repeatedly that exceptions to the warrant requirement are well-recognized and narrowly defined, and generally "provide for those cases where the societal costs of obtaining a warrant, such as danger to law officers or the risk of loss or destruction of evidence, outweigh the reasons for prior recourse to a neutral magistrate." State v. Wallace, 80 Hawai'i 382, 393, 910 P.2d 695, 706 (1996) (quoting State v. Clark, 65 Haw. 488, 493, 654 P.2d 355, 360 (1982) ).

      The "absolutely necessary under the circumstances" standard derives from our view that
      the right to be free of unreasonable searches and seizures under article, I, section [7] of the Hawaii Constitution is enforceable by a rule of reason which requires that governmental intrusions into the personal privacy of citizens of this State be no greater in intensity than absolutely necessary under the circumstances.
      State v. Kaluna, 55 Haw. 361, 369, 520 P.2d 51, 58-59 (1974) (internal quotation marks and footnote omitted).

      The police "may investigate matters unrelated to the original stop if they have an independent basis for reasonable suspicion to indicate that criminal activity is afoot[.]" Alvarez, 138 Hawai'i at 184, 378 P.3d at 900 (emphasis added). Here, however, there was no such basis. At oral argument, the State conceded that no theft investigation occurred at any point.

      Calls were made by the police to locate the owner without success; consequently, police at the scene called the Wai'anae police station and requested that it send an officer to the registered owner's residence.

      HRS § 291C-165(a) (2007) states that "[t]here shall be provided for use by authorized police officers, a form of summons or citation for use in citing violators of those traffic laws which do not mandate the physical arrest of such violators."


text:
    STATE of Hawai'i, Respondent/Plaintiff-Appellee, v. Steven E. YOUNG, Petitioner/Defendant-Appellant.
    SCWC-17-0000055
    Supreme Court of Hawai'i.
    July 3, 2019.
    SUMMARY DISPOSITION ORDER
    Vacate. Remand.