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NO. 22388 IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I

GE CAPITAL HAWAII, INC., a Hawai#i corporation,

) ) ) Plaintiff-Appellee, ) ) vs. ) ) CARINA CASTILLO BARLAN; ) MANOLITO ARCON ATIS; and ) JON ERIC BARLAN, ) ) Defendants-Appellants, ) ) and ) ) NEMESIO CASTILLO; ) LOR CASTILLO; JOHN DOES 1-20; ) JANE DOES 1-20; DOE ) PARTNERSHIPS 1-20; DOE ) CORPORATIONS 1-20; DOE ) ENTITIES 1-20; and DOE ) GOVERNMENTAL UNITS 1-20, ) ) Defendants. ) ______________________________)

CIV. NO. 98-1054 APPEAL FROM THE FIRST CIRCUIT COURT

MEMORANDUM OPINION Defendants-Appellants Carina Castillo Barlan (Carina), Manolito Arcon Atis (Manolito), and Jon Eric Barlan (Jon) (collectively Appellants), appeal the circuit court's February 25, 1999 Judgment. Specifically, they challenge the February 25, 1999 Plaintiff-Appellee GE Capital Hawaii, Inc.'s Findings of Fact, Conclusions of Law and Order Granting Motion for Summary Judgment Against All Defendants and for Interlocutory

Decree of Foreclosure Filed May 6, 19981 (February 25, 1999 FsOF, CsOL, Order) on the ground that there is insufficient admissible evidence in the record to support summary adjudication. We vacate the February 25, 1999 Judgment and the February 25, 1999 FsOF, CsOL, Order, and remand for further proceedings consistent with this opinion. BACKGROUND The Promissory Note dated October 21, 1996, is for the principal sum of $293,675.00, is signed by Carina, Manolito, Jon, Nemesio Castillo (Nemesio), and Lor Castillo (Lor), and imposes joint and several liability on each signer. On March 5, 1998, Plaintiff-Appellee GE Capital Hawaii, Inc. (GE Capital), filed a Complaint for Foreclosure of the mortgage on the property located at 94-1080 Kukula Street, Waipahu, Hawai#i 96797, against Carina, Manolito, Jon, Nemesio, Lor, and various Doe entities (collectively the Five Defendants). On April 9, 1998, the Five Defendants, proceeding pro se, filed their answer in opposition to the Complaint for Foreclosure. On May 6, 1998, GE Capital filed its Motion for Summary Judgment Against All Defendants and For Interlocutory Decree of Foreclosure (May 6, 1998 Motion for Summary Judgment). This

Although this document was prepared by Plaintiff-Appellee GE Capital Hawaii, Inc. (GE Capital), it became the court's document when it was signed and filed by the court.

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motion was accompanied by the Affidavit of Gordon Okumoto (Okumoto) stating in relevant part as follows: 1. I am a Loan Adjustment Specialist employed by [GE Capital], and I am authorized to make this affidavit. I am competent, if called upon as a witness in this case, to testify as to the matters contained in this affidavit. 2. I have reviewed the files and documents relating to [the Five Defendants]. . . . These files were made in the regular course of [GE Capital's] business at or near the time of the acts or events referenced therein. They are maintained in the ordinary course of [GE Capital's] business. . . . . 5. [The Five Defendants] are in default under the terms of the Note and Mortgage in that they have breached their covenant to pay the sums due thereunder. . . . . 8. As of February 26, 1998, there was due and owing from [the Five Defendants] to [GE Capital] under the Note and Mortgage, the amount of $300,314.85 calculated as follows: LOAN NO. NRO21944 Principal balance Interest to 03/06/98 Late Charges to 02/11/98 TOTAL: $292,159.22 7,889.73 265.90 $300,314.85

Interest continues to accrue on the Note at the present rate of 10.38% per annum, or $83.05 per day, from and including March 6, 1998 to the date of payment or entry of a judgment thereon. Attorneys fees and litigation expenses will also continue to accrue.

On June 5, 1998, prior to the June 8, 1998 hearing on the May 6, 1998 Motion for Summary Judgment, Carina filed a 3

notice of her filing "a Chapter 13 petition in the U.S. Bankruptcy Court on April 13, 1998." The June 8, 1998 hearing on

the motion was first postponed to August 24, 1998, then to October 19, 1998, and finally to February 1, 1999.2 On November 5, 1998, GE Capital filed a second Motion for Summary Judgment (November 5, 1998 Motion for Summary Judgment) against all the defendants except Carina.3 in relevant part: 1. That, pursuant to [Hawai#i Rules of Civil Procedure (HRCP)] Rule[s] 56(a) and (c), summary judgment be entered in favor of Plaintiff GE Capital and against the Motion Defendants on their liability and damages under the Promissory Note dated October 21, 1996 (the "Note') on the grounds that there is no genuine issue as to any material fact and that GE Capital is, therefore, entitled to judgment as a matter of law; . . . . It states

Attached to the November 5, 1998 Motion for Summary Judgment is an affidavit by Bruce C. Bigelow, one of the attorneys for GE Capital, stating in relevant part as follows: 3. Defendant Carina Castillo Barlan filed a Chapter 13 bankruptcy on April 20, 1998. Case No. 98-01566. That bankruptcy was dismissed on June 19, 1998 because Ms. Barlan failed to file her schedules and statement of affairs as required by the Bankruptcy Code. 4. Defendant Carina Castillo Barlan then filed a "no asset" chapter 7 bankruptcy on October 16, 1998. Case No. 98-04604. This case is pending so GE Capital has not included Ms. Barlan as one of the Defendants who are subject to the summary judgment motion filed simultaneously herewith. The named defendants are Manolito Arcon Atis, Jon Eric Barlan, Nemesio Castillo, and Lor Castillo.
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This Motion is based on the attached Affidavit of Gordon Okumoto and Memorandum in support thereof, and upon the pleadings and records on file herein, and such oral and documentary evidence as may be presented to the Court during the hearing. Please note that the foregoing Motion does not include any claims against Defendant CARINA CASTILLO BARLAN, who filed a Chapter 7 bankruptcy on October 16, 1998. Nor does the Motion seek to foreclose GE Capital's first mortgage against the property which secures the Note. This Motion is directly solely against the named Motion Defendants as to their obligations under the Note. Attached to the November 5, 1998 Motion for Summary Judgment was an Affidavit of Gordon Okumoto which states in relevant part as follows: 2. I have reviewed the GE Capital files and documents relating to Defendants Manolito Arcon Atis, Jon Eric Barlan, Nemesio Castillo and Lor Castillo in the above-entitled action (collectively, the "Motion Defendants"). These files were made in the regular course of GE Capital's business at or near the time of the acts or events referenced therein. They are maintained in the ordinary course of GE Capital's business. . . . . 4. For the purposes of securing payment to GE Capital when it became due and payable, Defendants executed that certain Mortgage, Security Agreement and Financing Statement dated October 21, 1996 on the property located at 94-1080 Kukula Street, Waipahu, HI 96797. . . . 5. The Motion Defendants are in default under the terms of the Note in that they have breached their covenant to pay the sums due thereunder. 6. By reason of the foregoing default, Plaintiff GE Capital exercised its option under the terms and covenants of the Note to declare the entire principal balance under the Note, together with interest, immediately due and payable. 5

7. Due notice was given to Motion Defendants of Plaintiff GE Capital's exercise of its option and although GE Capital made demand upon Motion Defendants, they have failed and continue to fail to pay the sums due under the Note. 8. To November 5, 1998, there was due and owing from the Motion Defendants to GE Capital under the Note the amount of $320,579.05 (exclusive of attorneys fees and costs), calculated as follows: LOAN NO. NR021944 Principal balance $292,159.22 Interest to 11/5/98 28,153.93 Late Charges to 02/11/98 265.90 TOTAL: $320,579.05

Interest continues to accrue on the Note at the present rate of 10.38% per annum, or $83.05 per day, from and including November 5, 1998 to the date of payment or entry of a judgment thereon. Attorneys fees and litigation expenses will also continue to accrue. On November 24, 1998, the United States Bankruptcy Court entered an Order Granting GE Capital Hawaii Inc.'s Motion to Modify Automatic Stay to Allow for Foreclosure, which allowed GE Capital to foreclose the mortgage and sell the mortgaged property but prohibited GE Capital from obtaining a deficiency judgment against Carina without permission by the bankruptcy court. After a December 28, 1998 hearing on the November 5, 1998 Motion for Summary Judgment, the circuit court, on January 13, 1999, entered (1) Findings of Fact, Conclusions of Law, and an Order Granting Motion for Summary Judgment Against Defendants Manolito Arcon Atis, Jon Eric Barlan, Nemesio Castillo

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and Lor Castillo and (2) a Judgment (January 13, 1999 Judgment). The latter ORDERED, ADJUDGED AND DECREED that, pursuant to Rules 54(b) and 58 of the Hawaii [Hawai#i] Rules of Civil Procedure, final judgment be entered in favor of Plaintiff GE CAPITAL HAWAII, INC. ("GE Capital") and against Defendants MANOLITO ARCON ATIS, JON ERIC BARLAN, NEMESIO CASTILLO and LOR CASTILLO as to their liability and damages under the Promissory Note dated October 21, 1996 as follows: 1. That judgment is rendered in favor of Plaintiff GE Capital in the principal amount of $292,159.22, together with interest of $28,153.93 through November 5, 1998 and late charges of $265.90 through February 11, 1998, for a total of $320,579.05, plus interest at the rate of 10.38% per annum, or $83.05 per day, from and including November 5, 1998 to the date of entry of this judgment and, thereafter, at the judgment rate of interest of 10% per annum pursuant to Hawaii [Hawai#i] Revised Statutes

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