Sakal v. Association of Apartment Owners of Hawaiian Monarch. ( 2020 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
18-JUN-2020
10:18 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
CHRISTIAN SAKAL, Petitioner/Plaintiff-Appellant,
vs.
ASSOCIATION OF APARTMENT OWNERS OF HAWAIIAN MONARCH; JONAH SCOTT
KOGEN; and K&F 1984 LLC, Respondents/Defendants-Appellees.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CAAP-XX-XXXXXXX; CIV. NO. 14-1-1118)
JUNE 18, 2020
McKENNA, POLLACK, AND WILSON, JJ., WITH
RECKTENWALD, C.J., CONCURRING IN PART AND DISSENTING IN PART,
WITH WHOM NAKAYAMA, J., JOINS
OPINION OF THE COURT BY POLLACK, J.
This case arises from the nonjudicial foreclosure of
the petitioner’s apartment by the apartment owners’ association
based on unpaid assessments. After the sale was conducted,
petitioner filed a complaint against the association and the
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purchaser of the property for wrongful foreclosure, seeking
relief that included damages and title to the property. The
trial court dismissed the complaint, finding that it failed to
state a claim upon which relief could be granted. Particularly,
the court found that Hawai‘i Revised Statutes (HRS) chapter 667,
which governs foreclosures, contained a statutory bar that
precluded the claims in the complaint. On appeal, the
Intermediate Court of Appeals determined the statutory bar
precluded petitioner’s claim to title of the property against
the purchaser but did not preclude petitioner’s claim for
damages against the association.
On certiorari, we consider whether the petitioner’s
claim for wrongful foreclosure, which is based on the
association’s lack of a valid power of sale, is statutorily
limited or barred. Because we conclude that the petitioner’s
claim to title of the property is not limited by HRS chapter 667
and that its provisions do not bar a common law claim of
wrongful foreclosure based on the lack of a power of sale, we
hold that the complaint did state a claim against both the
association and the purchaser of the apartment. Thus, the
dismissal of the apartment owner’s claims against both
defendants for wrongful foreclosure and the Intermediate Court
of Appeals’ partial affirmance of the dismissal were erroneous.
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I. BACKGROUND
On March 28, 2006, Christian Sakal acquired an
apartment in the Hawaiian Monarch Condominium Project (the
property) as a tenant in severalty. On March 16, 2012, the
Association of Apartment Owners of Hawaiian Monarch (AOAO
Hawaiian Monarch or the AOAO) filed a Notice of Lien with the
Office of Assistant Registrar of the Land Court against Sakal’s
property for unpaid assessments. The Notice stated that the
lien claimed a pre-petition amount of $11,417.91 and a post-
petition amount of $10,589.42.1 Three months later, the AOAO
filed a Notice of Default and Intention to Foreclose on Sakal’s
property in the Office of the Assistant Registrar of the State
of Hawai‘i (Assistant Registrar). Subsequently, AOAO Hawaiian
Monarch filed a Notice of Association’s Non-Judicial Foreclosure
Under Power of Sale with the Assistant Registrar, which stated
that a public auction would be held on December 3, 2012,
pursuant to HRS §§ 514B-146 and 667-21 through 667-42.
Four days before the sale was scheduled to occur,
Sakal filed a motion for preliminary injunction to stay the non-
judicial foreclosure sale of the property in the Circuit Court
of the First Circuit (circuit court). On December 3, 2012, the
1
Sakal filed a voluntary petition “under Chapter 13” in the United
States Bankruptcy Court for the District of Hawai‘i on April 27, 2011.
3
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circuit court denied Sakal’s motion for preliminary injunction,
and AOAO Hawaiian Monarch held a public auction offering Sakal’s
property for sale. A quitclaim deed was executed after the sale
conveying Sakal’s property to Jonah Scott Kogen for $50,500.
The deed was then recorded in the Office of the Assistant
Registrar on January 16, 2013.
On May 5, 2014, Sakal filed a complaint against AOAO
Hawaiian Monarch, Kogen, and K&F 1984 LLC in the circuit court.2
The complaint alleged wrongful foreclosure against AOAO Hawaiian
Monarch and common law trespass and quiet title claims against
AOAO Hawaiian Monarch, Kogen, and K&F 1984 LLC.3 As to the
wrongful foreclosure claim, Sakal alleged that the AOAO’s bylaws
did not include a power of sale that would allow it to
nonjudicially foreclose on his property. Additionally, Sakal
contended that the AOAO was not granted a power of sale by
statute. Thus, Sakal claimed that AOAO Hawaiian Monarch’s
nonjudicial foreclosure was void and title should be restored to
him.
Sakal further alleged that because neither AOAO
2
The Honorable Bert I. Ayabe presided.
3
The complaint alleged that K&F 1984 LLC was “a limited liability
company registered in the State of Hawaii on December 31, 2012.” The circuit
court entered default against K&F 1984 LLC for failing to plead or otherwise
defend against the complaint. Sakal dismissed all claims against K&F before
appealing the circuit court’s final judgment to the ICA.
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Hawaiian Monarch nor Kogen had authority to enforce a
nonjudicial foreclosure of an association lien, they were
committing a continuing trespass on the property. Sakal
requested that the circuit court declare the foreclosure auction
and subsequent documents transferring title null and void and
strike such documents, as well as “any and all other recorded
documents relating to the wrongful foreclosure,” from the
records of the Office of the Assistant Registrar. Sakal also
asked the circuit court to grant a preliminary and permanent
injunction preventing AOAO Hawaiian Monarch and Kogen from
enforcing the nonjudicial foreclosure and from trespassing on
the property. Finally, Sakal prayed for actual and treble
damages resulting from the foreclosure and his subsequent
eviction from his property.
AOAO Hawaiian Monarch filed an answer asserting that
Sakal’s claim was barred by, inter alia, the applicable statute
of limitations, laches, and improper service of process. Kogen
did not file an answer to Sakal’s complaint.
Kogen and AOAO Hawaiian Monarch filed separate motions
to dismiss the complaint pursuant to Hawaiʻi Rules of Civil
Procedure (HRCP) Rule 12(b)(6).4 In the memorandum supporting
4
HRCP Rule 12(b)(6) (2000) provides as follows:
(continued . . .)
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his motion, Kogen argued that the recordation of the quitclaim
deed on January 16, 2013, precluded Sakal from challenging his
right to title in the property. Kogen asserted that the AOAO
had, as required by HRS § 667-101(a), submitted an affidavit
after the public sale of the property attesting that the sale
had been lawfully conducted.5 Kogen maintained that HRS § 667-
102(b) prevented Sakal from challenging his title to the
(. . . continued)
(b) How presented. Every defense, in law or fact, to a
claim for relief in any pleading, whether a claim,
counterclaim, cross-claim or third-party claim, shall be
asserted in the responsive pleading thereto if one is
required, except that the following defenses may at the
option of the pleader be made by motion:. . . .
(6) to dismiss for failure of the pleading to state a
claim upon which relief can be granted, matters
outside the pleading are presented to and not
excluded by the court, the motion shall be treated as
one for summary judgment and disposed of as provided
in [HRCP] Rule 56, and all parties shall be given
reasonable opportunity to present all material made
pertinent to such a motion by [HRCP] Rule 56.
5
HRS § 667-101(a) (Supp. 2012) provides as follows:
(a) After the public sale is held, the association shall
sign an affidavit under penalty of perjury:
(1) Stating that the power of sale foreclosure was
made pursuant to the power of sale provision in the
law or association documents;
(2) Stating that the power of sale foreclosure was
conducted as required by this part;
(3) Summarizing what was done by the association;
(4) Attaching a copy of the recorded notice of
default and intention to foreclose; and
(5) Attaching a copy of the last public notice of the
public sale.
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property once the deed and the affidavit were recorded.6 Thus,
Sakal’s claims were barred, Kogen asserted, because the
complaint was filed after such documents were recorded.
Additionally, Kogen argued that even if Sakal’s claims
were not foreclosed by section 667-102, the claims were barred
by HRS § 667-60(c) (Supp. 2012), which provides that “[a]ny
action to void the transfer of title to the purchaser of
property pursuant to a foreclosure by power of sale” must be
filed “no later than sixty days following the recording of the
6
HRS § 667-102(a)-(b) (Supp. 2012) provide the following in full:
(a) The affidavit required under section 667-101 and the
conveyance document shall be recorded no earlier than ten
days after the public sale is held but not later than
forty-five days after the public sale is held. The
affidavit and the conveyance document may be recorded
separately and on different days. After the recordation,
the association shall mail or deliver a recorded copy to
those persons entitled to receive the public notice of the
public sale under section 667-96(c).
(b) When both the affidavit and the conveyance document are
recorded:
(1) The sale of the unit is considered completed;
(2) All persons claiming by, through, or under the
unit owner and all other persons having liens on the
unit junior to the lien of the association shall be
forever barred of and from any and all right, title,
interest, and claims at law or in equity in and to
the unit and every part of the unit, except as
otherwise provided by law;
(3) The lien of the association and all liens junior
in priority to the lien of an association shall be
automatically extinguished from the unit; and
(4) The purchaser shall be entitled to immediate and
exclusive possession of the unit.
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affidavit required by section 667-32.” Because Sakal failed to
file his complaint within sixty days of the recording of the
affidavit, Kogen contended that the claims were barred and the
complaint should be dismissed. AOAO Hawaiian Monarch’s
memorandum submitted in support of its motion restated Kogen’s
memorandum verbatim.
In opposition, Sakal argued that HRS § 667-102(b)(2)
provided an exception to the time bar for claims “as otherwise
provided by law.” The claim was not statutorily barred, Sakal
maintained, because the foreclosure was unlawful from its
inception due to the AOAO’s lack of a power of sale. Sakal
contended that since he was challenging the validity of the
foreclosure sale based on the AOAO’s lack of a power of sale,
the statutory bar did not apply to his claim.
Sakal also argued that the time bar set forth in HRS
§ 667-60(c) did not apply because the AOAO’s nonjudicial
foreclosure of his property was governed by part VI of HRS
chapter 667 and HRS § 667-60(c) was located within part IV,
making it inapplicable to the AOAO’s foreclosure.
The circuit court ruled that HRS § 667-102(b)(2),
which Kogen argued prevented Sakal from challenging title to the
property once the deed and the affidavit were recorded, was
applicable to Sakal’s claim because he was a unit owner. On
this basis, the court granted Kogen’s and the AOAO’s motions and
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dismissed Sakal’s claims against both parties with prejudice.
The circuit court thereafter issued a final judgment. Sakal
timely appealed.
II. ICA PROCEEDINGS
The Intermediate Court of Appeals (ICA) issued a
published opinion that partially affirmed and partially vacated
the circuit court’s grant of the motions to dismiss.7 The ICA
held that Sakal’s wrongful foreclosure claim was not barred by
HRS § 667-102 because the statute only bars claims “in and to
the unit” and not all claims arising out of wrongful and
unlawful nonjudicial foreclosures, such as claims for money
damages. The ICA reasoned that the statute barred any claim to
title to the property by Sakal because he failed to challenge
the nonjudicial foreclosure of the property prior to the
recordation of the affidavit and the quitclaim deed. However,
the ICA concluded that Sakal had stated a claim for wrongful
foreclosure on which damages could be granted because the AOAO
lacked a power of sale permitting it to foreclose on Sakal’s
property.
Therefore, the ICA held that the circuit court erred
in dismissing Sakal’s complaint in its entirety against AOAO
7
The opinion is published as Sakal v. Ass’n of Apartment Owners of
Hawaiian Monarch, 143 Hawaiʻi 219, 426 P.3d 443 (App. 2018).
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Hawaiian Monarch. The ICA vacated the dismissal of Sakal’s
claims for damages against the AOAO arising out of the wrongful
foreclosure and remanded the case to the circuit court. The ICA
affirmed the dismissal of all claims against Kogen and all
claims “at law or in equity” against the AOAO “that seek right,
title, or interest in and to the Property.”
AOAO Hawaiian Monarch and Sakal both sought certiorari
review of the ICA’s judgment on appeal.8
8
The AOAO’s application for writ of certiorari challenged the
ICA’s conclusion that the AOAO was not statutorily empowered to conduct a
nonjudicial foreclosure on Sakal’s property absent a power of sale provision
in the AOAO’s bylaws. This court rejected the AOAO’s application on December
28, 2018. Sakal v. Ass’n of Apartment Owners of Hawaiian Monarch, No. SCWC-
XX-XXXXXXX, 2018 WL 6818901 (Haw. Dec. 28, 2018) (order rejecting application
for writ of certiorari). It is noted that on July 10, 2019, SB 551, SD1,
HD2, CD1 of 2019, A Bill for an Act Relating to Condominiums, was enacted as
Act 282 without the Governor’s signature. See Gov. Msg. No. 1402, (attaching
Act 282 as pages 3–18 of the document), https://www.capitol.hawaii.gov/
session2019/bills/GM1402_.PDF. Act 282 purported to retroactively grant
apartment associations a statutory right to foreclose on members’ apartments
pursuant to part VI of HRS chapter 667. Malabe v. Ass’n of Apartment Owners
of Executive Centre, No. SCWC-XX-XXXXXXX, at 44-45 (Haw. June 17, 2020). In
Malabe, we concluded that it was unnecessary to consider Act 282’s effect on
the Malabes’ claim of wrongful foreclosure because the Act was only
applicable to foreclosures conducted under part VI of HRS chapter 667 and the
foreclosure in Malabe was conducted under part I of HRS chapter 667. Id. at
33, 52-54. We also observed that the United States District Court for the
District of Hawai‘i recently held Act 282 unconstitutional as violative of the
Contracts Clause of Article I, § 10 of the United States Constitution. Id.
at 55-57 (citing Galima v. Ass’n of Apartment Owners of Palm Court, Civ. No.
16-00023 LEK-RT, 2020 WL 1822599 (D. Haw. Apr. 10, 2020)).
In this case, neither the Notice of Association’s Non-Judicial
Foreclosure Under Power of Sale nor the Grantor’s Affidavit of Non-Judicial
Foreclosure Under Power of Sale are included in the record on appeal.
Sakal’s complaint, however, indicates that the notice stated the AOAO
intended to conduct a public foreclosure sale pursuant to HRS §§ 667-21
through 667-42, which corresponds to part II of HRS chapter 667. Because the
motions to dismiss were pursuant to HRCP Rule 12(b)(6), the allegations in
the complaint are taken to be true. Bank of America, N.A. v. Reyes-Toledo,
143 Hawai‘i 249, 265, 428 P.3d 761, 777 (2018). Thus, it is unnecessary for
us to consider Act 282’s effect on this litigation. See Malabe, No. SCWC-17-
(continued . . .)
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III. STANDARDS OF REVIEW
A. Motion to Dismiss
This court reviews a trial court’s ruling on a motion
to dismiss de novo. Kamaka v. Goodsill Anderson Quinn & Stifel,
117 Hawaiʻi 92, 104, 176 P.3d 91, 103 (2008).
B. Statutory Interpretation
The interpretation of a statute is a question of law,
which we review de novo. State v. Carlton, 146 Hawai‘i 16, 22,
455 P.3d 356, 362 (2019) (quoting State v. Lau, 78 Hawaiʻi 54,
58, 890 P.2d 291, 295 (1995)).
IV. DISCUSSION
A. The ICA Erred in Holding Sakal’s Claim to the Property Was
Barred by HRS § 667-102(b)(2).
Sakal argued before the ICA that his claim of wrongful
foreclosure was not barred by HRS § 667-102(b)(2) because his
claim was based on the AOAO’s lack of a valid power of sale. In
response, the AOAO and Kogen contended that this statutory
provision barred Sakal from seeking title to the property and
damages once the affidavit and the deed were recorded. In its
opinion, the ICA concluded that Sakal was barred from any claim
to the property itself because he failed to challenge the AOAO’s
(. . . continued)
0000145, at 54 (declining to consider the constitutionality of Act 282 under
the doctrine of constitutional avoidance).
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foreclosure prior to the recordation of the AOAO’s affidavit and
the quitclaim deed, but that he could seek damages for wrongful
foreclosure. Before this court, Sakal argues that such an
interpretation violates his constitutional right to procedural
due process. Thus, the ICA’s construction of HRS § 667-102 is a
critical and potentially dispositive issue in this case, and
accordingly we begin our analysis with a review of the ICA’s
statutory interpretation.9
This court’s construction of statutes is governed by
well-settled principles. State v. Carlton, 146 Hawai‘i 16, 22,
455 P.3d 356, 362 (2019). First, we examine the language of the
statute itself. Jaylo v. Jaylo, 125 Hawai‘i 369, 373, 262 P.3d
245, 249 (2011) (quoting State v. Silver, 125 Hawai‘i 1, 4, 249
P.3d 1141, 1144 (2011)). Second, if the language is plain and
9
This court has consistently held that we have a duty to review de
novo dispositive questions of law, such as the proper interpretation of a
statute, even when the parties have not challenged or have stipulated to an
erroneous interpretation. See, e.g., State v. Medeiros, 146 Hawai‘i 1, 3 n.2,
454 P.3d 1069, 1071 n.2 (2019) (noting that the State’s failure to challenge
the defendant’s eligibility for a deferred acceptance of a no contest plea
did not relieve this court of its obligation to determine whether the offense
charged was nonprobationable, which was a dispositive question of law);
Hawaiian Ass’n of Seventh-Day Adventists v. Wong, 130 Hawai‘i 36, 46, 305 P.3d
452, 462 (2013) (“We note, however, that the parties’ stipulation as to a
question of law is not binding on the court, and does not relieve us from the
obligation to review questions of law de novo.” (citing Chung Mi Ahn v.
Liberty Mut. Fire Ins. Co., 126 Hawai‘i 1, 10, 265 P.3d 470, 479 (2011))).
Thus, Sakal’s focus on the constitutionality of the ICA’s interpretation of
HRS § 667-102 does not “relieve us from the obligation to review questions of
law de novo.” LC v. MG & Child Support Enf’t Agency, 143 Hawai‘i 302, 320,
430 P.3d 400, 418 (2018) (Opinion of McKenna, J., writing for the court as to
Part III.B) (citing Wong, 130 Hawai‘i at 46, 305 P.3d at 462).
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unambiguous, we must give effect to its plain and obvious
meaning. Id. Third, implicit in statutory construction is our
obligation to ascertain and give effect to the intention of the
legislature, which is obtained primarily from the language of
the statute itself. Carlton, 146 Hawai‘i at 22, 455 P.3d at 362
(citing State v. Choy Foo, 142 Hawai‘i 65, 72, 414 P.3d 117, 124
(2018)).
Therefore, we first examine the language of the
statute. HRS § 667-102 provides in relevant part as follows:
(b) When both the affidavit and the conveyance document are
recorded:
. . . .
(2) All persons claiming by, through, or under the
unit owner and all other persons having liens on the
unit junior to the lien of the association shall be
forever barred of and from any and all right, title,
interest, and claims at law or in equity in and to
the unit and every part of the unit, except as
otherwise provided by law[.]
. . . .
(c) The unit owner and any person claiming by, through, or
under the unit owner and who is remaining in possession of
the unit after the recordation of the affidavit and the
conveyance document shall be considered a tenant at
sufferance subject to eviction or ejectment.
(Emphases added.)
The ICA appears to have concluded that Sakal is “a
person claiming by, through, or under the unit owner” to whom
HRS § 667-102(b)(2) applies. However, by its plain meaning, the
phrase “persons claiming by, through, or under the unit owner”
does not include a unit owner. In specifying that it applies to
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“persons claiming by, through, or under the unit owner,” the
provision contemplates at least one degree of separation between
the identified party and the unit owner. In other words, the
statute on its face applies to extinguish only interests derived
from the unit owner’s interest in the property and not to any
interest in the property retained by the unit owner.
When there is doubt, doubleness of meaning, or
indistinctiveness or uncertainty as to an expression used in a
statute, the expression is ambiguous and the meaning of any
ambiguous words may be sought by examining the context or
resorting to extrinsic aids to determine legislative intent.
Carlton, 146 Hawai‘i at 22, 455 P.3d at 362 (citing Citizens
Against Reckless Dev. v. Zoning Bd. of Appeals, 114 Hawai‘i 184,
194, 159 P.3d 143, 153 (2007)). Assuming there was some
ambiguity as to whether the legislature intended “persons
claiming by, through, or under the unit owner” to include the
unit owner themselves, which there is not, the plain meaning of
the text is confirmed by subsection (c) of the same statute,
which provides that following recordation, “The unit owner and
any person claiming by, through, or under the unit owner . . .
shall be considered a tenant at sufferance subject to eviction
or ejectment.” HRS § 667-102(c) (emphases added); see State v.
Yokota, 143 Hawai‘i 200, 205, 426 P.3d 424, 429 (2018) (“[L]aws
in pari materia, or upon the same subject matter, shall be
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construed with reference to each other.” (quoting State v.
Arceo, 84 Hawai‘i 1, 19, 928 P.2d 843, 861 (1996))). By
specifying that subsection (c) applies to both the “unit owner”
and “any person claiming by, through, or under the unit owner,”
the legislature indicated that unit owners themselves are not
“persons claiming by, through, or under the unit owner” within
the meaning of the statute. See Yokota, 143 Hawai‘i at 205, 426
P.3d at 429. To hold otherwise would render subsection (c)’s
use of “unit owner” redundant, which is contrary to the
“cardinal rule of statutory construction that courts are bound,
if rational and practicable, to give effect to all parts of a
statute.” Coon v. City & Cty. of Honolulu, 98 Hawai‘i 233, 259,
47 P.3d 348, 374 (2002) (“[N]o clause, sentence, or word shall
be construed as superfluous, void, or insignificant if a
construction can be legitimately found which will give force to
and preserve all words of the statute.” (quoting Franks v. City
& Cty. of Honolulu, 74 Haw. 328, 339, 843 P.2d 668, 673
(1993))).
Additionally, it is fundamental that when the same
phrase is used in different parts of the same statute, it is
presumed to have the same intended meaning. See State v.
Guyton, 135 Hawai‘i 372, 380, 351 P.3d 1138, 1146 (2015)
(“[W]here the meaning of a word is unclear in one part of a
statute but clear in another part, the clear meaning can be
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imparted to the unclear usage on the assumption that it means
the same thing throughout the statute.” (quoting Kam v. Noh, 70
Haw. 321, 325, 770 P.2d 414, 416 (1989))). Because HRS § 667-
102(c)’s reference to “any person claiming by, through, or under
the unit owner” does not encompass unit owners themselves, HRS
§ 667-102(b)(2)’s bar to claims by “persons claiming by,
through, or under the unit owner” does not bar claims by unit
owners themselves. Cf. Peak Capital Grp., LLC v. Perez, 141
Hawai‘i 160, 174, 407 P.3d 116, 130 (2017) (stating that the
circuit court’s interlocutory foreclosure decree provided that
“All Defendants . . . and all persons claiming by, through or
under them . . . will be perpetually barred of and from any and
all right . . . in the Property . . . upon closing of the sale
herein authorized.” (emphases added)); Fed. Home Loan Mortg.
Corp. v. Transamerica Ins. Co., 89 Hawai‘i 157, 165, 969 P.2d
1275, 1283 (1998) (“[T]he foreclosure order . . . expressly
divested [defendants] ‘and all persons claiming by, through or
under them’ of ‘any and all right, title and interest in the
said mortgaged property or any part thereof.’” (emphasis
added)).
Inasmuch as Sakal’s claim to title to the property
arises directly from his status as a unit owner and not “by,
through, or under” a unit owner, HRS § 667-102(b)(2) is
inapplicable. The ICA thus erred in determining that the
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provision operated to bar Sakal from seeking recovery of the
property.
B. The Sixty-Day Time Limit of HRS § 667-60(c) Is Not Applicable
to a Claim of Wrongful Foreclosure Based on the Lack of a Power
of Sale.
Before the circuit court, Kogen and the AOAO argued
that Sakal’s claim to recover title to the unit was barred
because it was not brought within the sixty-day time limit
established by HRS § 667-60(c). The circuit court did not
address this issue because it concluded that Sakal’s claim was
barred by HRS § 667-102(b)(2). Although neither Kogen nor the
AOAO have raised this argument before the ICA or this court, we
address the application of this statute as it is likely to be
reasserted on remand. Nordic PCL Constr., Inc. v. LPIHGC, LLC,
136 Hawai‘i 29, 44, 358 P.3d 1, 16 (2015) (“We now turn to issues
that may arise during the evidentiary hearing on remand.”);
Sentinel Ins. Co. v. First Ins. Co. of Hawai‘i, Ltd., 76 Hawai‘i
277, 297, 875 P.2d 894, 914 (1994) (addressing issues the court
expected would arise on remand).
As the ICA stated in this case, HRS chapter 667 “sets
forth the procedures for foreclosure in Hawai‘i and does not
create a right to foreclose.” Within HRS chapter 667, section
667-60 establishes a scheme of sanctions and remedies applicable
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when a party utilizing the foreclosure process fails to comply
with the statute’s procedural requirements.10 The statute
10
HRS § 667-60 (Supp. 2012) provides the following in relevant
part:
(a) Any foreclosing mortgagee who engages in any of the
following violations of this chapter shall have committed
an unfair or deceptive act or practice under section 480-2:
(1) Failing to provide a borrower or mortgagor with,
or failing to serve as required, the information
required by section 667-22 or 667-55;
(2) Failing to publish, or to post, information on
the mortgaged property, as required by section 667-
27 or 667-28;
. . . .
(5) Holding a public sale in violation of section
667-25;
(6) Failing to include in a public notice of public
sale the information required by section 667-
27 or section 667-28;
(7) Failing to provide the information required
by section 667-41;
. . . .
(b) Notwithstanding subsection (a), the transfer of title
to the purchaser of the property as a result of a
foreclosure under this chapter shall only be subject to
avoidance under section 480-12 for violations described in
subsection (a)(1) to (9) if such violations are shown to be
substantial and material; provided that a foreclosure sale
shall not be subject to avoidance under section 480-12 for
violation of section 667-56(5).
(c) Any action to void the transfer of title to the purchaser
of property pursuant to a foreclosure by power of sale under
part II of this chapter shall be filed in the circuit court
of the circuit within which the foreclosed property is
situated no later than sixty days following the recording of
the affidavit required by section 667-32. If no such action
is filed within the sixty-day period, then title to the
property shall be deemed conclusively vested in the purchaser
free and clear of any claim by the mortgagor or anyone
claiming by, through, or under the mortgagor.
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declares that certain enumerated violations are deemed to be
unfair or deceptive acts or practices in violation of HRS § 480-
2. See HRS § 667-60(a). As unfair or deceptive acts or
practices, these violations may subject the foreclosing party to
the penalties prescribed in Hawai‘i’s consumer protection
statute, HRS chapter 480. See, e.g., HRS § 480-3.1 (“Any
person, firm, company, association, or corporation violating any
of the provisions of section 480-2 shall be fined a sum of not
less than $500 nor more than $10,000 for each violation[.]”).
The law goes on to clarify, however, that when the
foreclosure sale has resulted in title passing to a third-party
purchaser, only substantial and material violations of a subset
of the identified violations will render the underlying
transaction void, as is generally the case when HRS chapter 480
is violated in other contexts.11 See HRS § 667-60(b). And HRS
§ 667-60(c) establishes a sixty-day time limit following the
recordation of a power of sale affidavit during which such an
action to void a transfer of title must be filed.
11
Under HRS § 480-12 (2008), “Any contract or agreement in
violation of [HRS chapter 480] is void and is not enforceable at law or in
equity.” Thus, a transaction that includes an unfair or deceptive business
practice is typically null and subject to rescission. See, e.g., 808 Dev.,
LLC v. Murakami, 111 Hawai‘i 349, 356, 141 P.3d 996, 1003 (2006) (“[B]ased
upon the plain language of the above statutes, a contractor who fails to
[comply with the statutory requirements] may not enforce the contract against
the owner and, consequently, is not entitled to a mechanic’s lien upon the
property.”).
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Significantly, HRS § 667-60(c) provides that the
sixty-day time limit is applicable to “[a]ny action to void the
transfer of title to the purchaser of property pursuant to a
foreclosure by power of sale under part II.”12 (Emphasis added.)
By its plain language, the statutory time limit is only
applicable when there is a valid power of sale; it does not
apply when a foreclosing party is alleged to have conducted a
foreclosure without a power of sale. A claim based on a lack of
power of sale is markedly different in nature and not dictated
by the procedures or relief prescribed in HRS chapter 667.
Rather, such a claim is governed by Hawai‘i common law, under
which an unauthorized nonjudicial foreclosure renders “the sale
of the property [] invalid and voidable at the election of the
mortgagor, who shall then regain title to and possession of the
property.” Santiago v. Tanaka, 137 Hawai‘i 137, 158, 366 P.3d
612, 633 (2016) (citing Ulrich v. Sec. Inv. Co., 35 Haw. 158,
168 (Haw. Terr. 1939)); see also Lee v. HSBC Bank USA, 121
Hawai‘i 287, 296, 218 P.3d 775, 784 (2009) (holding a nonjudicial
foreclosure sale void where the foreclosure sale was invalid
under an applicable statute). In this case Sakal’s claim is not
based on a violation of the foreclosure procedures set forth in
12
Part II of HRS chapter 667, entitled “Power of Sale Foreclosure
Process,” is comprised of HRS §§ 667-21 through 667-42.
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HRS chapter 667. Rather, he claims wrongful foreclosure based
on the absence of the AOAO’s power of sale.13 The wrongful
foreclosure claim alleged by Sakal is therefore a common-law
claim that is not subject to the HRS § 667-60(c) sixty-day time
limit.14
13
The “foreclosure by power of sale under part II” referred to in
HRS § 667-60(c) means a nonjudicial foreclosure when the mortgage or other
governing documents contain a power of sale provision. See Malabe, No. SCWC-
XX-XXXXXXX, at 46-47 (Haw. June 17, 2020). Under Act 282 of 2019, there are
three means by which condominium associations may foreclose their liens: (1)
by judicial action, (2) by nonjudicial foreclosure when the mortgage contains
a nonjudicial foreclosure or power of sale provision, or (3) by power of sale
foreclosure, regardless of the presence or absence of power of sale language
in an association’s governing documents. Id. at 46. With respect to the
third means, such “power of sale foreclosure” must be conducted under Part VI
of HRS chapter 667. Id. As stated, it is unclear from the record which
foreclosure procedures were utilized by the AOAO in this case. See supra
note 8. By its express terms, the sixty-day time limit contained in HRS §
667-60(c) applies only when there has been a “transfer of title to the
purchaser of property pursuant to a foreclosure by power of sale under part
II” of HRS chapter 667. (Emphasis added.) On remand, if it is determined
that the AOAO conducted the foreclosure pursuant to a part of HRS chapter 667
other than part II, such as part VI, HRS § 667-60(c)’s 60-day time limit
would be inapplicable to this case on that basis as well.
The dissent maintains that it is unnecessary to consider HRS §
667-60(c)’s effect on this case because the AOAO possessed a power of sale to
foreclose on Sakal’s property, even though the AOAO’s governing documents did
not contain a power of sale provision. Dissent at 1-2. As discussed in
Malabe, the AOAO was not permitted to foreclose on Sakal’s property in the
absence of a power of sale provision in either the association bylaws or
another enforceable agreement. Malabe, No. SCWC-XX-XXXXXXX, at 20.
14
Although we conclude that Sakal is not statutorily precluded from
seeking title to the property, we note that in cases of wrongful foreclosure,
a court has the “power to fashion an equitable relief” because wrongful
foreclosure is a proceeding that is equitable in nature. Santiago, 137
Hawai‘i at 158, 366 P.3d at 633 (citing Beneficial Haw., Inc. v. Kida, 96
Hawai‘i 289, 312, 30 P.3d 895, 918 (2001)). This court has left open the
question of whether, in light of the detailed statutory scheme governing the
registration and issuance of certificates of title in the land court system,
the equitable protections for good faith purchasers that we recognized in
Santiago are available with respect to registered property. See Wells Fargo
Bank, N.A. v. Omiya, 142 Hawai‘i 439, 457 n.37, 420 P.3d 370, 388 n.37 (2018).
In light of the fact that Kogen has not yet filed an answer in the
proceedings, we do not consider whether Sakal’s request for the equitable
relief of restoring the property is subject to an equitable defense.
(continued . . .)
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V. CONCLUSION
Based on the foregoing, we vacate in part and affirm
in part the ICA’s judgment on appeal and remand the case to the
circuit court for further proceedings consistent with this
opinion.15
Gary Victor Dubin, /s/ Sabrina S. McKenna
Frederick J. Arensmeyer
for petitioner /s/ Richard W. Pollack
Robert E. Chapman, Carlos D. /s/ Michael D. Wilson
Perez-Mesa, Jr., Mary Martin
for respondent
Association of Apartment Owners
of Hawaiian Monarch
Jeffrey P. Miller
for respondent Jonah Scott Kogen
John A. Morris, M. Anne
Anderson, Kapono F.H. Kiakona
for amicus curiae
Community Associations Institute
(. . . continued)
15
Our disposition of this case renders it unnecessary to address
Sakal’s argument that the ICA’s interpretation of HRS § 667-102 violates his
constitutional due process rights.
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