HawaiiUSA Federal Credit Union v. Monalim. ( 2020 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
30-APR-2020
10:08 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI‘I
---o0o---
HAWAIIUSA FEDERAL CREDIT UNION,
Respondent/Plaintiff-Appellee,
vs.
JONNAVEN JO MONALIM; MISTY MARIE MONALIM,
Petitioners/Defendants-Appellants,
and
ASSOCIATION OF APARTMENT OWNERS OF BEACH VILLAS AT KO OLINA,
by its Board of Directors; KO OLINA COMMUNITY ASSOCIATION, INC.,
a Hawai‘i nonprofit corporation;
Respondents/Defendants-Appellees.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIV. NO. 10-1-1388)
APRIL 30, 2020
McKENNA, POLLACK, AND WILSON, JJ., WITH NAKAYAMA, J., CONCURRING
AND DISSENTING, WITH WHOM RECKTENWALD, C.J., JOINS
OPINION OF THE COURT BY POLLACK, J.
The law has long permitted a borrower, or mortgagor,
to pledge real property to a lender, or mortgagee, as security
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for a loan. In the event of a default, the mortgagee may sell
the property to generate funds that will go toward paying what
is owed. In some instances, however, the proceeds of the sale
are insufficient to pay what is due under the mortgage, and the
mortgagee is entitled to a deficiency judgment holding the
mortgagor liable for the remaining balance.
Such a deficiency occurred in this case. The
mortgagors defaulted on the loans, the property was sold, and
the foreclosure sale price was less than the amount due on the
mortgage. Thereafter, the mortgagee waited over four years,
without explanation, before attempting to collect a deficiency
judgment. The mortgagors contend that this delay was
unreasonable and prejudiced them because they had begun to
rebuild their lives in the years since the sale, and the
mortgagee should therefore be barred from now seeking a
deficiency judgment by the doctrine of laches. They also argue
that, because the circumstances of a foreclosure auction are
likely to result in the sale of the property for less than its
fair market value, the process by which Hawai‘i courts calculate
a deficiency judgment is unfair. They ask that we instead adopt
the approach favored by a majority of other jurisdictions and
the Restatement (Third) of Property, in which the greater of the
fair market value as of the date of the foreclosure sale or the
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sale price of the property is deducted from the money owed when
calculating the deficiency.
On review, we hold that the mortgagors’ challenge to
the deficiency judgment is not barred by res judicata and that
the circuit court erred by failing to rule on their laches
defense. We also hold that, because the traditional approach
can result in unjust enrichment and the majority rule protects
all parties to the mortgage, the equities weigh in favor of
adopting the method of calculating a deficiency judgment
employed by a majority of other jurisdictions. However, our
adoption of the majority rule is prospective in effect and
applies only to foreclosure cases in which a deficiency judgment
is entered after the date of this opinion.
I. FACTS AND PROCEDURAL HISTORY
A. Background
In 2008, Jonnaven Jo Monalim and Misty Marie Monalim
(the Monalims) received two loans from HawaiiUSA Federal Credit
Union (HawaiiUSA) to purchase a property located in Kapolei,
Hawai‘i (the Property). The Property was a three bedroom, three
bathroom unit of the Beach Villas at Ko Olina Condominium built
in 2008. The first loan (Note 1) was for $911,200.00; the
second loan (Note 2) was for $113,900.00. Each loan was secured
by a mortgage on the Property to HawaiiUSA.
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On June 24, 2010, HawaiiUSA filed a complaint in the
Circuit Court of the First Circuit (circuit court) against the
Monalims,1 alleging that the Monalims had defaulted on the notes
and seeking to foreclose on the mortgages. Thereafter,
HawaiiUSA filed a motion for summary judgment, which the circuit
court granted on August 29, 2011 (Foreclosure Order). The
circuit court found that the Monalims owed $1,024,428.04 on Note
1 and $121,547.20 on Note 2 and that HawaiiUSA was entitled to
foreclose upon the mortgages securing the notes. On the same
day, the circuit court entered its judgment on the Foreclosure
Order (Foreclosure Judgment).
In the Foreclosure Order, the circuit court appointed
a commissioner to take possession of the Property and oversee
its sale, subject to confirmation by the court. HawaiiUSA was
allowed under the Foreclosure Order to request a deficiency
judgment in the event that the proceeds recovered from the
Property’s auction were insufficient to cover the Monalims’
outstanding debt on the notes:
At the hearing for confirmation of sale, if it appears that
the proceeds of the sale of the Mortgaged Property are
insufficient to pay all amounts due and owing to
[HawaiiUSA], [HawaiiUSA] may request a deficiency judgment
in its favor and against the [Monalims] for the amount of
the deficiency which shall be determined at the time of
confirmation and have immediate execution thereafter.
1
The Honorable Bert I. Ayabe presided.
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The Monalims filed an appeal of the Foreclosure Order
and Foreclosure Judgment to the Intermediate Court of Appeals
(ICA) on September 28, 2011. The appeal was dismissed on
September 20, 2012, for failure to submit an opening brief.
The Property was auctioned at public sale on October
24, 2011. Prior to the sale, the Property received a 2011 tax
assessment from the City and County of Honolulu in which it was
valued at $703,600.00. According to the commissioner’s report,
only three people attended the auction and sixteen bids were
received. The last bid was for $760,000.00. In the report, the
commissioner stated that $760,000.00 was a fair and reasonable
bid price based on comparable sales and recommended that the
court confirm the sale. HawaiiUSA filed a motion to confirm the
sale and for deficiency judgment. After a hearing, the circuit
court entered an order granting the motion on December 22, 2011.
The circuit court outlined the amounts outstanding and
directed the commissioner to disburse the proceeds of the sale
in order of priority.2 The court further ordered
that since the proceeds from the sale of the Mortgaged
Property are insufficient to fully satisfy the amounts due
to [HawaiiUSA], that a motion for deficiency judgment may
2
The circuit court found that as of October 31, 2011, the Monalims
owed $1,080,852.79 on Note 1, which included the principal balance, interest,
accumulated late charges, and an escrow advance, and owed $127,821.36 on Note
2, which included the principal balance and interest, plus any accruing late
charges or advances up to the date of escrow closing. The order granting
confirmation of sale also included amounts for commissioner’s and attorneys’
fees and costs.
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subsequently be filed by [HawaiiUSA] against [the
Monalims], jointly and severally.
The record indicates that the circuit court--based on the
Monalims’ objection--ordered a further hearing on the matter of
the deficiency judgment. The judgment confirming the sale was
also entered on December 22, 2011.
B. HawaiiUSA’s Motion for Deficiency Judgment
Over four years later, on January 12, 2016, HawaiiUSA
filed a motion for deficiency judgment. In its motion,
HawaiiUSA requested $355,687.07 on Note 1 and $131,755.87 on
Note 2, which it alleged remained outstanding as of December 30,
2011, the closing date of the sale.3 The amount outstanding on
Note 1 was calculated by subtracting the net proceeds of the
sale ($735,045.92) from the amount owed on Note 1
($1,090,732.99). Because the net proceeds were insufficient to
pay the full amount owed on Note 1, no sale proceeds were
applied to the outstanding balance on Note 2.
The Monalims filed a memorandum opposing HawaiiUSA’s
motion for deficiency judgment, contending that the motion was
untimely because HawaiiUSA waited “for more than an
unprecedented four [] years” to bring the motion and that
3
HawaiiUSA requested the following additional sums: “continuing
interest” on both notes from December 30, 2011, until “the date of entry of
the deficiency judgment and statutory interest” thereafter on both notes;
attorneys’ fees and costs for the preparation of the motion for deficiency
judgment; and attorneys’ fees and costs related to the Monalims’ previously
dismissed ICA appeal.
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HawaiiUSA was therefore barred by the doctrine of laches.
According to the Monalims, HawaiiUSA was required by the
Foreclosure Order to request the amount of any deficiency
immediately following the sale of confirmation, “which it []
deliberately chose [] not to do.” The Monalims averred that
they could have filed for Chapter 7 Bankruptcy and suffered no
deficiency judgment had HawaiiUSA filed its motion in 2011.
Instead, the Monalims contended, “in reliance upon there being
no deficiency judgment they [had] set out to rebuild their
lives.” They each started a business, began saving for their
daughter’s college tuition, and were only a few months from
clearing the foreclosure from their credit reports, the Monalims
stated in an appended declaration. HawaiiUSA’s unexplained
delay in filing its motion for deficiency judgment would
“overwhelming[ly] prejudice” them, they argued.
The Monalims also challenged the method used for
calculating the deficiency judgment and contended that an
evidentiary hearing should be held to determine the fair market
value of the Property at the time of the sale. According to the
Monalims, Hawai‘i courts currently calculate the amount of a
deficiency judgment by “mathematically” subtracting the net
proceeds of the sale from the mortgage debt without considering
any evidence of a higher property valuation or any subsequent
sales for higher prices. Hawai‘i courts will set aside the
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earlier auction price only if it is said to “shock the
conscience of the Court,” the Monalims related. The Monalims
contended that this “completely ignores reality and equity”
because lenders have the ability to routinely “credit bid” for
the property at the foreclosure auction, thereby scaring away
competition.4 This enables a mortgagee to recover the property
at less than fair market value and secure a windfall, the
Monalims asserted. The result, the Monalims argued, is that
borrowers are penalized beyond what the foreclosing mortgagee
actually lost.
The Monalims contended that this procedure for
calculating deficiency judgments violates both procedural and
substantive due process because mortgagees are constitutionally
entitled to no more than payment in full. The Monalims
maintained that Hawai‘i’s method represents the minority view
among states and that the circuit court should instead conduct a
separate evidentiary hearing to determine the fair market value
of the Property, which would be deducted from the mortgage debt
4
A credit bid allows a secured lender to bid up to the amount of
debt owed to it in lieu of cash at sale. Lambert v. Teisina, 131 Hawai‘i 457,
459 n.5, 319 P.3d 376, 378 n.5 (2014) (per curiam) (“A ‘credit bid’ is a bid
up to an amount equal to the unpaid principal and interest of a debt,
together with costs, fees, and other expenses, without tendering cash.”).
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in lieu of the sale price if it is the greater of the two.
(Citing Sostaric v. Marshall, 766 S.E.2d 396 (W.Va. 2014).)
In its reply, HawaiiUSA argued that its motion for
deficiency judgment was proper because Hawai‘i law does not
require such a motion to be filed within a certain time from the
date of confirmation. Further, HawaiiUSA argued, the Monalims
did not suffer any prejudice because HawaiiUSA did not prevent
the Monalims from filing bankruptcy or make representations that
it would not seek a deficiency judgment, and the Monalims could
still file for bankruptcy. HawaiiUSA also contended that under
Hawai‘i caselaw, the court may refuse to confirm the sale if the
highest bid “is so grossly inadequate as to shock the
conscience,” which it was not in this case. (Quoting Wodehouse
v. Hawaiian Trust Co., 32 Haw. 835, 854 (Haw. Terr. 1933).)
HawaiiUSA maintained that third party bidders were not
discouraged from bidding; HawaiiUSA did not receive a windfall;
and the Monalims’ due process rights were not violated.
At the hearing on the motion for deficiency judgment,
the circuit court asked counsel for HawaiiUSA if there was any
reason why it had waited four years to file the motion. Counsel
responded that, without going into attorney-client privileged
information, counsel could not “comment about any particular
client’s” propensity to seek a motion. However, counsel
contended that once a judgment is obtained it lasts for ten
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years and, by analogy, the motion should be considered timely
because it was brought within that time period. The Monalims
responded that the analogy worked the opposite way because
HawaiiUSA could wait an indefinite amount of time to seek the
deficiency judgment, effectively extending the statutory period
for collecting the judgment, which was contrary to the
legislature’s intention to give the borrower some peace by
limiting the time period of liability. HawaiiUSA replied that a
further hearing on the deficiency judgment was ordered based on
the Monalims’ objection at the confirmation hearing and argued
that the foreclosure price was reasonable.
On October 13, 2016, the circuit court entered its
“Order Granting in Part and Denying in Part [HawaiiUSA’s] Motion
for Deficiency Judgment Against [the Monalims] Filed January 12,
2016” (Order Granting Deficiency Judgment) and the “Deficiency
Judgment Against the [the Monalims] and in Favor of [HawaiiUSA]”
(Deficiency Judgment). The Order Granting Deficiency Judgment
awarded HawaiiUSA a deficiency judgment of $493,282.04.5 “[D]ue
to the delay in filing” the motion, however, the circuit court
denied HawaiiUSA’s request for interest for the period between
the closing date of the sale and the entry of the Deficiency
5
The amount included the deficiencies on the two loans, attorneys’
fees and costs incurred in the preparation of the motion, and attorneys’ fees
and cost associated with the Monalims’ dismissed ICA appeal.
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Judgment, as well as its request for statutory interest for the
period after the entry of the Deficiency Judgment. The Order
Granting Deficiency Judgment did not address the laches defense
raised by the Monalims or their request for a hearing as to the
market value of the Property. The Monalims appealed to the ICA.
C. ICA Proceedings
On appeal, the Monalims maintained that HawaiiUSA’s
motion for deficiency judgment was barred by laches and that the
circuit court should have held evidentiary hearings on prejudice
resulting from the untimely motion and on the amount owed.
The ICA entered its Summary Disposition Order (SDO) on
May 17, 2018.6 The ICA held that the Monalims’ assertion that
the deficiency judgment was required to be determined at the
time of the confirmation of sale was without merit because the
Monalims objected and sought a further hearing in regard to the
deficiency judgment.
The ICA also stated that the Monalims made no
discernable argument about laches. Nevertheless, the ICA
addressed the prejudice posed by HawaiiUSA’s delay in filing the
motion, concluding that the order confirming the sale of the
Property gave the Monalims notice of the possibility of a
deficiency judgment such that their contentions related to
6
The ICA’s SDO can be found at HawaiiUSA Fed. Cred. Union v.
Monalim, No. CAAP-XX-XXXXXXX, 2018 WL 2254707 (May 17, 2018).
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prejudice were without merit. The ICA additionally found that
the Monalims had not requested a hearing on prejudice and held
that the circuit court therefore did not deny their request for
a hearing. Further, the ICA noted, the circuit court did
address potential prejudice to the Monalims when it denied
HawaiiUSA’s request for continuing interest from the closing
date of the sale to the entry of the Deficiency Judgment and for
statutory interest after the entry of the Deficiency Judgment.
The ICA also pointed to the Monalims’ failure to seek a
dismissal under Hawai‘i Rules of Civil Procedure (HRCP) Rule
41(b)(1) or to file a motion to bring closure to the
proceedings.
The ICA likewise rejected the Monalims’ contention
that the circuit court should have held an evidentiary hearing
on the amount owed. The ICA ruled that the method for
calculating the deficiency was not determined by the Deficiency
Judgment but rather the amount was incident to the enforcement
of the Foreclosure Judgment. The ICA found that the Monalims
had the opportunity to challenge how the deficiency judgment
would be calculated in their first appeal, and they failed to do
so. The ICA therefore held that the Monalims were precluded by
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res judicata from challenging the method of calculating the
Deficiency Judgment and affirmed the circuit court.7
II. STANDARDS OF REVIEW
A. Questions of Law
“Questions of law are reviewed de novo under the
right/wrong standard of review.” Roes v. FHP, Inc., 91 Hawai‘i
470, 473, 985 P.2d 661, 664 (1999) (quoting Francis v. Lee
Enters., Inc., 89 Hawai‘i 234, 236, 971 P.2d 707, 709 (1999)).
B. Courts Sitting in Equity
The extent of the relief granted by a court in equity
rests within the sound discretion of the circuit court and will
not be disturbed unless the circuit court abused its discretion.
Peak Capital Grp., LLC, v. Perez, 141 Hawai‘i 160, 172, 407 P.3d
116, 128 (2017); Hawaii Nat’l Bank v. Cook, 100 Hawai‘i 2, 7, 58
P.3d 60, 66 (2002). A court abuses its discretion by “issuing a
decision that clearly exceeds the bounds of reason or
disregard[ing] rules or principles of law or practice to the
substantial detriment of the appellant.” Cook, 100 Hawai‘i at 7,
58 P.3d at 66 (quoting Shanghai Inv. Co. v. Alteka Co., 92
Hawai‘i 482, 493, 993 P.2d 516, 526 (2000)).
7
The Monalims further argued as points of error that the
deficiency judgment was “contrary to the law of the case,” HawaiiUSA waived
its right to a deficiency judgment, and they were irreparably prejudiced
because they reasonably relied on HawaiiUSA’s waiver. The ICA did not
address the merits of these issues.
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C. Statutory Interpretation
The interpretation of a statute is a question of law
that is reviewed de novo. Deutsche Bank Nat’l Trust Co. v.
Greenspon, 143 Hawai‘i 237, 243, 428 P.3d 749, 755 (2018).
III. DISCUSSION
A. The Monalims’ Challenge to the Deficiency Judgment Is Not
Barred by Res Judicata.
The ICA held that res judicata barred the Monalims
from challenging the method in which the Deficiency Judgment was
calculated because they failed to raise the issue in their
appeal of the Foreclosure Judgment. It is true that the
doctrine of res judicata prohibits parties from relitigating a
previously adjudicated cause of action or claims that could have
been brought in a previous action between the same parties but
were not. Mortg. Electr. Registration Sys., Inc. v. Wise, 130
Hawai‘i 11, 17-18, 304 P.3d 1192, 1198-99 (2013). However, under
this court’s precedents, “foreclosure cases are bifurcated into
two separately appealable parts: (1) the decree of foreclosure
and the order of sale, if the order of sale is incorporated
within the decree, and (2) all other orders.” Id. at 16, 304
P.3d at 1197 (quoting Sec. Pac. Mortg. Corp. v. Miller, 71 Haw.
65, 70, 783 P.2d 855, 857 (1989)). And the bifurcated nature of
mortgage foreclosure proceedings is treated as two separate
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proceedings for res judicata purposes. Id. at 17, 304 P.3d at
1198.
Additionally, Hawai‘i Revised Statutes (HRS)
§ 667-51(a) (Supp. 2010) sets forth the specific orders that are
deemed final and appealable in the foreclosure context. Section
667-51(a)(1)8 provides that an adjudication of the right to a
deficiency judgment incorporated into a judgment on a decree of
foreclosure is final and appealable. Separately, section
667-51(a)(3)9 states that an appeal may be taken from the amount
8
HRS § 667-51(a)(1) provides as follows:
(a) Without limiting the class of orders not specified in
section 641-1 from which appeals may also be taken, the
following orders entered in a foreclosure case shall be
final and appealable:
(1) A judgment entered on a decree of foreclosure, and
if the judgment incorporates an order of sale or an
adjudication of a movant’s right to a deficiency
judgment, or both, then the order of sale or the
adjudication of liability for the deficiency judgment
also shall be deemed final and appealable[.]
Additionally, HRS § 667-51(a)(2) provides that, in the event it is not
incorporated with another order, “[a] judgment entered on an order confirming
the sale of the foreclosed property,” is appealable “if the circuit court
expressly finds that no just reason for delay exists, and certifies the
judgment as final pursuant to rule 54(b) of the Hawaii rules of civil
procedure[.]”
9
HRS § 667-51(a)(3) provides that the following order entered in a
foreclosure case shall be final and appealable:
(3) A deficiency judgment; provided that no appeal from a
deficiency judgment shall raise issues relating to the
judgment debtor’s liability for the deficiency judgment (as
opposed to the amount of the deficiency judgment), nor
shall the appeal affect the finality of the transfer of
title to the foreclosed property pursuant to the order
confirming sale.
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of a deficiency judgment provided that the appeal does not raise
issues related to the judgment debtor’s right to the deficiency
judgment or affect the finality of the transfer of title of the
foreclosed property. It is thus unsurprising that in Wise, this
court held that the defendant’s “timely appeal from the
Deficiency Judgments would entitle it to challenge errors unique
to it, such as an erroneous upset price or miscalculation of
deficiency.”10 130 Hawai‘i at 16, 304 P.3d at 1197 (second
emphasis added) (quoting Miller, 71 Haw. at 71, 783 P.2d at
858).
The ICA misapprehended this holding in concluding that
because the Monalims failed to challenge the method for
calculating the deficiency in their appeal of the Foreclosure
Judgment--which was dismissed--they were barred by res judicata
from challenging it in an appeal of the Deficiency Judgment. In
Wise, the petitioner appealed from an order confirming sale,
challenging the respondent’s standing to bring the foreclosure
suit “in the first place.” 130 Hawai‘i at 15, 17, 304 P.3d at
1196, 1198. We concluded that because the issue of standing
could have been raised at any time, it was not “unique” to the
confirmation of sale and should therefore have been challenged
10
Although the court did not cite HRS § 667-51(a) as a basis for
its decision in Wise, its holding is consistent with the statute.
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in an appeal from the judgment of foreclosure. Id. at 17, 304
P.3d at 1198.
In contrast to the standing issue before the Wise
court, the Monalims’ appellate challenge is to the method by
which the circuit court calculated the deficiency judgment,
which pertains to the amount of the deficiency judgment--not
HawaiiUSA’s right to collect it “in the first place.” See id.
at 15, 17, 304 P.3d at 1196, 1198. When the Monalims’ appeal of
the Foreclosure Judgment was dismissed by the ICA, the Monalims
lost the ability to contest HawaiiUSA’s right to a deficiency
judgment pursuant to the Foreclosure Judgment. However,
pursuant to HRS § 667-51(a)(3) and this court’s precedents, the
Monalims may still appeal the Deficiency Judgment as long as
their challenge contests the calculation of the deficiency
amount and not HawaiiUSA’s right to the deficiency judgment
under the Foreclosure Judgment. The Foreclosure Judgment did
not set out the amount or method for calculating the deficiency
judgment. Because the Monalims were not required to contest the
amount of the deficiency judgment in their appeal from the
Foreclosure Judgment, the prior proceeding does not implicate
res judicata. The ICA therefore erred in concluding that the
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Monalims were barred from contesting the method for calculating
the amount of the deficiency judgment.11
B. The Circuit Court Failed To Address the Monalims’ Laches
Argument.
“Mortgage foreclosure is a proceeding equitable in
nature and is thus governed by the rules of equity.” Beneficial
Hawaii, Inc. v. Kida, 96 Hawai‘i 289, 312, 30 P.3d 895, 918
(2001). An equity court’s sound discretion is not bound by
strict rules of law, but it can be molded to do justice. Id.
Although laches was originally a doctrine reserved for equitable
proceedings like the present case, this court has stated that,
in the State of Hawai‘i, “laches is a defense in all civil
actions.” Ass’n of Apartment Owners of Royal Aloha v. Certified
Mgmt., Inc., 139 Hawai‘i 229, 235, 386 P.3d 866, 872 (2016).
Therefore, laches is a defense against a motion for deficiency
judgment. See BayBank Conn., N.A., v. Thumlert, 610 A.2d 658,
662 (Conn. 1992) (“[A] defendant who is demonstrably prejudiced
by a plaintiff’s delay in filing a motion for deficiency
judgment may invoke the equitable defense of laches.”); E.
Banking Co. v. Robbins, 149 N.W. 779, 780 (Neb. 1914) (holding
11
We also overrule the following ICA cases to the extent that they
held that res judicata barred the mortgagee from challenging the method in
which the deficiency judgment was calculated: Ke Kailani Partners, LLC v. Ke
Kailani Dev. LLC, Nos. CAAP-XX-XXXXXXX & CAAP-XX-XXXXXXX, 2016 WL 2941054
(App. Apr. 29, 2016) (mem.); LCP-Maui, LLC v. Tucker, No. CAAP-XX-XXXXXXX,
2018 WL 1082855 (App. Feb. 28, 2018) (SDO).
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that “a court of equity in the exercise of its inherent power to
deny relief on account of laches, independently of the statute
of limitations, should refuse to enter a deficiency judgment”
when the petitioner had waited more than 14 years).
The doctrine of laches reflects the maxim that equity
aids the vigilant, not those who slumber on their rights. Small
v. Badenhop, 67 Haw. 626, 640, 701 P.2d 647, 656 (1985). There
are two prongs of the laches defense, both of which must be
satisfied in order for the doctrine to become applicable:
First, there must have been a delay by the plaintiff in
bringing his claim, and that delay must have been
unreasonable under the circumstances. Delay is reasonable
if the claim was brought without undue delay after
plaintiff knew of the wrong or knew of facts and
circumstances sufficient to impute such knowledge to him.
Second, that delay must have resulted in prejudice to
defendant.
Herrmann v. Herrmann, 138 Hawai‘i 144, 153, 378 P.3d 860, 869
(2016) (quoting Adair v. Hustace, 64 Haw. 314, 321, 640 P.2d
294, 300 (1982)).
Despite ruling that the Monalims made no discernable
argument as to a laches defense, the ICA also stated that the
Monalims’ arguments as to prejudice--the second prong of laches-
-were without merit. However, a review of the record
demonstrates that the Monalims raised substantive arguments as
to both of the defense’s requirements.
When evaluating the first prong of laches, a court
considers whether, under the circumstances, the delay in
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bringing the claim was unreasonable. Id. In this case, the
judgment confirming the sale was entered on December 22, 2011.
More than four years later, on January 12, 2016, HawaiiUSA filed
its motion for deficiency judgment. The Monalims argued in
their opposition to HawaiiUSA’s motion that the four-year delay
was unprecedented, and that HawaiiUSA had provided no
explanation for the delay in its submissions to the court. And
when asked directly during the hearing on the motion, counsel
for HawaiiUSA declined to provide an explanation for the delay,
citing attorney-client privilege. The Monalims’ establishment
of a four-year delay in HawaiiUSA seeking to recover a
deficiency amount from the Monalims and the lack of any
explanation for this delay by HawaiiUSA satisfied the Monalims’
burden to adduce sufficient facts to raise a laches defense with
regard to the first prong. Cf. Herrmann, 138 Hawai‘i at 153-54,
378 P.3d at 869-70 (noting that the plaintiff did not proffer a
satisfactory excuse for the almost seven-year delay in bringing
suit); see also In re Kawai, 36 Haw. 533, 536 (Haw. Terr. 1943)
(observing that a party who waited nearly five years after the
final order of distribution before commencing an action to
revoke a will did not provide a “satisfactory excuse”).
As to the second prong, that the delay must have
resulted in prejudice to the defendant, we have stated, “What
qualifies as prejudice for purposes of the laches doctrine
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invariably depends on the facts and circumstances of a
particular case, but it is ordinarily understood as anything
that places the defendant ‘in a less favorable position.’”
Herrmann, 138 Hawai‘i at 154, 378 P.3d at 870 (citing 27A
Am.Jur.2d Equity § 143 (2008)).
At the circuit court, the Monalims averred in a
declaration that they had planned to file a Chapter 7 Bankruptcy
Petition to discharge the potential deficiency judgment but had
abandoned their plan “after waiting close to a year” in
anticipation of the deficiency judgment. In the interim, the
Monalims explained, they had each started a business, started
saving for their daughter’s college tuition, and were only
months from clearing the foreclosure from their credit reports.
The Monalims argued to the circuit court that the deficiency
judgment would “wipe out” all of their financial gains since the
confirmation of sale, which would not have occurred if HawaiiUSA
moved for a deficiency judgment in 2011. The Monalims therefore
contended that they would be in a significantly worse position--
and suffer significant prejudice--as a result of HawaiiUSA’s
delay.
The Monalims thus alleged facts concerning each prong
of their laches defense. See Kerrigan v. Kerrigan, 642 A.2d
1324, 1327 (D.C. App. 1994) (holding that the defendant made a
prima facie showing sufficient to establish that injustice would
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result from the plaintiff’s unexplained eight-year delay in
bringing suit based on evidence that the defendant’s financial
situation had greatly changed in the interim). The ICA in this
case thus clearly erred in holding that the Monalims made no
discernable argument as to a laches defense. Additionally,
despite the presentation of the defense, the circuit court did
not render findings of fact and conclusions of law or otherwise
rule upon the applicability of the Monalims’ laches defense in
its Order Granting Deficiency Judgment or the Deficiency
Judgment.
The present case is analogous to Herrmann v. Herrmann,
in which the plaintiff brought a motion for post-decree relief
against the defendant to recover overpaid child support
approximately seven years after being notified about the
overpayments. 138 Hawai‘i at 147-48, 378 P.3d at 863-64. The
defendant argued that the seven-year delay was unreasonable and
that the plaintiff provided no explanation for waiting to bring
the action for reimbursement. Id. at 148, 378 P.3d at 864. The
family court denied the plaintiff’s motion, citing the seven-
year delay in raising the issue and concluding that the
plaintiff was “estopped” from pursuing the claim. Id. at 150,
378 P.3d at 866. On appeal, the ICA determined that the family
court’s decision was based on “estoppel by laches” and that the
family court had not made an independent conclusion as to
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prejudice. Id. at 150, 378 P.3d at 866. Applying its own
judgment, the ICA held that both requirements of “estoppel by
laches” were not present, and it accordingly vacated the family
court’s decision. Id. at 150-53, 378 P.3d at 866-69.
On review, this court determined that there were three
possible explanations for the family court’s failure to make
findings of fact as to prejudice: (1) the family court did not
apply the laches doctrine; (2) the court implicitly found that
the prejudice prong had been satisfied; or (3) the family court
failed to recognize that prejudice was a required prong for the
application of laches. Id. at 155, 378 P.3d at 871. Because of
the family court’s silence, we stated that it was uncertain
whether the prejudice prong had been satisfied, and the case was
remanded to the family court to render factual findings with
respect to whether the defendant was prejudiced by the delay.
Id.
Similarly, there are at least three possible
explanations for the circuit court’s silence regarding the
Monalims’ laches defense: (1) the circuit court implicitly
concluded that laches was inapplicable because it determined
that there was no unreasonable delay or that the Monalims
suffered no prejudice; (2) the circuit court failed to properly
apply the laches defense; or (3) the circuit court failed to
duly consider the Monalims’ laches defense. That is to say,
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based on the circuit court’s lack of findings as to the laches
defense, we are unable to determine on review whether the
circuit court appropriately considered this defense presented by
the Monalims.12 See 138 Hawai‘i at 155, 378 P.3d at 871.
The ICA alternatively held that the circuit court
addressed the potential prejudice to the Monalims by denying
HawaiiUSA’s requested interest on the deficiency amount.
However, as our holding in Herrmann illustrates, because the
circuit court did not issue any findings with regard to
prejudice, we cannot know whether this constituted appropriate
consideration of the laches defense. See Herrmann, 138 Hawai‘i
at 155-56, 378 P.3d at 871-72. The ICA also concluded that the
Monalims were on notice of the deficiency amount such that their
contentions related to prejudice were without merit. Though the
12
The concurring and dissenting opinion (dissent) agrees with our
conclusion that the circuit court erred by failing to address the Monalims’
laches argument, but it then proceeds to consider and rule on the merits of
the Monalims’ claim as if it were in the position of the trial court.
Dissent at 23. When an appellate court discerns that a trial court has
failed to make a finding because of an erroneous view of the law, the
standard rule is that the case should be remanded to the trial court to
permit that court to evaluate and render the findings that should have been
made in the first instance. Pullman-Standard v. Swint, 456 U.S. 273, 291
(1982). The only exception to this rule is when the record permits only one
resolution of the factual issue. Sprint/United Mgmt. Co. v. Mendelsohn, 552
U.S. 379, 387 (2008). Because the trial court in this case failed to rule
upon the applicability of the Monalims’ laches defense and rendered no
findings of facts on this defense, this court is clearly not in a position to
rule as a matter of law regarding factual aspects of the Monalims’ laches
defense. We accordingly decline to deviate from the basic principle of law
that fact-finding should be left to the fact-finder. See also Goo v.
Arakawa, 132 Hawai‘i 304, 317, 321 P.3d 655, 668 (2014) (“[A] trial court is
better equipped than an appellate court operating at a distance to fashion
equitable relief.”).
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fact that the Monalims were on notice of the potential
deficiency judgment against them in 2011 is part of the
circumstances to be considered by the circuit court in
evaluating the prejudice prong, it is not dispositive of the
Monalims’ contention that they have been prejudiced by
HawaiiUSA’s delay in pursuing the deficiency judgment, nor can
we conclude that this fact was actually considered by the
circuit court.13 See id.; Badenshop, 67 Haw. at 640, 701 P.2d at
657 (“Prejudice has been found . . . where changes in the value
of the subject matter or in the defendant’s position have
occurred[.]” (emphasis added)).
In sum, we hold that the ICA erred in affirming the
circuit court’s Deficiency Judgment without the circuit court
having demonstrably addressed the Monalims’ laches defense.14
13
The ICA also noted that the Monalims did not seek a dismissal
order or file any motions to bring closure to the proceeding. However, under
a laches analysis, the Monalims are not required to show they actively tried
to bring the proceedings to a close to demonstrate prejudice.
14
The Monalims also argued to the ICA that the Deficiency Judgment
violated the “Law of the Case” and that HawaiiUSA waived its right to the
deficiency judgment. On certiorari review, the Monalims additionally argue
the defense of estoppel by acquiescence. The Monalims’ contentions are
premised on their interpretation of the term “shall” in the provision in the
Foreclosure Order granting HawaiiUSA the right to a deficiency judgment.
At the hearing for confirmation of sale, if it appears that
the proceeds of the sale of the Mortgaged Property are
insufficient to pay all amounts due and owing to
[HawaiiUSA], [HawaiiUSA] may request a deficiency judgment
in its favor and against the [Monalims] for the amount of
the deficiency which shall be determined at the time of
confirmation and have immediate execution thereafter.
(continued . . .)
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And thus, the Order Granting Deficiency Judgment and the
Deficiency Judgment must be vacated, and on remand the circuit
court shall consider and render a determination on the Monalims’
laches defense.15
C. The Traditional Approach to Determining a Deficiency Judgment
May Hold Mortgagors Liable for More than What Is Owed and
Grant Mortgagees a Windfall.
In what appears to be a matter of first impression
before this court, we review the method by which Hawai‘i courts
calculate deficiency judgments. The Monalims argue that courts
in Hawai‘i “matter-of-factly” calculate a deficiency judgment by
subtracting the net proceeds of the foreclosure sale from the
mortgage debt owed without considering evidence of the
foreclosed property’s true market value at the time of sale.
The Monalims contend that lower courts should be instructed to
hold an evidentiary hearing to determine the true value of a
property when calculating a deficiency judgment, and that this
(. . . continued)
(Emphases added.)
On its face, the term “shall” in the provision relates only to
when the court intended to determine the amount of the deficiency judgment
should one be requested. By contrast, the order specified that HawaiiUSA
“may” request a deficiency judgment at the hearing on the confirmation of
sale--a right HawaiiUSA appears to have exercised. We therefore hold that
these arguments are without merit.
15
In light of our disposition, we do not address the Monalims’
contention that the circuit court should have conducted a separate
evidentiary hearing on prejudice.
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amount should be deducted from the mortgage debt in lieu of the
sale price if it is the greater of the two.
Determination of the amount of a deficiency judgment
generally follows two approaches. Under the traditional
approach, the price obtained at a foreclosure sale is the
“conclusive measure” of the amount to be deducted from the
outstanding mortgage debt. Restatement (Third) of Property:
Mortgages § 8.4 cmt. a. (Am. Law Inst. 1997).16 The amount of
the deficiency judgment is thus automatically calculated by
subtracting the foreclosure sale price from the outstanding
mortgage debt. 1 Grant S. Nelson & Dale A. Whitman, Real Estate
Finance Law § 8:3 (6th ed. 2014). A majority of jurisdictions
have rejected this approach, however. “Whether by judicial
decision or by statute, the majority view ‘afford[s] the
deficiency defendant the right to insist that the greater of the
fair market value[17] of the real estate or the foreclosure sale
price be used in calculating the deficiency.’” Sostaric v.
16
“At the opposite extreme, some states flatly prohibit deficiency
judgments in certain contexts.” Restatement (Third) of Property: Mortgages §
8.4 Reporters’ Note to cmt. a.
17
The exact terminology used varies by jurisdiction and includes,
for example, “fair market value,” “true market value,” “actual value,”
“reasonable value,” “fair value,” and “true value.” See Restatement (Third)
of Property: Mortgages § 8.4 Reporters’ Note to cmt. a. This opinion treats
these terms interchangeably with “fair market value” and defines “fair market
value” as “the price which would result from negotiation and mutual
agreement, after ample time to find a purchaser, between a vendor who is
willing, but not compelled to sell, and a purchaser who is willing to buy,
but not compelled to take a particular piece of real estate.” Id. § 8.4
cmt. c (defining “fair market value”).
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Marshall, 766 S.E.2d 396, 400 (W.Va. 2014) (footnote omitted)
(quoting Restatement (Third) of Property: Mortgages § 8.4 cmt.
a).
Scholars of foreclosure law have observed that the
price obtained at a foreclosure sale is often far below the fair
market value of the property as a result of the forced nature of
a foreclosure sale. Robert M. Washburn, The Judicial and
Legislative Response to Price Inadequacy in Mortgage Foreclosure
Sales, 53 S. Cal. L. Rev. 843, 848 (1980); Nelson & Whitman,
supra. In times of economic depression a foreclosed property is
likely to bring an even lower price. Nelson & Whitman, supra.
Measuring the deficiency judgment based on the foreclosure sale
price therefore may result in a double-loss to the deficiency
debtor: the debtor has lost the foreclosed property, and the
debtor has not been credited the actual value of the property
against the outstanding mortgage debt. See Restatement (Third)
of Property: Mortgages § 8.4 cmt. a; Washburn, supra, at 850.
Conversely, these conditions may allow a mortgagee to
potentially recover more than the original mortgage debt owed to
it. This situation occurs, for example, when a mortgagee
purchases the property during a foreclosure sale at a price
below its fair market value, obtains a deficiency judgment for
the difference between the foreclosure price and the outstanding
mortgage debt, and then resells the property at or above its
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fair market value. Restatement (Third) of Property: Mortgages
§ 8.4 cmt. a; Nelson & Whitman, supra; Washburn, supra, at 849.
The traditional approach to calculating a deficiency judgment
thus may produce inequity between mortgagors and mortgagees by
holding a mortgagor liable for more than what is owed and
granting mortgagees a windfall they are not due. This has
prompted several state legislatures since the 1930s to abandon
the traditional approach and instead mandate the use of a
property’s fair market value as the minimum measure for
determining a deficiency judgment.18 Nelson & Whitman, supra.
In addition to the states that have adopted the
majority view through legislation, several state courts have
adopted the majority view through judicial decision. In
Trustees of Washington-Idaho-Montana-Carpenters Employers
Retirement Trust Fund v. Galleria Partnership, for example, the
Supreme Court of Montana was called upon to review a
$1,308,193.35 deficiency judgment against the defendants, whose
foreclosed property had been valued at $1,100,000 two years
prior to a sheriff’s sale but was sold for $565,000. 780 P.2d
608, 609, 611 (Mont. 1989). The court determined that its own
18
At least 23 states statutorily define a deficiency using the
“fair value” of the foreclosed property. See Restatement (Third) of
Property: Mortgages § 8.4 Reporters’ Note to cmt. a; Sostaric, 766 S.E.2d at
400 n.11. Of those that have not, many prohibit deficiency judgments
entirely or with respect to purchase money mortgages. See Restatement
(Third) of Property: Mortgages § 8.4 Reporters’ Note to cmt. a.
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statutes were silent as to the duty of the court to determine
whether the sheriff’s sale reflected the fair market value of
the foreclosed property. Id. at 616-17. The court observed,
however, that the majority of the neighboring states had
statutes that “limited [a deficiency judgment] to the difference
between the fair market value of the secured property at the
time of the foreclosure sale, regardless of a lesser amount
realized at the sale, and the outstanding debt for which the
property was secured.” Id. at 616-17. The Ninth Circuit had
recognized that the purpose of two of those states’ statutes was
to prevent the injustice that befalls the judgment debtor whose
foreclosed property brings a price significantly less than its
fair market value, the Montana court noted. Id. at 617 (citing
U.S. v. MacKenzie, 510 F.2d 39, 41 (9th Cir. 1975)). In the
exercise of its equity jurisdiction, the court deemed it proper
to remand the case for determination of the property’s fair
market value as of the time of the sheriff’s sale, which would
then be used to calculate the deficiency judgment. Id.
The Supreme Court of West Virginia has similarly
adopted the majority view through judicial decision. In
Sostaric v. Marshall, the court noted that, while the governing
state statute was silent as to whether the value of real
property could be challenged at a deficiency judgment
proceeding, the court had previously applied common law
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principles of equity to set aside foreclosure sales. 766 S.E.2d
at 403. Concluding that adoption of the majority view would,
inter alia, prevent a creditor from receiving a windfall at the
expense of a deficiency defendant, the court overruled its
previous precedent in favor of adopting the majority view. Id.
at 405. Thus, state supreme courts have not shied from using
their inherent equity powers to adopt the majority view to
create fairness between the parties in foreclosure proceedings.
See also Wansley v. First Nat. Bank of Vicksburg, 566 So. 2d
1218, 1223-25 (Miss. 1990) (holding that every aspect of the
foreclosure sale must be “commercially reasonable”); Vantium
Capital, Inc. v. Hobson, 137 So. 3d 497, 499 (Fla. Ct. App. 2014)
(utilizing the “fair market value” as the measure for awarding a
deficiency decree); Licursi v. Sweeney, 594 A.2d 396, 398-99
(Vt. 1991) (using the “value” of the property as the measure to
determine whether a deficiency existed).
In 1997, the American Law Institute also adopted the
majority approach in the Restatement (Third) of Property:
Mortgages § 8.4. As set forth in the Restatement, the
deficiency judgment debtor may request a determination of the
“fair market value” of foreclosed property as of the date of the
foreclosure sale. Restatement (Third) of Property: Mortgages
§ 8.4(c). If the fair market value is greater than the
foreclosure price, the deficiency judgment debtor is entitled to
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offset the deficiency against the fair market value. Id.
§ 8.4(d). Determination of a property’s fair market value is
not automatic and must be requested by a deficiency judgment
debtor. Id. § 8.4 cmt. b. Thus, the Restatement “adopts the
position of the substantial number of states that, by
legislation or judicial decision,” allow for the calculation of
the deficiency award using the greater of the fair market value
or foreclosure price. Id. § 8.4 cmt. a.
In adopting the majority view, the Restatement’s
approach is aimed at making the mortgagee whole while
simultaneously preventing the unjust enrichment that could
result from the traditional approach:
This approach enables the mortgagee to be made whole where
the mortgaged real estate is insufficient to satisfy the
mortgage obligation, but at the same time protects against
the mortgagee purchasing the property at a deflated price,
obtaining a deficiency judgment and, by reselling the real
estate at a profit, achieving a recovery that exceeds the
obligation.
Id. Logically, the majority rule protects a mortgagee against
any loss that would occur from a sale of the property at less
than its fair market value because the mortgagee retains the
option of tendering a credit bid for the amount of the
outstanding mortgage debt and obtaining the property without
additional monetary payment if there are no greater bids. The
dissent disagrees, arguing that “the mortgagee will still not be
made whole if the outstanding mortgage debt exceeds the fair
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market value of the property.” Dissent at 22. But this focus
on cases in which the outstanding mortgage debt exceeds the fair
market value of the property “deflects consideration of the risk
management techniques available to lenders when the loan is
made.”19 See Sostaric, 766 S.E.2d at 404 n.17 (quoting First
Bank v. Fischer & Frichtel, Inc., 364 S.W.3d 216, 227 n.5 (Mo.
2012) (Teitelman, C.J., dissenting)). Further, by allowing the
deficiency judgment debtor to request a determination of the
fair market value, the Restatement’s approach protects the
mortgagor from the danger of double-loss that would result from
“a deficiency judgment that does not fairly recognize the value”
of the foreclosed property. Restatement (Third) of Property:
Mortgages § 8.4 cmt. a; see also CSA 13-101 Loop, LLC v. Loop
101, LLC, 341 P.3d 452, 456 (Ariz. 2014) (“Restatement § 8.4
seeks to protect against artificially increased deficiencies.”).
19
As stated by the Sostaric court:
A lender compensates for risk by charging an interest rate
that is set both by the financial markets and by the
lender’s assessment of the borrower’s creditworthiness.
The lender also manages risk by appraising the fair market
value of the property to ensure that the loan is adequately
secured. Changing to a fair market value approach
certainly would lessen the lender’s chance of a large
windfall and would mean only that [the mortgagee], like the
borrower, is losing or gaining money based on fair market
value of property. The risk of loss is part of the risk of
lending. That risk of loss should not be borne solely by
the borrower and then amplified by measuring the deficiency
by reference to the foreclosure sale price.
Sostaric, 766 S.E.2d at 404 n.17 (quoting First Bank v. Fischer & Frichtel,
Inc., 364 S.W.3d 216, 227 n.5 (Mo. 2012) (Teitelman, C.J., dissenting)).
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Thus, section 8.4 of the Restatement provides a
greater balance of the equities between mortgagor and mortgagee
in the foreclosure process than the traditional approach.
D. We Adopt the Majority Approach Because It Is Consistent
with Principles of Equity and Hawai‘i Law.
In Hawai‘i, HRS § 667-1.5 (Supp. 2015) authorizes
foreclosure by action and provides as follows:
The circuit court may assess the amount due upon a
mortgage, whether of real or personal property, without the
intervention of a jury, and shall render judgment for the
amount awarded, and the foreclosure of the mortgage.
Execution may be issued on the judgment, as ordered by the
court.
Our interpretation of statutes is guided by the following well-
settled 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.
State v. Castillon, 144 Hawai‘i 406, 411, 443 P.3d 98, 103 (2019)
(quoting Panado v. Bd. of Trs., Emps.’ Ret. Sys., 134 Hawai‘i 1,
11, 332 P.3d 144, 154 (2014)). Therefore, our interpretation of
HRS § 667-1.5 must begin with the language of the statute
itself. HRS § 667-1.5 plainly states that the circuit court
“may assess the amount due upon a mortgage . . . and shall
render judgment for the amount awarded.” By its use of the word
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“may” the legislature has permitted courts to exercise
discretion in assessing the amount due on a mortgage, “without
the intervention of a jury.” HRS § 667-1.5. Further, the
statute confers on the court “specific authority to render a
deficiency judgment, as an incident to the foreclosure.” Bank
of Honolulu, N.A. v. Anderson, 3 Haw. App. 545, 549, 654 P.2d
1370, 1374 (1982) (emphasis omitted) (citing 2 Committee on
Coordination of Rules and Statutes, Report of Committee on
Coordination of Rules and Statutes (1971)). Under its plain
language, Chapter 667 (governing foreclosures) does not mandate
either the traditional or majority approach to calculating
deficiency judgments. Instead, the legislature has left the
determination of the amount due in a deficiency judgment and
thereby the method for its calculation to the discretion of the
courts.
The Monalims contend that courts in Hawai‘i currently
determine a deficiency judgment by mechanically subtracting the
price obtained at a foreclosure sale from the outstanding
mortgage debt. They ask that this court follow the approach of
the majority of states and the Restatement by requiring lower
courts to conduct an evidentiary hearing to determine the fair
market value of a foreclosed property when calculating a
deficiency judgment. Citing Wodehouse v. Hawaiian Trust Co., 32
Haw. 835, 854 (Haw. Terr. 1933), HawaiiUSA argues that no such
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inquiry is required under Hawai‘i law and contends that our
caselaw requires the mortgagor to bear the burden of any loss
unless the foreclosure price “is so grossly inadequate as to
shock the conscience.”
In Wodehouse, the trial court ordered the foreclosure
and sale of property at a public auction with an upset price of
$82,000. Id. at 840. After the property twice failed to receive
any bids, the court gave the mortgagees a choice between taking
possession of the mortgaged property as credit for $82,000 of
the debt or postponing the sale to a later date. Id. The
mortgagees declined both options, but the court nonetheless
ordered the conveyance of the property to the mortgagees and
credited the mortgagor $82,000 toward their outstanding debt.
Id.
On appeal, the Supreme Court of the Territory of
Hawai‘i concluded that while a court may refuse to confirm a sale
where “the highest bid offered is so grossly inadequate as to
shock the conscience,” the trial court could not compel the
mortgagee to purchase the property at a price set by the court
because the mortgagee had a contractual right to foreclose on
the property. Id. at 852-54. The court therefore set aside the
trial court’s decree and remanded the case to the lower court
with instructions to have the property offered at public auction
under foreclosure. Id. at 854.
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Wodehouse thus dealt with the court’s discretion with
regard to the sale and confirmation of sale of a foreclosed
property and not with the separate question of whether and for
what amount a deficiency judgment is due. See Wansley, 566
So. 2d at 1224 (holding that the rule that “a foreclosure sale
may not be set aside unless the sales price is so inadequate as
to shock the conscience . . . . has nothing whatsoever to do
with the separate and distinct question of what, if any,
deficiency judgment may be allowed” (citations omitted)).
Wodehouse is therefore not controlling with regard to the
question presently before the court.
“Mortgage foreclosure is a proceeding equitable in
nature and is thus governed by the rules of equity.” Beneficial
Hawaii, Inc. v. Kida, 96 Hawai‘i 289, 312, 30 P.3d 895, 918
(2001). A court sitting in equity has the power to mold its
decrees to conserve the equities of the parties under the
circumstances. Peak Capital Grp., LLC v. Perez, 141 Hawai‘i 160,
179, 407 P.3d 116, 135 (2017). When considering the equities in
a foreclosure case, “all of the equities must be considered”
including “[t]he equities affecting the mortgagees . . . as well
as those affecting the mortgagors.” Wodehouse, 32 Haw. at 842.
The equitable discretion provided to our courts by HRS § 667-1.5
is therefore governed by principles of equity and fairness.
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As observed in the commentary to the Restatement, the
majority rule “enables the mortgagee to be made whole” and “also
protects the mortgagor from the harsh consequences of suffering
both the loss of the real estate and the burden of a deficiency
judgment that does not fairly recognize the value of that real
estate.” Restatement (Third) of Property: Mortgages § 8.4
cmt. a. By contrast, the traditional approach is susceptible to
abuse, potentially permitting a mortgagee to reap an undue
windfall at a mortgagor’s expense. Id. The commentary goes on
to note that “[t]he approach of this section is embodied in
statutes in many jurisdictions, but the principles of this
section are applicable whether a statute requires it or not.”
Id. (emphasis added). Because the equities clearly weigh in
favor of the majority approach, we now adopt section 8.4 of the
Restatement (Third) of Property as Hawai‘i law. We thus hold
that a deficiency defendant “may request . . . a determination
of the fair market value of the real estate as of the date of
the foreclosure sale.” Id. § 8.4(c).20
20
Pursuant to HRS § 667-1.5, the court may determine the fair
market value of the property “without the intervention of a jury.” Section
8.4 of the Restatement (Third) of Property, which we expressly adopt, gives
guidance on how the fair market value may be calculated. Comment c to
section 8.4 provides as follows:
The determination of fair market value may appropriately
utilize a variety of approaches including (1) the “market
data” approach indicated by recent sales of comparable
properties; (2) the “income approach,” or the value which
the real estate’s net earning power will support based upon
(continued . . .)
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The dissent asserts that by adopting section 8.4 of
the Restatement (Third) of Property, which accords with the rule
in the majority of jurisdictions and the modern trend, this
court usurps the legislature’s role. Dissent at 10, 13, 13 n.4,
22-23. The dissent’s contention is groundless in light of the
fact that the legislature, through HRS § 667-1.5, has expressly
provided that the determination of the amount due in a
deficiency judgment, and thereby the method for its calculation,
is entrusted to the discretion of the courts. HRS § 667-1.5
(“The circuit court may assess the amount due upon a mortgage
. . . and shall render judgment for the amount awarded, and the
foreclosure of the mortgage.”). By not specifying a method of
calculation, the legislature authorized the courts to exercise
discretion in determining how to calculate deficiency judgments.
Nothing in the language of HRS § 667-1.5 suggests that the
legislature sought to circumscribe a court’s discretion in this
regard by precluding consideration of the fair market value of
(. . . continued)
a capitalization of net income; and (3) the current cost of
reproducing the property less depreciation.
Additionally, we adopt section 8.4’s prohibition on the advance
waiver of the right to a determination of the fair market value because “[i]f
such waiver were permitted, most mortgage forms would routinely incorporate
waiver language and the impact of this section would be significantly
weakened.” Id. § 8.4 Reporters’ Note to cmt. b.
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the foreclosed property.21 The dissent’s assertion reflects a
core misunderstanding of the legal principle at the foundation
of this opinion--the application of a statute to the facts of a
case. It is axiomatic that it is “the province and duty of the
judicial department to say what the law is.” Marbury v.
Madison, 5 U.S. 137, 177 (1803). And accordingly, “[t]hose who
apply the rule to particular cases, must of necessity expound
and interpret that rule.” Id.
Despite the clear language of the statute, the dissent
claims that our interpretation of HRS § 667-1.5 is “misguided.”
Dissent at 18. Specifically, the dissent first posits that a
court’s assessment of “the amount due upon a mortgage” under HRS
§ 667-1.5 is not related to the amount of a subsequent
deficiency judgment, but instead refers to a determination of
the amount due on the mortgage before a foreclosure sale has
taken place. Dissent at 15. However, the dissent’s
interpretation is directly contrary to longstanding precedent.
See Anderson, 3 Haw. App. at 549, 654 P.2d at 1374 (“[HRS § 667-
1.5] does not require the determination of a sum certain before
foreclosure is decreed since a deficiency judgment is rendered
only after the sale of the mortgaged property.”) (emphases
21
Indeed, at oral argument HawaiiUSA’s counsel acknowledged that
the circuit court could, under the right procedural circumstances, consider
the fair market value of a foreclosed property. Oral Argument at 00:59:45-
01:00:10, HawaiiUSA v. Monalim, (No. SCWC-XX-XXXXXXX), http://oaoa.hawaii.gov
/jud/oa/19/SCOA_011119_SCWC_16_807.mp3 [https://perma.cc/TBK2-9K9G].
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added) (citing Indep. Mortg. Tr. v. Glenn Constr. Corp., 57 Haw.
554, 555 n.1, 560 P.2d 488, 489 n.1 (1977)).22
Second, the dissent maintains that HRS § 667-1.5 does
not vest any discretion in the courts to determine the method by
which deficiency judgments are calculated. Particularly, the
dissent relies on the fact that HRS § 667-1.5 does not contain
language that “expressly permit[s] the court to consider fair
market value.” Dissent at 16. But it is this very absence of
22
The dissent criticizes our citation to Anderson because, the
dissent asserts, it is a decision of the ICA that “this court has never
referenced or adopted.” Dissent at 15 n.5. Respectfully, this is a
misstatement of our jurisprudence. See Bank of America, N.A. v. Reyes-
Toledo, 139 Hawai‘i 361, 367, 390 P.3d 1248, 1254 (2017) (citing Anderson for
the rule that a foreclosing party must prove the existence of an agreement,
the terms of the agreement, a default by the mortgagor under the terms of the
agreement, and the giving of the cancellation notice in order to prove
entitlement to foreclose); Bank of N.Y. Mellon v. R. Onaga, Inc., 140 Hawai‘i
358, 361, 370, 400 P.3d 559, 562, 571 (2017) (affirming circuit court’s
judgment confirming the sale of foreclosed property after the foreclosing
party proved it was entitled to foreclosure under the “[Anderson]
requirements”).
The dissent then asserts that its interpretation of HRS § 667-1.5
is in fact consistent with the interpretation of the statute in Anderson. To
reiterate, the dissent interprets HRS 667-1.5’s statement that “[t]he circuit
court may assess the amount due upon a mortgage” as referring to the
determination of the amount due upon the mortgage before a foreclosure sale
takes place. Dissent at 15. In Anderson, the ICA rejected a foreclosure
defendant’s contention that the decree of foreclosure, which entitled the
foreclosing party to a foreclosure sale, was invalid because it failed to
specify the actual amount due on the mortgage. The rule set out by the ICA
in Anderson, which we adopted in Reyes-Toledo, is that the foreclosing party
need only prove the existence of an agreement, the terms of the agreement, a
default by the mortgagor under the terms of the agreement, and the giving of
the cancellation notice in order to prove entitlement to foreclose.
Anderson, 3 Haw. App. at 549, 654 P.2d at 1374; Reyes-Toledo, 139 Hawai‘i at
367, 390 P.3d at 1254. Our law does not burden the foreclosing party with
the obligation to prove the amount due on the mortgage before the foreclosure
sale because “a deficiency judgment is rendered only after the sale of the
mortgaged property.” Anderson, 3 Haw. App. at 549, 654 P.2d at 1374. This
process does not require a court to determine the amount due on the mortgage
before granting a decree of foreclosure to the mortgagee.
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an express directive on the method of calculation that enables a
court to exercise discretion in determining the deficiency
judgment, including applying, or not applying, the traditional
method that the dissent appears to favor.
The dissent next relies upon 2012 “legislative
history” to HRS § 667-1.5, a statute that the dissent
acknowledges has essentially remained unchanged since its
enactment in 1859.23 Dissent at 16-17. Even if the legislative
“history” cited by the dissent had been contemporaneous with the
enactment of the 1859 version of the statute, resort to
legislative history in this manner would only be appropriate if
the word “may” in the statute were ambiguous. Castillon, 144
Hawai‘i at 411, 443 P.3d at 103 (“[W]here the statutory language
is plain and unambiguous, our sole duty is to give effect to its
plain and obvious meaning.” (quoting Panado, 134 Hawai‘i at 11,
332 P.3d at 154)). And assuming arguendo that the word “may” in
HRS § 667-1.5 is ambiguous, reliance on a subsequent legislative
committee report written 153 years after enactment of the
statute underscores the criticism this approach has repeatedly
garnered from the United States Supreme Court. United States v.
Texas, 507 U.S. 529, 535 n.4 (1993) (“[S]ubsequent legislative
23
The dissent describes the 2012 legislature as “the Legislature
which most recently amended HRS § 667-1.5[.]” Dissent at 18. We observe
that the only changes to HRS § 667-1.5 effected by the 2012 amendments were
to the section number and title. 2012 Haw. Sess. Laws Act 182, § 3 at 648.
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history is a ‘hazardous basis for inferring the intent of an
earlier’ Congress.” (quoting Pension Benefit Guar. Corp. v. LTV
Corp., 496 U.S. 633, 650 (1990))); United States v. Price, 361
U.S. 304, 313 (1960).24
The dissent’s accusation of usurpation and judicial
activism is therefore without any validity in light of our
statutory law vesting such discretion in the circuit court and
the equitable nature of foreclosure proceedings.25
Additionally, the dissent disagrees with our adoption
of the Restatement’s approach because “the new rule will
not . . . protect both parties to the mortgage.” Dissent at 10.
However, the dissent’s view has been overwhelmingly rejected by
24
Additionally, the committee report in fact acknowledges the
inequity of the traditional method of calculating deficiency judgments. See
S. Stand. Comm. Rep. No. 3325, in 2012 Senate Journal, at 1075 (“Your
Committee further notes that owner-occupants who lose their primary
residences to foreclosure suffer harsh personal losses that leave them
particularly susceptible in cases where the lender may pursue a deficiency
judgment . . . . As such, owner-occupants should be provided with greater
relief from deficiency judgments.”). As the committee report noted, the
tendency of the traditional method to produce inequitable results merited
further discussion. Id. It is not surprising that the majority rule, which
we adopt today, is cognizant of the concern articulated in the committee
report and provides an equitable means to calculate the deficiency judgment
in such cases.
The dissent argues to the contrary, stating that the legislature
“expressed concern about limiting lenders’ ability to pursue deficiency
judgments, even in the case of a displaced owner-occupant, due to the
prevalence of borrowers refinancing their mortgages for more than the value
of their home.” Dissent at 17-18 (footnote omitted). Respectfully, the
dissent misconstrues the legislature’s apprehension, which pertained solely
to “prohibiting” deficiency judgments, and not at all to consideration of a
more equitable means to determine their amount.
25
Indeed, in the Missouri case that the dissent relies upon, the
court declined to reconsider the manner in which deficiency judgments are
calculated substantially because Missouri lacked a statutory equivalent to
HRS § 667-1.5. Dissent at 18-19; First Bank, 364 S.W.3d at 223.
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the majority of jurisdictions, legal scholars, and the American
Law Institute. See Washburn, supra, at 939 (“Fairness in the
mortgage foreclosure process can be achieved only by balancing
the rights of the mortgagee with the need to protect the
mortgagor. The fulcrum of this balance is the market value of
the foreclosed property.”); Restatement (Third) of Property:
Mortgages § 8.4 cmt. a (adopting position of the substantial
number of jurisdictions providing the deficiency defendant with
the right to have “the greater of the fair market value of the
real estate or the foreclosure sale price be used in calculating
the deficiency”).
The dissent also posits that our adoption of the
majority rule “will unnecessarily burden parties to a
foreclosure action,” and that tasking the trial court with
assessing the fair market value of real property is unduly
burdensome because it will “require[] additional time and
force[] all parties to incur additional costs.” Dissent at 20-
21. Despite the dissent’s speculative concerns, the experience
of jurisdictions following the majority rule is quite the
contrary:
[W]e find no authority or data demonstrating that our
trustee foreclosure laws would be unsettled were we to
allow a trust deed grantor to challenge the value of real
property at a deficiency judgment proceeding. A majority
of states allow grantors to challenge the value of real
property at a deficiency judgment proceeding. We have
found no authority suggesting that the states that follow
the majority rule suffer from unsettled foreclosure laws,
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nor have we found any data demonstrating that the banking
institutions in those states have been negatively affected
as a result of their jurisdictions adhering to the majority
rule.
Sostaric, 766 S.E.2d at 404 (emphases added). Moreover, any
administrative concerns entailed by our adoption of section 8.4
are more than offset by the equity and fairness gained in
determining a deficiency judgment based on the fair market value
of the property, as manifestly demonstrated by the widespread
adoption of the majority approach.26
The dissent further contends that our adoption of the
majority rule in this case is unwarranted because, “[t]he record
26
Further, our courts are already called upon to make financial
determinations similar to assessing the fair market value of real property in
many other contexts. See, e.g., State v. Nelson, 140 Hawai‘i 123, 134 n.14,
398 P.3d 712, 723 n.14 (2017) (deeds of real property used to secure a bail
bond must have a market value at least twice the amount of the bail); Gordon
v. Gordon, 135 Hawai‘i 340, 349, 350 P.3d 1008, 1017 (2015) (division of real
property for divorce); City & Cty. of Honolulu v. Steiner, 73 Haw. 449, 459,
834 P.2d 1302, 1308 (1992) (tax appeals); Burgess v. Arita, 5 Haw. App. 581,
589, 704 P.2d 930, 936-37 (1985) (damages for breach of land sale contract).
Parties may adduce evidence of the fair market value of the foreclosed-upon
property in a variety of ways that do not entail significant additional
expenditure. See City & Cty. of Honolulu v. Int’l Air Serv. Co., 63 Haw.
322, 332, 628 P.2d 192, 200 (1981) (“Most courts presume an owner is familiar
with his land and the market therefor and thus is competent to state an
opinion of its value.”); State v. Kunimoto, 62 Haw. 502, 507, 617 P.2d 93, 97
(1980) (“[R]ecent sales of similar real estate are admissible as evidence in
condemnation cases, either as substantive proof of value of property taken or
in support of an expert’s opinion as to value.”); Krog v. Koahou, No. SCWC-
XX-XXXXXXX, 2014 WL 813038 (Feb. 28, 2014) (mem.) (holding that a declaration
of a real estate broker was properly admitted to prove the rental value of
real property).
In response to the many authorities cited above, the dissent
criticizes our citation to International Air Services Co. because “[n]either
the mortgagee nor the mortgagor would be a disinterested party who could
proffer an impartial opinion.” Dissent at 21 n.9. But assessing the
credibility of interested witnesses and the weight to be given to testimony
is a core function of a trial court. Additionally, this critique is equally
applicable to any case in which parties retain expert witnesses.
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shows that the deficiency judgment will not unjustly enrich the
credit union.” Dissent at 11.27 In support of this contention,
the dissent focuses on the fact that HawaiiUSA did not purchase
the Property at the foreclosure auction. Id. The Restatement,
however, rejects the requirement that the fair value
determination be restricted to mortgagee purchasers. Section
8.4 instructs that
limiting the application of the fair value determination to
mortgagee purchasers may discourage mortgagees who
contemplate obtaining deficiency judgments from taking part
in the foreclosure bidding and hence may remove a
significant impetus to higher bidding by third parties. In
addition, even when a third party is the purchaser, the
mortgagor may still suffer the unjustifiable double burden
imposed by the loss of his or her real estate and an
unfairly measured deficiency judgment. Consequently, under
this section foreclosing mortgagees are subject to the fair
value limitation on deficiency judgments irrespective of
who purchases at the sale.
Restatement (Third) of Property: Mortgages § 8.4 Reporters’ Note
to cmt. b (emphases added). Thus, while section 8.4’s primary
purpose is “preventing the unjust enrichment of the mortgagee .
. . . [section 8.4] also protects the mortgagor from the harsh
consequences of suffering both the loss of the real estate and
the burden of a deficiency judgment that does not fairly
recognize the value of that real estate.” Restatement (Third)
of Property: Mortgages § 8.4 cmt. a. This second purpose is
served even when a third party is the purchaser because the fair
value determination protects the mortgagor from a deficiency
27
HawaiiUSA also argues that it did not secure a windfall profit
over what was actually owed because it was not the purchaser of the Property.
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judgment that does not fairly recognize the value of the lost
real estate.28
We observe that both the dissent and HawaiiUSA argue
that the deficiency judgment awarded against the Monalims fairly
recognizes the value of the Property because the sale price at
the foreclosure auction exceeded the City and County’s valuation
of the Property for purposes of tax assessment. Dissent at 11.
The reliance by HawaiiUSA and the dissent on the tax-assessed
value of the Property to demonstrate market value does not
recognize the longstanding and “overwhelming weight of authority
that assessed value is not competent direct evidence of value
for purposes other than taxation.” C. C. Marvel, Annotation,
Valuation for Taxation Purposes as Admissible to Show Value for
Other Purposes 39 A.L.R. 2d 209 §4[a] (1955); see also Mettee v.
Urban Renewal Agency, 518 P.2d 555, 557 (Kan. 1974) (“Although
the assessor is required to appraise the value of the property,
28
The dissent claims incredulity of our adoption of the majority
rule in this case. Dissent at 10, 14, 22-23. The dissent acknowledges,
however, that in instances where, for example, (1) the lender is the
purchaser, (2) the borrower alleges that the sale terms were unconscionable,
or (3) the borrower alleges that the sale was conducted fraudulently, a court
could be required to make a fair value determination when there are
suggestions of inequity to ensure fairness to the borrower. Dissent at 20
n.7. But waiting for a case in which the mortgagee is unjustly enriched
before adopting the majority rule is imprudent. Our adoption of the majority
rule shall be prospective only--as it would be in any subsequent case. See
infra pp. 49-51. It would thus result in a greater injustice if we were to
await a case in which the mortgagee receives an undue windfall and the
borrower suffers the “harsh consequences” of “a deficiency judgment that does
not fairly recognize the value of that real estate.” Restatement (Third) of
Property: Mortgages § 8.4 cmt a.
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it is an open secret that the assessment rarely approaches the
true market value.” (quoting 5 Nichols on Eminent Domain § 22.1
(3d ed.))). For over a century, courts in this country have
recognized that tax assessments of real estate are not always
aimed at estimating fair market value, and even when that is the
case it is well understood that the custom of assessors is to
assess property in comparison with the surrounding land. Wray
v. Knoxville, L.F. & J.R. Co., 82 S.W. 471, 475 (Tenn. 1904)
(“This court knows judicially and as a part of the financial
history of the State that land is never assessed for purposes of
taxation at its real cash market value, though that may be the
law, but only in comparison with other lands around it[.]”); see
also McClure v. Delguzzi, 767 P.2d 146, 148 (Wash. Ct. App.
1989) (“[N]otwithstanding statutory requirements, assessor’s
values were relative, not actual.”).29 As such, the reliance by
the dissent and HawaiiUSA on the tax-assessed valuation of the
Property is misguided. In fact, examination of the facts in
this very case disabuses one of the notion that tax assessments
accurately reflect market value. The Monalims purchased the
Property in 2008. The mortgages the Monalims executed on the
property at the time of sale were for the total amount of
29
Assessed values may also exceed market values. See, e.g, Kuiters
v. Cty. of Freeborn, 430 N.W.2d 461, 462 (Minn. 1988) (agricultural property
in the county was assessed, on average, at 115% of its market value).
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$1,025,100. The tax-assessed value of the Property in 2008 was
$322,600.
In any event we need not resolve whether the
deficiency judgment awarded against the Monalims fairly
accounted for the value of the Property. Of more fundamental
importance, there is little disagreement that the equitable
considerations of foreclosure proceedings warrant affording the
mortgagee the right to apply the fair market value of mortgaged
property towards the amount due on the mortgage, as section 8.4
provides. The majority of jurisdictions and the growing
consensus regarding a mortgagor’s right to a fair market value
determination firmly establishes that, by adopting section 8.4,
we advance the fundamental fairness of foreclosure proceedings
in Hawai‘i, protect mortgagors from the double burden of losing
their land and suffering an unfairly measured deficiency
judgment, and enable mortgagees to be made whole.
Because our adoption of section 8.4 “announce[s] a new
rule . . . we are free to apply this new rule with or without
retroactivity.”30 Lewi v. State, 145 Hawai‘i 333, 349 n.21, 452
P.3d 330, 346 n.21 (2019) (internal quotations and alterations
omitted) (quoting State v. Jess, 117 Hawai‘i 381, 401, 184 P.3d
30
We reject the Monalims’ contention that procedural and
substantive due process was violated in determining the amount of the
deficiency judgment in light of the circumstances of this case.
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133, 153 (2008)). Regarding the retroactive effect of our
holdings, we have adopted the following approach:
This court has generally considered three primary
alternatives in deciding to what degree a new rule is to
have retroactive effect. First, this court may give a new
rule purely prospective effect, which means that the rule
is applied neither to the parties in the law-making
decision nor to those others against or by whom it might be
applied to conduct or events occurring before that
decision. Second, this court may give a new rule limited
or “pipeline” retroactive effect, under which the rule
applies to the parties in the decision and all cases that
are on direct review or not yet final as of the date of the
decision. Third, this court may give a new rule full
retroactive effect, under which the rule applies both to
the parties before the court and to all others by and
against whom claims may be pressed. . . .
In exercising our discretion in deciding the effect of a
new rule, we weigh the merits and demerits of retroactive
application of the particular rule in light of (a) the
purpose of the newly announced rule, (b) the extent of
reliance . . . on the old standards, and (c) the effect on
the administration of justice of a retroactive application
of the new standards.
Id. (internal citations and quotations omitted). Here, we adopt
the majority approach to calculating deficiency judgments in
order to properly balance the equities between mortgagors and
mortgagees, protect mortgagors from double-loss by not fairly
recognizing the value of the foreclosed property, and prevent
undue windfalls at mortgagors’ expense. However, parties have
relied on the finality of the many deficiency judgments that
have occurred within this state over the years, and allowing
petitions to reopen finalized deficiency judgments would impose
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a significant effect on the administration of justice.31 See
id.; see also HRCP Rule 60(b)(6) (permitting courts to upon
motion relieve a party of final judgment for any “reason
justifying relief from the operation of the judgment”).
Therefore, our adoption of the majority rule is prospective in
effect and applies only to foreclosure cases in which a
31
Citing federal caselaw, the dissent counsels that “we do not
promulgate new rules to be applied prospectively only[.]” Dissent at 13 n.4
(quoting James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 547 (1991)
(Blackmun, J., concurring)). Respectfully, the citation is simply inapposite
because that case concerned “a newly declared constitutional rule,” James B.
Beam Distilling Co., 501 U.S. at 547 (Blackmun, J. concurring), and more
significantly, the courts of this state are not subject to the limitations of
the federal case and controversy requirement cited by Justice Blackmun.
Additionally, Justice Blackmun was not advocating against the prospective
application of a new rule, instead he was arguing that the Court’s decision
was required to be applied both prospectively and retroactively. It is also
well settled that “[w]hen questions of state law are at issue, state courts
generally have the authority to determine the retroactivity of their own
decisions.” Garcia, 96 Hawai‘i at 211, 29 P.3d at 930; State v. Yong Shik
Won, 137 Hawai‘i 330, 355 n.49, 372 P.3d 1065, 1090 n.49 (2015); Schwartz v.
State, 136 Hawai‘i 258, 272, 361 P.3d 1161, 1175 (2015). Our decision to
apply the holding in this case only prospectively is based on the application
of the factors set forth in our precedent. We note, at oral argument,
HawaiiUSA’s counsel specifically stated that if this court were “inclined to
adopt the majority view and to adopt a new rule for calculating deficiency
judgments . . . it should be prospective in application.” Oral Argument at
00:59:07-19, HawaiiUSA v. Monalim, (No. SCWC-XX-XXXXXXX),
http://oaoa.hawaii.gov/jud/oa/19/SCOA_011119_SCWC_16_807.mp3
[https://perma.cc/TBK2-9K9G].
In addition, this course of applying our decisions prospectively
is one we have frequently followed when doing so is in the interests of
justice. See, e.g., Chen v. Mah, 146 Hawaiʻi 157, 177, 457 P.3d 796, 816
(2020) (applying a holding prospectively); State v. Torres, 144 Hawai‘i 282,
295, 439 P.3d 234, 247 (2019) (same); State by Office of Consumer Prot. v.
Joshua, 141 Hawaiʻi 91, 98-99, 405 P.3d 527, 534-35 (2017) (same); State v.
Auld, 136 Hawai‘i 244, 255-56, 361 P.3d 471, 482-83 (2015) (same); In re T.M.,
131 Hawai‘i 419, 319 P.3d 338 (2014) (same); State v. Hussein, 122 Hawai‘i
495, 229 P.3d 313 (2010) (same); Jess, 117 Hawai‘i at 404, 184 P.3d at 156
(same); Kahale v. City & Cty. of Honolulu, 104 Hawai‘i 341, 348, 90 P.3d 233,
240 (2004) (same); Lindinha v. Hilo Coast Processing Co., 104 Hawai‘i 164,
170, 86 P.3d 973, 979 (2004) (same); Tachibana v. State, 79 Hawai‘i 226, 238,
900 P.2d 1293, 1305 (1995) (same); State v. Stanley, 60 Haw. 527, 533, 592
P.2d 422, 426 (1979) (same).
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deficiency judgment is first entered after the date of this
opinion.32
IV. CONCLUSION
Based on the foregoing, we vacate the ICA’s August 16,
2018 Judgment on Appeal, the circuit court’s Order Granting
Deficiency Judgment, and the Deficiency Judgment, and the case
is remanded to the circuit court for proceedings consistent with
this opinion.
Gary Victor Dubin /s/ Sabrina S. McKenna
(Frederick J. Arensmeyer
with him on the briefs, /s/ Richard W. Pollack
application, and reply)
for petitioners /s/ Michael D. Wilson
Thomas J. Berger
(Jonathan W.Y. Lai and
Tracey L. Ohta with him
on the briefs and response)
for respondent
32
In the event a deficiency judgment is entered on remand, our
adoption of the majority rule will not be applicable to the Monalims as the
Deficiency Judgment was initially entered before the date of this decision.
52